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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2007 OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 0-20206
PERCEPTRON, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Michigan
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38-2381442 |
(State or Other Jurisdiction of
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(I.R.S. Employer |
Incorporation or Organization)
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Identification No.) |
47827 Halyard Drive
Plymouth, Michigan 48170-2461
(Address of Principal Executive Offices)
(734) 414-6100
(Registrants telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
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Title of Each Class |
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Name of Each Exchange on Which Registered |
Common Stock, $0.01 par value
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The NASDAQ Stock Market LLC |
Rights to Purchase Preferred Stock |
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Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act. Yes o No þ
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 preceding 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.
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate market value of the voting stock held as of the registrants most recently completed
second fiscal quarter by non-affiliates of the registrant, based upon the closing sale price of the
Common Stock on December 31, 2006, as reported by the NASDAQ National Market System, was
approximately $67,000,000 (assuming, but not admitting for any purpose, that all directors and
executive officers of the registrant are affiliates).
The number of shares of Common Stock, $0.01 par value, issued and outstanding as of September 20,
2007, was 8,293,016.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document, to the extent specified in this report, are incorporated by
reference in Part III of this report:
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Document |
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Incorporated by reference in: |
Proxy Statement for 2007 |
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Annual Meeting of Shareholders
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Part III, Items 10-14 |
PART I
ITEM 1: BUSINESS
General
Perceptron, Inc. (Perceptron or the Company) develops, produces and markets non-contact
metrology solutions for manufacturing process control as well as sensor and software technologies
for non-contact measurement and inspection applications. Perceptrons product offerings are
designed to improve quality, increase productivity and decrease costs in manufacturing and product
development. Perceptron also produces innovative technology solutions for scanning and inspection,
serving industrial, trade and consumer applications. Among the solutions offered by the Company
are: 1) Laser-based, non-contact gauging systems that provide 100% in-line measurement for
reduction of process variation; 2) Laser-based, non-contact systems that guide robots in a variety
of automated assembly applications; 3) Laser-based, non-contact 3-D scanning systems that eliminate
costly and complex mechanical devices, and; 4) Technology products and software for the Coordinate
Measurement Machine (CMM), portable CMM, wheel alignment, reverse engineering, digitizing,
inspection and forest products industry. The Company services multiple markets, with the largest
being the automotive industry. The Companys primary operations are in North America, Europe and
Asia.
The Companys current principal products are based upon proprietary three-dimensional image
processing and AutoSolveä feature extraction software algorithms combined with the
TriCam® three-dimensional object imaging technology. TriCam® technology uses
structured laser light triangulation techniques to obtain accurate three-dimensional measurements.
The Company has recently introduced a new line of electronic inspection products. The new line is
currently being sold to an original equipment manufacturer (OEM) and distributed through its
wholesale and retail distribution networks targeting both the professional tradesmen and the
do-it-yourself homeowner. The products leverage the Companys strong technical expertise in
electronics, optics, and image processing.
The Company was incorporated in Michigan in 1981 and is headquartered at 47827 Halyard Drive,
Plymouth, Michigan 48170-2461, (734) 414-6100. The Company also has operations in Munich, Germany;
Voisins le Bretonneux, France; Barcelona, Spain; Sao Paulo, Brazil; Tokyo, Japan; Shanghai, China
and Singapore.
Markets
The Company services multiple markets, with the largest being the automotive industry. The Company
has product offerings encompassing virtually the entire automobile manufacturing process, including
product development, manufacturing process development and implementation, stamping and
fabrication, body shop, paint shop, trim, chassis and final assembly. The Company also believes
there are applications for its three-dimensional measurement systems in other industrial and
commercial applications. The foregoing statement is a forward-looking statement within the
meaning of the Securities Exchange Act of 1934, as amended (Exchange Act). See Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations Safe
Harbor Statement and Item 1A, Risk Factors, 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.
The Company has recently announced the introduction of a new line of electronic inspection
products. The first product in this line is being sold to an OEM and distributed through wholesale
and retail distribution networks targeting the professional tradesmen and the do-it-yourself
homeowner.
Products and Applications
Automated Systems
AutoGauge®: These systems are used in the assembly and fabrication plants of
many of the worlds leading auto manufacturers and their suppliers to contain, correct and control
the quality of body structures. AutoGauge® systems are placed directly in the
manufacturing line to automatically measure critical dimensional characteristics of automotive
vehicles, sub-assemblies and parts using non-contact, laser triangulation sensors.
AutoGauge® has the ability to provide hybrid systems containing both fixed-mounted
sensors and robot-mounted sensors. This ability provides automotive manufacturers with the
flexibility to measure multiple vehicle styles or part types on a single manufacturing line while
maintaining their high-speed production rates.
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AutoFit®: These systems are used in automotive manufacturing plants to contain,
correct and control the fit of exterior body panels. The system automatically measures, records and
displays the gap and flushness of parts most visible to the automobile consumer such as gaps
between front and rear doors, hoods and fenders, and decklids and rear quarter panels. The
TriCam® laser triangulation sensor has been enhanced to enable gap and flushness to be
measured in several parts of the manufacturing process: in the body shop during assembly of
non-painted vehicles, and in the final assembly area after the vehicle has been painted.
AutoFit® has the ability to measure vehicles while in motion along the assembly line or
in a stationary position.
AutoScan®: These systems provide a fast, non-contact method of gathering data
for the analysis of the surface contour of a part or product such as automotive closure panels
including doors, decklids, and hoods. These systems use a robot mounted Contour Tricam®
sensor specifically designed to scan a part as the robot moves throughout its path. The
AutoScan® system measures and collects the point cloud data required for contour
analysis and dimensional feature extraction. This allows the parts shape to be automatically
scanned and compared to a computer-generated design.
AutoGuide®: These robot guidance systems were developed in response to the
increasing use of robots for flexible, automated assembly applications. These systems utilize
Perceptron sensors and measurement technology to improve the accuracy of robotic assembly
operations. AutoGuide® systems calculate the difference between theoretical and actual
relationships of a robot and the part being assembled and send compensation data, in six axes, to
the robot. Robotic applications supported by AutoGuide® include windshield insertion,
roof loading, hinge mounting, door attachment, sealant application and many others.
Value Added Services
The Company provides additional services including: training, field service, launch support
services, consulting services, maintenance agreements, repairs, and software tools.
Technology Products
ScanWorks
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: The Company provides ScanWorks® products to a variety of
markets through third party original equipment manufacturers (OEMs), system integrators and
value-added resellers (VARs). These products target the digitizing, reverse engineering, and
inspection markets.
ScanWorks® is a hardware/software component set that allows customers to add digitizing
capabilities to their machines or systems. The use of the ScanWorks® software and the
Contour Probe® sensor enables users to collect, display, manipulate and export large
sets of point cloud data from portable CMMs.
ToolKit is a software solution enabler used by CMM manufacturers, system integrators and
application software developers. It enables the integration of Perceptrons laser-based scanning
technology into their proprietary systems.
Non-Contact Wheel Alignment Components (NCA): NCA components include
WheelWorks® software and sensors based upon the TriCam® design. These
technology components offer a fast, accurate, non-contact method of measuring wheel position for
use in automated or manual wheel alignment machines in automotive assembly plants. The Company
supplies NCA components to multiple wheel alignment machine OEMs in Europe, Asia and North America.
Forest Products: Under the terms of a Sensor Supply and Manufacturing License Agreement
between the Company and U.S. Natural Resources, Inc., (USNR), (Sensor Supply Agreement), the
Company manufactures and supplies TriCamâ sensors to USNR for use in various optimizing
applications.
Commercial Products: The Company has recently introduced a new line of electronic
inspection products. The products leverage the Companys strong technical expertise in
electronics, optics, and image processing. The first product in this line is sold to Ridge Tool
Company pursuant to a long-term supply agreement. The product is sold by Ridge Tool through
distribution channels in the United States, Canada, Europe and Asia. The product is marketed by
Ridge Tool under the product name SeeSnakeâ microÔ to both the professional tradesmen
and the do-it-yourself homeowner. The SeeSnakeâ micro is an optical technology tool that
allows its user to see in unreachable places, via a liquid crystal display screen on a hand held
unit. It is used to detect and diagnose problems a tradesperson or homeowner may have beneath,
behind, or in-between places that cannot otherwise be seen such as around machinery, inside
pipes, behind walls, inside ductwork, etc. Attachments also allow the user to retrieve loose
objects via a hook or magnet. Details of the current product are available at the RIDGIDâ
website, www.ridgid.com. The information found on the website
is not part of this or any report the Company files with, or
furnishes to, the SEC. The Company has follow on products planned which it expects to introduce
in fiscal 2008 and beyond. The foregoing statements are forward-looking statements within the
meaning of the Securities Exchange Act of 1934, as amended. See Item 7 Managements Discussion
and Analysis of Financial Condition and Results of Operations Safe Harbor Statement and Item
1A, Risk Factors 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.
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For information regarding net sales, operating income and net assets of the Companys two business
segments, Automated Systems and Technology Products, see Note 11 to the Consolidated Financial
Statements Segment and Geographic Information.
Sales and Marketing
The Company markets its products directly to end users, and through manufacturing line builders,
system integrators, VARs and OEMs.
The Companys direct sales efforts are led by account managers who develop a close consultative
selling relationship with the Companys customers. The Company also provides Technology Products
to selected system integrators, OEMs and VARs that integrate the Companys products into their own
systems and products for sales to end user customers.
The Company has two segments, its Automated Systems Segment and its Technology Products Segment.
The Company either sells its Automated Systems Products directly or through manufacturing line
builders, system integrators or OEMs. The Companys principal customers for its Automated Systems
products have historically been automotive companies. The Companys Automated Systems products are
typically purchased for installation in connection with new model retooling programs undertaken by
these companies. As sales are dependent on the timing of customers re-tooling programs, sales by
customer vary significantly from year to year, as do the Companys largest customers. For the
fiscal year ended June 30, 2007, approximately 31% of total net sales were derived from the
Companys four largest automotive customers (Volkswagen, General Motors, DaimlerChrysler and BMW).
The Company also sells to manufacturing line builders, system integrators and OEMs, who in turn
sell to these same automotive companies. For the fiscal year ended June 30, 2007, approximately
12% of net sales were to manufacturing line builders, system integrators and OEMs for the benefit
of the same four automotive companies. For the fiscal year ended June 30, 2006 approximately 38%
of total net sales were derived from the Companys four largest automotive customers (General
Motors, Volkswagen, BMW and Peugeot Citroen). For the fiscal year ended June 30, 2005,
approximately 40%, of total net sales were derived from the Companys four largest automotive
customers (General Motors, DaimlerChrysler, Volkswagen and Ford). For the fiscal years ended June
30, 2006 and 2005, approximately 9% and 13%, respectively, of net sales, were to system integrators
and OEMs for the benefit of the same four largest customers. These numbers reflect consolidations
that have occurred within the Companys four largest automotive customers. During the fiscal year
ended June 30, 2007, sales to Volkswagen and General Motors were 13.2% and 11.7%, respectively, of
the Companys total net sales. At June 30, 2007, accounts receivable from Volkswagen and General
Motors totaled approximately $2.5 million and $1.4 million respectively.
The Company sells its Technology Products to a variety of markets through OEMs, system integrators
and VARs. These Technology Products target the digitizing, reverse engineering and inspection
markets. The Companys commercial products will be distributed through third party OEMs with
marketing knowledge and distribution channels in the wholesale and retail market. The Companys
commercial products are currently sold to Ridge Tool for distribution through Ridge Tool and its
customers wholesale and retail distribution networks. During the fiscal year ended June 30, 2007,
sales to Ridge Tool were 11.3% of the Companys total net sales. At June 30, 2007, accounts
receivable from Ridge Tool totaled approximately $4.9 million.
In fiscal year 2002, the Company sold substantially all of the assets of its Forest Products
business unit. As part of the sale, the Company and USNR entered into a Covenant Not to Compete
dated March 13, 2002. The Company agreed, among other matters, for a period of ten years not to
compete with USNR in any business in which the Forest Products business unit was engaged at any
time during the three-year period prior to the closing of the transaction, and for so long as USNR
is a customer of the Company, not to sell products or services intended primarily for operators of
wood processing facilities or license any intellectual property to any third party primarily for
use in any wood processing facility.
Manufacturing and Suppliers
The Companys manufacturing operations consist primarily of final assembly, testing and integration
of the Companys software with individual components such as printed circuit boards manufactured by
third parties according to the Companys designs. The Company believes a low level of vertical
integration gives it significant manufacturing flexibility and minimizes total product costs.
The Company purchases a number of component parts and assemblies from single source suppliers.
With respect to most of its components, the Company believes that alternate suppliers are readily
available. The Companys commercial products currently are manufactured for the Company by a
single subcontractor located in China. Component supply shortages in certain industries, including
the electronics industry, have occurred in the past and are possible in the future due to
imbalances in supply and demand. Significant delays or interruptions in the delivery of
components, assemblies or products by suppliers, or difficulties or delays in shifting
manufacturing capacity to new suppliers, could have a material adverse effect on the Company.
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International Operations
Europe: The Companys European operations contributed approximately 43%, 33%, and 36%, of
the Companys net sales during the fiscal years ended June 30, 2007, 2006 and 2005, respectively.
The Companys wholly-owned subsidiary, Perceptron Europe B.V. (Perceptron B.V.), formed in The
Netherlands, holds a 100% equity interest in Perceptron (Europe) GmbH (Perceptron GmbH).
Perceptron GmbH is located in Munich, Germany and is the operational headquarters for the European
market. Perceptron GmbH holds a 100% interest in Perceptron E.U.R.L. located in Voisins le
Bretonneux, France and a 100% interest in Perceptron Iberica SL located in Barcelona, Spain. At
June 30, 2007, the Company employed 56 people in its European operations.
Asia: The Company operates direct sales, application and support offices in Tokyo, Japan
and Singapore to service customers in Asia. In fiscal 2008, the Company opened a direct sales,
application and support office in Shanghai, China.
South America: The Company has a direct sales, application and support office in Sao
Paulo, Brazil to service customers in South America.
The Companys foreign operations are subject to certain risks typically encountered in such
operations, including fluctuations in foreign currency exchange rates and controls, expropriation
and other economic and local policies of foreign governments, and the laws and policies of the U.S.
and local governments affecting foreign trade and investment. For information regarding net sales
and identifiable assets of the Companys foreign operations, see Note 11 to the Consolidated
Financial Statements, Segment and Geographic Information.
Competition
The Company believes that its Automated Systems products provide the best and most complete
solutions to its customers in terms of system capabilities and support, at a competitive price for
the value provided, which it believes are the principal competitive
factors. The principal competitive
factors for the Companys Technology Products are a competitive price for
the level of functionality and reliability provided. The Company
believes its Technology Products are well focused
technologically and ergonomically toward the targeted end users requirements. There are a number of
companies that sell similar and/or alternative technologies, methods and products into the same
markets and regions as the Company.
The Company believes that there may be other entities, some of which may be substantially larger
and have substantially greater resources than the Company, which may be engaged in the development
of technology and products, that could prove to be competitive with those of the Company. In
addition, the Company believes that certain existing and potential customers may be capable of
internally developing their own technology. There can be no assurance that the Company will be
able to successfully compete with any such entities, or that any competitive pressures will not
result in price erosion or other factors, which will adversely affect the Companys financial
performance.
Backlog
As of June 30, 2007, the Company had a backlog of $23.0 million, compared to $18.8 million at June
30, 2006. Most of the backlog is subject to cancellation by the customer. The level of order
backlog at any particular time is not necessarily indicative of the future operating performance of
the Company. The Company expects to be able to fill substantially all of the orders in its backlog
by June 30, 2008.
Research and Development
The Company has multiple development initiatives focused on new products to: increase market share
penetration in existing markets; expand into new and adjacent markets; and to diversify into new,
non-adjacent markets. The Company also has multiple development initiatives focused on the
continuous improvement of our existing products and systems to: reduce material and installation
costs; enhance performance; add new features and functionality; and to incorporate appropriate new
technologies as they emerge.
The Companys research, development and engineering activities are currently focused on:
high-accuracy, laser-based dimensional sensors; high-accuracy, high-throughput scanning sensors;
complex feature recognition algorithms; specialized three-dimensional metrology software;
manufacturing process display and analysis software; control system and robotic interface software;
related cell and system hardware; and new Technology Product segment initiatives that utilize many
of the Companys core competencies to address specific customer needs, such as software interfaces,
cell designs and system hardware. As of June 30, 2007, 49 persons employed by the Company were
focused primarily on research, development and engineering.
For the fiscal years ended June 30, 2007, 2006 and 2005, the Companys research, development and
engineering expenses were $7.9 million, $7.8 million and $7.2 million, respectively.
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Patents, Trade Secrets and Confidentiality Agreements
As of June 30, 2007, the Company has been granted 26 U.S. patents and has pending 11 U.S. patent
applications, which relate to various products and processes manufactured, used, and/or sold by the
Company, including 10 patents and patent applications relating to its Technology Products. The
Company also has been granted 16 foreign patents in Canada, Europe and Japan and has 17 patent
applications pending in foreign locations, including 6 patents and patent applications relating to
its Technology Products. The U.S. patents expire from 2008 through 2025 and the Companys existing
foreign patent rights expire from 2007 through 2027. In addition, the Company holds perpetual
licenses to more than 35 other U.S. patents including rights to practice 6 patents for non-forest
product related applications that were assigned to USNR in conjunction with the sale of the Forest
Products business unit in 2002. The expiration dates for these licensed patents range from 2007 to
2020.
The Company has registered, and continues to register, various trade names and trademarks including
Perceptron®, AutoGauge®, IPNet®, AutoFit®,
AutoGuide®, AutoScan®, AutoSolve®, Contour Probe®,
ScanWorks®, TriCam®, WheelWorks®, Visual Fixturing® and
LASAR®, among others, which are used in connection with the conduct of its business.
Perceptrons products include hardware (camera, lens, etc.) for scanning an image and imbedded
software (extraction software algorithms) to convey the results of the scan to the customer. The
hardware and software operate and are sold as one product. Perceptron generally does not market
its software algorithms as a separate item distinct from the scanning product. The Companys
software products are copyrighted and generally licensed to customers pursuant to license
agreements that restrict the use of the products to the customers own internal purposes on
designated Perceptron equipment. The licensing language conveys the proprietary nature of the
Companys product.
The Company also uses non-disclosure agreements with employees, consultants and other parties.
There can be no assurance that any of the above measures will be adequate to protect the Companys
intellectual property or other proprietary rights. Effective patent, trademark, copyright and
trade secret protection may be unavailable in certain foreign countries.
The Company has been informed that certain of its customers have received allegations of possible
patent infringement involving processes and methods used in the Companys products. Certain of
these customers, including customers who were parties to patent infringement suits relating to this
matter, have settled such claims. Management believes that the processes used in the Companys
products were independently developed without utilizing any previously patented process or
technology. Because of the uncertainty surrounding the nature of any possible infringement and the
validity of any such claim or any possible customer claim for indemnity relating to claims against
the Companys customers, it is not possible to estimate the ultimate effect, if any, of this matter
on the Companys financial statements.
The Company has licensed certain of the Companys patents relating to non-contact wheel alignment
systems to another company on a non-exclusive basis. In August 2003, the Company ceased the
manufacture of LASAR® sensors and, as required by the terms of the Sensor Supply
Agreement, the Company granted a non-exclusive, perpetual worldwide license to USNR to manufacture
LASAR® sensors primarily intended for sale to operators of wood processing facilities
(e.g., sawmills, planer mills, panel mills, etc.).
Employees
As of June 30, 2007, the Company employed 231 persons. None of the employees is covered by a
collective bargaining agreement and the Company believes its relations with its employees to be
good.
Available Information
The Companys Internet address is www.perceptron.com. There the Company makes available, free of
charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and any amendments to those reports, filed or furnished after the date of this Form 10-K, as soon
as reasonably practicable after the Company electronically files such material with, or furnishes
it to, the Securities and Exchange Commission (SEC). These reports can be accessed through the
Company section of the website. The information found on the Companys website is not part of this
or any report the Company files with, or furnishes to, the SEC.
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ITEM 1A: RISK FACTORS
An investment in our Common Stock involves numerous risks and uncertainties. You should carefully
consider the following information about these risks. Any of the risks described below could
result in a significant or material adverse effect on our future results of operations, cash flows
or financial condition. The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial,
also may become important factors that adversely affect our business in the future. We believe
that the most significant of the risks and uncertainties we face are as follows:
Our revenues are principally derived from the sale of products for use in the global automotive
market, particularly by manufacturers based in the United States and Western Europe. These
manufacturers have experienced periodic downturns in their businesses that could adversely affect
their level of purchases of our products.
Our revenues are principally derived from the sale of products for use in the automotive industry,
particularly to manufacturers based in the United States and Western Europe. As a result, our
ability to sell our systems and solutions to automotive manufacturers and suppliers is affected by
periodic downturns in the global automotive industry.
New vehicle tooling programs are the most important selling opportunity for our automotive related
sales. The number and timing of new vehicle tooling programs can be influenced by a number of
economic factors. Our customers only launch a limited number of new car programs in any given year
because of the time and financial resources required. From a macro perspective we continue to
assess the global economy and its likely effect on our automotive customers and markets served. We
continue to view the automotive industrys focus on introducing new vehicles more frequently to
satisfy their customers changing requirements, as well as their continuing focus on improved
quality, as positive indicators for new business. However, because of periodic economic downturns
experienced by our customers, our customers could determine to reduce their number of new car
programs. We are experiencing continued pricing pressures from our customers, particularly our
automotive customers. These pricing pressures could adversely affect the margins we realize on the
sale of our products and, ultimately, our profitability.
Our future success is dependent upon our ability to implement our long-term growth
strategy.
We realize that we are vulnerable to fluctuations in the global automotive industry. Our future
success is dependent upon our ability to implement our long-term strategy to expand our customer
base in our automotive markets and to expand into new markets. Currently, we are focusing on the
successful introduction of our two newly released Automated Systems products, AutoFit® and
AutoScan®, which are designed to expand our product offerings in our worldwide automotive markets,
and the continued development of enhanced versions of our ScanWorks® product line for sale within
and outside the automotive markets. We have also initiated plans to achieve sales growth in
largely untapped geographic sales areas, including automotive markets in Asia and Eastern Europe
and the expansion of our business with current customers in Japan. We also continue to explore
opportunities for expansion into non-automotive markets. However, there are a number of
uncertainties involved in our long-term strategy over which we have no or limited control,
including:
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The quality and cost of competitive products already in existence or developed in the
future. |
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The level of interest existing and potential new customers may have in our
existing and new products and technologies. |
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Our ability to resolve technical issues inherent in the development of new
products and technologies. |
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Our ability to identify and satisfy market needs. |
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Our ability to identify satisfactory distribution networks. |
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General product development and commercialization difficulties. |
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Rapid or unexpected technological changes. |
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General product demand and market acceptance risks. |
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Our ability to successfully compete with alternative and similar technologies. |
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Our ability to attract the appropriate personnel to effectively represent, install and
service our products. |
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The effect of economic conditions. |
Even if we are able to expand our customer base and markets, the new revenues we derive may not
offset declines in revenues from our current products, especially our AutoGauge®
products. We also may not be able to generate profits from these new customers or markets at the
same level as we generate from our current business. There can be no assurance that we will be able
to expand our customer base and markets or successfully execute our strategies in a fashion to
maintain or increase our revenues and profits.
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We have recently introduced a new line of products for sale in a new market. We could
experience unanticipated difficulties in bringing these products to market that would adversely
affect our financial results of operation and divert the attention of our management.
The Company has a long term supply agreement for the sale of a new line of electronic inspection
products for wholesale and retail distribution that are manufactured in China through a single
subcontractor. As a result, we could experience unforeseen difficulties including:
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Product quality problems and costs to correct those problems resulting from
design or manufacturing defects. |
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Warranty claims at greater levels than anticipated. |
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Product orders at significantly greater volumes than our subcontractors
current manufacturing capabilities. |
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The speed at which competitors products may be brought to market. |
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The need and cost to revise our product offerings to respond to competitors
product introductions or unanticipated consumer preferences or negative reactions to
our products. |
Handling such unforeseen difficulties could require significant management time and could adversely
affect our operating results.
A significant percentage of our revenues are derived from a small number of customers
concentrated in the automotive industry, so that the loss of any one of these customers could
result in a reduction in our revenues and profits.
We sell a majority of our systems and solutions to a small number of customers that consist
primarily of automotive manufacturers and suppliers in North American and Western Europe.
With such a large percentage of our revenues coming from such a small and highly concentrated group
of customers, we are susceptible to a substantial risk of losing revenues if these customers stop
purchasing our products or reduce their purchases of our products. In addition, we have no control
over whether these customers will continue to purchase our systems and solutions in volumes or at
prices sufficient to generate profits for us.
Our new
electronic inspection product,
SeeSnake®
micro, is sold exclusively to Ridge Tool pursuant
to a long-term supply agreement that requires Ridge Tool to purchase certain minimum levels of
product to maintain exclusivity. We anticipate Ridge Tools purchases to be substantially in
excess of the minimum levels. If Ridge Tool purchased just sufficient products to maintain
exclusivity, the Companys revenue from the product would be substantially less than anticipated.
If Ridge Tool ceases to buy these products altogether, we would have to find alternative wholesale
purchasers or distributors for this product, which could substantially reduce, at least in the
short-term, the revenues and profits anticipated to be derived by us from this product.
Our future commercial success depends upon our ability to maintain a competitive technological
position in our markets, which are characterized by continual technological change.
Technology plays a key role in the systems and solutions that we produce. Our ability to sell our
products to customers is directly influenced by the technology used in our systems and solutions.
With the rapid pace at which technology is changing, there is a possibility that our customers may
require more technologically advanced systems and solutions than what we may be capable of
producing.
Technological developments could render actual and proposed products or technologies of ours
uneconomical or obsolete.
There also is a possibility that we may not be able to keep pace with our competitors products.
In that case, our competitors may make technological improvements to their products that make them
more desirable than our products.
Our near-term focus for growth has been on the successful introduction of our newly introduced
commercial product, additional commercial products to be introduced, our two newly released
Automated Systems products, AutoFit® and AutoScan®, which are designed to expand our product
offerings in our worldwide automotive markets, and the continued development of enhanced versions
of our ScanWorks® and AutoGauge® product lines.
Our growth and future financial performance depend upon our ability to introduce new products and
enhance existing products that include the latest technological advances and customer requirements.
We may not be able to introduce new products successfully or achieve market acceptance for such
products. Any failure by us to anticipate or respond
8
adequately to changes in technology and customer preferences, or any significant delays in product
development or introduction, could have a material adverse effect on our business. Accordingly, we
believe that our future commercial success will depend upon our ability to develop and introduce
new cost-effective products and maintain a competitive technological position.
We are dependent on proprietary technology. If our competitors develop competing products that
do not violate our intellectual property rights or successfully challenge those rights, our
revenues and profits may be adversely affected.
Our products contain features that are protected by patents, trademarks, trade secrets, copyrights,
and contractual rights.
Despite these protections, there is still a chance that competitors may use these protected
features in their products as a result of our inability to keep our trade secrets confidential, or
in violation of our intellectual property rights or following a successful challenge to those
rights. The prosecution of infringement claims against third parties and the defense of legal
actions challenging our intellectual property rights could be costly and require significant
attention from management. Because of the small size of our management team, this could result in
the diversion of managements attention from day-to-day operations.
There also is a chance that competitors may develop technology that performs the same functions as
our products without infringing upon our exclusive rights. It is possible that competitors may
reverse engineer those features of our products that are not protected by patents, trademarks and
trade secrets. If a competitor is able to reverse engineer an unprotected feature successfully,
the competitor may gain an understanding of how the feature works and introduce similar products to
compete with our products.
Because our new retail electronic inspection products will be manufactured in China, we are at risk
of competitors misappropriating our intellectual property included in those products or reverse
engineering those products. As a result, we may have a more limited ability, and significantly
greater costs, to enforce our intellectual property rights in those products. Constant
technological improvement of those products will be particularly important to keep the products
competitive in their markets.
We could become involved in costly litigation alleging patent infringement.
We have been informed that certain of our customers have received allegations of possible patent
infringement involving processes and methods used in our products. Certain of these customers,
including one customer who was a party to a patent infringement suit relating to this matter, have
settled such claims. We believe that the processes used in our products were independently
developed without utilizing any previous patented process or technology. Because of the
uncertainty surrounding the nature of any possible infringement and the validity of any such claim
or any possible customer claim for indemnity relaying to claims against our customers, it is not
possible to estimate the ultimate effect, if any, of this matter on our financial position.
The defense of patent infringement litigation could be costly and require significant attention
from management. Because of the small size of our management team, this could result in the
diversion of managements attention from day-to-day operations.
A number of new competitors have recently entered our markets, or are developing products to
compete with our products, which could result in a reduction in our revenues through lost sales or
a reduction in prices.
We are aware of a number of companies that have recently entered a number of our markets selling
products using similar or alternative technologies and methods. We believe that there may be other
companies, some of whom may be substantially larger and have substantially greater resources than
us, which may be engaged in the development of technology and products for some of our markets that
could prove to be competitive with ours. We believe that the principal competitive factor in our
markets is the total capability that a product offers as a process control system. In some
markets, price and value added are the principal competitive factors. While we believe that our
products compete favorably, it is possible that these new competitors could capture some of our
sales opportunities or force us to reduce prices in order to complete the sale.
We believe that certain existing and potential customers may be capable of internally developing
their own technology. This could cause a decline in sales of our products to those customers.
Our business depends on our ability to attract and retain key personnel.
Our success depends in large part upon the continued service of our executives and key employees,
including those in engineering, technical, sales and marketing positions, as well as our ability to
attract additional such employees in the future. At times and in certain geographic markets,
competition for the type of highly skilled employees we require can
9
be significant. The loss of key personnel or the inability to attract new qualified key employees
could adversely affect our ability to implement our long-term growth strategy and have a material
adverse effect on our business.
We may not be able to complete business opportunities and acquisitions and our profits could be
negatively affected if we do not successfully operate those that we do complete.
We will evaluate from time to time business opportunities that fit our strategic plans. There can
be no assurance that we will identify any opportunities that fit our strategic plans or will be
able to enter into agreements with identified business opportunities on terms acceptable to us.
There is also no assurance that we will be able to effectively integrate businesses that we may
acquire due to the significant challenges in consolidating functions and integrating procedures,
personnel, product lines, technologies and operations in a timely and efficient manner. The
integration process may require significant attention from management and devotion of resources.
Because of the small size of our management team, this could result in the diversion of
managements attention from day to day operations and impair our relationships with current
employees and customers.
We intend to finance any such business opportunities from available cash on hand, existing credit
facilities, issuance of additional stock or additional sources of financing, as circumstances
warrant. The issuance of additional equity securities could be substantially dilutive to our
stockholders. In addition, our profitability may suffer because of acquisition-related costs, debt
service requirements or amortization costs for acquired intangible assets. If we are not
successful in generating additional profits from these transactions, this dilution and these
additional costs could cause our common stock price to drop.
We are expanding our foreign operations, increasing the possibility that our business could be
adversely affected by risks of doing business in foreign countries.
We have significant operations outside of the United States and are currently implementing a
strategy to expand our operations outside of the United States, especially in Eastern Europe and
Asia.
Our foreign operations are subject to risks customarily encountered in such foreign operations.
For instance, we may encounter fluctuations in foreign currency exchange rates, differences in the
level of protection available for our intellectual property, the impact of differences in language
and local business and social customs on our ability to market and sell our products in these
markets and transportation delays from our Chinese subcontractor. In addition, we may be affected
by U.S. laws and policies that impact foreign trade and investment. Finally, we may be adversely
affected by laws and policies imposed by foreign governments in the countries where we have
business operations or sell our products. These laws and policies vary from jurisdiction to
jurisdiction.
Because of our significant foreign operations, our revenues and profits can vary significantly
as a result of fluctuations in the value of the United States dollar against foreign
currencies.
Products that we sell in foreign markets are sometimes priced in currency of the country where the
customer is located. To the extent that the dollar fluctuates against these foreign currencies,
the prices of our products in U.S. dollars also will fluctuate. As a result, our return on the
sale of our products may vary based on these fluctuations. We may use, from time to time, a
limited hedging program to minimize the impact of foreign currency fluctuations. These
transactions involve the use of forward contracts, typically mature within one year and are
designed to hedge anticipated foreign currency transactions. We may use forward exchange contracts
to hedge the net assets of certain of our foreign subsidiaries to offset the translation and
economic exposures related to our investment in these subsidiaries. There is no guarantee that
these hedging transactions will protect against the fluctuations in the value of the dollar.
Because a large portion of our revenues are generated from a limited number of sizeable orders,
our revenues and profits may vary widely from quarter to quarter and year to year.
A large portion of our revenues are generated from a limited number of sizeable orders that are
placed by a small number of customers. If the timing of these orders is delayed from one quarter
to the next, or from one year to the next, we may experience fluctuations in our quarterly and
annual revenues and operating results.
The amount of revenues that we earn in any given quarter may vary based in part on the timing of
new vehicle programs in the global automotive industry. In contrast, many of our operating
expenses are fixed and will not vary from quarter to quarter. As a result, our operating results
may vary significantly from quarter to quarter and from year to year.
10
The trading price of our stock has been volatile.
The following factors may affect the market price of our Common Stock, which can vary widely
over time:
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announcements of new commercial products by us; |
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|
announcements of new commercial products by our competitors; |
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variations in our operating results; |
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|
|
market conditions in the electronic and sensing industry; |
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|
|
market conditions and stock prices in general; and |
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|
the volume of our Common Stock traded. |
Because of the limited trading in our Common Stock, it may be difficult for shareholders to
dispose of a large number of shares of our Common Stock in a short period of time or at then
current prices.
Because of the limited number of shares of our Common Stock outstanding and the limited number of
holders of our Common Stock, only a limited number of shares of our Common Stock trade on a daily
basis. This limited trading in our Common Stock makes it difficult to dispose of a large number of
shares in a short period of time. In addition, it is likely that the sale by a shareholder of a
large number of shares of our Common Stock over an extended period would depress the price of our
Common Stock.
We do not plan on paying dividends and are restricted under our loan agreement from paying
dividends.
Our Board of Directors does not intend to declare or pay cash dividends on our Common Stock.
Instead, the Board intends to retain future earnings to finance the development of our business.
Furthermore, cash dividends are not permitted under our bank credit agreement.
As permitted under Michigan law, our directors are not liable to Perceptron for monetary
damages resulting from their actions or inactions.
Under our articles of incorporation, as permitted under the Michigan Business Corporation Act,
members of our Board of Directors are not liable for monetary damages for any negligent or grossly
negligent action that the director takes, or for any negligent or grossly negligent failure of a
director to take any action. However, a director will remain liable for:
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intentionally inflicting harm on Perceptron or its shareholders; |
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distributions that the director makes in violation of the Michigan Business
Corporation Act; and |
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intentional criminal acts that the director commits. |
However, we or our shareholders may seek an injunction, or other appropriate equitable relief,
against a director. Finally, liability may be imposed against members of the Board of Directors
under the federal securities laws.
We are required to indemnify our officers and directors if they are involved in litigation as a
result of their serving as officers or directors of Perceptron, which could reduce our profits and
cash available to operate our business.
Our by-laws require us to indemnify our officers and directors. We may be required to pay
judgments, fines, and expenses incurred by an officer or director, including reasonable attorneys
fees, as a result of actions or proceedings in which such officers or directors are involved by
reason of being or having been an officer or director of Perceptron. Funds paid in satisfaction of
judgments, fines and expenses would reduce our profits and may be funds we need for the operation
of our business and the development of products. This could cause our stock price to drop.
Our profits will be reduced as a result of our compliance with new SEC rules relating to our
internal controls over financial reporting.
Beginning with our annual report on Form 10-K for the fiscal year ending June 30, 2008, we expect
we will be required by SEC rules to include a report of management on Perceptrons internal control
over financial reporting in our annual reports. In addition, our independent registered public
accounting firm auditing our financial statements will be required to provide an attestation report
on our internal controls.
We will expend significant resources in developing the necessary documentation and testing
procedures required by these new rules, which could adversely affect our profitability.
11
If management is not able to provide a positive report on our internal controls over financial
reporting, and our independent registered public accounting firm is not able to provide an
unqualified opinion regarding our internal controls, shareholders and others may lose confidence in
our financial statements, which could cause our stock price to drop.
Because of our relatively small size, we have a limited number of personnel in our finance
department to handle their existing responsibilities, as well as compliance with the SECs new
rules relating to our internal controls over financial reporting.
Accordingly, there can be no positive assurance that management will provide a positive report on
our internal controls or that we will receive an unqualified opinion from our independent
registered public accounting firm regarding our internal controls. In the event we identify
significant deficiencies or material weaknesses in our internal controls that we cannot remediate
in a timely manner, investors and others may lose confidence in the reliability of our financial
statements. This could cause our stock price to drop.
If the subcontractors we rely on for component parts or products delay deliveries or fail to
deliver parts or products meeting our requirements, we may not be able to deliver products to our
customers in a timely fashion and our revenues and profits could be reduced.
We rely on subcontractors for certain components of our products, including outside subcontracting
assembly houses to produce the circuit boards that we use in our products. Our new electronic
inspection product is manufactured by a single subcontractor located in China. As a result, we
have limited control over the quality and the delivery schedules of components or products
purchased from third parties. In addition, we purchase a number of component parts from single
source suppliers. If our supplies of component parts or products meeting our requirements are
significantly delayed or interrupted, we may not be able to deliver products to our customers in a
timely fashion. This could result in a reduction in revenues and profits for these periods. It is
also possible, if our delay in delivering products to our customer is too long, the customer could
cancel its order, resulting in a permanent loss of revenue and profit from that sale. From time to
time, we have experienced significant delays in the receipt of certain components, most recently
for our ScanWorks® systems.
Finally, although we believe that alternative suppliers are available, difficulties or delays may
arise if we shift manufacturing capacity to new suppliers.
The Board of Directors has the right to issue up to 1,000,000 shares of preferred stock without
further action by shareholders. The issuance of those shares could cause the market price of our
Common Stock to drop significantly and could be used to prevent or frustrate shareholders attempts
to replace or remove current management.
Although no preferred stock currently is outstanding, we are authorized to issue up to 1,000,000
shares of preferred stock. Preferred stock may be issued in one or more series, the terms of which
may be determined at the time of issuance by the Board of Directors, without further action by
shareholders, and may include voting rights (including the right to vote as a series on particular
matters), the dividends payable thereon, liquidation payments, preferences as to dividends and
liquidation, conversion rights and redemption rights. In the event that preferred stock is issued,
the rights of the common stockholders may be adversely affected. This could result in a reduction
in the value of our Common Stock.
The preferred stock could be issued to discourage, delay or prevent a change in control of
Perceptron. This may be beneficial to our management or Board of Directors in a hostile tender
offer or other takeover attempt and may have an adverse impact on shareholders who may want to
participate in the tender offer or who favor the takeover attempt.
Our common stock rights plan could be used to discourage hostile tender offers.
We
maintain a common stock rights plan. Under the plan, if any person
acquires 15% or more of our
outstanding Common Stock, our shareholders, other than the acquirer, will have the right to
purchase shares of our Common Stock at half their market price. The common stock rights plan
discourages potential acquirers from initiating tender offers for our Common Stock without the
approval of the Board of Directors. This may be beneficial to our management or Board of Directors
in a hostile tender offer or other takeover attempt and may have an adverse impact on shareholders
who may want to participate in the tender offer or who favor the takeover attempt.
12
ITEM 1B: UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2: PROPERTIES
Perceptrons principal domestic facilities consist of a 70,000 square foot building located in
Plymouth, Michigan, owned by the Company. In addition, the Company leases a 1,500 square meter
facility in Munich, Germany and leases office space in Voisins le Bretonneux, France; Sao Paulo,
Brazil; Tokyo, Japan; and Singapore. In fiscal 2008, the Company leased office space in Shanghai
China. The Company believes that its current facilities are sufficient to accommodate its
requirements through fiscal year 2008.
ITEM 3: LEGAL PROCEEDINGS
The Company is a party to a suit filed by Industries GDS, Inc., Bois Granval GDS Inc., and Centre
de Preparation GDS, Inc. (collectively, GDS) on or about November 21, 2002 in the Superior Court
of the Judicial District of Quebec, Canada against the Company, Carbotech, Inc. (Carbotech), and
U.S. Natural Resources, Inc. (USNR), among others. The suit alleges that the Company breached
its contractual and warranty obligations as a manufacturer in connection with the sale and
installation of three systems for trimming and edging wood products. The suit also alleges that
Carbotech breached its contractual obligations in connection with the sale of equipment and the
installation of two trimmer lines, of which the Companys systems were a part, and that USNR, which
acquired substantially all of the assets of the Forest Products business unit from the Company, was
liable for GDS damages. USNR has sought indemnification from the Company under the terms of
existing contracts between the Company and USNR. GDS seeks compensatory damages against the
Company, Carbotech and USNR of approximately $6.3 million using a June 30, 2007 exchange rate. GDS
and Carbotech have filed for bankruptcy protection in Canada. The Company intends to vigorously
defend GDS claims.
See Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies Litigation and Other Contingencies for a discussion of the
Companys accounting policies regarding legal proceedings and other contingencies.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2007.
13
PART II
ITEM 5: MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Perceptrons Common Stock is traded on The NASDAQ Stock Markets National Market under the symbol
PRCP. The following table shows the reported high and low sales prices of Perceptrons Common
Stock for fiscal 2007 and 2006:
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Prices |
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Low |
|
High |
Fiscal 2007 |
|
|
|
|
|
|
|
|
Quarter through September 30, 2006 |
|
$ |
7.35 |
|
|
$ |
9.00 |
|
Quarter through December 31, 2006 |
|
$ |
7.87 |
|
|
$ |
9.44 |
|
Quarter through March 31, 2007 |
|
$ |
8.12 |
|
|
$ |
10.04 |
|
Quarter through June 30, 2007 |
|
$ |
8.15 |
|
|
$ |
10.08 |
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|
|
|
|
|
|
|
|
Fiscal 2006 |
|
|
|
|
|
|
|
|
Quarter through September 30, 2005 |
|
$ |
6.00 |
|
|
$ |
7.28 |
|
Quarter through December 31, 2005 |
|
$ |
6.29 |
|
|
$ |
7.63 |
|
Quarter through March 31, 2006 |
|
$ |
6.63 |
|
|
$ |
8.73 |
|
Quarter through June 30, 2006 |
|
$ |
7.11 |
|
|
$ |
8.80 |
|
No cash dividends or distribution on Perceptrons Common Stock have been paid in the past and it is
not anticipated that any will be paid in the foreseeable future. In addition, the payment of cash
dividends or other distributions is prohibited under the terms of Perceptrons revolving credit
agreement with its bank. See Item 7, Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital Resources, for a discussion of other
restrictions on the payment of dividends.
The approximate number of shareholders of record on September 20, 2007, was 191.
The information pertaining to the securities the Company has authorized for issuance under equity
plans is hereby incorporated by reference to Item 12, Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters Equity Compensation Plan Information.
For more information about the Companys equity compensation plans, see Note 9 of Notes to the
Consolidated Financial Statements, Stock Incentive Plans, included in Item 8 of this report.
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder return on the Common Stock
from June 30, 2002 through June 30, 2007 with an index consisting of returns from a peer group of
companies, consisting of Cognex Corp., Cyberoptics Corporation,
Integral Vision, Inc. PPT Vision, Inc. and Robotic Vision Systems,
Inc. (the
Peer Group Index) and The Nasdaq Stock Market (U.S.) Index (the Nasdaq Composite Index). The returns of each company in the Peer Group Index have
been weighted according to their respective stock market capitalization. The graph assumes that
the value of the investment in the Companys Common Stock, the Peer Group Index and the Nasdaq
Composite Index was $100 on June 30, 2002 and that all dividends were reinvested.
14
|
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CUMULATIVE TOTAL RETURN |
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6/30/02 |
|
6/30/03 |
|
6/30/04 |
|
6/30/05 |
|
6/30/06 |
|
6/30/07 |
Perceptron, Inc. |
|
|
100 |
|
|
|
387 |
|
|
|
459 |
|
|
|
438 |
|
|
|
521 |
|
|
|
638 |
|
Nasdaq Stock Market (US) |
|
|
100 |
|
|
|
110 |
|
|
|
139 |
|
|
|
142 |
|
|
|
156 |
|
|
|
191 |
|
Peer Group |
|
|
100 |
|
|
|
104 |
|
|
|
193 |
|
|
|
126 |
|
|
|
125 |
|
|
|
110 |
|
The graph displayed above is presented in accordance with applicable legal requirements.
Shareholders are cautioned against drawing any conclusions from the data contained in the graph, as
past results are not necessarily indicative of future performance. The graph in no way reflects
the Companys forecast of future financial performance.
15
ITEM 6: SELECTED FINANCIAL DATA
The selected statement of operations and balance sheet data presented below are derived from the
Companys consolidated financial statements and should be read in conjunction with the Companys
consolidated financial statements and notes thereto and Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations included in this report.
PERCEPTRON, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
|
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|
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|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
June 30, |
|
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
Statement of Operations Data: 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
62,252 |
|
|
$ |
57,875 |
|
|
$ |
54,892 |
|
|
$ |
53,393 |
|
|
$ |
54,679 |
|
Gross profit |
|
|
27,000 |
|
|
|
27,287 |
|
|
|
25,907 |
|
|
|
25,100 |
|
|
|
27,534 |
|
Operating income |
|
|
1,853 |
|
|
|
4,368 |
|
|
|
4,695 |
|
|
|
5,630 |
|
|
|
8,548 |
|
Income before income taxes |
|
|
2,746 |
|
|
|
4,927 |
|
|
|
5,186 |
|
|
|
6,653 |
|
|
|
6,124 |
|
Net income |
|
|
1,459 |
|
|
|
3,239 |
|
|
|
3,282 |
|
|
|
3,987 |
|
|
|
3,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.18 |
|
|
|
0.38 |
|
|
|
0.37 |
|
|
|
0.46 |
|
|
|
0.43 |
|
Diluted |
|
|
0.17 |
|
|
|
0.35 |
|
|
|
0.35 |
|
|
|
0.43 |
|
|
|
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
8,114 |
|
|
|
8,582 |
|
|
|
8,766 |
|
|
|
8,593 |
|
|
|
8,284 |
|
Diluted |
|
|
8,761 |
|
|
|
9,200 |
|
|
|
9,437 |
|
|
|
9,327 |
|
|
|
8,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital |
|
$ |
42,364 |
|
|
$ |
42,652 |
|
|
$ |
41,100 |
|
|
$ |
36,777 |
|
|
$ |
30,405 |
|
Total assets |
|
|
65,456 |
|
|
|
62,395 |
|
|
|
63,390 |
|
|
|
62,924 |
|
|
|
59,414 |
|
Shareholders equity |
|
|
53,805 |
|
|
|
54,230 |
|
|
|
53,922 |
|
|
|
50,360 |
|
|
|
44,945 |
|
|
|
|
1 |
|
No cash dividends have been declared or paid during the periods presented. |
16
ITEM 7: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT
We make statements in this Managements Discussion and Analysis of Financial Condition and Results
of Operations that may be forward-looking statements within the meaning of the Securities
Exchange Act of 1934, including the Companys expectation as to fiscal 2008 and future new order
bookings, revenue, expenses, net income and backlog levels, trends affecting its future revenue
levels, the rate of new orders, the timing of revenue and net income increases from new products
which we have recently released or have not yet released and from our plans to make important new
investments, largely for personnel, for newly introduced products and geographic growth
opportunities in the U.S., Europe, Eastern Europe, Asia, the timing of the introduction of new
products, our ability to fund our fiscal year 2008 cash flow requirements and customers current
and future interest in our Value Added Services. We may also make forward-looking statements in
our press releases or other public or shareholder communications. When we use words such as
will, should, believes, expects, anticipates, estimates or similar expressions, we are
making forward-looking statements. We claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 for all of our
forward-looking statements. While we believe that our forward-looking statements are reasonable,
you should not place undue reliance on any such forward-looking statements, which speak only as of
the date made. Because these forward-looking statements are based on estimates and assumptions
that are subject to significant business, economic and competitive uncertainties, many of which are
beyond our control or are subject to change, actual results could be materially different. Factors
that might cause such a difference include, without limitation, the risks and uncertainties
discussed from time to time in our reports filed with the Securities and Exchange Commission,
including those listed in Item 1A Risk Factors in this report. Other factors not currently
anticipated by management may also materially and adversely affect our financial condition,
liquidity or results of operations. Except as required by applicable law, we do not undertake, and
expressly disclaim, any obligation to publicly update or alter our statements whether as a result
of new information, events or circumstances occurring after the date of this report or otherwise.
The Companys expectations regarding future bookings and revenues are projections developed by the
Company based upon information from a number of sources, including, but not limited to, customer
data and discussions. These projections are subject to change based upon a wide variety of
factors, a number of which are discussed above. Certain of these new orders have been delayed in
the past and could be delayed in the future. Because the Companys products are typically
integrated into larger systems or lines, the timing of new orders is dependent on the timing of
completion of the overall system or line. In addition, because the Companys products have shorter
lead times than other components and are required later in the process, orders for the Companys
products tend to be given later in the integration process. A significant portion of the Companys
projected revenues and net income depends upon the Companys ability to successfully develop and
introduce new products and expand into new geographic markets. Because a significant portion of
the Companys revenues are denominated in foreign currencies and are translated for financial
reporting purposes into U.S. Dollars, the level of the Companys reported net sales, operating
profits and net income are affected by changes in currency exchange rates, principally between U.S.
Dollars and Euros. Currency exchange rates are subject to significant fluctuations, due to a
number of factors beyond the control of the Company, including general economic conditions in the
United States and other countries. Because the Companys expectations regarding future revenues,
order bookings, backlog and operating results are based upon assumptions as to the levels of such
currency exchange rates, actual results could differ materially from the Companys expectations.
Overview
Perceptron, Inc. (Perceptron or the Company) develops, produces and markets non-contact
metrology solutions for manufacturing process control as well as sensor and software technologies
for non-contact measurement and inspection applications. Perceptrons product offerings are
designed to improve quality, increase productivity and decrease costs in manufacturing and product
development. Perceptron also produces innovative technology solutions for scanning and inspection,
serving industrial, trade and consumer applications. The solutions offered by the Company are
divided into three groups: 1) The Automated Systems Group made up of AutoGaugeâ,
AutoFitâ, AutoScanâ, and AutoGuideâ products; 2) The Technology Products Group
made up of ScanWorksâ, Non-Contact Wheel Alignment (WheelWorksâ), TriCamâ
sensors for the forest products industry and commercial products; and 3) The Value Added Services
Group offering consulting, training and non-warranty support services. The Company services
multiple markets, with the largest being the automotive industry. The Companys primary operations
are in North America, Europe and Asia.
In the quarter ended March 31, 2007 the Company launched its first commercial product, the
SeeSnakeâ micro, designed to be used by professional tradespersons as well as individual
homeowners. The SeeSnakeâ micro is an optical technology tool that allows its user to see in
unreachable places, via a liquid crystal display screen on a hand held unit. It is used to detect
and diagnose problems a tradesperson or homeowner may have beneath, behind, or in-between places
that cannot otherwise be seen such as around machinery, inside pipes, behind walls, inside
ductwork, etc. Attachments also allow the user to retrieve objects via a hook or magnet. The
product is sold to Ridge Tool
pursuant to a long-term supply agreement, which requires Ridge Tool to purchase certain minimum
levels of product to
17
maintain exclusivity. The Company expects to introduce additional electronic
inspection products in fiscal 2008 and future years.
The Company continues to be in a strong financial position as of June 30, 2007 with no debt and
approximately $17.2 million of cash. During fiscal 2007, the Company completed the stock buyback
programs approved by the Board of Directors in September 2005 and August 2006 by purchasing $5.2
million of its common stock.
For the full fiscal year 2007, the Companys sales were principally derived from the sale of
products for use in the automotive industry. In the fourth quarter, however, sales of the Companys
commercial product, the SeeSnakeâ micro, became an important part of the Companys total
sales.
New vehicle tooling programs represent the most important selling opportunity for the Companys
automotive related sales. The number and timing of new vehicle tooling programs varies in
accordance with individual automotive manufacturers plans and is also influenced by the state of
the economy. From a macro perspective, the Company continues to assess the global economy and its
likely effect on the Companys automotive customers and markets served.
The Company is continuing its efforts to expand its opportunities outside the automotive industry,
principally through new commercial product development efforts in its
Technology Products Segment.
The Company expects sales from its Technology Products Segment, in large part due to anticipated
growth in commercial products, to become a greater percentage of overall revenue in fiscal 2008.
The Companys European operations had increased sales in fiscal 2007. The increase principally
occurred in the second half of fiscal 2007 and helped offset the
weakness in the domestic North
American automotive market. During the fourth quarter of fiscal 2007, the Company took steps to reduce expenses in its
automotive business by over $1.4 million annually. Cost reductions were targeted that will not
impact the Companys growth plans.
During fiscal 2007 the Company, continued to invest in the Asian automotive market by adding
personnel in its offices in Singapore, Japan and China. In addition, the Company is in the process
of adding the ability to demonstrate its Automated Systems in three separate locations throughout
China. One demonstration system will be at the Autobody Manufacturing Technology Center of Chinas
prestigious Jiaotong University. The second will be located in the
technical center of a company we
are working with in Qingdao, China. The third will be in
Perceptrons own technical support office
in Shanghai. The Company continues to believe that the potential for sales growth in Japan, Korea,
and China is promising.
Results of Operations
Fiscal Year Ended June 30, 2007, Compared to Fiscal Year Ended June 30, 2006
Overview The Company reported net income of $1.5 million or $0.17 per diluted share, for
the fiscal year ended June 30, 2007 compared with net income of $3.2 million, or $0.35 per diluted
share, for the fiscal year ended June 30, 2006. Specific line item results are described below.
Sales Net sales of $62.3 million for fiscal 2007 were up $4.4 million, or 7.6%,
compared with the same period one year ago. The following tables set forth comparison data for
the Companys net sales by product groups and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (by group) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2007 |
|
|
2006 |
|
|
Increase/(Decrease) |
|
Automated Systems |
|
$ |
37.5 |
|
|
|
60.2 |
% |
|
$ |
43.3 |
|
|
|
74.8 |
% |
|
$ |
(5.8 |
) |
|
|
(13.4 |
)% |
Technology Products |
|
|
20.0 |
|
|
|
32.1 |
% |
|
|
10.9 |
|
|
|
18.8 |
% |
|
|
9.1 |
|
|
|
83.5 |
% |
Value Added Services |
|
|
4.8 |
|
|
|
7.7 |
% |
|
|
3.7 |
|
|
|
6.4 |
% |
|
|
1.1 |
|
|
|
29.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
62.3 |
|
|
|
100.0 |
% |
|
$ |
57.9 |
|
|
|
100.0 |
% |
|
$ |
4.4 |
|
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (by location) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2007 |
|
|
2006 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
33.1 |
|
|
|
53.1 |
% |
|
$ |
37.4 |
|
|
|
64.6 |
% |
|
$ |
(4.3 |
) |
|
|
(11.5 |
)% |
Europe |
|
|
26.8 |
|
|
|
43.0 |
% |
|
|
18.9 |
|
|
|
32.6 |
% |
|
|
7.9 |
|
|
|
41.8 |
% |
Asia |
|
|
2.4 |
|
|
|
3.9 |
% |
|
|
1.6 |
|
|
|
2.8 |
% |
|
|
0.8 |
|
|
|
50.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
62.3 |
|
|
|
100.0 |
% |
|
$ |
57.9 |
|
|
|
100.0 |
% |
|
$ |
4.4 |
|
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The decrease in fiscal 2007 Automated Systems sales compared to fiscal 2006 was attributable to
North America. The domestic North American auto manufacturers all suffered losses in their North
American operations and were engaged in determining how to complete significant downsizing in
their headquarters personnel, plant personnel, and plant operations. As a result of these
restructuring efforts, and as programs were reassessed in response to demand for more fuel
efficient models, customers delayed some of their tooling programs and purchases from the Company.
As a result, Automated Systems sales in North America were significantly below fiscal 2006
levels. Automated Systems sales in Europe grew by 36% in fiscal 2007 over fiscal 2006, of which 9% related to the strength of the Euro relative
to the U.S. dollar. Technology Products sales growth
occurred in all three regions and in all of its product lines ScanWorks®, WheelWorks®, TriCam® and
commercial products. Most of the growth occurred in commercial products which had no sales in
fiscal 2006. Value Added Services fiscal 2007 sales increased in all three geographic regions
compared to fiscal 2006.
Bookings Bookings represent new orders received from customers. During fiscal 2007 the
Company had new order bookings of $66.4 million compared with new order bookings of $58.7 million
during fiscal 2006. The amount of new order bookings during any particular period is not
necessarily indicative of the future operating performance of the Company. The following tables
set forth comparison data for the Companys bookings by product groups and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings (by group) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2007 |
|
|
2006 |
|
|
Increase/(Decrease) |
|
Automated Systems |
|
$ |
34.0 |
|
|
|
51.2 |
% |
|
$ |
44.3 |
|
|
|
75.5 |
% |
|
$ |
(10.3 |
) |
|
|
(23.3 |
)% |
Technology Products |
|
|
27.8 |
|
|
|
41.9 |
% |
|
|
10.0 |
|
|
|
17.0 |
% |
|
|
17.8 |
|
|
|
178.0 |
% |
Value Added Services |
|
|
4.6 |
|
|
|
6.9 |
% |
|
|
4.4 |
|
|
|
7.5 |
% |
|
|
0.2 |
|
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
66.4 |
|
|
|
100.0 |
% |
|
$ |
58.7 |
|
|
|
100.0 |
% |
|
$ |
7.7 |
|
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings (by location) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2007 |
|
|
2006 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
41.3 |
|
|
|
62.2 |
% |
|
$ |
36.5 |
|
|
|
62.2 |
% |
|
$ |
4.8 |
|
|
|
13.2 |
% |
Europe |
|
|
22.7 |
|
|
|
34.2 |
% |
|
|
20.7 |
|
|
|
35.3 |
% |
|
|
2.0 |
|
|
|
9.7 |
% |
Asia |
|
|
2.4 |
|
|
|
3.6 |
% |
|
|
1.5 |
|
|
|
2.5 |
% |
|
|
0.9 |
|
|
|
60.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
66.4 |
|
|
|
100.0 |
% |
|
$ |
58.7 |
|
|
|
100.0 |
% |
|
$ |
7.7 |
|
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings in Automated Systems were down due to the difficulties the domestic North American auto
manufacturers experienced in fiscal 2007, as described above. The increase in Technology Products
bookings occurred primarily in the commercial products line, with increases in WheelWorks® and
ScanWorks® as well. North American bookings increased as a result of the increases in Technology
Products, partially offset by a decline in Automated Systems due to the weak domestic automotive
market.
Backlog Backlog represents orders or bookings received by the Company that have not yet
been filled. The Companys backlog was $23.0 million as of June 30, 2007 compared with $18.8
million as of June 30, 2006. The following tables set forth comparison data for the Companys
backlog by product groups and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog (by group) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2007 |
|
|
2006 |
|
|
Increase/(Decrease) |
|
Automated Systems |
|
$ |
11.4 |
|
|
|
49.6 |
% |
|
$ |
15.2 |
|
|
|
80.9 |
% |
|
$ |
(3.8 |
) |
|
|
(25.0 |
)% |
Technology Products |
|
|
9.8 |
|
|
|
42.6 |
% |
|
|
1.7 |
|
|
|
9.0 |
% |
|
|
8.1 |
|
|
|
476.5 |
% |
Value Added Services |
|
|
1.8 |
|
|
|
7.8 |
% |
|
|
1.9 |
|
|
|
10.1 |
% |
|
|
(0.1 |
) |
|
|
(5.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
23.0 |
|
|
|
100.0 |
% |
|
$ |
18.8 |
|
|
|
100.0 |
% |
|
$ |
4.2 |
|
|
|
22.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog (by location) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2007 |
|
|
2006 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
16.4 |
|
|
|
71.3 |
% |
|
$ |
8.1 |
|
|
|
43.1 |
% |
|
$ |
8.3 |
|
|
|
102.5 |
% |
Europe |
|
|
6.3 |
|
|
|
27.4 |
% |
|
|
10.4 |
|
|
|
55.3 |
% |
|
|
(4.1 |
) |
|
|
(39.4 |
)% |
Asia |
|
|
0.3 |
|
|
|
1.3 |
% |
|
|
0.3 |
|
|
|
1.6 |
% |
|
|
0.0 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
23.0 |
|
|
|
100.0 |
% |
|
$ |
18.8 |
|
|
|
100.0 |
% |
|
$ |
4.2 |
|
|
|
22.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
The increase in North American and Technology Products backlogs is primarily due to the commercial
products line. The Company expects to be able to fill substantially all of the orders in backlog
during the next twelve months. The level of backlog during any particular period is not
necessarily indicative of the future operating performance of the Company. Most of the backlog is
subject to cancellation by the customer.
Gross Profit Gross profit was $27.0 million, or 43.4% of sales, in the fiscal year ended
June 30, 2007, as compared to $27.3 million, or 47.1% of sales, in the fiscal year ended June 30,
2006. Changes in product mix were the primary reason for the change in gross profit as a percent of
sales. Commercial products represented the most significant element of the change in the product
mix. Gross margin on commercial products was lower than other product lines within Technology
Products due to higher manufacturing start-up costs. The Company does not expect commercial
product margins to be significantly lower than other product lines within Technology Products in
the future.
Selling, General and Administrative (SG&A) Expenses SG&A expenses during fiscal 2007
were $17.3 million, compared with $15.2 million during fiscal 2006. The increase was primarily due
to: the investment of approximately $1.1 million in additional personnel and related expenses in
Asia and in commercial products in order to grow the Asia market and new product line respectively;
a $400,000 increase in European SG&A cost due to the strengthening of the Euro against the U.S.
dollar; an increase of approximately $230,000 in the cost of outside professional fees for legal
and audit services; a net increase of $321,000 in the provision for bad debt; and an approximately
$275,000 increase in sales and promotion costs, primarily related to commercial products.
Engineering, Research and Development (R&D) Expenses Engineering and R&D expenses were
$7.9 million for the fiscal year ended June 30, 2007, compared with $7.8 million for fiscal 2006.
The increase was primarily due to an increase in salary cost related to the addition of commercial
product engineering personnel in fiscal 2007 and an increase in the cost of contract services that
was partially offset by a reduction in the cost of engineering materials.
Interest Income, net Net interest income was $958,000 in fiscal 2007, compared with
$722,000 in fiscal 2006. The increase in interest income reflected cash balances invested in short
term securities at higher average interest rates during fiscal 2007.
Foreign Currency Gain Loss There was a net foreign currency loss of $84,000 in fiscal
2007 compared with a net foreign currency loss of $21,000 in fiscal 2006. The loss in both years
was primarily due to the change in foreign exchange rates between the time that the Companys
foreign subsidiaries, principally in Europe and Japan, received material denominated in U.S.
dollars and when funds were converted to pay for the material received.
Other Income and Expense Other income was $19,000 in fiscal 2007, compared with other
expense of $142,000 in fiscal 2006 which reflected the recognition of a $311,000 foreign currency
translation adjustment related to closing Perceptron Canada, Inc. that was partially offset by the
market value of $160,000 of stock received by the Company when a mutual life insurance company was
demutualized.
Income Taxes The effective income tax rate of 46.9% for fiscal 2007 compares to 34.3% in
fiscal 2006. Income tax for fiscal 2006 included the recognition of a $725,000 tax benefit
associated with reversing a valuation allowance related to net operating losses in North America, a
$290,000 tax expense related to the repatriation of $6.3 million of unremitted earnings of certain
of the Companys European subsidiaries under the provisions of the American Jobs Creation Act of
2004, and income tax expense of $211,000 related to a tax audit of prior years in the Companys
German operations. The effective tax rate for fiscal 2006 excluding these items was 38.8%. In
addition, the Company is not able to record a tax benefit for non-cash stock-based compensation
expense related to incentive stock options and the Companys Employee Stock Purchase Plan, which
had the effect of increasing the effective tax rate in fiscal 2007 and 2006 by 4.0% and 2.0%,
respectively. The balance of the change in the effective tax rate reflected the effect of the mix
of operating profit and loss among the Companys various operating entities and their respective
tax rates. See Note 10 of the Notes to the Consolidated Financial Statements, Income Taxes.
Outlook The outlook for fiscal 2008 is positive. The Company expects strong growth in
sales of its Technology Products, driven for the most part by growth in the commercial products
line. Based on the backlog as of June 30, 2007 and new vehicle tooling programs being considered
by customers in the Companys North American and European automotive markets, the Company also
expects modest growth in its Automotive products in fiscal 2008.
As a result of the foregoing, the Company expects both sales and net income levels for fiscal 2008
to be significantly higher than those of fiscal 2007, although the magnitude of the increase is
difficult to project at this time.
Fiscal Year Ended June 30, 2006, Compared to Fiscal Year Ended June 30, 2005
Overview The Company reported net income of $3.2 million or $0.35 per diluted share, for
the fiscal year ended June 30, 2006 compared with net income of $3.3 million, or $0.35 per diluted
share, for the fiscal year ended June 30, 2005. Specific line item results are described below.
20
Sales Net sales of $57.9 million for fiscal 2006 were up $3.0 million, or 5.5%,
compared with the same period one year ago. The following tables set forth comparison data for
the Companys net sales by product groups and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (by group) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2006 |
|
|
2005 |
|
|
Increase/(Decrease) |
|
Automated Systems |
|
$ |
43.3 |
|
|
|
74.8 |
% |
|
$ |
39.0 |
|
|
|
71.0 |
% |
|
$ |
4.3 |
|
|
|
11.0 |
% |
Technology Products |
|
|
10.9 |
|
|
|
18.8 |
% |
|
|
11.2 |
|
|
|
20.4 |
% |
|
|
(0.3 |
) |
|
|
(2.7 |
)% |
Value Added Services |
|
|
3.7 |
|
|
|
6.4 |
% |
|
|
4.7 |
|
|
|
8.6 |
% |
|
|
(1.0 |
) |
|
|
(21.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
57.9 |
|
|
|
100.0 |
% |
|
$ |
54.9 |
|
|
|
100.0 |
% |
|
$ |
3.0 |
|
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (by location) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2006 |
|
|
2005 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
37.4 |
|
|
|
64.6 |
% |
|
$ |
33.1 |
|
|
|
60.3 |
% |
|
$ |
4.3 |
|
|
|
13.0 |
% |
Europe |
|
|
18.9 |
|
|
|
32.6 |
% |
|
|
19.9 |
|
|
|
36.2 |
% |
|
|
(1.0 |
) |
|
|
(5.0 |
)% |
Asia |
|
|
1.6 |
|
|
|
2.8 |
% |
|
|
1.9 |
|
|
|
3.5 |
% |
|
|
(0.3 |
) |
|
|
(15.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
57.9 |
|
|
|
100.0 |
% |
|
$ |
54.9 |
|
|
|
100.0 |
% |
|
$ |
3.0 |
|
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The higher level of sales in North America was primarily due to increased sales of the Automated
Systems product group and primarily reflected the number of new vehicle programs and associated
tooling requirements of customers in this region. The sales decrease in Europe was impacted by a
generally declining Euro that based on conversion rates in effect during fiscal 2006, generated
sales that were approximately $0.7 million less than the comparable rates in fiscal 2005 would
have yielded. Weak economic conditions in Europe also caused customers to delay capital
appropriation decisions that resulted in sales for the Companys European subsidiary to decline
slightly compared to one year ago. The Company believes that the decline in sales of Value Added
Services was a function of customer requirements and did not represent a trend of lower sales for
this product group.
Bookings Bookings represent new orders received from customers. The Company had new
order bookings during fiscal 2006 of $58.7 million compared with new order bookings of $53.9
million during fiscal 2005. The amount of new order bookings during any particular period is not
necessarily indicative of the future operating performance of the Company. The following tables
set forth comparison data for the Companys bookings by product groups and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings (by group) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2006 |
|
|
2005 |
|
|
Increase/(Decrease) |
|
Automated Systems |
|
$ |
44.3 |
|
|
|
75.5 |
% |
|
$ |
39.1 |
|
|
|
72.5 |
% |
|
$ |
5.2 |
|
|
|
13.3 |
% |
Technology Products |
|
|
10.0 |
|
|
|
17.0 |
% |
|
|
11.4 |
|
|
|
21.2 |
% |
|
|
(1.4 |
) |
|
|
(12.3 |
)% |
Value Added Services |
|
|
4.4 |
|
|
|
7.5 |
% |
|
|
3.4 |
|
|
|
6.3 |
% |
|
|
1.0 |
|
|
|
29.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
58.7 |
|
|
|
100.0 |
% |
|
$ |
53.9 |
|
|
|
100.0 |
% |
|
$ |
4.8 |
|
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings (by location) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2006 |
|
|
2005 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
36.5 |
|
|
|
62.2 |
% |
|
$ |
30.6 |
|
|
|
56.8 |
% |
|
$ |
5.9 |
|
|
|
19.3 |
% |
Europe |
|
|
20.7 |
|
|
|
35.3 |
% |
|
|
21.6 |
|
|
|
40.1 |
% |
|
|
(0.9 |
) |
|
|
(4.2 |
)% |
Asia |
|
|
1.5 |
|
|
|
2.5 |
% |
|
|
1.7 |
|
|
|
3.1 |
% |
|
|
(0.2 |
) |
|
|
(11.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
58.7 |
|
|
|
100.0 |
% |
|
$ |
53.9 |
|
|
|
100.0 |
% |
|
$ |
4.8 |
|
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Automated Systems product group benefited from the number of new vehicle programs and
associated tooling requirements of customers in North America while weak economic conditions in
Europe caused customers to delay capital appropriation decisions. The Company believes that the rate of new orders during the
year primarily reflected the timing of customer requirements. This was also true for Technology
Products, the only product group that experienced a reduction in the level of new order bookings
compared to last year. There was no discernible change in Technology Component customers
purchasing decisions during the year.
21
Backlog Backlog represents orders or bookings received by the Company that have not yet
been filled. The Companys backlog was $18.8 million as of June 30, 2006 compared with $18.0
million as of June 30, 2005. The following tables set forth comparison data for the Companys
backlog by product groups and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog (by group) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2006 |
|
|
2005 |
|
|
Increase/(Decrease) |
|
Automated Systems |
|
$ |
15.2 |
|
|
|
80.9 |
% |
|
$ |
14.0 |
|
|
|
77.8 |
% |
|
$ |
1.2 |
|
|
|
8.6 |
% |
Technology Products |
|
|
1.7 |
|
|
|
9.0 |
% |
|
|
2.7 |
|
|
|
15.0 |
% |
|
|
(1.0 |
) |
|
|
(37.0 |
)% |
Value Added Services |
|
|
1.9 |
|
|
|
10.1 |
% |
|
|
1.3 |
|
|
|
7.2 |
% |
|
|
0.6 |
|
|
|
46.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
18.8 |
|
|
|
100.0 |
% |
|
$ |
18.0 |
|
|
|
100.0 |
% |
|
$ |
0.8 |
|
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog (by location) |
|
|
|
|
|
|
|
|
|
(in millions) |
|
2006 |
|
|
2005 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
8.1 |
|
|
|
43.1 |
% |
|
$ |
9.0 |
|
|
|
50.0 |
% |
|
$ |
(0.9 |
) |
|
|
(10.0 |
)% |
Europe |
|
|
10.4 |
|
|
|
55.3 |
% |
|
|
8.6 |
|
|
|
47.8 |
% |
|
|
1.8 |
|
|
|
20.9 |
% |
Asia |
|
|
0.3 |
|
|
|
1.6 |
% |
|
|
0.4 |
|
|
|
2.2 |
% |
|
|
(0.1 |
) |
|
|
(25.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
18.8 |
|
|
|
100.0 |
% |
|
$ |
18.0 |
|
|
|
100.0 |
% |
|
$ |
0.8 |
|
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The level of backlog during any particular period is not necessarily indicative of
the future operating performance of the Company. Most of the backlog is subject to cancellation
by the customer.
Gross Profit Gross profit was $27.3 million, or 47.1% of sales, in the fiscal year ended
June 30, 2006, as compared to $25.9 million, or 47.2% of sales, in the fiscal year ended June 30,
2005. The declining Euro through the first nine months of fiscal 2006 had the effect of reducing
margins by approximately $400,000, or 0.7% of sales, in fiscal 2006 compared to fiscal 2005.
Installation and manufacturing costs were 25.3% of sales this year compared to 26.6% of sales last
year when unfavorable inventory adjustments were approximately $400,000 higher than in fiscal 2006.
Product mix accounted for the balance of the change in gross profit as a percent of sales.
Selling, General and Administrative (SG&A) Expenses SG&A expenses during fiscal 2006
were $15.2 million, compared with $14.0 million during fiscal 2005. The increase primarily
reflected higher salary and benefit expenses of approximately $440,000 for merit and healthcare
cost increases, costs of additional personnel to support sales growth plans in Asia and Europe of
approximately $385,000, travel expenses of $375,000, non-cash stock-based compensation expense of
$244,000, contract services of $170,000 to support sales growth initiatives, and employee profit
sharing of approximately $130,000 that were partially offset by lower bad debt expense of
approximately $400,000 compared with fiscal 2005 when a significant customer bankruptcy occurred,
lower legal expense of approximately $290,000 and lower SG&A expense in Europe of $230,000 that
primarily resulted from the lower value of the Euro compared to fiscal 2005.
Engineering, Research and Development (R&D) Expenses Engineering and R&D expenses were
$7.8 million for the fiscal year ended June 30, 2006, compared with $7.2 million for fiscal 2005.
The increase was primarily due to incremental salary and benefit expenses of approximately $290,000
for merit and healthcare cost increases, non-cash stock-based compensation expense of $227,000,
engineering materials of $165,000, and higher employee profit sharing of approximately $130,000
that were partially offset by lower spending for contract services of $360,000.
Interest Income, net Net interest income was $722,000 in fiscal 2006, compared with
$492,000 in fiscal 2005. The increase in interest income reflected higher average cash balances
invested in short term securities at higher average interest rates during fiscal 2006.
Foreign Currency Gain Loss There was a net foreign currency loss of $21,000 in fiscal
2006 compared with a net foreign currency loss of $49,000 in fiscal 2005. The loss in both years
was primarily due to the change in foreign exchange rates between the time that the Companys
foreign subsidiaries, principally in Europe and Japan, received material denominated in U.S.
dollars and when funds were converted to pay for the material received.
Other Income and Expense Other expense of $142,000 in fiscal 2006 reflected the
recognition of a $311,000 foreign currency translation adjustment related to closing Perceptron
Canada, Inc. that was partially offset by the market value of $160,000 of stock received by the
Company when a mutual life insurance company was demutualized. Other income in fiscal 2005 of
$48,000 was primarily due to receipt of an insurance claim.
Income Taxes Income tax for fiscal 2006 included the recognition of a $725,000 tax
benefit associated with reversing a valuation allowance related to net operating losses in North
America that the Company now believes will be utilized, a $290,000 tax expense related to the
repatriation of $6.3 million of unremitted earnings of certain of the Companys
22
European subsidiaries under the provisions of the American Jobs Creation Act of 2004, and income tax expense
of $211,000 related to a tax audit of prior years in the Companys German operations. The effective
tax rate for fiscal 2006 excluding these items was 38.8% compared with 36.7% for fiscal year 2005.
In addition, the Company is not able to record a tax benefit for non-cash stock-based compensation
expense related to incentive stock options and the Companys Employee Stock Purchase Plan, which
had the effect of increasing the effective tax rate in fiscal 2006 by 2.0%. The balance of the
change in the effective tax rate reflected the effect of the mix of operating profit and loss among
the Companys various operating entities and their respective tax rates. See Note 10 of the Notes
to the Consolidated Financial Statements, Income Taxes.
Liquidity and Capital Resources
The Companys cash and cash equivalents were $17.2 million at June 30, 2007 compared to $25.2
million at June 30, 2006. The cash decrease of $8.0 million for the fiscal year ended June 30,
2007, resulted primarily from $5.2 million used to buy back company stock, $3.5 million used to
fund operations activities, and $1.2 million used for capital expenditures, which were mitigated by
$1.6 million received from the Companys stock plans.
The $3.5 million of cash used for operations was primarily related to net working capital changes
of $7.7 million, offset by cash generated from earnings of $1.5 million, the add back of non-cash
items such as depreciation and amortization expense of $1.3 million and stock compensation expense
of $815,000. Net working capital is defined as changes in assets and liabilities, exclusive of
changes shown separately on the Consolidated Statements of Cash Flow. The cash used for net
working capital resulted primarily from a $7.3 million increase in net receivables due to a higher
receivable balance at June 30, 2007 compared to 2006. The higher receivable balance was primarily
the result of the higher sales level in the fourth quarter of fiscal 2007 which was $8.9 million
higher than the comparable quarter of fiscal 2006. Other uses of working capital were a $1.0
million increase in inventory and $2.0 million for current assets and liabilities. Mitigating
these uses was an increase in accounts payable of $2.5 million due to the timing of payments. The
$1.0 million increase in inventory related primarily to increased finished goods inventory for
future orders. The $2.0 million use of cash for other current assets and liabilities primarily
represents progress payments on purchase order commitments for deposits related to the Companys
new electronic inspection product.
The Company provides a reserve for obsolescence to recognize the effects of engineering change
orders and other matters that affect the value of the inventory. A detailed review of the
inventory is performed yearly with quarterly updates for known changes that have occurred since the
annual review. When inventory is deemed to have no further use or value, the Company disposes of
the inventory and the reserve for obsolescence is reduced. During fiscal 2007, the Companys
German subsidiary made a change to separate its reserve for obsolescence from its inventory value
to reflect the methodology used by the rest of the Company. As a result, the inventory of the
German subsidiary is reported at a gross value and the reserve for obsolescence increased by
$421,000, which had no effect on net income. During fiscal year 2007, the Company increased its
reserve for inventory obsolescence by a net $357,000, which resulted from the disposal of $64,000
of inventory that had been reserved for at June 30, 2006 and additional reserves for obsolescence
of approximately $421,000, described above.
The Company determines its allowance for doubtful accounts by considering a number of factors,
including the length of time trade accounts receivable are past due, the Companys previous loss
history, the customers current ability to pay its obligation to the Company, and the condition of
the general economy and the industry as a whole. The Company writes-off accounts receivable when
they become uncollectible, and payments subsequently received on such receivables are credited to
the allowance for doubtful accounts. During fiscal year 2007, the Company wrote off $79,000 of
receivables and increased its provision for bad debts by $400,000.
Financing activities during fiscal year 2007 primarily reflected $5.2 million used to repurchase
company stock and $1.6 million received under the Companys stock plans.
The Company has a $7.5 million secured Credit Agreement with Comerica Bank, which expires on
November 1, 2008. Proceeds under the Credit Agreement may be used for working capital and capital
expenditures. The security for the loan is substantially all non real estate assets of the Company
held in the United States. Borrowings are designated as a Prime-based Advance or as a
Eurodollar-based Advance. Interest on Prime-based Advances is payable on the last day of each
month and is calculated daily at a rate that ranges from a 1/2% below to a 1/4% above the banks prime
rate (8.25% as of June 30, 2007) dependent upon the Companys ratio of funded debt to earnings
before interest, taxes, depreciation and amortization (EBITDA). Interest on Eurodollar-based Advances is calculated at a
specific margin above the Eurodollar Rate offered at the time and for the period chosen
(approximately 7.24% as of June 30, 2007) dependent upon the Companys ratio of funded debt to
EBITDA and is payable on the last day of the applicable period. Quarterly, the Company pays a
commitment fee on the daily unused portion of the Credit Agreement based on a percentage dependent
upon the Companys ratio of funded debt to EBITDA. The Credit Agreement prohibits the Company from
paying dividends. In addition, the Credit Agreement requires the Company to maintain a Tangible
Net Worth, as defined in the Credit Agreement, of not less than $41.0 million as of June 30, 2007
and to have no advances outstanding for 30 consecutive days each calendar year. At June 30, 2007,
the Company had no borrowings outstanding.
23
At June 30, 2007, the Companys German subsidiary (GmbH) had an unsecured credit facility totaling
500,000 Euros (equivalent to approximately $674,000 at June 30, 2007). The facility may be used to
finance working capital needs and equipment purchases or capital leases. Any borrowings for
working capital needs will bear interest at 9.0% on the first 100,000 Euros of borrowings and 2.0%
for borrowings over 100,000 Euros. The German credit facility is cancelable at any time by either
GmbH or the bank and any amounts then outstanding would become immediately due and payable. At
June 30, 2007, GmbH had no borrowings outstanding.
On September 9, 2005, the Companys Board of Directors approved a stock repurchase program
authorizing the Company to repurchase up to $5.0 million of the Companys Common Stock. The
Company was authorized to buy shares of its Common Stock on the open market or in privately
negotiated transactions from time to time, based on market prices. Pursuant to the authorization,
the Company repurchased 20,000 shares of Common Stock at an average price of $8.03 per share during
the fiscal year ended June 30, 2007. In July 2006, the Company completed its fiscal 2006 stock
repurchase program.
On August 7, 2006, the Companys Board of Directors (Board) approved a stock repurchase program
authorizing the Company to repurchase up to $3.0 million of the Companys Common Stock through
August 2007. On November 13, 2006, the Board approved a $2.0 million increase to the stock
repurchase program bringing the total repurchase authorized to $5.0 million through August 2007.
The Company was authorized to buy shares of its Common Stock on the open market or in privately
negotiated transactions from time to time, based on market prices. The Company also announced that
it had entered into a Rule 10b5-1 trading plan (Repurchase Plan) with Barrington Research
Associates, Inc. to purchase up to $5.0 million of the Companys Common Stock through August 2007
(less the dollar amount of purchases by the Company outside the Repurchase Plan), in open market or
privately negotiated transactions, in accordance with the requirements of Rule 10b-18. Pursuant to
the authorization, the Company repurchased 592,600 shares of Common Stock at an average price of
$8.43 per share during the fiscal year ended June 30, 2007. The Company completed its fiscal 2007
stock repurchase program in February 2007.
See Item 3, Legal Proceedings and Note 6 to the Consolidated Financial Statements,
Contingencies, for a discussion of certain contingencies relating to the Companys liquidity,
financial position and results of operations. See also, Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations Critical Accounting Policies -
Litigation and Other Contingencies.
The Company expects to spend approximately $1.5 million during fiscal year 2008 for capital
equipment, although there is no binding commitment to do so. Based on the Companys current
business plan, including the introduction of its new line of electronic inspection products, the
Company believes that available cash on hand and existing credit facilities will be sufficient to
fund anticipated fiscal year 2008 cash flow requirements, except to the extent that the Company
implements new business development opportunities, which would be financed as discussed below. The
Company does not believe that inflation has significantly impacted historical operations and does
not expect any significant near-term inflationary impact.
The Company will consider evaluating business opportunities that fit its strategic plans. There
can be no assurance that the Company will identify any opportunities that fit its strategic plans
or will be able to enter into agreements with identified business opportunities on terms acceptable
to the Company. The Company anticipates that it would finance any such business opportunities from
available cash on hand, existing credit facilities, issuance of additional shares of its stock or
additional sources of financing, as circumstances warrant.
Contractual Obligations
The following summarizes the Companys contractual obligations at June 30, 2007, and the effect
such obligations are expected to have on its liquidity and cash flow in future periods (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
More than 5 |
|
|
Total |
|
1 Year |
|
1 3 Years |
|
3 5 Years |
|
Years |
Purchase Obligations |
|
$ |
10,674 |
|
|
$ |
9,173 |
|
|
$ |
1,501 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Operating Leases |
|
$ |
1,646 |
|
|
$ |
913 |
|
|
$ |
685 |
|
|
$ |
48 |
|
|
$ |
0 |
|
A purchase obligation is defined as an agreement to purchase goods or services that is enforceable
and legally binding. Included in the purchase obligations category above are obligations related
to purchase orders for inventory purchases under the Companys standard terms and conditions and
under negotiated agreements with vendors. The Company expects to receive consideration (products
or services) for these purchase obligations. The purchase obligation amounts do not represent all
anticipated purchases in the future, but represent only those items for which the Company
was contractually obligated at June 30, 2007. Operating leases represent commitments to lease
building space, office equipment and motor vehicles.
24
Critical Accounting Policies
The Companys discussion and analysis of its financial condition and results of operations are
based upon the Companys financial statements and accompanying notes, which have been prepared in
accordance with accounting principles generally accepted in the United States (U.S. GAAP). The
Companys significant accounting policies are discussed in Note 1 of the Notes to Consolidated
Financial Statements, Summary of Significant Accounting Policies. Certain of the Companys
significant accounting policies are subject to judgments and uncertainties, which affect the
application of these policies and require the Company to make estimates based on assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its
estimates on historical experience and on various assumptions that are believed to be reasonable
under the circumstances. On an on-going basis, the Company evaluates its estimates and underlying
assumptions. In the event estimates or underlying assumptions prove to be different from actual
amounts, adjustments are made in the subsequent period to reflect more current information. The
Company believes that the following significant accounting policies involve managements most
difficult, subjective or complex judgments or involve the greatest uncertainty.
Revenue Recognition. The Company recognizes revenue in accordance with Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, and SAB 104, Revenue
Recognition. Revenue related to products is recognized upon shipment when title and risk of loss
has passed to the customer, there is persuasive evidence of an arrangement, the sales price is
fixed or determinable, collection of the related receivable is reasonably assured and customer
acceptance criteria have been successfully demonstrated. Revenue related to services is recognized
upon completion of the service. The Company also has multiple element arrangements in its
Automated Systems product line that may include purchase of equipment, labor support and/or
training. Each element has value on a stand-alone basis. For multiple element arrangements, the
Company defers from revenue recognition the greater of the fair value of any undelivered elements
of the contract or the portion of the sales price of the contract that is not payable until the
undelivered elements are completed. Delivered items are not contingent upon the delivery of any
undelivered items nor do the delivered items include general rights of return. The Company does
not have price protection agreements or requirements to buy back inventory. The Companys
Automated Systems products are made to order systems that are designed and configured to meet each
customers specific requirements. As a result, the Company has virtually no history of returns.
Stock-Based Compensation. The Company accounts for non-cash stock-based compensation in
accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions
of this statement, share-based compensation cost is measured at the grant date based on the value
of the award and is recognized as expense over the vesting period. Determining the fair value of
share-based awards at the grant date requires judgment, including estimating the amount of
share-based awards that are expected to be forfeited. The estimated forfeiture rate may change
from time to time based upon the Companys actual experience. An increase in the forfeiture rate
would require the Company to reverse a portion of its prior expense for non-cash stock-based
compensation, which would positively impact the Companys results of operations. Because the
Company currently experiences a low forfeiture rate, a reduction in the estimated forfeiture rate
would not have a material impact on the Companys results of operations.
Accounts Receivable. The Company monitors its accounts receivable and charges to expense
an amount equal to its estimate of potential credit losses. The Company considers a number of
factors in determining its estimates, including, the length of time trade accounts receivable are
past due, the Companys previous loss history, the customers current ability to pay its obligation
and the condition of the general economy and the industry as a whole. The use of different
estimates for future credit losses would result in different charges to selling, general and
administrative expense in each period presented and could negatively affect the Companys results
of operations for the period. In addition, if actual experience differs materially from the
Companys estimates, the Company could be required to record large credit losses that could
negatively affect the Companys results of operations for the period.
Inventories. Inventories are valued at the lower of cost or market; cost being determined
under the first in, first out method. Provision is made to reduce inventories to net realizable
value for excess and/or obsolete inventory. The Company reviews its inventory levels quarterly in
order to identify obsolete and slow-moving inventory. The Company estimates excess or obsolete
inventory based principally upon contemplated future customer demand for the Companys products and
the timing of product upgrades. The use of different assumptions in determining slow-moving and
obsolete inventories would result in different charges to cost of sales in each period presented
and could negatively affect the Companys results of operations for the period. In addition, if
actual experience differs materially from the Companys estimates, the Company could be required to
record large losses that could negatively affect the Companys results of operations for the
period.
Deferred Income Taxes. The Company accounts for its deferred income taxes in accordance
with SFAS No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities
represent the future income tax effect of temporary differences between the book and tax basis of
the Companys assets and liabilities, assuming they will be realized and settled at the amounts
reported in the Companys financial statements. The Company records a valuation allowance to
reduce its deferred tax assets to the amount that it believes is more likely than not to be
realized. This
assessment includes consideration for the scheduled reversal of temporary taxable differences,
projected future taxable income and the impact of tax planning. The Company adjusts this valuation
allowance periodically based upon changes
25
in these considerations. In fiscal 2006, the Company
reduced the valuation allowance, described in Income Taxes and Note 10 of the Notes to the
Consolidated Financial Statements, Income Taxes, based on the past few years of taxable income
and projected future taxable income. If actual long-term future taxable income is lower than the
Companys estimate, the Company may be required to record material adjustments to the deferred tax
assets, resulting in a charge to income in the period of determination and negatively impacting the
Companys results of operations and financial position for the period.
Litigation and Other Contingencies. The Company is subject to certain legal proceedings
and other contingencies, the outcomes of which are subject to significant uncertainty. The Company
accrues for estimated losses if it is probable that an asset has been impaired or a liability has
been incurred and the amount of the loss can be reasonably estimated. The Company uses judgment
and evaluates, with the assistance of legal counsel, whether a loss contingency arising from
litigation should be disclosed or recorded. The outcome of legal proceedings is inherently
uncertain and so typically a loss cannot be reasonably estimated. Accordingly, if the outcome of
legal proceedings are different than is anticipated by the Company, the Company would have to
record a charge for the matter, generally in the full amount at which it was resolved, in the
period resolved, negatively impacting the Companys results of operations and financial position
for the period.
Product Warranty. The Company provides a reserve for warranty based on its experience and
knowledge. Because the Company does not have historical claims experience in its new line of
electronic inspection products, the Company provides for estimated warranty expenses at the time
the new electronic inspection products are sold to its customer based on knowledge of the industry
in which the product is sold. Factors affecting the Companys warranty liability include the
number of units sold or in service and historical and anticipated rates of claims and cost per
claim. The Company periodically assesses the adequacy of its warranty liability based on changes
in these factors. If a special circumstance arises requiring a higher level of warranty reserve,
the Company would make a special warranty provision commensurate with the facts. Management
believes that the accounting estimate related to warranty reserves is a critical accounting
estimate because changes in it could materially affect net income, and it requires management to
estimate the frequency and amounts of future claims, which are inherently uncertain. Managements
policy is to continuously monitor the warranty liabilities to determine their adequacy, therefore,
the warranty reserve is maintained at an amount management deems adequate to cover estimated
warranty expense. Actual claims incurred in the future may differ from the original estimates,
which may result in material revisions to the warranty reserve that could negatively affect the
Companys results of operations for the period.
Market Risk Information
Perceptrons primary market risk is related to foreign exchange rates. The foreign exchange risk
is derived from the operations of its international subsidiaries, which are primarily located in
Germany and for which products are produced in the U.S. The Company may from time to time have
interest rate risk in connection with the investment of its cash.
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-United States currencies, the currency rate risk exposure is
predominantly less than one year with the majority in the 120 to 150 day range. At June 30, 2007,
the Companys percentage of sales commitments in non-United States currencies was approximately
28.8% or $6.6 million, compared to 58.7% or $11.0 million at June 30, 2006.
The Company may use, from time to time, a limited hedging program to minimize the impact of foreign
currency fluctuations. These transactions involve the use of forward contracts, typically mature
within one year and are designed to hedge anticipated foreign currency transactions. The Company
may use forward exchange contracts to hedge the net assets of certain of its foreign subsidiaries
to offset the translation and economic exposures related to the Companys investment in these
subsidiaries.
At June 30, 2007, the Company had forward exchange contracts to sell 5.0 million Euros ($6.7
million equivalent) at a weighted average settlement rate of 1.34 Euros to the United States
Dollar. The contracts outstanding at June 30, 2007, mature through November 29, 2007. The
objective of the hedge transactions is to protect designated portions of the Companys net
investment in its foreign European subsidiary against adverse changes in the Euro/U.S. Dollar
exchange rate. The Company assesses hedge effectiveness based on overall changes in fair value of
the forward contract. Since the critical risks of the forward contract and the net investment
coincide, there was no ineffectiveness. The accounting for the hedges is consistent with
translation adjustments where any gains and losses are recorded to other comprehensive income. The
Company recognized a loss of $83,000 in other comprehensive income (loss) for the unrealized and
realized change in value of the forward exchange contracts during the fiscal year ended June 30,
2007. Offsetting this amount in other comprehensive income (loss) was the translation effect of
the Companys foreign
subsidiary. Because the forward contracts were effective, there was no gain or loss recognized in
earnings. The Companys forward exchange contracts do not subject it to material risk due to
exchange rate movements because gains and losses on these contracts offset losses and gains on the
assets, liabilities, and transactions being hedged.
26
At June 30, 2006 and 2005, the Company had approximately $5.0 million and $3.0 million,
respectively, of forward exchange contracts between the United States Dollar and the Euro with
weighted average settlement prices of 1.25 and 1.30 Euro to each United States Dollar,
respectively. The Company recognized a loss of $38,000 and income of approximately $168,000 in
other comprehensive income (loss) for the unrealized change in value of forward exchange contracts
during the fiscal years ended June 30, 2006 and June 30, 2005, respectively.
The Companys potential loss in earnings that would have resulted from a hypothetical 10% adverse
change in quoted foreign currency exchange rates related to the translation of foreign denominated
revenues and expenses into U.S. dollars for the fiscal years ended June 30, 2007, 2006 and 2005,
would have been approximately $90,000, $2,000 and $114,000, respectively.
Interest Rate Risk
The Company invests its cash and cash equivalents in high quality, short-term investments with
primarily a term of three months or less. Given the short maturities and investment grade quality
of the Companys investment holdings at June 30, 2007, a 100 basis point rise in interest rates
would not be expected to have a material adverse impact on the fair value of the Companys cash and
cash equivalents. As a result, the Company does not currently hedge these interest rate exposures.
New Accounting Pronouncements
For a discussion of new accounting pronouncements, see Note 1 to the Consolidated Financial
Statements, Summary of Significant Accounting Policies-New Accounting Pronouncements.
ITEM 7A: QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required pursuant to this item is incorporated by reference herein from Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations -
Market Risk Information.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
|
|
Page |
|
|
|
|
|
28 |
Consolidated Financial Statements: |
|
|
|
|
29 |
|
|
30 |
|
|
31 |
|
|
32 |
|
|
33 |
27
[GRANT THORNTON LETTERHEAD]
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders of Perceptron, Inc.
We have audited the accompanying consolidated balance sheets of Perceptron, Inc. and Subsidiaries
(the Company) as of June 30, 2007 and 2006, and the related consolidated statements of
income, comprehensive income, shareholders equity and cash flows for each of the three years in the period ended June
30, 2007. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Perceptron, Inc. and Subsidiaries as of June 30, 2007 and 2006,
and the results of its operations and its cash flows for each of the three years in the period
ended June 30, 2007 in conformity with accounting principles generally accepted in the United
States of America.
/S/ Grant Thornton LLP
Southfield, Michigan
September 25, 2007
28
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amount)
|
|
|
|
|
|
|
|
|
As of June 30, |
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
17,178 |
|
|
$ |
25,188 |
|
Receivables: |
|
|
|
|
|
|
|
|
Billed receivables, net of allowance for doubtful accounts
of $673 and $352, respectively |
|
|
21,287 |
|
|
|
15,623 |
|
Unbilled receivables |
|
|
2,858 |
|
|
|
994 |
|
Other receivables |
|
|
799 |
|
|
|
577 |
|
Inventories, net of reserves of $911 and $554, respectively |
|
|
7,625 |
|
|
|
6,433 |
|
Deferred taxes |
|
|
1,243 |
|
|
|
1,481 |
|
Other current assets |
|
|
3,025 |
|
|
|
521 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
54,015 |
|
|
|
50,817 |
|
|
|
|
|
|
|
|
|
|
Property and Equipment |
|
|
|
|
|
|
|
|
Building and land |
|
|
5,984 |
|
|
|
6,013 |
|
Machinery and equipment |
|
|
11,952 |
|
|
|
11,566 |
|
Furniture and fixtures |
|
|
1,133 |
|
|
|
1,093 |
|
|
|
|
|
|
|
|
|
|
|
19,069 |
|
|
|
18,672 |
|
Less Accumulated depreciation and amortization |
|
|
(12,012 |
) |
|
|
(11,264 |
) |
|
|
|
|
|
|
|
Net property and equipment |
|
|
7,057 |
|
|
|
7,408 |
|
|
|
|
|
|
|
|
|
|
Deferred Tax Asset |
|
|
4,384 |
|
|
|
4,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
65,456 |
|
|
$ |
62,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,446 |
|
|
$ |
1,667 |
|
Accrued liabilities and expenses |
|
|
2,764 |
|
|
|
2,277 |
|
Accrued compensation |
|
|
1,075 |
|
|
|
1,740 |
|
Income taxes payable |
|
|
883 |
|
|
|
145 |
|
Deferred revenue |
|
|
3,483 |
|
|
|
2,336 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
11,651 |
|
|
|
8,165 |
|
|
|
|
|
|
|
|
|
|
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 8,142 and 8,352, respectively |
|
|
81 |
|
|
|
84 |
|
Accumulated other comprehensive income (loss) |
|
|
869 |
|
|
|
(15 |
) |
Additional paid-in capital |
|
|
36,346 |
|
|
|
39,111 |
|
Retained earnings |
|
|
16,509 |
|
|
|
15,050 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
53,805 |
|
|
|
54,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
65,456 |
|
|
$ |
62,395 |
|
|
|
|
|
|
|
|
The notes to the consolidated financial statements are an integral part of these statements.
29
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended June 30, |
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
62,252 |
|
|
$ |
57,875 |
|
|
$ |
54,892 |
|
Cost of Sales |
|
|
35,252 |
|
|
|
30,588 |
|
|
|
28,985 |
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
27,000 |
|
|
|
27,287 |
|
|
|
25,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
17,262 |
|
|
|
15,155 |
|
|
|
13,970 |
|
Engineering, research and development |
|
|
7,885 |
|
|
|
7,764 |
|
|
|
7,242 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
25,147 |
|
|
|
22,919 |
|
|
|
21,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
1,853 |
|
|
|
4,368 |
|
|
|
4,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income and (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
|
958 |
|
|
|
722 |
|
|
|
492 |
|
Foreign currency gain (loss) |
|
|
(84 |
) |
|
|
(21 |
) |
|
|
(49 |
) |
Other |
|
|
19 |
|
|
|
(142 |
) |
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
893 |
|
|
|
559 |
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
2,746 |
|
|
|
4,927 |
|
|
|
5,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
|
1,287 |
|
|
|
1,688 |
|
|
|
1,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
1,459 |
|
|
$ |
3,239 |
|
|
$ |
3,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.18 |
|
|
$ |
0.38 |
|
|
$ |
0.37 |
|
Diluted |
|
$ |
0.17 |
|
|
$ |
0.35 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
8,114 |
|
|
|
8,582 |
|
|
|
8,766 |
|
Dilutive effect of stock options |
|
|
647 |
|
|
|
618 |
|
|
|
671 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
8,761 |
|
|
|
9,200 |
|
|
|
9,437 |
|
|
|
|
|
|
|
|
|
|
|
The notes to the consolidated financial statements are an integral part of these statements.
30
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended June 30, |
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,459 |
|
|
$ |
3,239 |
|
|
$ |
3,282 |
|
Adjustments to reconcile net income to net cash provided from
(used for) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,333 |
|
|
|
1,345 |
|
|
|
1,326 |
|
Stock compensation expense |
|
|
815 |
|
|
|
667 |
|
|
|
|
|
Deferred income taxes |
|
|
15 |
|
|
|
753 |
|
|
|
775 |
|
Stock option income tax benefit |
|
|
|
|
|
|
|
|
|
|
142 |
|
Disposal of assets |
|
|
306 |
|
|
|
28 |
|
|
|
150 |
|
Allowance for doubtful accounts |
|
|
326 |
|
|
|
(39 |
) |
|
|
(235 |
) |
Changes in assets and liabilities, exclusive of changes shown separately |
|
|
(7,724 |
) |
|
|
3,976 |
|
|
|
(3,412 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used for) provided from operating activities |
|
|
(3,470 |
) |
|
|
9,969 |
|
|
|
2,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit borrowings |
|
|
1,300 |
|
|
|
797 |
|
|
|
608 |
|
Revolving credit repayments |
|
|
(1,300 |
) |
|
|
(797 |
) |
|
|
(608 |
) |
Proceeds from stock plans |
|
|
1,601 |
|
|
|
542 |
|
|
|
407 |
|
Repurchase of company stock |
|
|
(5,184 |
) |
|
|
(4,872 |
) |
|
|
(279 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used for) provided from financing activities |
|
|
(3,583 |
) |
|
|
(4,330 |
) |
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(1,247 |
) |
|
|
(1,093 |
) |
|
|
(1,449 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities |
|
|
(1,247 |
) |
|
|
(1,093 |
) |
|
|
(1,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
290 |
|
|
|
268 |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
(8,010 |
) |
|
|
4,814 |
|
|
|
695 |
|
Cash and Cash Equivalents, July 1 |
|
|
25,188 |
|
|
|
20,374 |
|
|
|
19,679 |
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, June 30 |
|
$ |
17,178 |
|
|
$ |
25,188 |
|
|
$ |
20,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net |
|
$ |
(7,256 |
) |
|
$ |
5,582 |
|
|
$ |
(3 |
) |
Inventories |
|
|
(1,007 |
) |
|
|
(550 |
) |
|
|
(196 |
) |
Accounts payable |
|
|
2,523 |
|
|
|
(187 |
) |
|
|
410 |
|
Other current assets and liabilities |
|
|
(1,984 |
) |
|
|
(869 |
) |
|
|
(3,623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(7,724 |
) |
|
$ |
3,976 |
|
|
$ |
(3,412 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest |
|
$ |
1 |
|
|
$ |
10 |
|
|
$ |
1 |
|
Cash paid during the year for income taxes |
|
|
795 |
|
|
|
1,393 |
|
|
|
3,816 |
|
The notes to the consolidated financial statements are an integral part of these statements.
31
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Additional |
|
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Comprehensive |
|
|
Paid-In |
|
|
Retained |
|
|
Shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Income (Loss) |
|
|
Capital |
|
|
Earnings |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2004 |
|
|
8,716 |
|
|
$ |
87 |
|
|
$ |
(758 |
) |
|
$ |
42,502 |
|
|
$ |
8,529 |
|
|
$ |
50,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,282 |
|
|
|
3,282 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
(87 |
) |
|
|
|
|
|
|
|
|
|
|
(87 |
) |
Hedging |
|
|
|
|
|
|
|
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,363 |
|
Stock plans |
|
|
145 |
|
|
|
1 |
|
|
|
|
|
|
|
547 |
|
|
|
|
|
|
|
548 |
|
Stock repurchase |
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
(279 |
) |
|
|
|
|
|
|
(279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2005 |
|
|
8,822 |
|
|
$ |
88 |
|
|
$ |
(677 |
) |
|
$ |
42,770 |
|
|
$ |
11,811 |
|
|
$ |
53,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,239 |
|
|
|
3,239 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
|
700 |
|
Hedging |
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,901 |
|
Stockbased compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
667 |
|
|
|
|
|
|
|
667 |
|
Stock plans |
|
|
197 |
|
|
|
2 |
|
|
|
|
|
|
|
540 |
|
|
|
|
|
|
|
542 |
|
Stock repurchase |
|
|
(667 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
(4,866 |
) |
|
|
|
|
|
|
(4,872 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2006 |
|
|
8,352 |
|
|
$ |
84 |
|
|
$ |
(15 |
) |
|
$ |
39,111 |
|
|
$ |
15,050 |
|
|
$ |
54,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,459 |
|
|
|
1,459 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
967 |
|
|
|
|
|
|
|
|
|
|
|
967 |
|
Hedging |
|
|
|
|
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,343 |
|
Stockbased compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
815 |
|
|
|
|
|
|
|
815 |
|
Stock plans |
|
|
403 |
|
|
|
3 |
|
|
|
|
|
|
|
1,598 |
|
|
|
|
|
|
|
1,601 |
|
Stock repurchase |
|
|
(613 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
(5,178 |
) |
|
|
|
|
|
|
(5,184 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2007 |
|
|
8,142 |
|
|
$ |
81 |
|
|
$ |
869 |
|
|
$ |
36,346 |
|
|
$ |
16,509 |
|
|
$ |
53,805 |
|
|
|
|
The notes to the consolidated financial statements are an integral part of these statements.
32
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Operations
Perceptron, Inc. and its wholly-owned subsidiaries (collectively, the Company) are involved in
the design, development, manufacture, and marketing of information-based measurement and inspection
solutions for process improvements primarily for the automotive industry.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition
Revenue related to products is recognized upon shipment when title and risk of loss has passed to
the customer, there is persuasive evidence of an arrangement, the sales price is fixed or
determinable, collection of the related receivable is reasonably assured and customer acceptance
criteria have been successfully demonstrated. Revenue related to services is recognized upon
completion of the service. The Company also has multiple element arrangements in its Automated
Systems product line that may include purchase of equipment, labor support and/or training. Each
element has value on a stand-alone basis. For multiple element arrangements, the Company defers
from revenue recognition the greater of the fair value of any undelivered elements of the contract
or the portion of the sales price of the contract that is not payable until the undelivered
elements are completed. Delivered items are not contingent upon the delivery of any undelivered
items nor do the delivered items include general rights of return. The Company does not have price
protection agreements or requirements to buy back inventory. The Companys Automated Systems
products are made to order systems that are designed and configured to meet each customers
specific requirements. As a result, the Company has virtually no history of returns.
Research and Development
Research and development costs, including software development costs, are expensed as incurred.
Foreign Currency
The financial statements of the Companys wholly-owned foreign subsidiaries have been translated in
accordance with Statement of Financial Accounting Standards (SFAS) No. 52, with the functional
currency being the local currency in the foreign country. Under this standard, translation
adjustments are accumulated in a separate component of shareholders equity until the subsidiary is
disposed of. During the fourth quarter of fiscal 2006, the Company liquidated Perceptron Canada,
Inc., an inactive subsidiary, and recognized as expense accumulated translation adjustments of
$311,000. Gains and losses on foreign currency transactions are included in the consolidated
statement of income under Other Income and Expenses.
Earnings Per Share
Basic earnings per share (EPS) is calculated by dividing net income by the weighted average
number of common shares outstanding during the period. Other obligations, such as stock options,
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,
unless such effect is anti-dilutive. Effective with the adoption of Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS 123R), the calculation of
diluted shares also takes into effect the average unrecognized non-cash stock-based compensation
expense and additional adjustments for tax benefits related to non-cash stock-based compensation
expense.
Options to purchase 281,000, 480,000, and 580,000 shares of common stock outstanding in the fiscal
years ended June 30, 2007, 2006 and 2005, respectively, were not included in the computation of
diluted EPS because the effect would have been anti-dilutive.
33
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with maturities of three months or
less to be cash equivalents. Fair value approximates carrying value because of the short maturity
of the cash equivalents. Those with a greater life are recorded as
marketable securities. At June 30, 2007, the Company had
$17.2 million in cash and cash equivalents of which
$6.4 million was held in foreign bank accounts.
Accounts Receivable and Concentration of Credit Risk
The Company markets and sells its products principally to automotive assembly companies, line
builders, system integrators, original equipment manufacturers (OEMs) and value-added resellers.
The Companys accounts receivable are principally from a small number of large customers. The
Company performs ongoing credit evaluations of its customers. Accounts receivable are generally
due within 30 days and are stated at amounts due from customers net of an allowance for doubtful
accounts. Accounts outstanding longer than the contractual payment terms are considered past due.
The Company determines its allowance by considering a number of factors, including the length of
time trade accounts receivable are past due, the Companys previous loss history, the customers
current ability to pay its obligation to the Company, and the condition of the general economy and
the industry as a whole. The Company writes-off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are credited to the allowance
for doubtful accounts. Changes in the Companys allowance for doubtful accounts are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning |
|
Costs and |
|
Less |
|
Ending |
|
|
Balance |
|
Expenses |
|
Charge-offs |
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended June 30, 2007 |
|
$ |
352 |
|
|
$ |
400 |
|
|
$ |
79 |
|
|
$ |
673 |
|
Fiscal year ended June 30, 2006 |
|
$ |
391 |
|
|
$ |
(22 |
) |
|
$ |
17 |
|
|
$ |
352 |
|
Fiscal year ended June 30, 2005 |
|
$ |
625 |
|
|
$ |
387 |
|
|
$ |
621 |
|
|
$ |
391 |
|
Property and Equipment
Property and equipment are recorded at cost. Depreciation related to machinery and equipment and
furniture and fixtures is primarily computed on a straight-line basis over estimated useful lives
ranging from 3 to 13 years. Depreciation on buildings is computed on a straight-line basis over 40
years.
When assets are retired, the costs of such assets and related accumulated depreciation or
amortization are eliminated from the respective accounts, and the resulting gain or loss is
reflected in the consolidated statement of income.
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. The Company provides a reserve for obsolescence to recognize
the effects of engineering change orders, age and use of inventory that affect the value of the
inventory. When the related inventory is disposed of, the obsolescence reserve is reduced. A
detailed review of the inventory is performed yearly with quarterly updates for known changes that
have occurred since the annual review. Inventory, net of reserves, is comprised of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
At June 30, |
|
|
|
2007 |
|
|
2006 |
|
Component parts |
|
$ |
2,900 |
|
|
$ |
3,038 |
|
Work in process |
|
|
355 |
|
|
|
309 |
|
Finished goods |
|
|
4,370 |
|
|
|
3,086 |
|
|
|
|
|
|
|
|
Total |
|
$ |
7,625 |
|
|
$ |
6,433 |
|
|
|
|
|
|
|
|
Changes in the Companys reserves for obsolescence are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning |
|
Costs and |
|
Less |
|
Ending |
|
|
Balance |
|
Expenses |
|
Charge-offs |
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended June 30, 2007 |
|
$ |
554 |
|
|
$ |
421 |
|
|
$ |
64 |
|
|
$ |
911 |
|
Fiscal year ended June 30, 2006 |
|
$ |
520 |
|
|
$ |
193 |
|
|
$ |
159 |
|
|
$ |
554 |
|
Fiscal year ended June 30, 2005 |
|
$ |
510 |
|
|
$ |
230 |
|
|
$ |
220 |
|
|
$ |
520 |
|
34
Deferred Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis, and the effects of operating losses and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. A valuation allowance is provided for
deferred tax assets if it is more likely than not that these items will either expire before the
Company is able to realize their benefit, or future deductibility is uncertain.
Financial Instruments
The carrying amounts of the Companys financial instruments, which include cash, accounts
receivable, accounts payable, forward exchange contracts and amounts due to banks or other lenders,
approximate their fair values at June 30, 2007 and 2006. Fair values have been determined through
information obtained from market sources and management estimates.
In the normal course of business, the Company may employ forward exchange contracts to manage its
exposure to fluctuations in foreign currency exchange rates. Forward contracts for forecasted
transactions are designated as cash flow hedges and recorded as assets or liabilities on the
balance sheet at their fair value. Changes in the contracts fair value are recognized in
accumulated other comprehensive income until they are recognized in earnings at the time the
forecasted transaction occurs. If the forecasted transaction does not occur, or it becomes probable
that it will not occur, the gain or loss on the related cash flow hedge is recognized in earnings
at that time. For forward exchange contracts designated as hedging the net assets of the Companys
foreign subsidiaries, changes in the contracts fair value are offset against the translation
reflected in shareholders equity to the extent effective. The Company does not enter into any
derivative transactions for speculative purposes.
Warranty
Automotive industry systems carry a three-year warranty for parts and a one-year warranty for labor
and travel related to warranty. Product sales to the forest products industry carry a three-year
warranty for TriCam® sensors. Sales of ScanWorks® and ScanWorks®
ToolKit have a one-year warranty for parts; sales of NCA products have a two-year warranty for
parts; sales of the Companys commercial products have a two-year warranty for parts and labor.
The Company provides a reserve for warranty based on its experience and knowledge. Because the
Company does not have historical claims experience in its new line of electronic inspection
products, the Company provides for estimated warranty expenses at the time the new electronic
inspection products are sold to its customer based on knowledge of the industry in which the product is
sold. Factors affecting the Companys warranty liability include the number of units
sold or in service and historical and anticipated rates of claims and cost per claim. The Company
periodically assesses the adequacy of its warranty liability based on changes in these factors. If
a special circumstance arises requiring a higher level of warranty, the Company would make a
special warranty provision commensurate with the facts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning |
|
Costs and |
|
Less |
|
Ending |
|
|
Balance |
|
Expenses |
|
Charge-offs |
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended June 30, 2007 |
|
$ |
200 |
|
|
$ |
449 |
|
|
$ |
386 |
|
|
$ |
263 |
|
Fiscal year ended June 30, 2006 |
|
$ |
209 |
|
|
$ |
222 |
|
|
$ |
231 |
|
|
$ |
200 |
|
Fiscal year ended June 30, 2005 |
|
$ |
194 |
|
|
$ |
325 |
|
|
$ |
310 |
|
|
$ |
209 |
|
Advertising
Expense
The Company charges advertising expense in the period incurred. As of June 30, 2007, 2006,
and 2005, advertising expense was $290,000, $92,000, and $116,000, respectively.
Stock-Based Compensation
The Company has stock plans, which are described more fully in Notes 8 and 9. The Company adopted
Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS
123R), effective July 1, 2005. SFAS 123R requires the recognition of the fair value of
stock-based compensation in the Companys financial statements. Prior to July 1, 2005, the Company
applied the requirements of APB Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees, and related interpretations in accounting for its stock-based plans. Under APB 25,
generally no stock-based compensation expense was recognized for the Companys stock-based plans
since the exercise price of granted employee stock options was greater than or equal to the market
value of the underlying
35
common stock on the date of grant. The following table illustrates the pro forma effect on net
income and earnings per share for the periods indicated as if the Company had applied the fair
value recognition provisions of SFAS 123R to its stock-based employee compensation plans (in
thousands except per share amounts):
|
|
|
|
|
|
|
2005 |
|
Net Income |
|
|
|
|
As Reported |
|
$ |
3,282 |
|
Effect of Stock-based Compensation Expense net of tax |
|
|
(521 |
) |
|
|
|
|
Pro Forma |
|
$ |
2,761 |
|
|
|
|
|
Earnings Per Share |
|
|
|
|
Basic As Reported |
|
$ |
0.37 |
|
Basic Pro Forma |
|
$ |
0.31 |
|
Diluted As Reported |
|
$ |
0.35 |
|
Diluted Pro Forma |
|
$ |
0.29 |
|
Self Insurance
Perceptron is self-insured for health, vision and short term disability costs up to a certain stop
loss level per claim and on an aggregate basis of a percentage of estimated annual costs. The
estimated liability is based upon review by Management and an independent insurance consultant of
claims filed and claims incurred but not reported.
New Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 159, The Fair Value Options for Financial Assets and Financial
Liabilities Including an amendment of FASB Statement No. 115. This Statement permits entities
to choose to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. This Statement is expected to expand
the use of fair value measurement, which is consistent with the Boards long-term measurement
objectives for accounting for financial instruments. This statement is effective for fiscal years
beginning after November 15, 2007. The impact of adopting this statement on the Companys
financial statements has not yet been evaluated.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB)
No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Current Year
Misstatement. This bulletin requires analysis of misstatements using both an income statement
(rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and
provides for a one-time cumulative effect transition adjustment. This bulletin is effective for
the Companys 2007 fiscal year annual financial statements and did not have a material impact on
the Companys financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurements. This statement defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement does not require any
new fair value measurements, but does provide guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. This statement is effective
for fiscal years beginning after November 15, 2007. The impact of adopting this statement on the
Companys financial statements has not yet been evaluated.
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109. This
Interpretation prescribes a recognition threshold and a measurement attribute for the financial
statement reporting of tax positions taken in tax returns. The Interpretation is effective for
fiscal years beginning after December 15, 2006 and will not have a material impact on the Companys
financial statements.
36
2. Leases
The Company leases building space, office equipment and motor vehicles under operating leases.
Lease terms generally cover periods from two to five years and may contain renewal options. The
following is a summary, as of June 30, 2007, of the future minimum annual lease payments required
under the Companys operating leases having initial or remaining non-cancelable terms in excess of
one year (in thousands):
|
|
|
|
|
Year |
|
Minimum Rentals |
|
2008 |
|
$ |
913 |
|
2009 |
|
|
388 |
|
2010 |
|
|
197 |
|
2011 |
|
|
100 |
|
2012 and beyond |
|
|
48 |
|
|
|
|
|
Total minimum lease payments |
|
$ |
1,646 |
|
|
|
|
|
Rental expenses for operating leases in the fiscal years ended June 30, 2007, 2006 and 2005 were
$1,121,000, $1,105,000 and $908,000, respectively.
3. Short-term and Long-term Notes Payable
The Company had no debt outstanding at June 30, 2007 and June 30, 2006.
The Company has a $7.5 million secured Credit Agreement with Comerica Bank, which expires on
November 1, 2008. Proceeds under the Credit Agreement may be used for working capital and capital
expenditures. The security for the loan is substantially all non real estate assets of the Company
held in the United States. Borrowings are designated as a Prime-based Advance or as a
Eurodollar-based Advance. Interest on Prime-based Advances is payable on the last day of each
month and is calculated daily at a rate that ranges from a 1/2% below to a 1/4% above the banks prime
rate (8.25% as of June 30, 2007) dependent upon the Companys ratio of funded debt to earnings
before interest, taxes, depreciation and amortization (EBITDA). Interest on Eurodollar-based
Advances is calculated at a specific margin above the Eurodollar Rate offered at the time and for
the period chosen (approximately 7.24% as of June 30, 2007) dependent upon the Companys ratio of
funded debt to EBITDA and is payable on the last day of the applicable period. Quarterly, the
Company pays a commitment fee on the daily unused portion of the Credit Agreement based on a
percentage dependent upon the Companys ratio of funded debt to EBITDA. The Credit Agreement
prohibits the Company from paying dividends. In addition, the Credit Agreement requires the
Company to maintain a Tangible Net Worth, as defined in the Credit Agreement, of not less than
$41.0 million as of June 30, 2007 and to have no advances outstanding for 30 consecutive days each
calendar year.
At June 30, 2007, the Companys German subsidiary (GmbH) had an unsecured credit facility totaling
500,000 Euros (equivalent to approximately $674,000 at June 30, 2007). The facility may be used to
finance working capital needs and equipment purchases or capital leases. Any borrowings for
working capital needs will bear interest at 9.0% on the first 100,000 Euros of borrowings and 2.0%
for borrowings over 100,000 Euros. The German credit facility is cancelable at any time by either
GmbH or the bank and any amounts then outstanding would become immediately due and payable. At
June 30, 2007 and June 30,2006, GmbH had no borrowings outstanding.
4. Foreign Exchange Contracts
The Company may use, from time to time, a limited hedging program to minimize the impact of foreign
currency fluctuations. These transactions involve the use of forward contracts, typically mature
within one year and are designed to hedge anticipated foreign currency transactions. The Company
may use forward exchange contracts to hedge the net assets of certain of its foreign subsidiaries
to offset the translation and economic exposures related to the Companys investment in these
subsidiaries.
At June 30, 2007, the Company had forward exchange contracts to sell 5.0 million Euros ($6.7
million equivalent) at a weighted average settlement rate of 1.34 Euros to the United States
Dollar. The contracts outstanding at June 30, 2007, mature through November 29, 2007. The
objective of the hedge transactions is to protect designated portions of the Companys net
investment in its foreign European subsidiary against adverse changes in the Euro/U.S. Dollar
exchange rate. The Company assesses hedge effectiveness based on overall changes in fair value of
the forward contract. Since the critical risks of the forward contract and the net investment
coincide, there was no ineffectiveness. The accounting for the hedges is consistent with
translation adjustments where any gains and losses are recorded to other comprehensive income. The
Company recognized a loss of $83,000 in other comprehensive income (loss) for the unrealized and
realized change in value of the forward exchange contracts during the fiscal year ended June 30,
2007. Offsetting this amount in other comprehensive income (loss) was the translation effect of
the Companys foreign
37
subsidiary. Because the forward contracts were effective, there was no gain or loss recognized in
earnings. The Companys forward exchange contracts do not subject it to material risk due to
exchange rate movements because gains and losses on these contracts offset losses and gains on the
assets, liabilities, and transactions being hedged.
At June 30, 2006 and 2005, the Company had approximately $5.0 million and $3.0
million, respectively, of forward exchange contracts between the United States Dollar and the Euro
with weighted average settlement prices of 1.25 and 1.30 Euro to each United States Dollar,
respectively. The Company recognized a loss of $38,000 and income of approximately $168,000 in
other comprehensive income (loss) for the unrealized change in value of forward exchange contracts
during the fiscal years ended June 30, 2006 and June 30, 2005, respectively.
5. Information About Major Customers
The Company has two segments, its Automated Systems Segment and its Technology Products Segment.
The Companys principal customers for its Automated Systems products have historically been
automotive companies that the Company either sells to directly or through manufacturing line
builders, system integrators or OEMs. The Companys Automated Systems products are typically
purchased for installation in connection with new model retooling programs undertaken by these
companies. Because sales are dependent on the timing of customers re-tooling programs, sales by
customer vary significantly from year to year, as do the Companys largest customers. For the
fiscal year ended June 30, 2007, approximately 31% of total net sales were derived from the
Companys four largest automotive customers (Volkswagen, General Motors, DaimlerChrysler and BMW).
The Company also sells to system integrators or OEMs, who in turn sell to these same automotive
companies. For the fiscal year ended June 30, 2007, approximately 12% of net sales were to
manufacturing line builders, system integrators and OEMs for the benefit of the same four
automotive companies. For the fiscal year ended June 30, 2006 approximately 38% of total net sales
were derived from the Companys four largest automotive customers (General Motors, Volkswagen, BMW
and Peugeot Citroen). For the fiscal year ended June 30, 2005, approximately 40%, of total net
sales were derived from the Companys four largest automotive customers (General Motors,
DaimlerChrysler, Volkswagen and Ford). The Company also sells to
manufacturing line builders,
system integrators or OEMs, who in turn sell to these same automotive companies. For the fiscal
years ended June 30, 2006 and 2005, approximately 9% and 13%, respectively, of net sales, were to
system integrators and OEMs for the benefit of the same four automotive companies. These numbers
reflect consolidations that have occurred within the Companys four largest automotive customers.
During the fiscal year ended June 30, 2007, sales to Volkswagen and General Motors were 13.2% and
11.7%, respectively, of the Companys total net sales. At June 30, 2007, accounts receivable from
Volkswagen and General Motors totaled approximately $2.5 million and $1.4 million respectively.
The Company sells its Technology Products to a variety of markets through original equipment
manufacturers, system integrators and value-added resellers. The Companys Technology Products
target the digitizing, reverse engineering and inspection markets. During the fiscal year ended
June 30, 2007, sales to Ridge Tool were 11.3% of the Companys total net sales. At June 30, 2007,
accounts receivable from Ridge Tool totaled approximately $4.9 million.
6. Contingencies
The Company may, from time to time, be subject to claims and suits in the ordinary course of its
business.
To estimate whether a loss contingency should be accrued, the Company evaluates, among other
factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable
estimate of the amount of the loss. Since the outcome of claims and litigation is subject to
significant uncertainty, changes in these factors could materially impact the Companys financial
position or results of operations.
The Company is a party to a suit filed by Industries GDS, Inc., Bois Granval GDS Inc., and Centre
de Preparation GDS, Inc. (collectively, GDS) on or about November 21, 2002 in the Superior Court
of the Judicial District of Quebec, Canada against the Company, Carbotech, Inc. (Carbotech), and
U.S. Natural Resources, Inc. (USNR), among others. The suit alleges that the Company breached
its contractual and warranty obligations as a manufacturer in connection with the sale and
installation of three systems for trimming and edging wood products. The suit also alleges that
Carbotech breached its contractual obligations in connection with the sale of equipment and the
installation of two trimmer lines, of which the Companys systems were a part, and that USNR, which
acquired substantially all of the assets of the Forest Products business unit from the Company, was
liable for GDS damages. USNR has sought indemnification from the Company under the terms of
existing contracts between the Company and USNR. GDS seeks compensatory damages against the
Company, Carbotech and USNR of approximately $6.3 million using a June 30, 2007 exchange rate. GDS
and Carbotech have filed for bankruptcy protection in Canada. The Company intends to vigorously
defend GDS claims.
The Company has been informed that certain of its customers have received allegations of possible
patent infringement involving processes and methods used in the Companys products. Certain of
these customers, including one customer who was a party to a patent infringement suit relating to
this matter, have settled such claims. Management believes that the processes used in the
Companys products were independently developed without utilizing any previously patented
38
process or technology. Because of the uncertainty surrounding the nature of any possible
infringement and the validity of any such claim or any possible customer claim for indemnity
relating to claims against the Companys customers, it is not possible to estimate the ultimate
effect, if any, of this matter on the Companys financial statements.
Management is currently unaware of any significant pending litigation affecting the Company, other
than the matters set forth above.
7. 401(k) Plan
The Company has a 401(k) tax deferred savings plan that covers all eligible employees. The Company
may make discretionary contributions to the plan. The Companys contributions during the fiscal
years ended June 30, 2007, 2006 and 2005, were $539,000, $437,000 and $453,000, respectively.
8. Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan for all employees meeting certain eligibility
criteria. Under the Plan, eligible employees may purchase shares of the Companys common stock at
85% of its market value at the beginning of the six-month election period. Purchases are limited
to 10% of an employees eligible compensation and the shares purchased are restricted from being
sold for one year from the purchase date. At June 30, 2007,
119,557 shares remained available
under the Plan. During fiscal years 2007, 2006 and 2005, 12,401, 11,854 and 9,299 shares,
respectively, were issued to employees. The average purchase price per share was $6.41, $5.87 and
$6.08 in fiscal years 2007, 2006 and 2005, respectively. In fiscal 2006 the Company adopted SFAS
123R and began recording stock based compensation expense in the income statement. During fiscal
2007 and fiscal 2006, the Company recorded non-cash stock based compensation expense of $30,000 and
$29,000, respectively, related to this plan. No compensation expense was recognized in fiscal year
2005 for this plan.
9. Stock Incentive Plans
The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment (SFAS 123R), effective July 1, 2005. SFAS 123R requires the recognition of the fair
value of stock-based compensation in the Companys financial statements. Prior to July 1, 2005,
the Company applied the requirements of APB Opinion No. 25 (APB 25), Accounting for Stock Issued
to Employees, and related interpretations in accounting for its stock-based plans. Under APB 25,
generally no compensation expense was recognized for the Companys stock-based plans since the
exercise price of granted employee stock options was greater than or equal to the market value of
the underlying common stock on the date of grant.
The Company elected the modified prospective transition method for adopting SFAS 123R. Under this
method, the provisions of SFAS 123R apply to all awards granted or modified after the date of
adoption. The Company continues to use the Black Scholes model for determining stock option
valuations. The provisions of SFAS 123R also apply to awards granted prior to July 1, 2005 that
did not vest before July 1, 2005 (transition awards). The compensation cost for the portion of the
transition awards that had not vested by July 1, 2005 is based on the grant-date fair value of
these transition awards as calculated for pro forma disclosures under the provisions of SFAS 123.
Compensation cost for these transition awards are attributed to periods beginning July 1, 2005 and
use the Black Scholes method used under SFAS 123, except that an estimate of expected forfeitures
is used rather than actual forfeitures.
The Company recognized operating expense for non-cash stock-based compensation costs in the amount
of $815,000 and $667,000 for the fiscal years ended June 30, 2007 and 2006, respectively, which
includes the Employee Stock Purchase Plan discussed above. This had the effect of decreasing net
income by $647,000, or $0.07 per diluted share for the fiscal year ended June 30, 2007 and $537,000
or $.06 per diluted share for fiscal year 2006. As of June 30, 2007, the total remaining
unrecognized compensation cost related to non-vested stock options amounted to $1.1 million. The
Company expects to recognize this cost over a weighted average vesting period of 1.52 years.
The Company received $1,390,000 in cash from option exercises under all share-based payment
arrangements for the twelve months ended June 30, 2007. The actual tax benefit realized related to
tax deductions for non-qualified options exercised and disqualifying dispositions under all
share-based payment arrangements totaled $1,350,000 for fiscal 2007. The Company maintains a 1992
Stock Option Plan (1992 Plan) and 1998 Global Team Member Stock Option Plan (1998 Plan)
covering substantially all company employees and certain other key persons and a Directors Stock
Option Plan (Directors Plan) covering all non-employee directors. During fiscal 2005,
shareholders approved a new 2004 Stock Incentive Plan that replaced the 1992 and Directors Plans as
to future grants. Options previously granted under the 1992 and Directors Plans will continue to
be maintained until all options are exercised, cancelled or expire. The 2004, 1992 and Directors
Plans are administered by a committee of the Board of Directors, the Management Development,
Compensation and Stock Option Committee. The 1998 Plan is administered by the President of the
Company.
Awards under the 2004 Stock Incentive Plan may be in the form of stock options, stock appreciation
rights, restricted stock or restricted stock units, performance share awards, director stock
purchase rights and deferred stock units; or any
39
combination thereof. The terms of the awards will be determined by the Management Development,
Compensation and Stock Option Committee, unless specified in the 2004 Stock Incentive Plan. As of
June 30, 2007, the Company has only issued awards in the form of stock options. Options
outstanding under the 2004 Stock Incentive Plan and the 1992 and 1998 Plans generally become
exercisable at 25% per year beginning one year after the date of grant and expire ten years after
the date of grant. Options outstanding under the Directors Plan are either an initial option or an
annual option. Prior to December 7, 2004, initial options of 15,000 shares were granted as of the
date the non-employee director was first elected to the Board of Directors and became exercisable
in full on the first anniversary of the date of grant. Prior to December 7, 2004, annual options
of 3,000 shares were granted as of the date of the respective annual meeting to each non-employee
director serving at least six months prior to the annual meeting and become exercisable in three
annual increments of 33 1/3% after the date of grant. Options under the Directors Plan expire ten
years from the date of grant. Option prices for options granted under these plans must not be less
than fair market value of the Companys stock on the date of grant.
Activity under these Plans is shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2007 |
|
Fiscal Year 2006 |
|
|
|
|
|
|
Weighted |
|
Aggregate |
|
|
|
|
|
Weighted |
|
Aggregate |
|
|
|
|
|
|
Average |
|
Intrinsic |
|
|
|
|
|
Average |
|
Intrinsic |
|
|
|
|
|
|
Exercise |
|
Value(1) |
|
|
|
|
|
Exercise |
|
Value(1) |
|
|
Shares |
|
Price |
|
($000) |
|
Shares |
|
Price |
|
($000) |
Shares subject to option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period |
|
|
1,985,447 |
|
|
$ |
6.13 |
|
|
|
|
|
|
|
2,204,007 |
|
|
$ |
7.56 |
|
|
|
|
|
New Grants (based on fair value
of common stock at
dates of grant) |
|
|
334,070 |
|
|
$ |
8.55 |
|
|
|
|
|
|
|
243,675 |
|
|
$ |
6.72 |
|
|
|
|
|
Exercised |
|
|
(390,325 |
) |
|
$ |
3.62 |
|
|
|
|
|
|
|
(170,699 |
) |
|
$ |
2.16 |
|
|
|
|
|
Expired |
|
|
(49,993 |
) |
|
$ |
26.67 |
|
|
|
|
|
|
|
(234,001 |
) |
|
$ |
23.17 |
|
|
|
|
|
Forfeited |
|
|
(44,240 |
) |
|
$ |
6.78 |
|
|
|
|
|
|
|
(57,535 |
) |
|
$ |
6.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
1,834,959 |
|
|
$ |
6.53 |
|
|
$ |
7,734 |
|
|
|
1,985,447 |
|
|
$ |
6.13 |
|
|
$ |
6,557 |
|
Exercisable at end of period |
|
|
1,181,415 |
|
|
$ |
5.92 |
|
|
$ |
6,260 |
|
|
|
1,337,246 |
|
|
$ |
6.08 |
|
|
$ |
5,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2005 |
|
|
|
|
|
|
Weighted |
|
Aggregate |
|
|
|
|
|
|
Average |
|
Intrinsic |
|
|
|
|
|
|
Exercise |
|
Value(1) |
|
|
Shares |
|
Price |
|
($000) |
Shares subject to option |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period |
|
|
2,182,882 |
|
|
$ |
8.06 |
|
|
|
|
|
New Grants (based on fair value
of common
stock at dates of grant) |
|
|
401,350 |
|
|
$ |
6.75 |
|
|
|
|
|
Exercised |
|
|
(122,247 |
) |
|
$ |
2.13 |
|
|
|
|
|
Expired |
|
|
(95,809 |
) |
|
$ |
24.09 |
|
|
|
|
|
Forfeited |
|
|
(162,169 |
) |
|
$ |
6.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
2,204,007 |
|
|
$ |
7.56 |
|
|
$ |
5,039 |
|
Exercisable at end of period |
|
|
1,435,874 |
|
|
$ |
8.80 |
|
|
$ |
3,814 |
|
|
|
|
(1) |
|
The intrinsic value of a stock option is the amount by which the current market value of the
underlying stock exceeds the exercise price of the option. The total intrinsic value of stock
options exercised during the fiscal years ended June 30, 2007, 2006 and 2005, were $1,025,000,
$571,000 and $553,000, respectively. |
The total fair value of shares vested during the fiscal years ended June 30, 2007, 2006 and 2005,
were $843,000, $746,000 and $1,076,000, respectively.
The estimated fair value as of the date options were granted during the periods presented using the
Black Scholes option-pricing model, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Weighted Average Estimated Fair Value
Per Share Of Options Granted During The
Period |
|
$ |
3.08 |
|
|
$ |
2.28 |
|
|
$ |
2.12 |
|
Assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Dividend Yield |
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Price Volatility |
|
|
31.42 |
% |
|
|
30.16 |
% |
|
|
28.40 |
% |
Risk Free Rate Of Return |
|
|
4.68 |
% |
|
|
4.02 |
% |
|
|
3.38 |
% |
Expected Option Term (in years) |
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
40
The following table summarizes information about stock options at June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
Options Exercisable |
|
|
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
|
Remaining |
|
Exercise |
|
|
|
|
|
Exercise |
Range of Exercise Prices |
|
Shares |
|
Contractual Life |
|
Price |
|
Shares |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.24 to $3.16 |
|
|
473,723 |
|
|
|
4.27 |
|
|
$ |
1.67 |
|
|
|
473,723 |
|
|
$ |
1.67 |
|
3.27 to 6.50 |
|
|
518,626 |
|
|
|
5.23 |
|
|
$ |
5.71 |
|
|
|
377,563 |
|
|
$ |
5.42 |
|
6.55 to 8.00 |
|
|
470,239 |
|
|
|
7.21 |
|
|
$ |
7.05 |
|
|
|
229,458 |
|
|
$ |
6.93 |
|
8.04 to 31.40 |
|
|
372,371 |
|
|
|
7.14 |
|
|
$ |
13.19 |
|
|
|
100,671 |
|
|
$ |
25.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.24 to $31.40 |
|
|
1,834,959 |
|
|
|
5.87 |
|
|
$ |
6.53 |
|
|
|
1,181,415 |
|
|
$ |
5.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
June 30, 2007, options covering 263,397 shares were available for future grants under the 2004
and 1998 Plans.
10. Income Taxes
Income from continuing operations before income taxes for U.S. and foreign operations was as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
U.S. |
|
$ |
679 |
|
|
$ |
1,096 |
|
|
$ |
3,289 |
|
Foreign |
|
|
2,067 |
|
|
|
3,831 |
|
|
|
1,897 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,746 |
|
|
$ |
4,927 |
|
|
$ |
5,186 |
|
|
|
|
|
|
|
|
|
|
|
During fiscal 2006, the Company recorded $290,000 of tax expense related to the repatriation of
$6.3 million of un-remitted earnings of certain of the Companys European subsidiaries under the
provisions of the American Jobs Creation Act of 2004. The income tax provision (benefit)
reflected in the statement of income consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Current provision (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal & State |
|
$ |
(193 |
) |
|
$ |
420 |
|
|
$ |
(8 |
) |
Foreign |
|
|
1,406 |
|
|
|
537 |
|
|
|
606 |
|
Deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
307 |
|
|
|
757 |
|
|
|
1,154 |
|
Foreign |
|
|
(233 |
) |
|
|
(26 |
) |
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
Total provision |
|
$ |
1,287 |
|
|
$ |
1,688 |
|
|
$ |
1,904 |
|
|
|
|
|
|
|
|
|
|
|
The Companys deferred tax assets are substantially represented by the tax benefit of net operating
losses and the tax benefit of future deductions represented by allowance for bad debts, warranty
expenses and inventory obsolescence and tax credit carry-forwards. The Company established in
fiscal 2002 a valuation allowance for tax credit carry forwards and other items where it was more
likely than not that these items would expire or not be deductible before the Company was able to
realize their benefit. In fiscal 2007, the Company increased its valuation allowance to provide
for net operating loss carry-forwards related to some of its foreign operations where the Company
believed it was more likely than not that the tax benefits would not be fully utilized in the next
few years. In the second quarter of fiscal 2006, the Company recognized a $725,000 tax benefit
associated with reversing the valuation allowance related to net operating losses in the United
States. This action was taken because the Company believed there was positive evidence that it was
more likely than not that the tax benefits associated with the valuation allowance on the net
operating loss carry-forwards in the United States would be utilized. The positive evidence was
based on several years of taxable income in the United States and expected taxable income in the
United States in the future. The Company continues to have a valuation allowance for tax credit
carry-forwards in the United States that it still expects will more likely than not expire prior to
the tax benefit being realized. The components of deferred tax assets were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit of net operating losses |
|
$ |
4,803 |
|
|
$ |
4,399 |
|
|
$ |
5,947 |
|
Tax credit carry-forwards |
|
|
3,780 |
|
|
|
3,571 |
|
|
|
2,967 |
|
Other, principally reserves |
|
|
1,015 |
|
|
|
1,405 |
|
|
|
1,182 |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset |
|
|
9,598 |
|
|
|
9,375 |
|
|
|
10,096 |
|
Valuation allowance |
|
|
(3,971 |
) |
|
|
(3,724 |
) |
|
|
(3,692 |
) |
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
5,627 |
|
|
$ |
5,651 |
|
|
$ |
6,404 |
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Rate reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision at U.S. statutory rate |
|
|
34.0 |
% |
|
|
34.0 |
% |
|
|
34.0 |
% |
Net effect of taxes on foreign activities |
|
|
11.1 |
% |
|
|
(13.5 |
)% |
|
|
2.2 |
% |
Tax effect of U.S. permanent differences |
|
|
5.4 |
% |
|
|
8.6 |
% |
|
|
|
|
State taxes and other, net |
|
|
0.4 |
% |
|
|
0.1 |
% |
|
|
0.5 |
% |
Adjustment of federal/foreign income taxes provided for in prior years |
|
|
(13.0 |
)% |
|
|
4.5 |
% |
|
|
(2.8 |
)% |
Valuation allowance |
|
|
9.0 |
% |
|
|
0.6 |
% |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
46.9 |
% |
|
|
34.3 |
% |
|
|
36.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
No provision was made with respect to earnings as of June 30, 2007 that have been retained for use
by foreign subsidiaries. It is not practicable to estimate the amount of unrecognized deferred tax
liability for the undistributed foreign earnings. At June 30, 2007, the Company had net operating
loss carry-forwards for Federal income tax purposes of $12.4 million that expire in the years 2020
through 2027 and tax credit carry-forwards of $3.8 million of which $3.5 million expire in the
years 2007 through 2021. The net change in the total valuation allowance for the years ended June
30, 2007, 2006, and 2005 was an increase of $247,000, $32,000 and $145,000, respectively.
11. Segment and Geographic Information
Effective
April 1, 2007, the Company organized its business into two operating
segments, Automated Systems and Technology Products. The Companys
reportable segments are strategic business units that have separate management teams focused on
different marketing strategies. The Automated Systems segment primarily sells its products to
automotive companies either directly or through manufacturing line builders, system integrators or
original equipment manufacturers, (OEMs). The Companys Automated Systems products are
primarily custom designed systems typically purchased for installation in connection with new model
retooling programs. The Automated Systems segment includes Value-Added Services products as the
services are primarily related to Automated Systems products. The Technology Products segment
sells its product to a variety of markets through OEMs, system integrators and value-added
resellers. The Companys Technology Products target the digitizing, reverse engineering and
inspection markets and include products that are sold as whole components ready for use.
The accounting policies of the segments are the same as those described in the summary of
significant policies. The Company evaluates performance based on operating income, excluding
unusual items. Company-wide costs are allocated between segments based on revenues and/or labor as
deemed appropriate.
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments ($000) |
|
Automated Systems |
|
Technology Products |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
42,309 |
|
|
$ |
19,943 |
|
|
$ |
62,252 |
|
Operating income (loss) |
|
|
1,007 |
|
|
|
846 |
|
|
|
1,853 |
|
Assets, net |
|
|
43,038 |
|
|
|
22,427 |
|
|
|
65,465 |
|
Depreciation and amortization |
|
|
7,904 |
|
|
|
4,108 |
|
|
|
12,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
46,959 |
|
|
$ |
10,916 |
|
|
$ |
57,875 |
|
Operating income (loss) |
|
|
4,871 |
|
|
|
(503 |
) |
|
|
4,368 |
|
Assets, net |
|
|
50,296 |
|
|
|
12,099 |
|
|
|
62,395 |
|
Depreciation and amortization |
|
|
9,079 |
|
|
|
2,185 |
|
|
|
11,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended June 30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
43,724 |
|
|
$ |
11,168 |
|
|
$ |
54,892 |
|
Operating income (loss) |
|
|
4,709 |
|
|
|
(14 |
) |
|
|
4,695 |
|
Assets, net |
|
|
50,568 |
|
|
|
12,822 |
|
|
|
63,390 |
|
Depreciation and amortization |
|
|
8,010 |
|
|
|
2,028 |
|
|
|
10,038 |
|
The Company primarily accounts for geographic sales based on the country from which the sale is
invoiced rather than the country to which the product is shipped. The Company operates in three
primary geographic areas: The Americas (substantially all of which is the United States, with
immaterial net sales in Brazil), Europe, and Asia.
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical Regions ($000) |
|
Americas |
|
Europe |
|
Asia |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
33,086 |
|
|
$ |
26,772 |
|
|
$ |
2,394 |
|
|
$ |
62,252 |
|
Long-lived assets, net |
|
|
6,438 |
|
|
|
513 |
|
|
|
106 |
|
|
|
7,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
37,384 |
|
|
$ |
18,938 |
|
|
$ |
1,553 |
|
|
$ |
57,875 |
|
Long-lived assets, net |
|
|
6,765 |
|
|
|
534 |
|
|
|
109 |
|
|
|
7,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended June 30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
33,067 |
|
|
$ |
19,897 |
|
|
$ |
1,928 |
|
|
$ |
54,892 |
|
Long-lived assets, net |
|
|
7,142 |
|
|
|
521 |
|
|
|
24 |
|
|
|
7,687 |
|
|
|
|
1 |
|
The Companys German subsidiary had net external sales of $26.8 million, $18.9 million and $19.9
million in the fiscal years ended June 30, 2007, 2006 and 2005, respectively. Long-lived assets
of the Companys German subsidiary were $478,000, $514,000 and $505,000 as of June 30, 2007,
2006 and 2005, respectively. |
12. Selected Quarterly Financial Data (unaudited)
Selected unaudited quarterly financial data for the fiscal years ended June 30, 2007 and 2006 are
as follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
Fiscal Year 2007 |
|
09/30/06 |
|
12/31/06 |
|
03/31/07 |
|
06/30/07 |
Net sales |
|
$ |
10,710 |
|
|
$ |
12,234 |
|
|
$ |
15,954 |
|
|
$ |
23,354 |
|
Gross profit |
|
|
4,487 |
|
|
|
4,546 |
|
|
|
7,257 |
|
|
|
10,710 |
|
Net income (loss) |
|
|
(641 |
) |
|
|
(864 |
) |
|
|
691 |
|
|
|
2,273 |
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
(0.08 |
) |
|
|
(0.11 |
) |
|
|
0.09 |
|
|
|
0.28 |
|
Diluted |
|
|
(0.08 |
) |
|
|
(0.11 |
) |
|
|
0.08 |
|
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2006 |
|
|
09/30/05 |
|
|
|
12/31/05 |
|
|
|
03/31/06 |
|
|
|
06/30/06 |
|
Net sales |
|
$ |
12,760 |
|
|
$ |
17,188 |
|
|
$ |
13,447 |
|
|
$ |
14,480 |
|
Gross profit |
|
|
5,583 |
|
|
|
8,298 |
|
|
|
7,149 |
|
|
|
6,257 |
|
Net income (loss) |
|
|
269 |
|
|
|
2,194 |
|
|
|
1,048 |
|
|
|
(272 |
) |
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.03 |
|
|
|
0.25 |
|
|
|
0.12 |
|
|
|
(0.03 |
) |
Diluted |
|
|
0.03 |
|
|
|
0.24 |
|
|
|
0.12 |
|
|
|
(0.03 |
) |
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A: CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the participation of the
Companys management, including its Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer of the effectiveness of the design and operation of the Companys disclosure
controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon
that evaluation, the Companys Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer concluded that, as of June 30, 2007, solely as a result of the material weakness in our
internal control over financial reporting discussed below, the Companys disclosure controls and
procedures were not effective in causing the material information required to be disclosed in the
reports that it files or submits under the Securities Exchange Act of 1934 to be recorded,
processed, summarized and reported, to the extent applicable, within the time periods required for
the Company to meet the SEC filing deadlines for these reports specified in the SECs rules and
forms.
During the quarter ended June 30, 2007, in connection with the audit of the Companys consolidated
financial statements as of June 30, 2007, the Company and its outside auditor, Grant Thornton LLP,
identified a material weakness in the Companys internal control over financial reporting related
to the calculation and review of income taxes. This deficiency resulted from an ineffective review
process. As a result of this deficiency, there were errors in the accounting for the provision for
income taxes, deferred income taxes, and current income taxes payable, primarily related to the
Companys foreign operations, which were detected and remedied in connection with the preparation
of the Companys consolidated
43
financial statements as of June 30, 2007. The Company is in the process of remediating the
material weakness by implementing additional monitoring and oversight controls including engaging
external tax advisors to assist in the review of our income tax calculations to ensure compliance
with generally accepted accounting principles.
There have been no changes in the Companys internal controls over financial reporting during the
quarter ended June 30, 2007 identified in connection with the Companys evaluation that has
materially affected, or is reasonably likely to materially affect, the Companys internal controls
over financial reporting.
ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS and CORPORATE GOVERNANCE OF THE REGISTRANT
The
information contained under the captions Matters to Come before the Meeting Proposal 1:
Election of Directors, Corporate Governance,
Executive Officers, Section 16(a) Beneficial
Ownership Reporting Compliance and Corporate Governance
Code of Ethics of the registrants proxy statement for
2007 Annual Meeting of Shareholders (the Proxy Statement) is incorporated herein by reference.
The information required by Part III, Item 10 with respect to the Companys
nominating committee, audit committee and the audit committees financial
expert is set forth in the Proxy Statement under the captions
Corporate Governance Audit Committee,
Corporate Governance
Nominating and Corporate Governance Committee and
Corporate Governance Audit Committee Report, which paragraphs are incorporated herein by reference.
The Company has adopted a Code of Business Conduct and Ethics that applies to all of the Companys
directors, executive and financial officers and employees. The Code of Business Conduct and Ethics
has been posted to the Companys website at www.perceptron.com in the Company section under
Financials and is available free of charge through the Companys website. The Company will post
information regarding any amendment to, or waiver from, the Companys Code of Business Conduct and
Ethics for executive and financial officers and directors on the Companys website in the Company
section under Financials.
ITEM 11: EXECUTIVE COMPENSATION
The information contained under the captions
Matters to Come before the Meeting Proposal 1: Election
of Directors - Director Compensation for 2007,
Matters to Come before the Meeting Proposal 1: Election of Directors Standard Director Compensation
Arrangements, Compensation of Executive Officers, Corporate Governance Management Development,
Compensation and Stock Option Committee Interlocks and Insider
Participation and Compensation of Executive
Officers - Report of the Management Development, Compensation and
Stock Option Committee of the Proxy
Statement is incorporated herein by reference.
ITEM
12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information contained under the captions
Share Ownership of Management and Certain Shareholders
Principal Shareholders and Share Ownership
of Management and Certain Shareholders Beneficial Ownership by
Directors and Executive Officers
of the Proxy Statement is incorporated herein by reference.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about the Companys Common Stock that may be issued upon the
exercise of options, warrants and rights under all of the Companys existing equity compensation
plans as of June 30, 2007, including the 2004 Stock Incentive Plan, the 1992 Stock Option Plan, the
Directors Stock Option Plan, the 1998 Global Team Member Stock Option Plan, and the Employee Stock
Purchase Plan (together, the Plans):
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
|
remaining available for |
|
|
Number of securities |
|
Weighted-average |
|
future issuance under |
|
|
to be issued upon |
|
exercise price of |
|
equity compensation |
|
|
exercise of |
|
outstanding |
|
plans (excluding |
|
|
outstanding options, |
|
options, warrants |
|
securities |
Plan Category |
|
warrants and rights |
|
and rights |
|
reflected in column (a)) |
|
|
(a) |
|
(b) |
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
approved by shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
2004 Stock Incentive Plan |
|
|
314,450 |
(1) |
|
$ |
8.16 |
|
|
|
245,389 |
|
1992 Stock Option Plan |
|
|
820,985 |
(2) |
|
$ |
6.76 |
|
|
|
|
|
Directors Stock Option Plan |
|
|
139,000 |
(2) |
|
$ |
4.83 |
|
|
|
|
|
Employee Stock Purchase Plan |
|
|
5,610 |
(3) |
|
$ |
7.23 |
|
|
|
119,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of equity
compensation plans
approved by
shareholders |
|
|
1,280,045 |
|
|
$ |
6.90 |
|
|
|
364,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
not approved by
shareholders: 1998 Global
Team Member Stock Option
Plan |
|
|
560,524 |
|
|
$ |
5.69 |
|
|
|
18,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
1,840,569 |
|
|
$ |
6.53 |
|
|
|
382,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Awards under the 2004 Stock Incentive Plan may be in the form of stock options, stock
appreciation rights, restricted stock or restricted stock units, performance share awards,
director stock purchase rights and deferred stock units; or any combination thereof. |
|
(2) |
|
The 2004 Stock Incentive Plan replaced the 1992 Stock Option Plan and Directors Stock Option
Plan effective December 7, 2004. Further grants under these plans have been cancelled. |
|
(3) |
|
Does not include an undeterminable number of shares subject to a payroll deduction election
under the Employee Stock Purchase Plan for the period from July 1, 2007 until December 31,
2007, which will not be issued until January 2008. |
1998 Global Team Member Stock Option Plan
On February 26, 1998, the Companys Board approved the 1998 Global Team Member Stock Option Plan
(the 1998 Plan), pursuant to which non-qualified stock options may be granted to employees who
are not officers or directors or subject to Section 16 of the Exchange Act. The 1998 Plan has been
amended by the Board on several occasions thereafter.
The purpose of the 1998 Plan is to promote the Companys success by linking the personal interests
of non-executive employees to those of the Companys shareholders and by providing participants
with an incentive for outstanding performance. The 1998 Plan authorizes the granting of
non-qualified stock options only. The President of the Company administers the 1998 Plan and has
the power to set the terms of any grants under the 1998 Plan. The exercise price of an option may
not be less than the fair market value of the underlying stock on the date of grant and no option
may have a term of more than ten years. All of the options that are currently outstanding under
the 1998 Plan become exercisable ratably over a four-year period beginning at the grant date and
expire ten years from the date of grant. If, for any reason, an option lapses, expires or
terminates without having been exercised in full, the unpurchased shares covered thereby are again
available for grants of options under the 1998 Plan. In addition, if the option is exercised by
delivery to the Company of shares previously acquired pursuant to options granted under the 1998
Plan, then shares of Common Stock delivered in payment of the exercise price of an option will
again be available for grants of options under the 1998 Plan.
The exercise price is payable in full in cash at the time of exercise; or in shares of Common
Stock, (but generally, only if such shares have been owned for at least six months or, if they have
not been owned by the optionee for at least six months, the optionee then owns, and has owned for
at least six months, at least an equal number of shares of Common Stock as the option shares being
delivered); or the exercise price may be paid by delivery to the Company of a properly executed
exercise notice, together with irrevocable instructions to the participants broker to deliver to
the Company sufficient cash to pay the exercise price and any applicable income and employment
withholding taxes, in accordance with a written agreement between the Company and the brokerage
firm (cashless exercise procedure).
Generally, if the employment by the Company of any optionee who is an employee terminates for any
reason, other than by death or total and permanent disability, any option which the optionee is
entitled to exercise on the date of employment termination may be exercised by the optionee at any
time on or before the earlier of the expiration date of
45
the option or three months after the date of employment termination, but only to the extent of the
accrued right to purchase at the date of such termination. In addition, the President of the
Company has the discretionary power to extend the date to exercise beyond three months after the
date of employment termination. If the employment of any optionee who is an employee is terminated
because of total and permanent disability, the option may be exercised by the optionee at any time
on or before the earlier of the expiration date of the option or one year after the date of
termination of employment, but only to the extent of the accrued right to purchase at the date of
such termination. If any optionee dies while employed by the Company and, if at the date of death,
the optionee is entitled to exercise an option, such option may be exercised by any person who
acquires the option by bequest or inheritance or by reason of the death of the optionee, or by the
executor or administrator of the estate of the optionee, at any time before the earlier of the
expiration date of the option or one year after the date of death of the optionee, but only to the
extent of the accrued right to purchase at the date of death.
The 1998 Plan provides for acceleration of vesting of awards in the event of a change in control of
the Company. See Compensation of Executive Officers - Potential
Payments Upon Termination or Change in Control of the Proxy Statement for a
definition of change in control. The 1998 Plan will terminate automatically on February 25, 2008.
However, the Board may amend or terminate the 1998 Plan at any time without shareholder approval,
but no amendment or termination of the 1998 Plan or any award agreement may adversely affect any
award previously granted under the 1998 Plan without the consent of the participant. The NASDAQ
listing requirements prohibit the Company from amending the 1998 Plan to add additional shares of
Common Stock without shareholder approval.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS and DIRECTOR INDEPENDENCE
The
information contained under the captions Corporate Governance
Board of Directors and Committees and Related Party Transactions of the Proxy Statement is incorporated herein
by reference.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained under the captions Independent Accountants Policy for Pre-Approval of
Audit and Non Audit Services and Independent Accountants
Fees Paid to Independent Registered Public Accounting Firm of
the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 15: EXHIBITS and FINANCIAL STATEMENT SCHEDULES
|
A. |
|
Financial Statements and Schedules Filed |
|
|
|
|
Financial Statements see Item 8 of this report. Financial statement schedules have
been omitted since they are either not required, not applicable, or the information
is otherwise included. |
|
|
B. |
|
Exhibits: |
|
|
|
|
Exhibits the exhibits filed in response to Item 601 of Regulation S-K with this
report are listed on pages 48 through 51. The Exhibit List is incorporated herein by
reference. |
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
|
|
|
|
Perceptron, Inc.
(Registrant)
|
|
|
By: |
/S/ Alfred A. Pease
|
|
|
|
Alfred A. Pease, Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: September 27, 2007 |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
|
|
|
|
|
/S/ Alfred A. Pease
Alfred A. Pease
|
|
Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ John H. Lowry III
John H. Lowry III
|
|
Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ Sylvia M. Smith
Sylvia M. Smith
|
|
Controller (Principal Accounting Officer)
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ Kenneth R. Dabrowski
Kenneth R. Dabrowski
|
|
Director
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ Philip J. DeCocco
Philip J. DeCocco
|
|
Director
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ W. Richard Marz
W. Richard Marz
|
|
Director
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ Robert S. Oswald
Robert S. Oswald
|
|
Director
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ James A. Ratigan
James A. Ratigan
|
|
Director
|
|
September 27, 2007 |
|
|
|
|
|
|
|
|
|
|
/S/ Terryll R. Smith
Terryll R. Smith
|
|
Director
|
|
September 27, 2007 |
47
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
No. |
|
Description of Exhibits |
|
|
|
3.
|
|
Restated Articles of Incorporation and Bylaws. |
|
|
|
3.1
|
|
Restated Articles of Incorporation, as amended to date, are
incorporated herein by reference to Exhibit 3.1 of the Companys
Report on Form 10-Q for the Quarter Ended March 31, 1998. |
|
|
|
3.2
|
|
Amended and Restated Bylaws, as amended to date, are incorporated
herein by reference to Exhibit 3.2 of the Companys Form S-8
Registration Statement No. 333-55164. |
|
|
|
4.
|
|
Instruments Defining the Rights of Securities Holders. |
|
|
|
4.1
|
|
Articles IV, V and VI of the Companys Restated Articles of
Incorporation are incorporated herein by reference to Exhibit 3.1 of
the Companys Report on Form 10-Q for the Quarter Ended March 31,
1998. |
|
|
|
4.2
|
|
Articles I, II, III, VI, VII, X and XI of the Companys Amended and
Restated Bylaws are incorporated herein by reference to Exhibit 3.2 of
the Companys Form S-8 Registration Statement No. 333-55164. |
|
|
|
4.3
|
|
Credit Agreement dated October 24, 2002, between Perceptron, Inc. and
Comerica Bank is incorporated by reference to Exhibit 4.9 of the
Companys Report on Form 10-Q for the Quarter Ended September 30,
2002. |
|
|
|
4.4
|
|
Form of certificate representing Rights (included as Exhibit B to the
Rights Agreement filed as Exhibit 4.5) is incorporated herein by
reference to Exhibit 2 of the Companys Report on Form 8-K filed March
24, 1998. Pursuant to the Rights Agreement, Rights Certificates will
not be mailed until after the earlier of (i) the tenth business day
after the Shares Acquisition Date (or, if the tenth day after the
Shares Acquisition Date occurs before the Record Date, the close of
business on the Record Date) (or, if such Shares Acquisition Date
results from the consummation of a Permitted Offer, such later date as
may be determined before the Distribution Date, by action of the Board
of Directors, with the concurrence of a majority of the Continuing
Directors), or (ii) the tenth business day (or such later date as may
be determined by the Board of Directors, with the concurrence of a
majority of the Continuing Directors, prior to such time as any person
becomes an Acquiring Person) after the date of the commencement of, or
first public announcement of the intent to commence, a tender or
exchange offer by any person or group of affiliated or associated
persons (other than the Company or certain entities affiliated with or
associated with the Company), other than a tender or exchange offer
that is determined before the Distribution Date to be a Permitted
Offer, if, upon consummation thereof, such person or group of
affiliated or associated persons would be the beneficial owner of 15%
or more of such outstanding shares of Common Stock. |
|
|
|
4.5
|
|
Rights Agreement, dated as of March 24, 1998, between Perceptron, Inc.
and American Stock Transfer & Trust Company, as Rights Agent, is
incorporated herein by reference to Exhibit 2 of the Companys Report
on Form 8-K filed March 24, 1998. |
|
|
|
4.6
|
|
First Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank is incorporated by reference to
Exhibit 4.6 of the Companys Report on Form 10-Q for the Quarter Ended
September 30, 2003. |
|
|
|
4.7
|
|
Second Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank is incorporated by reference to
Exhibit 4.7 of the Companys Report on Form 10-Q for the Quarter Ended
September 30, 2003. |
|
|
|
4.8
|
|
Third Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank is incorporated by reference to
Exhibit 4.8 of the Companys Report on Form 10-K for the Year Ended
June 30, 2004. |
|
|
|
4.9
|
|
Fourth Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank is incorporated by reference to
Exhibit 10.1 of the Companys Report on Form 8-K filed January 5,
2005. |
|
|
|
4.10
|
|
Fifth Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank, is incorporated by reference to
Exhibit 4.10 of the Companys Report on Form 10-Q for the Quarter
ended September 30, 2005. |
|
|
|
4.11
|
|
Sixth Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank, is incorporated by reference to
Exhibit 4.11 of the Companys Report on Form 10-Q for the Quarter
ended September 30, 2006. |
48
|
|
|
Exhibit |
|
|
No. |
|
Description of Exhibits |
|
|
|
4.12
|
|
Seventh Amendment to Credit Agreement dated October 24, 2002, between
Perceptron, Inc. and Comerica Bank, is incorporated by reference to
Exhibit 4.1 of the Companys Report on Form 8-K filed December 21,
2006. |
|
|
|
|
|
Other instruments, notes or extracts from agreements defining the
rights of holders of long-term debt of the Company or its subsidiaries
have not been filed because (i) in each case the total amount of
long-term debt permitted thereunder does not exceed 10% of the
Companys consolidated assets, and (ii) the Company hereby agrees that
it will furnish such instruments, notes and extracts to the Securities
and Exchange Commission upon its request. |
|
|
|
10.
|
|
Material Contracts. |
|
|
|
10.1
|
|
Registration Agreement, dated as of June 13, 1985, as amended, among
the Company and the Purchasers identified therein, is incorporated by
reference to Exhibit 10.3 of the Companys Form S-1 Registration
Statement (amended by Exhibit 10.2) No. 33-47463. |
|
|
|
10.2
|
|
Patent License Agreement, dated as of August 23, 1990, between the
Company and Diffracto Limited, is incorporated herein by reference to
Exhibit 10.10 of the Companys Report on Form S-1 Registration
Statement No. 33-47463. |
|
|
|
10.3
|
|
Form of Proprietary Information and Inventions Agreement between the
Company and all of the employees of the Company is incorporated herein
by reference to Exhibit 10.11 of the Companys Form S-1 Registration
Statement No. 33-47463. |
|
|
|
10.4
|
|
Form of Confidentiality and Non-Disclosure Agreement between the
Company and certain vendors and customers of the Company is
incorporated herein by reference to Exhibit 10.12 of the Companys
Form S-1 Registration Statement No. 33-47463. |
|
|
|
10.5
|
|
Form of Executive Agreement Not to Compete between the Company and
certain officers of the Company is incorporated herein by reference to
Exhibit 10.5 of the Companys Annual Report on Form 10-K for the Year
Ended June 30, 2005. |
|
|
|
10.6@
|
|
Perceptron, Inc. 2004 Stock Incentive Plan is incorporated by
reference to Exhibit 10.1 of the Companys Report on Form 8-K filed
December 10, 2004. |
|
|
|
10.7@
|
|
Form of Incentive Stock Option Agreement Terms for Officers under the
Perceptron, Inc. 2004 Stock Incentive Plan is incorporated by
reference to Exhibit 10.2 of the Companys Report on Form 8-K filed
January 5, 2005. |
|
|
|
10.8@
|
|
Form of Nonqualified Stock Option Agreement Terms for Officers under
the Perceptron, Inc. 2004 Stock Incentive Plan is incorporated by
reference to Exhibit 10.3 of the Companys Report on Form 8-K filed
January 5, 2005. |
|
|
|
10.9@
|
|
Form of Incentive Stock Option Agreement Terms for Officers under the
Perceptron, Inc. 2004 Stock Incentive Plan is incorporated by
reference to Exhibit 10.3 of the Companys Report on Form 8-K filed
December 27, 2005. |
|
|
|
10.10@
|
|
Form of Nonqualified Stock Option Agreement Terms for Officers under
the Perceptron, Inc. 2004 Stock Incentive Plan is incorporated by
reference to Exhibit 10.2 of the Companys Report on Form 8-K filed
December 27, 2005. |
|
|
|
10.11@
|
|
Form of Nonqualified Stock Option Agreement Terms Board of
Directors under the Perceptron, Inc. 2004 Stock Incentive Plan is
incorporated by reference to Exhibit 10.1 of the Companys Report on
Form 8-K filed August 10, 2006. |
|
|
|
10.12@
|
|
1998 Global Team Member Stock Option Plan and Form of Non-Qualified
Stock Option Agreements under such Plan is incorporated herein by
reference to Exhibit 10.20 to the Companys Annual Report on Form 10-K
for the Year Ended December 31, 1997. |
|
|
|
10.13@
|
|
First Amendment to the 1998 Global Team Member Stock Option Plan is
incorporated by reference to Exhibit 10.28 of the Companys Report on
Form 10-K for the Transition Period Ended June 30, 1999. |
|
|
|
10.14@
|
|
Second Amendment to the 1998 Global Team Member Stock Option Plan is
incorporated by reference to Exhibit 10.29 of the Companys Report on
Form 10-K for the Transition Period Ended June 30, 1999. |
|
|
|
10.15@
|
|
Third Amendment to the 1998 Global Team Member Stock Option Plan is
incorporated by reference to Exhibit 99.6 of the Companys Form S-8
Registration Statement No. 333-55164. |
49
|
|
|
Exhibit |
|
|
No. |
|
Description of Exhibits |
|
|
|
10.16@
|
|
Fourth Amendment to the 1998 Global Team Member Stock Option Plan is
incorporated by reference to Exhibit 99.7 of the Companys S-8
Registration Statement No. 333-76194. |
|
|
|
10.17@
|
|
Form of Non-Qualified Stock Option Agreements under 1998 Global Team
Member Stock Option Plan after September 1, 1998 is incorporated by
reference to Exhibit 10.6 of the Companys Report on Form 10-K for the
Year Ended December 31, 1998. |
|
|
|
10.18@
|
|
Forms of Non-Qualified Stock Option Agreements under 1998 Global Team
Member Stock Option Plan after September 1, 1999 is incorporated by
reference to Exhibit 10.31 of the Companys Report on Form 10-Q for
the Quarter Ended September 30, 1999. |
|
|
|
10.19@
|
|
Form of Non-Qualified Stock Option Agreements under 1998 Global Team
Member Stock Option Plan after January 1, 2006 is incorporated by
reference to Exhibit 10.47 of the Companys Report on Form 10-Q for
the Quarter Ended March 31, 2006. |
|
|
|
10.20@
|
|
Perceptron, Inc. Employee Stock Purchase Plan, as amended and restated
as of October 22, 2004, is incorporated by reference to Exhibit 10.2
of the Companys Report on Form 8-K filed December 10, 2004. |
|
|
|
10.21@
|
|
Amended and Restated 1992 Stock Option Plan is incorporated herein by
reference to Exhibit 10.53 of the Companys Report on Form 10-Q for
the Quarter Ended September 30, 1996. |
|
|
|
10.22@
|
|
First Amendment to Amended and Restated 1992 Stock Plan is
incorporated by reference to Exhibit 10.39 of the Companys Report on
Form 10-Q for the Quarter Ended March 31, 1997. |
|
|
|
10.23@
|
|
Second Amendment to Amended and Restated 1992 Stock Option Plan is
incorporated by reference to Exhibit 10.26 of the Companys Report on
Form 10-Q for the Quarter Ended March 31, 1999. |
|
|
|
10.24@
|
|
Third Amendment to Amended and Restated 1992 Stock Option Plan is
incorporated by reference to Exhibit 10.35 of the Companys Report on
Form 10-K for the Year Ended June 30, 2001. |
|
|
|
10.25@
|
|
Fourth Amendment to Amended and Restated 1992 Stock Option Plan is
incorporated by reference to Exhibit 10.37 of the Companys Report on
Form 10-K for the Year Ended June 30, 2002. |
|
|
|
10.26@
|
|
Forms of Incentive Stock Option Agreements (Team Members and Officers)
and Non-Qualified Stock Option Agreements under 1992 Stock Option Plan
after January 1, 1997, and Amendments to existing Stock Option
Agreements under the 1992 Stock Option Plan is incorporated by
reference to Exhibit 10.22 to the Companys Annual Report on Form 10-K
for the Year Ended December 31, 1996. |
|
|
|
10.27@
|
|
Forms of Incentive Stock Option Agreements (Officers) and
Non-Qualified Stock Option Agreements (Officers) under 1992 Stock
Option Plan after September 1, 1998 is incorporated by reference to
Exhibit 10.25 of the Companys Report on Form 10-K for the Year Ended
December 31, 1998. |
|
|
|
10.28@
|
|
Forms of Incentive Stock Option Agreements (Officers) and
Non-Qualified Stock Option Agreements (Officers) under 1992 Stock
Option Plan after September 1, 1999 is incorporated by reference to
Exhibit 10.30 of the Companys Report on Form 10-Q for the Quarter
Ended September 30, 1999. |
|
|
|
10.29@
|
|
Amended and Restated Directors Stock Option Plan is incorporated by
reference to Exhibit 10.56 to the Companys Report on Form 10-Q for
the Quarter Ended September 30, 1996. |
|
|
|
10.30@
|
|
First Amendment to Amended and Restated Directors Stock Option Plan is
incorporated by reference to Exhibit 10.27 of the Companys Report on
Form 10-Q for the Quarter Ended March 31, 1999. |
|
|
|
10.31@
|
|
Second Amendment to the Perceptron, Inc. Directors Stock Option Plan
(Amended and Restated October 31, 1996) is incorporated by reference
to Exhibit 10.33 of the Companys Report on Form 10-Q for the Quarter
Ended March 31, 2000. |
|
|
|
10.32@
|
|
Form of Non-Qualified Stock Option Agreements and Amendments under the
Director Stock Option Plan is incorporated by reference to Exhibit
10.27 to the Companys Annual Report on Form 10-K for the Year Ended
December 31, 1996. |
|
|
|
10.33@
|
|
Forms of Non-Qualified Stock Option Agreements under the Directors
Stock Option Plan after September 1, 1999 is incorporated by reference
to Exhibit 10.32 of the Companys Report on Form 10-Q for the Quarter
Ended December 31, 1999. |
|
|
|
10.34@
|
|
Letter Agreement, dated February 14, 1996, between the Company and
Alfred A. Pease is incorporated herein by reference to Exhibit 10.36
to the Companys Annual Report on Form 10-K for the Year Ended
December 31, 1996. |
50
|
|
|
Exhibit |
|
|
No. |
|
Description of Exhibits |
|
|
|
10.35
|
|
Covenant Not to Compete between U.S. Natural Resources, Inc., and
Perceptron, Inc., dated March 13, 2002 is incorporated by reference to
Exhibit 2.1 of the Companys Report on Form 8-K filed March 29, 2002. |
|
|
|
10.36@
|
|
Written Description of 2006 Team Member Profit Sharing Plan is
incorporated by reference to Exhibit 10.1 of the Companys Report on
Form 8-K filed December 27, 2005. |
|
|
|
10.37@
|
|
Written Description of 2007 Team Member Profit Sharing Plan is
incorporated by reference to Exhibit 10.1 of the Companys Report on
Form 8-K filed November 17, 2006. |
|
|
|
10.38@
|
|
Written Description of 2008 Team Member Profit Sharing Plan is
incorporated by reference to Exhibit 10.1 of the Companys Report on
Form 8-K filed August 9, 2007. |
|
|
|
10.39@
|
|
Severance Agreement, dated September 7, 2005, between the Company and
Alfred A. Pease is incorporated by reference to Exhibit 10.1 of the
Companys Report on Form 8-K filed September 12, 2005. |
|
|
|
10.40@
|
|
Severance Agreement, dated September 7, 2005, between the Company and
Harry T. Rittenour is incorporated by reference to Exhibit 10.2 of the
Companys Report on Form 8-K filed September 12, 2005. |
|
|
|
10.41@
|
|
Severance Agreement, dated September 8, 2005, between the Company and
Wilfred J. Corriveau is incorporated by reference to Exhibit 10.3 of
the Companys Report on Form 8-K filed September 12, 2005. |
|
|
|
10.42@
|
|
Severance Agreement, dated September 7, 2005, between the Company and
John J. Garber is incorporated by reference to Exhibit 10.4 of the
Companys Report on Form 8-K filed September 12, 2005. |
|
|
|
10.43@
|
|
Severance Agreement, dated May 18, 2007, between the Company and Paul
J. Eckhoff is incorporated by reference to Exhibit 10.1 of the
Companys Report on Form 8-K filed May 23, 2007. |
|
|
|
10.44@
|
|
Severance Agreement, dated June 12, 2007, between the Company and John
H. Lowry III is incorporated by reference to Exhibit 10.1 of the
Companys Report on Form 8-K filed June 25, 2007. |
|
|
|
10.45@
|
|
Consulting Agreement, dated January 5, 2007, between the Company and
John J. Garber is incorporated by reference to Exhibit 10.1 of the
Companys Report on Form 8-K filed January 10, 2007. |
|
|
|
21.
|
|
A list of subsidiaries of the
Company is incorporated by reference to Exhibit 21 of the Companys
Report on Form 10-K for the Year Ended June 30, 2002. |
|
|
|
23.*
|
|
Consent of Experts and Counsel. |
|
|
|
31.
|
|
Rule 13a-14(a)/15d-14(a) Certifications |
|
|
|
31.1*
|
|
Certification by the Chief Executive Officer of the Company pursuant
to Rule 13a-14(a) and Rule 15d-14(a). |
|
|
|
31.2*
|
|
Certification by the Chief Financial Officer of the Company pursuant
to Rule 13a-14(a) and Rule 15d-14(a). |
|
|
|
32.
|
|
Section 1350 Certifications |
|
|
|
32.1*
|
|
Certification by the Chief Executive Officer of the Company pursuant
to Rule 13a-14(a) and Rule 15d-14(a). |
|
|
|
32.2*
|
|
Certification by the Chief Financial Officer of the Company pursuant
to Rule 13a-14(a) and Rule 15d-14(a). |
|
|
|
* |
|
Filed with the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2007. |
|
@ |
|
Indicates a management contract, compensatory plan or arrangement. |
51