e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended September 30, 2009.
Commission file number: 0-20206
PERCEPTRON, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Michigan
(State or Other Jurisdiction of
Incorporation or Organization)
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38-2381442
(I.R.S. Employer
Identification No.) |
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47827 Halyard Drive, Plymouth, Michigan
(Address of Principal Executive Offices)
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48170-2461
(Zip Code) |
(734) 414-6100
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T(§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
The number of shares outstanding of each of the issuers classes of common stock as of November 09, 2009, was:
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Common Stock, $0.01 par value
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8,901,463 |
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Class
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Number of shares |
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 2009
2
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30, |
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June 30, |
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(In Thousands, Except Per Share Amount) |
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2009 |
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2009 |
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(Unaudited) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
17,445 |
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$ |
22,654 |
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Short-term investments |
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4,475 |
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1,241 |
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Receivables: |
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Billed receivables, net of allowance for doubtful accounts
of $222 and $603, respectively |
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8,371 |
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8,975 |
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Unbilled receivables |
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323 |
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296 |
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Other receivables |
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730 |
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357 |
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Inventories, net of reserves of $712 and $646, respectively |
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10,180 |
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10,005 |
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Deferred taxes |
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2,290 |
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2,290 |
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Other current assets |
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2,547 |
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2,909 |
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Total current assets |
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46,361 |
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48,727 |
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Property and Equipment |
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Building and land |
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6,013 |
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6,013 |
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Machinery and equipment |
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13,588 |
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13,418 |
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Furniture and fixtures |
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869 |
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869 |
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20,470 |
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20,300 |
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Less Accumulated depreciation and amortization |
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(14,097 |
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(13,763 |
) |
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Net property and equipment |
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6,373 |
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6,537 |
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Long-Term Investments |
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2,192 |
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2,192 |
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Deferred Tax Asset |
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8,654 |
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7,903 |
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Total Assets |
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$ |
63,580 |
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$ |
65,359 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
2,088 |
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$ |
2,461 |
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Accrued liabilities and expenses |
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2,100 |
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2,197 |
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Accrued compensation |
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744 |
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1,192 |
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Income taxes payable |
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81 |
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69 |
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Deferred revenue |
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2,127 |
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2,975 |
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Total current liabilities |
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7,140 |
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8,894 |
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Long-term Liabilities |
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Accrued taxes |
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765 |
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765 |
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Total liabilities |
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7,905 |
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9,659 |
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Shareholders Equity |
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Preferred stock no par value, authorized 1,000 shares, issued none |
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Common stock, $0.01 par value, authorized 19,000 shares, issued
and outstanding 8,901 and 8,873, respectively |
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89 |
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89 |
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Accumulated other comprehensive income |
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1,243 |
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718 |
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Additional paid-in capital |
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41,177 |
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40,914 |
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Retained earnings |
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13,166 |
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13,979 |
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Total shareholders equity |
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55,675 |
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55,700 |
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Total Liabilities and Shareholders Equity |
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$ |
63,580 |
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$ |
65,359 |
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The notes to the consolidated financial statements are an integral part of these statements.
3
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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Three Months Ended |
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September 30, |
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(In Thousands, Except Per Share Amounts) |
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2009 |
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2008 |
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Net Sales |
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$ |
10,813 |
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$ |
19,265 |
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Cost of Sales |
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6,884 |
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12,463 |
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Gross Profit |
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3,929 |
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6,802 |
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Operating Expenses |
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Selling, general and administrative |
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3,664 |
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4,483 |
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Engineering, research and development |
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1,729 |
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2,301 |
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Total operating expenses |
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5,393 |
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6,784 |
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Operating Income (Loss) |
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(1,464 |
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18 |
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Other Income and (Expenses) |
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Interest income, net |
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57 |
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233 |
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Foreign currency gain (loss) |
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209 |
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(64 |
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Other |
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1 |
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2 |
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Total other income |
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267 |
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171 |
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Income (Loss) Before Income Taxes |
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(1,197 |
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189 |
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Income Tax Benefit (Expense) |
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384 |
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(221 |
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Net Income (Loss) |
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$ |
(813 |
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$ |
(32 |
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Earnings (Loss) Per Common Share |
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Basic |
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($0.09 |
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($0.00 |
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Diluted |
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($0.09 |
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($0.00 |
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Weighted Average Common Shares Outstanding |
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Basic |
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8,888 |
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8,848 |
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Dilutive effect of stock options |
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Diluted |
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8,888 |
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8,848 |
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The notes to the consolidated financial statements are an integral part of these statements.
4
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
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Three Months Ended |
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September 30, |
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(In Thousands) |
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2009 |
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2008 |
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Cash Flows from Operating Activities |
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Net loss |
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$ |
(813 |
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$ |
(32 |
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Adjustments to reconcile net income (loss) to net cash provided from
(used for) operating activities:
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Depreciation and amortization |
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341 |
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379 |
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Stock compensation expense |
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175 |
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230 |
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Deferred income taxes |
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(676 |
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272 |
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Disposal of assets and other |
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(42 |
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(15 |
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Allowance for doubtful accounts |
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8 |
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33 |
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Changes in assets and liabilities |
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Receivables, net |
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419 |
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2,560 |
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Inventories |
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(50 |
) |
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(546 |
) |
Accounts payable |
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(559 |
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|
1,449 |
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Other current assets and liabilities |
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(1,136 |
) |
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(1,449 |
) |
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Net cash provided
from (used for)
operating activities |
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(2,333 |
) |
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2,881 |
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Cash Flows from Financing Activities |
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Proceeds from stock plans |
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89 |
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49 |
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Net cash provided from financing activities |
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89 |
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49 |
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Cash Flows from Investing Activities |
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Purchases of investments |
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(3,234 |
) |
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Capital expenditures |
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(152 |
) |
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(187 |
) |
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Net cash used for investing activities |
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(3,386 |
) |
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(187 |
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Effect of Exchange Rate Changes on Cash and Cash Equivalents |
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421 |
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(870 |
) |
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Net Increase (Decrease) in Cash and Cash Equivalents |
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(5,209 |
) |
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1,873 |
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Cash and Cash Equivalents, July 1 |
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22,654 |
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22,157 |
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Cash and Cash Equivalents, September 30 |
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$ |
17,445 |
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$ |
24,030 |
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The notes to the consolidated financial statements are an integral part of these statements.
5
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying consolidated financial statements should be read in conjunction with the Companys
2009 Annual Report on Form 10-K. In the opinion of management, the unaudited information furnished
herein reflects all adjustments necessary, for a fair presentation of the financial statements for
the periods presented. The results of operations for any interim period are not necessarily
indicative of the results of operations for a full year.
2. New Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Topic 105, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
(ASC). The ASC instituted a major change in the way accounting standards are organized and
became the official single source of authoritative, nongovernmental U.S. generally accepted
accounting principles (GAAP). As of September 30, 2009 the only authoritative literature is the
ASC and other guidance issued by the Securities and Exchange Commission. All other literature is
non-authoritative. The Company adopted the ASC in the first quarter of fiscal 2010. The adoption
of the ASC had no impact on the Companys consolidated financial statements.
3. Financial Instruments
ASC 820 Fair Value Measurements emphasizes that fair value is a market-based measurement, not
an entity specific measurement. Therefore, a fair value measurement should be determined based on
assumptions that the market participants would use in pricing an asset or liability. As a basis
for considering market participant assumptions in fair market measurements, ASC 820 establishes a
fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:
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Level 1 Quoted prices in active markets that are unadjusted and accessible at the
measurement date for identical, unrestricted assets or liabilities. |
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Level 2 Quoted prices for identical assets and liabilities in markets that are not
active, quoted prices for similar assets and liabilities in active markets or financial
instruments for which significant inputs are observable, either directly or indirectly. |
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Level 3 Prices or valuations that require inputs that are both significant to the
fair value measurement and unobservable and reflect managements estimates and assumptions. |
The following table presents the Companys investments measured at fair value during the period
ended September 30, 2009:
(in thousands)
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Description |
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September 30, 2009 |
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Level 1 |
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Level 2 |
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Level 3 |
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Long Term Investments |
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$ |
2,192 |
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$ |
2,192 |
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Description |
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June 30, 2009 |
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Level 1 |
|
Level 2 |
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Level 3 |
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Long Term Investments |
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$ |
2,192 |
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$ |
2,192 |
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The Companys Level 3 investments consist of preferred stock investments (see Note 5 Short-Term
and Long-Term Investments) and are measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) as defined in ASC 820.
Fair value estimates are made at a specific point in time based on relevant market information and
information about the financial instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.
6
4. 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 of $712,000 and $646,000 at
September 30, 2009 and June 30, 2009, respectively, is comprised of the following (in thousands):
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September 30, |
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June 30, |
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Inventory |
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2009 |
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2009 |
|
Component parts |
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$ |
2,449 |
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$ |
2,651 |
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Work in process |
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|
95 |
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|
90 |
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Finished goods |
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7,636 |
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|
7,264 |
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Total |
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$ |
10,180 |
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|
$ |
10,005 |
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5. Short-Term and Long-Term Investments
The Company accounts for its investments in accordance with ASC 320 Investments Debt and Equity
Securities. Investments with a maturity of greater than three months to one year are classified
as short-term investments. Investments with maturities beyond one year may be classified as
short-term if the Company reasonably expects the investment to be realized in cash or sold or
consumed during the normal operating cycle of the business. Investments available for sale are
recorded at market value using the specific identification method. Investments expected to be held
to maturity or until market conditions improve are measured at amortized cost in the statement of
financial position if it is the Companys intent and ability to hold those securities long-term.
Each balance sheet date, the Company evaluates its investments for possible other-than-temporary
impairment which involves significant judgment. In making this judgment, management reviews factors
such as the length of time and extent to which fair value has been below the cost basis, the
anticipated recovery period, the financial condition of the issuer, the credit rating of the
instrument and the Companys ability and intent to hold the investment for a period of time which
may be sufficient for recovery of the cost basis. Any unrealized gains and losses on securities are
reported as other comprehensive income as a separate component of shareholders equity until
realized or until a decline in fair value is determined to be other than temporary. Once a decline
in fair value is determined to be other-than-temporary, an impairment charge is recorded in the
income statement. If market, industry, and/or investee conditions deteriorate, future impairments
may be incurred.
At September 30, 2009, the Company had $4.5 million of short-term investments in certificate of
deposit holdings.
At September 30, 2009, the Company holds long-term investments in preferred stock investments that
are not registered under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration requirements. The Company
estimated that the fair market value of these investments at September 30, 2009 was $2.2 million
based on an independent valuation performed by an external independent valuation firm together with
managements judgment of the market. The fair market analysis considered the following key inputs,
(i) the underlying structure of each security; (ii) the present value of the future principal and
dividend payments discounted at rates considered to reflect current market conditions; and (iii)
the time horizon that the market value of each security could return to its cost and be sold.
Under ASC 820, Fair Value Measurements, such valuation assumptions are defined as Level 3 inputs.
The following table summarizes the Companys long-term investments (in thousands):
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Long-Term Investments |
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September
30, 2009 |
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June
30, 2009 |
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Cost |
|
$ |
6,300 |
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$ |
6,300 |
|
Unrealized (Losses) |
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(4,108 |
) |
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(4,108 |
) |
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Estimated Fair Value |
|
$ |
2,192 |
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$ |
2,192 |
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7
6. 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 September 30, 2009 and 2008 the Company had no forward exchange contracts outstanding. During
the quarter ended September 30, 2008, the Company recognized a loss of approximately $19,000 in
other comprehensive income (loss) for the unrealized and realized change in value of the forward
exchange contracts that matured on July 1, 2008.
7. Comprehensive Income
Comprehensive income is defined as the change in common shareholders equity during a period from
transactions and events from non-owner sources, including net income. Other items of comprehensive
income include revenues, expenses, gains and losses that are excluded from net income. Total
comprehensive income, net of tax, for the applicable periods is as follows (in thousands):
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|
|
Three Months Ended September 30, |
|
2009 |
|
|
2008 |
|
Net (Loss) |
|
$ |
(813 |
) |
|
$ |
(32 |
) |
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
525 |
|
|
|
(1,602 |
) |
Temporary impairment on investments |
|
|
|
|
|
|
(185 |
) |
Forward contracts |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
Total Comprehensive (Loss) |
|
$ |
(288 |
) |
|
$ |
(1,838 |
) |
|
|
|
|
|
|
|
8. Credit Facilities
The Company had no debt outstanding at September 30, 2009.
The Company renewed its Credit Agreement with Comerica Bank effective September 30, 2009. The
Company has a $6.0 million secured Credit Agreement, which expires on November 1, 2011. 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 Libor-based Advance or as a Prime-based Advance if the Libor-based
Advance is not available. Interest on Libor-based Advances is calculated currently at 2.35% above
the Libor Rate offered at the time and for the period chosen and is payable on the last day of the
applicable period. The Company may not select a Prime-based rate for Advances except during any
period of time during which the Libor-based rate is not available as the applicable interest rate.
Interest on Prime-based Advances is payable on the first business day of each month commencing on
the first business day following the month during which such Advance is made and at maturity and is
calculated daily, using the interest rate established by the Bank as its prime rate for its
borrowers. Quarterly, the Company pays a commitment fee of 0.15% per annum on the daily unused
portion of the Credit Agreement. 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 $41.4 million as of September 30, 2009 and to
have no advances outstanding for 30 consecutive days each calendar year.
At September 30, 2009, the Companys German subsidiary (GmbH) had an unsecured credit facility
totaling 300,000 Euros (equivalent to approximately $438,000). 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
September 30, 2009, GmbH had no borrowings outstanding. At September 30, 2009, the facility
supported outstanding letters of credit totaling 62,552 Euros (equivalent to approximately
$91,000).
8
9. Stock-Based Compensation
The Company uses the Black-Scholes model for determining stock option valuations. The
Black-Scholes model requires subjective assumptions, including future stock price volatility and
expected time to exercise, which affect the calculated values. The expected term of option
exercises is derived from historical data regarding employee exercises and post-vesting employment
termination behavior. The risk-free rate of return is based on published U.S. Treasury rates in
effect for the corresponding expected term. The expected volatility is based on historical
volatility of the Companys stock price. These factors could change in the future, which would
affect the stock-based compensation expense in future periods.
The Company recognized operating expense for non-cash stock-based compensation costs in the amount
of $175,000 and $230,000 in the three months ended September 30, 2009 and 2008, respectively. This
had the effect of decreasing net income by $116,000, or $0.01 per diluted share, and $165,000, or
$0.02 per diluted share, for the three months ended September 30, 2009 and 2008, respectively. As
of September 30, 2009, the total remaining unrecognized compensation cost related to non-vested
stock options amounted to $984,000. The Company expects to recognize this cost over a weighted
average vesting period of 2.4 years.
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. No further grants are permitted to be made under the
terms of the 1998 Plan. Options previously granted under the 1992, Directors and 1998 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 combination thereof. The terms of the awards will
be determined by the Management Development, Compensation and Stock Option Committee, except as
otherwise specified in the 2004 Stock Incentive Plan. As of September 30, 2009, 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. All options
outstanding under the Directors Plan are vested and 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.
The Company did not grant any stock options during the quarter ended September 30, 2009. The
estimated fair value as of the date options were granted during the comparable quarter ended
September 30, 2008 using the Black Scholes option-pricing model, was as follows:
|
|
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2008 |
Weighted average estimated fair value per share of
options granted during the period |
|
$ |
3.01 |
|
Assumptions: |
|
|
|
|
Amortized dividend yield |
|
|
|
|
Common stock price volatility |
|
|
35.24 |
% |
Risk free rate of return |
|
|
3.38 |
% |
Expected option term (in years) |
|
|
5 |
|
The Company received $89,000 in cash from option exercises under all share-based payment
arrangements for the three months ended September 30, 2009.
9
10. 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. 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 1,022,000 and 588,000 shares of common stock outstanding in the three months
ended September 30, 2009 and 2008, respectively, were not included in the computation of diluted
EPS because the effect would have been anti-dilutive.
11. Income Taxes
The Company had long-term tax contingencies of $765,000 as of September 30, 2009 and June 30, 2009.
12. Commitments and Contingencies
Management is currently unaware of any significant pending litigation affecting the Company, other
than the matters set forth below.
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 $6.1 million using a September 30, 2009 exchange rate.
GDS and Carbotech filed and subsequently emerged from bankruptcy protection in Canada. The
Company intends to vigorously defend against GDS claims.
The Company may, from time to time, be subject to other claims and suits in the ordinary course of
its business.
To estimate whether a loss contingency should be accrued by a charge to income, 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.
13. Segment Information
Effective July 1, 2009, the Company reorganized its business into two operating segments, the
Industrial Business Unit (IBU) and the Commercial Products Business Unit (CBU). The
reorganization of the Companys business segments was in response to the growth, increased
development and focus that has occurred in the Companys commercial products since its initial
sales in the third quarter of fiscal 2007. The Companys reportable segments are strategic
business units that have separate management teams focused on different marketing strategies. The
IBU segment markets its products primarily to industrial companies directly or through
manufacturing line builders, system integrators, original equipment manufacturers (OEMs) and
value-added resellers (VARs). Products sold by IBU include automated systems products consisting
of AutoGaugeâ, AutoFitâ, AutoScanâ, and AutoGuideâ
10
that are primarily custom-configured systems typically purchased for installation in connection
with new automotive model retooling programs, value added services that are primarily related to
automated systems products, and ScanWorks® and WheelWorks® products that target the digitizing,
reverse engineering, inspection and original equipment manufacturers wheel alignment
markets. The CBU segment products are designed for sale to professional tradesmen in the
commercial market and are sold to and distributed through strategic partners.
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. Segment results for the three months ended September 30, 2008 have been
revised to conform to the new fiscal 2010 segment reporting structure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
Commercial Products |
|
|
Reportable Segments ($000) |
|
Business Unit |
|
Business Unit |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
8,092 |
|
|
$ |
2,721 |
|
|
$ |
10,813 |
|
Operating loss |
|
|
(821 |
) |
|
|
(643 |
) |
|
|
(1,464 |
) |
Assets |
|
|
38,675 |
|
|
|
24,905 |
|
|
|
63,580 |
|
Accumulated depreciation and amortization |
|
|
13,514 |
|
|
|
583 |
|
|
|
14,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
11,125 |
|
|
$ |
8,140 |
|
|
$ |
19,265 |
|
Operating income (loss) |
|
|
(1,622 |
) |
|
|
1,640 |
|
|
|
18 |
|
Assets |
|
|
51,086 |
|
|
|
21,646 |
|
|
|
72,732 |
|
Accumulated depreciation and amortization |
|
|
13,357 |
|
|
|
241 |
|
|
|
13,598 |
|
14. Subsequent Events
The Company has evaluated subsequent events through the date that the consolidated financial
statements were issued. No events have taken place that meet the definition of a subsequent event
that requires disclosure in this filing.
11
ITEM 2. 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 and Note 12 to the Consolidated Financial Statements that may be forward-looking
statements within the meaning of the Securities Exchange Act of 1934, including the Companys
expectation as to its fiscal year 2010 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, the timing of the introduction of new products and our ability to fund our fiscal
year 2010 and future cash flow requirements. 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 the Companys Annual Report on Form 10-K for
fiscal year 2009. 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 Industrial Business Unit segment 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 Industrial Business Unit segment
products have shorter lead times than other components and are required later in the process,
orders for the Companys Industrial Business Unit segment products tend to be given later in the
integration process. The Companys Commercial Products Business Unit segment products are subject
to the timing of firm orders from its customers, which may change on a monthly basis. In addition,
because the Companys Commercial Products Business Unit segment products require short lead times
from firm order to delivery, the Company purchases long lead time components before firm orders are
in hand. 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 sells non-contact
measurement and inspection solutions for industrial and commercial applications. Effective July 1,
2009, the Company reorganized its business into two operating segments, the Industrial Business
Unit (IBU) and the Commercial Products Business Unit (CBU). The reorganization of the Companys
business segments was in response to the growth, increased development and focus that has occurred
in the Companys commercial products since its initial sales in the third
12
quarter of fiscal 2007. IBU products provide solutions for manufacturing process control as well as
sensor and software technologies for non-contact measurement, scanning and inspection applications.
These products are used by the Companys customers to help them manage their complex manufacturing
processes to improve quality, shorten product launch times, reduce overall manufacturing costs and
for digitizing and reverse engineering. Products sold by IBU include the automated systems products
consisting of AutoGauge®, AutoFit®, AutoScan®, and AutoGuide® that are
primarily custom-configured systems typically purchased for installation in connection with new
automotive model retooling programs, value added services that are primarily related to automated
systems products, and ScanWorks® and WheelWorks® products that target the digitizing, reverse
engineering, inspection and original equipment manufacturers wheel alignment markets. The products
of the CBU segment are designed for sale to professional tradesmen in the commercial market and are
sold to and distributed through strategic partners. The Company services multiple markets, with the
largest being the automotive industry serviced by IBU. The Companys primary operations are in
North America, Europe and Asia.
In the IBU segment, 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. During the first quarter of fiscal 2010, the IBU segment continued to be
affected by the state of the automotive industry and the economy. There are signs, however, that
business conditions for the Companys IBU customers are improving. IBU sales in the first quarter
of fiscal 2010 improved $1.8 million over sales in the fourth quarter of fiscal 2009. Some projects
that were previously delayed have now been scheduled. The Company has seen increased interest by
its customers in the enhanced functionality that is being incorporated into the AutoGauge® product.
There has also been increased business activity in Asia which is the first geographic area that the
Company expects to improve.
Sales in the CBU segment also continue to be negatively affected by the economy. In addition, the
first quarter of fiscal 2010 saw reduced sales to Ridge Tool Company (Ridge) because of contract
negotiations that were taking place during that time. In October, the Company and Ridge made a
mutual decision not to renew the supply agreement between the two companies. Sales to Ridge will
continue through the rest of this year and will be from existing inventory as well as for products
not yet manufactured. The existing inventory sales will be at significantly reduced margins while
sales of accessories to be manufactured will be at normal margins. For fiscal 2010, sales to Ridge
will be significantly below the $11.2 million level in fiscal 2009.
Revenues for the first quarter of fiscal 2010 included sales of both the Snap-on BK5500 and the
BK6000 and various accessories. The Company is opening tooling for a new Snap-on product to be
manufactured with an expected delivery to Snap-on in the third quarter of fiscal 2010. The Company
is in contract discussions with other potential partners to market and sell its commercial
products.
Outlook The Company is encouraged by the increased sales activities it experienced in the IBU
segment and the prospect of new strategic partners in the CBU segment.
The IBU level of quoting in the Americas is at higher levels than in recent quarters and the
Company recently received another significant AutoGauge® order in China. As a result, the Company
is optimistic that it has seen the worst of the business conditions affecting the IBU segment.
Based on anticipated timing of sales to Ridge, on-going sales to Snap-on and product development
lead times for new potential partners, CBU sales are expected to be low in the second quarter and
grow in the third and fourth quarters of fiscal 2010. Overall, CBU sales in fiscal 2010 are
expected to be below fiscal 2009.
The Company achieved the level of cost savings it anticipated in the first quarter and continues to
expect annual cost reductions of approximately $5.4 million in fiscal year 2010. The Companys
financial base remains strong with no debt and approximately $21.9 million of cash and short-term
investments at September 30, 2009 available to support its growth plans. Near-term the Company will
continue to focus on the release of new products in both of its business segments, geographic
growth, principally in Asia and working with one or more potential new strategic partners in the
CBU.
13
RESULTS OF OPERATIONS
Overview For the first quarter of fiscal 2010, the Company reported a net loss of $813,000, or
$0.09 per diluted share, compared to a net loss of $32,000 or $0.00 per diluted share, for the
first quarter of fiscal 2009. Specific line item results are described below.
Sales Sales decreased 44.0% or $8.5 million to $10.8 million in the first quarter of fiscal 2010
compared to net sales of $19.3 million in the same period one year ago. The following tables show
comparative data regarding the Companys net sales by segment and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
First |
|
|
|
|
Sales (by segment) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
8.1 |
|
|
|
75.0 |
% |
|
$ |
11.1 |
|
|
|
57.5 |
% |
|
$ |
(3.0 |
) |
|
|
(27.0 |
)% |
Commercial Products Business Unit |
|
|
2.7 |
|
|
|
25.0 |
% |
|
|
8.2 |
|
|
|
42.5 |
% |
|
|
(5.5 |
) |
|
|
(67.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
10.8 |
|
|
|
100.0 |
% |
|
$ |
19.3 |
|
|
|
100.0 |
% |
|
$ |
(8.5 |
) |
|
|
(44.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
First |
|
|
|
|
Sales (by location) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
5.6 |
|
|
|
51.9 |
% |
|
$ |
13.5 |
|
|
|
69.9 |
% |
|
$ |
(7.9 |
) |
|
|
(58.5 |
)% |
Europe |
|
|
4.8 |
|
|
|
44.4 |
% |
|
|
5.0 |
|
|
|
25.9 |
% |
|
|
(0.2 |
) |
|
|
(4.0 |
)% |
Asia |
|
|
0.4 |
|
|
|
3.7 |
% |
|
|
0.8 |
|
|
|
4.2 |
% |
|
|
(0.4 |
) |
|
|
(50.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
10.8 |
|
|
|
100.0 |
% |
|
$ |
19.3 |
|
|
|
100.0 |
% |
|
$ |
(8.5 |
) |
|
|
(44.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales in the IBU segment decreased $3.0 million, primarily due to decreased sales of automated
systems products and to a lesser extent, lower WheelWorks® and ScanWorks® sales. Also impacting the
comparison is the fact that the first quarter of fiscal 2009 had not yet been fully affected by the
forthcoming downturn in the automotive industry and the economy as a whole that largely occurred in
the second quarter of fiscal 2009 and continued through the first quarter of fiscal 2010. Sales in
the CBU segment decreased primarily as a result of the state of the economy in the fiscal 2010
quarter compared to the first quarter of fiscal 2009. Also affecting the CBU first quarter of
fiscal 2010 were reduced sales to Ridge because of contract negotiations that ultimately resulted
in the mutual decision not to renew the Ridge supplier agreement. The fiscal 2009 first quarter
reflected a high ramp up of sales that related to the newly introduced Snap-on BK5500 product. The
decrease in sales of the CBU was also the primary reason for the decrease in the Americas.
Increased automated systems products sales in Europe were offset by lower WheelWorks® and
ScanWorks® sales in that region. Sales in Asia decreased primarily due to lower automated systems
products sales.
Bookings Bookings represent new orders received from customers. The Company had new order
bookings during the fiscal 2010 quarter of $9.8 million compared with new order bookings of $20.4
million for the quarter ended September 30, 2008. The amount of new order bookings fluctuates from
one period to another and is not necessarily indicative of the future operating performance of the
Company. The following tables show comparative data regarding the Companys bookings by segment and
geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
First |
|
|
|
|
Bookings (by segment) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
8.0 |
|
|
|
81.6 |
% |
|
$ |
13.0 |
|
|
|
63.7 |
% |
|
$ |
(5.0 |
) |
|
|
(38.5 |
)% |
Commercial Products
Business Unit |
|
|
1.8 |
|
|
|
18.4 |
% |
|
|
7.4 |
|
|
|
36.3 |
% |
|
|
(5.6 |
) |
|
|
(75.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
9.8 |
|
|
|
100.0 |
% |
|
$ |
20.4 |
|
|
|
100.0 |
% |
|
$ |
(10.6 |
) |
|
|
(52.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
First |
|
|
|
|
Bookings (by location) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
4.8 |
|
|
|
49.0 |
% |
|
$ |
12.0 |
|
|
|
58.8 |
% |
|
$ |
(7.2 |
) |
|
|
(60.0 |
)% |
Europe |
|
|
3.1 |
|
|
|
31.6 |
% |
|
|
7.8 |
|
|
|
38.2 |
% |
|
|
(4.7 |
) |
|
|
(60.3 |
)% |
Asia |
|
|
1.9 |
|
|
|
19.4 |
% |
|
|
0.6 |
|
|
|
3.0 |
% |
|
|
1.3 |
|
|
|
216.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
9.8 |
|
|
|
100.0 |
% |
|
$ |
20.4 |
|
|
|
100.0 |
% |
|
$ |
(10.6 |
) |
|
|
(52.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The comparison between the first quarters of fiscal 2010 and fiscal 2009 is impacted by the fact
that the first quarter of fiscal 2009 had not yet been fully affected by the forthcoming downturn
in the automotive industry and the economy as a whole that largely occurred in the second quarter
of fiscal 2009 and continued through the first quarter of fiscal 2010. IBU bookings decreased $5.0
million primarily as a result of lower automated systems products bookings and to a lesser extent
lower WheelWorks® and ScanWorks® bookings. CBU bookings decreased primarily because the comparable
fiscal 2009 quarter reflected the ramp up of orders related to two newly released products, namely,
the Ridge microEXPLORER Digital Inspection Camera and the Snap-on BK5500. Also affecting the CBU
segment in the first quarter of fiscal 2010 was a reduction in bookings received from Ridge because
of contract negotiations that were going on at that time. The decrease in CBU bookings was also the
primary reason for the decrease in the Americas. European bookings decreased primarily for
automated systems products and to a lesser extent lower orders of WheelWorks® and spare parts. The
increase in Asian bookings was primarily for automated systems products.
Backlog Backlog represents orders or bookings received by the Company that have not yet been
filled. The Companys backlog was $16.5 million as of September 30, 2009 compared to $26.5 million
as of September 30, 2008. The following tables show comparative data regarding the Companys
backlog by segment and geographic location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
First |
|
|
|
|
Backlog (by segment) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
15.4 |
|
|
|
93.3 |
% |
|
$ |
20.3 |
|
|
|
76.6 |
% |
|
$ |
(4.9 |
) |
|
|
(24.1 |
)% |
Commercial Products
Business Unit |
|
|
1.1 |
|
|
|
6.7 |
% |
|
|
6.2 |
|
|
|
23.4 |
% |
|
|
(5.1 |
) |
|
|
(82.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
16.5 |
|
|
|
100.0 |
% |
|
$ |
26.5 |
|
|
|
100.0 |
% |
|
$ |
(10.0 |
) |
|
|
(37.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
First |
|
|
|
|
Backlog (by location) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
5.0 |
|
|
|
30.3 |
% |
|
$ |
13.4 |
|
|
|
50.4 |
% |
|
$ |
(8.4 |
) |
|
|
(62.7 |
)% |
Europe |
|
|
9.5 |
|
|
|
57.6 |
% |
|
|
11.5 |
|
|
|
43.2 |
% |
|
|
(2.0 |
) |
|
|
(17.4 |
)% |
Asia |
|
|
2.0 |
|
|
|
12.1 |
% |
|
|
1.6 |
|
|
|
6.4 |
% |
|
|
0.4 |
|
|
|
25.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
16.5 |
|
|
|
100.0 |
% |
|
$ |
26.5 |
|
|
|
100.0 |
% |
|
$ |
(10.0 |
) |
|
|
(37.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affecting the comparison quarter over quarter is the fact that the fiscal 2009 quarter was the
second highest quarter ending backlog in the past seven years and the fact that the first quarter of
fiscal 2009 had not yet been fully affected by the forthcoming downturn in the automotive industry
and the economy as a whole. The decrease in IBU backlog primarily related to a decrease in the
backlog of automated systems products and to a lesser extent, a lower backlog in Value Added
Services and WheelWorks®. The decrease in CBU backlog reflects the fact that the Company is off
backorder status with orders and has been able to manufacture
inventory ahead of, or as orders are
received. The Company expects to be able to fill substantially all of the orders in its backlog
during the following 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.
15
Gross Profit Gross profit was $3.9 million, or 36.3% of sales, in the first quarter of fiscal
year 2010, as compared to $6.8 million, or 35.3% of sales, in the first quarter of fiscal year
2009. The Company achieved a gross profit margin percentage increase of 1.0% even though the
quarter comparison showed a 44% reduction in sales. The gross margin percentage increase was
primarily the result of the cost reduction actions taken by the Company in the second half of
fiscal 2009 and the mix of sales between the IBU and the CBU segments. The effect of the weaker
Euro in the first quarter of fiscal 2010 compared to 2009 reduced gross profit approximately
$250,000 or approximately 2%. Also contributing to the lower margin in the fiscal 2009 quarter was
a large project that had a sizable third party outsourcing content which resulted in a lower
overall margin on the project than was typical for the Company.
Selling, General and Administrative (SG&A) Expenses SG&A expenses were $3.7 million in the
quarter ended September 30, 2009 compared to $4.5 million in the first quarter a year ago. The
$819,000 decrease in SG&A expenses in fiscal 2010 was primarily due to lower personnel related
costs and contract services resulting from the cost reduction actions taken by the Company in the
second half of fiscal 2009. The weaker Euro in the fiscal 2010 quarter compared to fiscal 2009 did
not have a material effect on the comparison.
Engineering, Research and Development (R&D) Expenses Engineering and R&D expenses were $1.7
million in the quarter ended September 30, 2009 compared to $2.3 million in the first quarter a
year ago. The decrease was primarily due to lower personnel related costs, contract services and
travel costs resulting from the cost reduction actions taken by the Company in the second half of
fiscal 2009.
Interest Income, net Net interest income was $57,000 in the first quarter of fiscal 2010
compared with net interest income of $233,000 in the first quarter of fiscal 2009. The decrease was
primarily due to considerably lower interest rates in the first quarter of fiscal 2010 compared to
the first quarter of fiscal 2009. The Companys average cash and investment balances in the first
quarter of fiscal 2010 were also approximately 8% below the first quarter of fiscal 2009.
Foreign Currency There was net foreign currency income of $209,000 in the first quarter of
fiscal 2010 compared with a net foreign currency loss of $64,000 in the first quarter of fiscal
2009. The difference relates primarily to foreign currency changes in the Yen and to a lesser
extent, foreign currency changes in the Brazilian Real and Euro within the respective quarters.
Income Taxes The effective tax rate for the first quarter of fiscal 2010 was 32.1% compared to
116.7% in the first quarter of fiscal 2009 and primarily reflected the effect of the mix of
operating profit and loss among the Companys various operating entities and their countries
respective tax rates. The low pretax income on a combined basis in fiscal 2009 distorted the
effective tax rate for that quarter. The effective tax rate in the United States was 33.3% on a
pretax loss and 36.0% on pretax income in the fiscal 2010 and 2009 quarters, respectively. The
foreign subsidiaries combined effective tax rate was 36.2% on a combined pretax income and 17.9% on
a combined pretax loss in the fiscal 2010 and 2009 quarters, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Companys cash and cash equivalents were $17.4 million at September 30, 2009, compared to $22.7
million at June 30, 2009. The cash decrease of $5.2 million for the quarter ended September 30,
2009 resulted primarily from $3.2 million used to purchase short-term investments and $2.3 million
used for operating activities. The use of cash for operations was not unexpected and the Company
expects some use of cash over the next couple of quarters as working capital uses increase.
The $2.3 million of cash used for operations was related to changes in assets and liabilities of
$1.3 million, the net loss of $813,000 and adjustments for non-cash items of $194,000. The $1.3
million change in assets and liabilities resulted primarily from a use of cash for changes in other
current assets and liabilities of $1.1 million which reflected lower deferred revenue of
approximately $890,000 resulting from the timing of revenue recognition, lower accrued compensation
and other liabilities of approximately $530,000 related to the timing of payments, and a decrease
in deposits and prepaid expenses of approximately $375,000. Also contributing to the
$1.3 million change in assets and liabilities was a decrease in accounts payable of $559,000
related to the timing of payments that was mitigated by a reduction in receivables of $419,000
primarily related to cash collections during the quarter exceeding new sales in the quarter.
16
The Company provides a reserve for obsolescence to recognize the effects of engineering changes 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 the first quarter of fiscal 2010, the
Company increased the reserve for obsolescence by $67,000 and had no disposals.
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. The Company increased its allowance for doubtful accounts by
$13,000 and wrote off $394,000 of receivables during the first quarter of fiscal 2010, resulting in
a net decrease of $381,000.
The Company had no debt outstanding at September 30, 2009. The Company renewed its Credit Agreement
with Comerica Bank effective September 30, 2009. The Company has a $6.0 million secured Credit
Agreement, which expires on November 1, 2011. 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 Libor-based
Advance or as a Prime-based Advance if the Libor-based Advance is not available. Interest on
Libor-based Advances is calculated currently at 2.35% above the Libor Rate offered at the time and
for the period chosen and is payable on the last day of the applicable period. The Company may not
select a Prime-based rate for Advances except during any period of time during which the
Libor-based rate is not available as the applicable interest rate. Interest on Prime-based Advances
is payable on the first business day of each month commencing on the first business day following
the month during which such Advance is made and at maturity and is calculated daily, using the
interest rate established by the Bank as its prime rate for its borrowers. Quarterly, the Company
pays a commitment fee of 0.15% per annum on the daily unused portion of the Credit Agreement. 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 $41.4 million as of September 30, 2009 and to have no advances outstanding for 30
consecutive days each calendar year.
At September 30, 2009, the Companys German subsidiary (GmbH) had an unsecured credit facility
totaling 300,000 Euros (equivalent to approximately $438,000). 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 September 30, 2009,
GmbH had no borrowings outstanding. At September 30, 2009, the facility supported outstanding
letters of credit totaling 62,552 Euros (equivalent to approximately $91,000).
For a discussion of certain contingencies relating to the Companys liquidity, financial position
and results of operations, see Note 12 to the Consolidated Financial Statements, Commitments and
Contingencies, contained in this Quarterly Report on Form 10-Q, Item 3, Legal Proceedings and
Note 6 to the Consolidated Financial Statements, Contingencies, of the Companys Annual Report on
Form 10-K for fiscal year 2009. See also, Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations Critical Accounting Policies Litigation and
Other Contingencies of the Companys Annual Report on Form 10-K for fiscal year 2009.
At September 30, 2009, the Company has short-term investments totaling $4.5 million and long-term
investments valued at $2.2 million. See Note 5 to the Consolidated Financial Statements,
Short-Term and Long-Term Investments, for further information on the Companys investments and
their current valuation. The market for the long-term investments is currently illiquid. Based on
the Companys current business plan, cash, cash equivalents and short-term investments of $21.9
million at September 30, 2009 and its existing unused credit facilities, the Company does not
currently anticipate that the lack of liquidity on these investments will affect the Companys
ability to operate or fund its currently anticipated fiscal 2010 cash flow requirements.
The Company expects to spend approximately $1.5 million during fiscal year 2010 for capital
equipment, although there is no binding commitment to do so. Based on the Companys current
business plan, the Company believes that available cash on hand and existing credit facilities will
be sufficient to fund anticipated fiscal year 2010 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.
17
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.
CRITICAL ACCOUNTING POLICIES
A summary of critical accounting policies is presented in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations Critical Accounting Policies of the
Companys Annual Report on Form 10-K for fiscal year 2009.
New Accounting Pronouncements
For a discussion of new accounting pronouncements, see Note 2 to the Consolidated Financial
Statements, New Accounting Pronouncements.
ITEM 4(T). 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 and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures
pursuant to Rule 13a-15 (b) of the Securities Exchange Act of 1934 (the 1934 Act). Based upon
that evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that,
as of September 30, 2009, the Companys disclosure controls and procedures were effective. Rule
13a-15(e) of the 1934 Act defines disclosure controls and procedures as controls and other
procedures of the Company that are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is accumulated and communicated to the
Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
There have been no changes in the Companys internal controls over financial reporting during the
quarter ended September 30, 2009 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.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
There have been no material changes made to the risk factors listed in Item 1A Risk Factors of
the Companys Annual Report on Form 10-K for fiscal year 2009.
ITEM 6. EXHIBITS
10.40 |
|
Eleventh 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 on November 10, 2009. |
|
31.1 |
|
Certification by the Chief Executive Officer of the Company pursuant to
Rule 13a 14(a) of the Securities Exchange Act of 1934. |
|
31.2 |
|
Certification by the Chief Financial Officer of the Company pursuant to
Rule 13a 14(a) of the Securities Exchange Act of 1934. |
|
32 |
|
Certification pursuant to 18 U.S.C. Section 1350 and Rule 13a 14(b)
of the Securities Exchange Act of 1934. |
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Perceptron, Inc.
(Registrant)
|
|
Date: November 12, 2009 |
By: |
/S/ Harry T. Rittenour
|
|
|
|
Harry T. Rittenour |
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
Date: November 12, 2009 |
By: |
/S/ John H. Lowry III
|
|
|
|
John H. Lowry III |
|
|
|
Vice President and Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
|
Date: November 12, 2009 |
By: |
/S/ Sylvia M. Smith
|
|
|
|
Sylvia M. Smith |
|
|
|
Controller and Chief Accounting Officer
(Principal Accounting Officer) |
|
|
19