Form 10-Q
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 December 31, 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):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(Do not check if a smaller reporting company) |
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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 February 8, 2010, was:
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Common Stock, $0.01 par value
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8,952,149 |
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Class
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Number of shares |
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarter Ended December 31, 2009
2
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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December 31, |
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June 30, |
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(In Thousands, Except Per Share Amount) |
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2009 |
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2009 |
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(Unaudited) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
17,128 |
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$ |
22,654 |
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Short-term investments |
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3,987 |
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1,241 |
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Receivables: |
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Billed receivables, net of allowance for doubtful accounts
of $250 and $603, respectively |
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9,958 |
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8,975 |
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Unbilled receivables |
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358 |
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296 |
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Other receivables |
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733 |
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357 |
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Inventories, net of reserves of $662 and $646, respectively |
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10,448 |
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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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1,476 |
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2,909 |
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Total current assets |
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46,378 |
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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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13,606 |
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13,418 |
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Furniture and fixtures |
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870 |
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869 |
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20,489 |
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20,300 |
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Less Accumulated depreciation and amortization |
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(14,389 |
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(13,763 |
) |
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Net property and equipment |
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6,100 |
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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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8,957 |
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7,903 |
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Total Assets |
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$ |
63,627 |
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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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$ |
1,904 |
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$ |
2,461 |
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Accrued liabilities and expenses |
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2,486 |
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2,197 |
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Accrued compensation |
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904 |
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1,192 |
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Income taxes payable |
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101 |
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69 |
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Deferred revenue |
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2,325 |
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2,975 |
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Total current liabilities |
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7,720 |
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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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8,485 |
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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, $0.01 par value, authorized 19,000 shares, issued
and outstanding 8,930 and 8,873, respectively |
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89 |
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89 |
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Accumulated other comprehensive income |
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901 |
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718 |
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Additional paid-in capital |
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41,400 |
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40,914 |
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Retained earnings |
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12,752 |
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13,979 |
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Total shareholders equity |
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55,142 |
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55,700 |
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Total Liabilities and Shareholders Equity |
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$ |
63,627 |
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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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Six Months Ended |
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December 31, |
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December 31, |
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(In Thousands, Except Per Share Amounts) |
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2009 |
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2008 |
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2009 |
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2008 |
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Net Sales |
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$ |
11,751 |
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$ |
19,851 |
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$ |
22,564 |
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$ |
39,116 |
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Cost of Sales |
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6,944 |
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12,214 |
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13,828 |
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24,677 |
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Gross Profit |
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4,807 |
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7,637 |
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8,736 |
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14,439 |
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Operating Expenses |
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Selling, general and administrative |
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3,966 |
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4,477 |
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7,630 |
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8,960 |
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Engineering, research and development |
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1,554 |
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2,008 |
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3,283 |
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4,309 |
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Total operating expenses |
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5,520 |
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6,485 |
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10,913 |
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13,269 |
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Operating Income (Loss) |
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(713 |
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1,152 |
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(2,177 |
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1,170 |
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Other Income and (Expenses) |
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Interest income, net |
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71 |
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241 |
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128 |
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474 |
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Foreign currency gain (loss) |
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(34 |
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282 |
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175 |
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218 |
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Other |
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1 |
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3 |
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2 |
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5 |
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Total other income |
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38 |
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526 |
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305 |
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697 |
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Income (Loss) Before Income Taxes |
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(675 |
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1,678 |
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(1,872 |
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1,867 |
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Income Tax Benefit (Expense) |
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261 |
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(587 |
) |
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645 |
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(808 |
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Net Income (Loss) |
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$ |
(414 |
) |
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$ |
1,091 |
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$ |
(1,227 |
) |
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$ |
1,059 |
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Earnings (Loss) Per Common Share |
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Basic |
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($0.05 |
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$ |
0.12 |
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($0.14 |
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$ |
0.12 |
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Diluted |
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($0.05 |
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$ |
0.12 |
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($0.14 |
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$ |
0.12 |
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Weighted Average Common Shares Outstanding |
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Basic |
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8,902 |
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8,851 |
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8,895 |
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8,849 |
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Dilutive effect of stock options |
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91 |
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134 |
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Diluted |
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8,902 |
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8,942 |
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8,895 |
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8,983 |
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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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Six Months Ended |
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December 31, |
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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 income (loss) |
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$ |
(1,227 |
) |
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$ |
1,059 |
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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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690 |
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764 |
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Stock compensation expense |
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301 |
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333 |
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Deferred income taxes |
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(1,003 |
) |
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718 |
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Disposal of assets and other |
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(74 |
) |
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(52 |
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Allowance for doubtful accounts |
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(355 |
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(9 |
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Changes in assets and liabilities |
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Receivables, net |
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(991 |
) |
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(814 |
) |
Inventories |
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(343 |
) |
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(592 |
) |
Accounts payable |
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(633 |
) |
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2,914 |
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Other current assets and liabilities |
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703 |
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(1,929 |
) |
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Net cash provided from (used for) operating activities |
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(2,932 |
) |
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2,392 |
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Cash Flows from Financing Activities |
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Proceeds from stock plans |
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186 |
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53 |
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Net cash provided from financing activities |
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186 |
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53 |
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Cash Flows from Investing Activities |
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Purchases of investments |
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(3,244 |
) |
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Proceeds from sales and maturities of investments |
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498 |
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Capital expenditures |
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(238 |
) |
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(462 |
) |
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Net cash used for investing activities |
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(2,984 |
) |
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(462 |
) |
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Effect of Exchange Rate Changes on Cash and Cash Equivalents |
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204 |
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(867 |
) |
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Net Increase (Decrease) in Cash and Cash Equivalents |
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(5,526 |
) |
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|
1,116 |
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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, December 31 |
|
$ |
17,128 |
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|
$ |
23,273 |
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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). 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.
In October 2009, the FASB issued an accounting standards update amending revenue recognition
requirements for multiple-deliverable revenue arrangements. This update provides guidance on
separating the deliverables and on the method to measure and allocate arrangement consideration,
particularly when the arrangement includes both products and services provided to the customers.
The update is effective for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010. Early adoption is permitted. The Company has not yet
adopted this update and is currently evaluating the impact it may have on its financial condition
and results of operations.
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 at December 31, 2009
and June 30, 2009, in thousands:
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Description |
|
December 31, 2009 |
|
|
Level 1 |
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Level 2 |
|
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Level 3 |
|
Short-Term Investments |
|
$ |
12 |
|
|
$ |
12 |
|
|
|
|
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|
Long-Term Investments |
|
$ |
2,192 |
|
|
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|
|
|
|
|
|
|
$ |
2,192 |
|
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Description |
|
June 30, 2009 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Long-Term Investments |
|
$ |
2,192 |
|
|
|
|
|
|
|
|
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|
$ |
2,192 |
|
6
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.
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 $662,000 and $646,000 at
December 31, 2009 and June 30, 2009, respectively, is comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
Inventory |
|
2009 |
|
|
2009 |
|
Component parts |
|
$ |
2,091 |
|
|
$ |
2,651 |
|
Work in process |
|
|
156 |
|
|
|
90 |
|
Finished goods |
|
|
8,201 |
|
|
|
7,264 |
|
|
|
|
|
|
|
|
Total |
|
$ |
10,448 |
|
|
$ |
10,005 |
|
|
|
|
|
|
|
|
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 December 31, 2009, the Company had $4.0 million of short-term investments in certificate of
deposit holdings.
At December 31, 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 December 31, 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.
7
The following table summarizes the Companys long-term investments (in thousands):
|
|
|
|
|
|
|
|
|
Long-Term Investments |
|
December 31, 2009 |
|
|
June 30, 2009 |
|
Cost |
|
$ |
6,300 |
|
|
$ |
6,300 |
|
Unrealized (Losses) |
|
|
(4,108 |
) |
|
|
(4,108 |
) |
|
|
|
|
|
|
|
Estimated Fair Value |
|
$ |
2,192 |
|
|
$ |
2,192 |
|
|
|
|
|
|
|
|
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 December 31, 2009 and 2008 the Company had no forward exchange contracts outstanding. During
the six months ended December 31, 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):
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
2009 |
|
|
2008 |
|
Net Income (Loss) |
|
$ |
(414 |
) |
|
$ |
1,091 |
|
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(342 |
) |
|
|
(367 |
) |
Temporary impairment on investment |
|
|
|
|
|
|
|
|
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income (Loss) |
|
$ |
(756 |
) |
|
$ |
724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, |
|
2009 |
|
|
2008 |
|
Net Income (Loss) |
|
$ |
(1,227 |
) |
|
$ |
1,059 |
|
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
183 |
|
|
|
(1,969 |
) |
Temporary impairment on investment |
|
|
|
|
|
|
(185 |
) |
Forward contracts |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
Total Comprehensive (Loss) |
|
$ |
(1,044 |
) |
|
$ |
(1,114 |
) |
|
|
|
|
|
|
|
8. Credit Facilities
The Company had no debt outstanding at December 31, 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 December 31, 2009 and to have
no advances outstanding for 30 consecutive days each calendar year.
8
At December 31, 2009, the Companys German subsidiary (GmbH) had an unsecured credit facility
totaling 300,000 Euros (equivalent to approximately $430,000). 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 December
31, 2009, GmbH had no borrowings outstanding. At December 31, 2009, the facility supported
outstanding letters of credit totaling 62,552 Euros (equivalent to approximately $90,000).
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 $126,000 and $301,000 in the three and six months ended December 31, 2009, respectively. This
had the effect of decreasing net income by $86,000, or $0.01 per diluted share, and $202,000, or
$0.02 per diluted share, for the three and six months ended December 31, 2009, respectively. The
Company recognized operating expense for non-cash stock-based compensation costs in the amount of
$103,000 and $333,000 in the three and six months ended December 31, 2008, respectively. This had
the effect of decreasing net income by $55,000, or $0.01 per diluted share, and $220,000, or $0.02
per diluted share, for the three and six months ended December 31, 2008, respectively. As of
December 31, 2009, the total remaining unrecognized compensation cost related to non-vested stock
options amounted to $870,000. The Company expects to recognize this cost over a weighted average
vesting period of 2.35 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 December 31, 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.
9
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
Six Months |
|
|
Six Months |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
12/31/2009 |
|
|
12/31/2008 |
|
|
12/31/2009 |
|
|
12/31/2008 |
|
Weighted Average Estimated Fair
Value Per Share of Options
Granted During the Period |
|
$ |
1.38 |
|
|
$ |
1.84 |
|
|
$ |
1.38 |
|
|
$ |
2.16 |
|
Assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Dividend Yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Price Volatility |
|
|
47.35 |
% |
|
|
36.46 |
% |
|
|
47.35 |
% |
|
|
36.13 |
% |
Risk Free Rate of Return |
|
|
2.38 |
% |
|
|
3.13 |
% |
|
|
2.38 |
% |
|
|
3.19 |
% |
Expected Option Term (in years) |
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
The Company received $89,000 in cash from option exercises under all share-based payment
arrangements for the three and six months ended December 31, 2009.
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 1,115,000 and 1,018,000 shares of common stock outstanding in the three months
ended December 31, 2009 and 2008, respectively, were not included in the computation of diluted EPS
because the effect would have been anti-dilutive. Options to purchase 994,000 and 962,000 shares
of common stock outstanding in the six months ended December 31, 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 December 31, 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 $6.4 million using a December 31, 2009 exchange rate.
GDS and Carbotech filed and subsequently emerged from bankruptcy protection in Canada. The Company
intends to vigorously defend against GDS claims.
10
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 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 technology components consisting of 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 and six months ended December 31, 2008 have been
revised to conform to the new fiscal 2010 segment reporting structure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
Industrial |
|
|
Products Business |
|
|
|
|
Reportable Segments ($000) |
|
Business Unit |
|
|
Unit |
|
|
Consolidated |
|
Three months ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
9,861 |
|
|
$ |
1,890 |
|
|
$ |
11,751 |
|
Operating income (loss) |
|
|
275 |
|
|
|
(988 |
) |
|
|
(713 |
) |
Assets |
|
|
43,111 |
|
|
|
20,516 |
|
|
|
63,627 |
|
Accumulated depreciation and amortization |
|
|
13,705 |
|
|
|
684 |
|
|
|
14,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
11,941 |
|
|
$ |
7,910 |
|
|
$ |
19,851 |
|
Operating income (loss) |
|
|
(52 |
) |
|
|
1,204 |
|
|
|
1,152 |
|
Assets |
|
|
50,471 |
|
|
|
22,979 |
|
|
|
73,450 |
|
Accumulated depreciation and amortization |
|
|
13,611 |
|
|
|
324 |
|
|
|
13,935 |
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
Industrial |
|
|
Products Business |
|
|
|
|
Reportable Segments ($000) |
|
Business Unit |
|
|
Unit |
|
|
Consolidated |
|
Six months ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
17,953 |
|
|
$ |
4,611 |
|
|
$ |
22,564 |
|
Operating income (loss) |
|
|
(546 |
) |
|
|
(1,631 |
) |
|
|
(2,177 |
) |
Assets |
|
|
41,218 |
|
|
|
22,409 |
|
|
|
63,627 |
|
Accumulated depreciation and amortization |
|
|
13,705 |
|
|
|
684 |
|
|
|
14,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
23,066 |
|
|
$ |
16,050 |
|
|
$ |
39,116 |
|
Operating income (loss) |
|
|
(1,674 |
) |
|
|
2,844 |
|
|
|
1,170 |
|
Assets |
|
|
50,844 |
|
|
|
22,606 |
|
|
|
73,450 |
|
Accumulated depreciation and amortization |
|
|
13,611 |
|
|
|
324 |
|
|
|
13,935 |
|
14. Subsequent Events
On January 29, 2010, Ram Reinsurance Company Ltd., the issuer of one of the Companys preferred
stock investments, initiated a tender offer for all of its outstanding preference shares at $25,000
per share, if the shares are tendered by February 11, 2010. The tender offer period remains open
until February 26, 2010. The Company has tendered its shares. Provided that the tender offer is accepted
and closed, the Company expects to receive $925,000 which would result in a net gain of
approximately $200,000 over the Companys estimated fair market value of this investment at
December 31, 2009.
12
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.
13
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
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 AutoGaugeâ, AutoFitâ, AutoScanâ, and AutoGuideâ 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 technology components consisting of 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 automated systems. 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. Sales related to services and technology components are on-going and vary from
period to period based on customers plans. Sales of ScanWorksâ are primarily to
non-automotive customers. IBU sales in the second quarter of fiscal 2010 were still well below
historical levels and 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 second quarter improved $1.8 million over the first quarter of fiscal
2010 and sales in the first quarter of fiscal 2010 had improved $1.9 million over sales in the
fourth quarter of fiscal 2009. Bookings in the second quarter of fiscal 2010 were the highest
achieved in the last four quarters. Second quarter bookings increased $4.0 million or 50% over the
first quarter of fiscal 2010 and increased in all three geographic regions with Europe and Asia
having the largest percentage increases. Margins have improved as a result of the cost reduction
actions taken in the second half of fiscal 2009. IBUs quoting activity has increased and there
has been increased interest by our customers in the enhanced functionality that is being
incorporated into the AutoGauge® product. There has also been increased business activity in Asia
which was the first geographic area to show economic improvement.
During the second quarter of fiscal 2010, CBU entered into supply agreements with two new strategic
vertical partners and allowing for product design, development and
production, expects initial sales will occur before the end of fiscal 2010. Also as
previously disclosed, in October, the Company and Ridge Tool Company (Ridge) mutually decided not
to renew the Ridge supplier agreement. Sales to Ridge are expected to continue through the rest of
this fiscal year and will principally be from existing inventory with some sales expected 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. In the third
quarter of fiscal 2010, the Company began shipping two new accessories to Snap-on, a
Digital Video Recorder (DVR) and a 5.5 mm imager. The DVR adds the capability to record and store
images for users of the BK5500 product. The 5.5mm imager allows mechanics to see into diesel
injector ports and glow plugs.
Outlook - The Company is encouraged by the trend over the past two quarters of increased sales and
bookings in the IBU segment. The Company expects continued, gradual improvement in IBU sales.
Sales quoting activity in the United States is continuing at a higher level than it has in the past
four quarters. In Europe, the Company received automated system orders from a leading German
automotive manufacturer for its facilities in Europe, China, and South America. Sales in Asia,
particularly China, are expected to grow in the third and fourth quarter of fiscal 2010 and as a
result, the Company moved to a larger office in Shanghai and is in the process of hiring additional
engineers to support its growth in this area.
The Company expects sales for its CBU segment to begin growing again.
With the addition of the two new CBU partnerships and continued sales
to Snap-On and Ridge, the Company expects CBU sales to be higher in
the third and fourth quarters of fiscal 2010 compared to the level
achieved in the second quarter of fiscal 2010. CBU sales are expected to grow in fiscal 2011
compared to fiscal 2010 as the new strategic partners roll out product. The Company also continues
to be in active contract discussions with additional potential partners.
The Company continued to achieve the level of cost savings in the second quarter that it
anticipated at the time cost reduction actions were taken. As sales improve, the Company intends
to be conservative and strategic in determining where cost increases will be allowed to occur. The
Companys financial base remains strong with no debt and approximately $21.1 million of cash and
short-term investments at December 31, 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 its strategic partners in the CBU.
14
RESULTS OF OPERATIONS
Three Months Ended December 31, 2009 Compared to Three Months Ended December 31, 2008
Overview - For the second quarter of fiscal 2010, the Company reported a net loss of $414,000, or
$0.05 per diluted share, compared to net income of $1.1 million, or $0.12 per diluted share for the
second quarter of fiscal 2009. Specific line item results are described below.
Sales - Net sales in the second quarter of fiscal 2010 were $11.8 million, compared to $19.9
million for the quarter ended December 31, 2008. The following tables set forth comparison data
for the Companys net sales by segment and geographic location.
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Second |
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|
Second |
|
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|
Sales (by segment) |
|
Quarter |
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|
Quarter |
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|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
9.9 |
|
|
|
83.9 |
% |
|
$ |
12.0 |
|
|
|
60.3 |
% |
|
$ |
(2.1 |
) |
|
|
(17.5 |
)% |
Commercial Products Business Unit |
|
|
1.9 |
|
|
|
16.1 |
% |
|
|
7.9 |
|
|
|
39.7 |
% |
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|
(6.0 |
) |
|
|
(75.9 |
)% |
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Totals |
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$ |
11.8 |
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|
|
100.0 |
% |
|
$ |
19.9 |
|
|
|
100.0 |
% |
|
$ |
(8.1 |
) |
|
|
(40.7 |
)% |
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Second |
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Second |
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Sales (by location) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
4.9 |
|
|
|
41.5 |
% |
|
$ |
12.5 |
|
|
|
62.8 |
% |
|
$ |
(7.6 |
) |
|
|
(60.8 |
)% |
Europe |
|
|
6.1 |
|
|
|
51.7 |
% |
|
|
5.9 |
|
|
|
29.7 |
% |
|
|
.2 |
|
|
|
3.4 |
% |
Asia |
|
|
.8 |
|
|
|
6.8 |
% |
|
|
1.5 |
|
|
|
7.5 |
% |
|
|
(.7 |
) |
|
|
(46.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
11.8 |
|
|
|
100.0 |
% |
|
$ |
19.9 |
|
|
|
100.0 |
% |
|
$ |
(8.1 |
) |
|
|
(40.7 |
)% |
|
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|
Sales in the IBU segment decreased $2.1 million, primarily due to decreased sales of automated
systems products and to a lesser extent, lower technology component sales. The decrease reflects
the fact that the second quarter of fiscal 2009 had not yet been fully affected by the downturn in
the automotive industry and the economy as a whole that largely occurred toward the end of the
second quarter of fiscal 2009 and continued into fiscal 2010. Sales in the CBU segment decreased
primarily from lower sales to Ridge as a result of the decision not to renew the Ridge supplier
agreement and lower sales to Snap-on due to the state of the economy in the fiscal 2010 quarter
compared to the second quarter of fiscal 2009. The second quarter of fiscal 2009 also reflected a
ramp up of sales that related to the newly introduced Snap-on BK5500 product and the Ridge
microEXPLORER Digital Inspection Camera. 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 technology component sales in that region. The decrease in sales in Asia was
essentially split between lower automated systems products sales and lower technology component
sales and relates to the impact the automotive downturn had on the Company in fiscal 2010 that had
not yet impacted Asia sales in fiscal 2009.
Bookings - Bookings represent new orders received from customers. The Company had new order
bookings during the quarter of $14.7 million compared to $12.4 million for the second quarter
ended December 31, 2008. The following tables set forth comparison data for the Companys
bookings by segment and geographic location. It should be noted that the Companys level of new
orders fluctuates from quarter to quarter and the amount of new
order bookings during any particular period is not necessarily indicative of the future operating
performance of the Company.
15
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Second |
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|
Second |
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|
Bookings (by segment) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
12.0 |
|
|
|
81.6 |
% |
|
$ |
8.8 |
|
|
|
71.0 |
% |
|
$ |
3.2 |
|
|
|
36.4 |
% |
Commercial Products Business Unit |
|
|
2.7 |
|
|
|
18.4 |
% |
|
|
3.6 |
|
|
|
29.0 |
% |
|
|
(0.9 |
) |
|
|
(25.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
14.7 |
|
|
|
100.0 |
% |
|
$ |
12.4 |
|
|
|
100.0 |
% |
|
$ |
2.3 |
|
|
|
18.5 |
% |
|
|
|
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Second |
|
|
Second |
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|
|
|
Bookings (by location) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
6.2 |
|
|
|
42.2 |
% |
|
$ |
7.1 |
|
|
|
57.3 |
% |
|
$ |
(0.9 |
) |
|
|
(12.7 |
)% |
Europe |
|
|
5.7 |
|
|
|
38.8 |
% |
|
|
4.8 |
|
|
|
38.7 |
% |
|
|
0.9 |
|
|
|
18.8 |
% |
Asia |
|
|
2.8 |
|
|
|
19.0 |
% |
|
|
0.5 |
|
|
|
4.0 |
% |
|
|
2.3 |
|
|
|
460.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
14.7 |
|
|
|
100.0 |
% |
|
$ |
12.4 |
|
|
|
100.0 |
% |
|
$ |
2.3 |
|
|
|
18.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
IBU bookings increased $3.2 million primarily as a result of higher automated systems products
bookings. IBU bookings have improved for three consecutive quarters and in the second quarter of
fiscal 2010 were the highest since the first quarter of fiscal 2009. Europe and Asia bookings
increased primarily for automated systems products. CBU bookings decreased primarily due to the state of the economy in the fiscal 2010 quarter
compared to the second quarter of fiscal 2009. The decrease in CBU bookings was also the primary
reason for the decrease in the Americas.
Backlog - Backlog represents orders or bookings received by the Company that have not yet been
filled. The Companys backlog was $19.4 million as of December 31, 2009 compared with $19.1
million as of December 31, 2008. The following tables set forth comparison data for the Companys
backlog by segment and geographic location. It should be noted that 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. The Company expects to
be able to fill substantially all of the orders in backlog during the following twelve months.
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|
Second |
|
|
Second |
|
|
|
|
Backlog (by segment) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
17.6 |
|
|
|
90.7 |
% |
|
$ |
17.1 |
|
|
|
89.5 |
% |
|
$ |
0.5 |
|
|
|
2.9 |
% |
Commercial Products Business Unit |
|
|
1.8 |
|
|
|
9.3 |
% |
|
|
2.0 |
|
|
|
10.5 |
% |
|
|
(0.2 |
) |
|
|
(10.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
19.4 |
|
|
|
100.0 |
% |
|
$ |
19.1 |
|
|
|
100.0 |
% |
|
$ |
0.3 |
|
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
Second |
|
|
Second |
|
|
|
|
Backlog (by location) |
|
Quarter |
|
|
Quarter |
|
|
|
|
(in millions) |
|
2010 |
|
|
2009 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
6.3 |
|
|
|
32.5 |
% |
|
$ |
8.0 |
|
|
|
41.9 |
% |
|
$ |
(1.7 |
) |
|
|
(21.3 |
)% |
Europe |
|
|
9.1 |
|
|
|
46.9 |
% |
|
|
10.5 |
|
|
|
55.0 |
% |
|
|
(1.4 |
) |
|
|
(13.3 |
)% |
Asia |
|
|
4.0 |
|
|
|
20.6 |
% |
|
|
0.6 |
|
|
|
3.1 |
% |
|
|
3.4 |
|
|
|
566.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
19.4 |
|
|
|
100.0 |
% |
|
$ |
19.1 |
|
|
|
100.0 |
% |
|
$ |
0.3 |
|
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
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|
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|
16
There was no significant change in the overall backlog for either IBU or CBU compared to the second
quarter of fiscal 2009. The trend in IBUs backlog has been improving since the third quarter of
fiscal 2009 and is at its highest level since the first quarter of fiscal 2009. Asian backlog
increased as a result of higher automated systems bookings and was the reason for the overall
increase in IBU backlog.
Gross Profit - Gross profit was $4.8 million, or 40.9% of sales, in the second quarter of fiscal
2010, as compared to $7.6 million, or 38.5% of sales, in the second quarter of fiscal 2009. The
Company achieved a gross profit margin percentage increase of 2.4% even though the quarter
comparison showed a 40.8% 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 stronger Euro in the
second quarter of fiscal 2010 compared to 2009 increased gross profit approximately $400,000.
Selling, General and Administrative (SG&A) Expenses - SG&A expenses decreased $511,000 to $4.0
million compared to $4.5 million in the quarter ended December 31, 2008. The decrease was
primarily due to lower personnel related costs resulting from the cost reduction actions taken by
the Company in the second half of fiscal 2009 and to a lesser extent, lower advertising expenses.
The stronger Euro in the fiscal 2010 quarter compared to fiscal 2009 increased costs approximately
$120,000.
Engineering, Research and Development (R&D) Expenses - Engineering and R&D expenses were $1.6
million in the quarter ended December 31, 2009 compared to $2.0 million in the second quarter a
year ago. The $454,000 decrease was primarily due to lower personnel related 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 $71,000 in the second quarter of fiscal 2010
compared with net interest income of $241,000 in the second quarter of fiscal 2009. The decrease
was primarily due to significantly lower interest rates and to a lesser extent lower average cash
and investment balances compared to one year ago.
Foreign Currency - There was a net foreign currency loss of $34,000 in the fiscal 2010 quarter
compared with a gain of $282,000 a year ago and represents foreign currency changes, particularly
related to the Yen within the respective periods.
Income Taxes - The effective tax rate for the second quarter of fiscal 2010 was 38.7% compared to
35.0% in the second quarter of fiscal 2009. The effective rate in both 2009 and 2008 primarily
reflects the effect of the mix of pre-tax profit and loss among the Companys various operating
entities and their countries respective tax rates.
Six Months Ended December 31, 2009 Compared to Six Months Ended December 31, 2008
Overview - The Company reported a net loss of $1.2 million, or $0.14 per diluted share, for the
first half of fiscal 2010, compared with net income of $1.1 million, or $0.12 per diluted share for
the six months ended December 31, 2008. Specific line item results are described below.
Sales - Net sales in the first six months of fiscal 2010 were $22.6 million, compared to $39.1
million for the six months ended December 31, 2008. The following tables set forth comparison
data for the Companys net sales by segment and geographic location.
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (by segment) |
|
Six Months |
|
|
Six Months |
|
|
|
|
(in millions) |
|
Ended 12/31/09 |
|
|
Ended 12/31/08 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
18.0 |
|
|
|
79.6 |
% |
|
$ |
23.1 |
|
|
|
59.1 |
% |
|
$ |
(5.1 |
) |
|
|
(22.1 |
)% |
Commercial Products Business Unit |
|
|
4.6 |
|
|
|
20.4 |
% |
|
|
16.0 |
|
|
|
40.9 |
% |
|
|
(11.4 |
) |
|
|
(71.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
22.6 |
|
|
|
100.0 |
% |
|
$ |
39.1 |
|
|
|
100.0 |
% |
|
$ |
(16.5 |
) |
|
|
(42.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (by location) |
|
Six Months |
|
|
Six Months |
|
|
|
|
(in millions) |
|
Ended 12/31/09 |
|
|
Ended 12/31/08 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
10.4 |
|
|
|
46.0 |
% |
|
$ |
26.0 |
|
|
|
66.5 |
% |
|
$ |
(15.6 |
) |
|
|
(60.0 |
)% |
Europe |
|
|
10.9 |
|
|
|
48.2 |
% |
|
|
10.8 |
|
|
|
27.6 |
% |
|
|
0.1 |
|
|
|
0.9 |
% |
Asia |
|
|
1.3 |
|
|
|
5.8 |
% |
|
|
2.3 |
|
|
|
5.9 |
% |
|
|
(1.0 |
) |
|
|
(43.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
22.6 |
|
|
|
100.0 |
% |
|
$ |
39.1 |
|
|
|
100.0 |
% |
|
$ |
(16.5 |
) |
|
|
(42.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales in the IBU segment decreased $5.1 million, primarily due to decreased sales of automated
systems products and to a lesser extent, lower technology component sales. The decrease reflects
the fact that the Companys first six months results in fiscal 2009 had not yet been significantly
affected by the forthcoming downturn in the automotive industry and the overall economy that
largely occurred toward the end of the second quarter of fiscal 2009 and continued into fiscal
2010. Sales in the CBU segment decreased primarily due to the high sales level achieved in the
fiscal 2009 period that reflected a high ramp up of sales related to the newly introduced Snap-on
BK5500 product and the Ridge microEXPLORER Digital Inspection Camera. Also affecting the CBU
fiscal 2010 period was the state of the economy in the fiscal 2010 period compared to the fiscal
2009 period and reduced sales to Ridge resulting from the decision not to renew the Ridge supplier
agreement. 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 technology
component sales in that region. Sales in Asia decreased primarily due to lower automated systems
products sales and, to a lesser extent, lower technology component sales.
Bookings - Bookings represent new orders received from customers. New order bookings for the six
months ended December 31, 2009 were $24.5 million compared to $32.8 million for the same period one
year ago. The following tables set forth comparison data for the Companys bookings by segment and
geographic location. It should be noted that historically, the Companys level of new orders has
varied from period to period and the amount of new order bookings during any particular period is
not necessarily indicative of the future operating performance of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings (by segment) |
|
Six Months |
|
|
Six Months |
|
|
|
|
(in millions) |
|
Ended 12/31/09 |
|
|
Ended 12/31/08 |
|
|
Increase/(Decrease) |
|
Industrial Business Unit |
|
$ |
20.1 |
|
|
|
82.0 |
% |
|
$ |
21.7 |
|
|
|
66.2 |
% |
|
$ |
(1.6 |
) |
|
|
(7.4 |
)% |
Commercial Products Business Unit |
|
|
4.4 |
|
|
|
18.0 |
% |
|
|
11.1 |
|
|
|
33.8 |
% |
|
|
(6.7 |
) |
|
|
(60.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
24.5 |
|
|
|
100.0 |
% |
|
$ |
32.8 |
|
|
|
100.0 |
% |
|
$ |
(8.3 |
) |
|
|
(25.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookings (by location) |
|
Six Months |
|
|
Six Months |
|
|
|
|
(in millions) |
|
Ended 12/31/09 |
|
|
Ended 12/31/08 |
|
|
Increase/(Decrease) |
|
Americas |
|
$ |
11.1 |
|
|
|
45.3 |
% |
|
$ |
19.1 |
|
|
|
58.2 |
% |
|
$ |
(8.0 |
) |
|
|
(41.9 |
)% |
Europe |
|
|
8.8 |
|
|
|
35.9 |
% |
|
|
12.6 |
|
|
|
38.4 |
% |
|
|
(3.8 |
) |
|
|
(30.2 |
)% |
Asia |
|
|
4.6 |
|
|
|
18.8 |
% |
|
|
1.1 |
|
|
|
3.4 |
% |
|
|
3.5 |
|
|
|
318.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
24.5 |
|
|
|
100.0 |
% |
|
$ |
32.8 |
|
|
|
100.0 |
% |
|
$ |
(8.3 |
) |
|
|
(25.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in IBU bookings of $1.6 million for the six-month period of fiscal 2010 occurred
entirely in the first quarter. 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 half of fiscal 2010 was the state of the economy in the fiscal 2010 period compared to
the fiscal 2009 period. The decrease in CBU bookings was also the primary reason for the decrease
in the Americas and to a lesser extent lower technology component and automated systems bookings
that occurred in the first quarter of fiscal 2010. European bookings decreased primarily due to
lower automated systems products and also occurred in the first quarter of fiscal 2010. The
increase in Asian bookings was primarily for automated systems products.
18
Gross Profit - Gross profit was $8.7 million, or 38.7% of sales, in the first half of fiscal 2010,
as compared to $14.4 million, or 36.9% of sales, in the first half of fiscal 2009. The Company
achieved a gross profit margin percentage increase of 1.8% even though the six-month period
comparison showed a 42.2% 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 stronger Euro in the
first half of fiscal 2010 compared to 2009 increased gross profit approximately $170,000. Also
contributing to the lower margin in the fiscal 2009 period 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 $7.6 million in the first
half of fiscal 2010 compared to $9.0 million in the same period one year ago. The decrease of
approximately $1.4 million 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 stronger Euro in the fiscal 2010 period 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 $3.3
million for the six months ended December 31, 2009 compared to $4.3 million for the six-month
period a year ago. The $1.0 million decrease was principally due to lower personnel related costs
resulting from the cost reduction actions taken by the Company in the second half of fiscal 2009
and to a lesser extent lower contract services.
Interest Income, net - Net interest income was $128,000 in the first half of fiscal 2010 compared
with net interest income of $474,000 in the first half of fiscal 2009. The decrease was principally
due to lower interest rates and to a lesser extent, lower cash and investment balances in the first
half of fiscal 2010 compared to the first half of fiscal 2009.
Foreign Currency - There was a net foreign currency gain of $175,000 in the first half of fiscal
2010 compared with a gain of $218,000 a year ago and represents foreign currency changes,
particularly related to the Yen and to a lesser extent the Real within the respective periods.
Income Taxes - The effective tax rate for the first six months of fiscal 2010 was 34.5% compared to
43.3% in the first half of fiscal 2009. The effective tax rate in both 2009 and 2008 periods
primarily reflected the effect of the mix of operating profit and loss among the Companys various
operating entities and their countries respective tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The Companys cash and cash equivalents were $17.1 million at December 31, 2009, compared to $22.7
million at June 30, 2009. The largest component of the $5.6 million decrease for the six months
ended December 31, 2009 was from purchases of short-term investments totaling $3.2 million. In
addition, there was $2.9 million used for operations and $238,000 used for capital expenditures
which were offset by proceeds of $498,000 from sales and maturities of investments and $204,000 for
the effect of exchange rate changes on cash and cash equivalents.
Of the $2.9 million in cash used for operations, $1.3 million was used for net working capital
needs and $1.6 million reflected the net loss of $1.2 million plus the add back of non-cash items
totaling $441,000. The net working capital use resulted primarily from increased receivables of
$991,000, decreased accounts payables of $633,000, and increased inventory of $343,000 which were
offset by a $703,000 favorable change in other current assets and liabilities. The $991,000
increase in receivables primarily related to higher sales during the second quarter of fiscal 2010
compared to the fourth quarter of fiscal 2009. The decrease in accounts payable related to normal
fluctuations in the timing of payments. The change in other current assets and liabilities
represented lower prepaid expenses and higher accrued liabilities offset by lower deferred revenue
and accrued compensation.
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 half
of fiscal 2010, the Company increased the reserve for obsolescence by $16,000, net of foreign
currency translation effects of the Euro and had no disposals.
19
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
$37,000 and wrote off $390,000 of receivables during the first half of fiscal 2010, resulting in a
net decrease of $353,000.
The Company had no debt outstanding at December 31, 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 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 a 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 December 31, 2009 and to have no advances outstanding for 30 consecutive days
each calendar year.
At December 31, 2009, the Companys German subsidiary (GmbH) had an unsecured credit facility
totaling 300,000 Euros (equivalent to approximately $430,000). 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 December
31, 2009, GmbH had no borrowings outstanding. At December 31, 2009, the facility supported
outstanding letters of credit totaling 62,552 Euros (equivalent to approximately $90,000).
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 December 31, 2009, the Company had short-term investments totaling $4.0 million and long-term
investments valued at $2.2 million. See Note 5 and Note 14 to the Consolidated Financial
Statements, Short-Term and Long-Term Investments, and Subsequent Events, respectively, 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 $21.1 million at December 31, 2009 and its existing
unused credit facilities, the Company does not currently anticipate that the lack of liquidity on
these long-term investments will affect the Companys ability to operate or fund its currently
anticipated fiscal 2010 cash flow requirements.
The Company expects to spend approximately $1.3 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.
20
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 December 31, 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 December 31, 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 |
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.
21
|
|
|
ITEM 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
The Company held its Annual Meeting of Shareholders on November 17, 2009 at which time the
following action was taken:
1. The Shareholders elected the following persons as the Companys Board of Directors, and the
results of the vote on this matter were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
For |
|
|
Withheld |
|
|
Broker Non-Votes |
|
|
|
David J. Beattie |
|
|
7,415,243 |
|
|
|
485,029 |
|
|
|
|
|
Kenneth R. Dabrowski |
|
|
7,071,718 |
|
|
|
828,554 |
|
|
|
|
|
Philip J. DeCocco |
|
|
7,095,308 |
|
|
|
804,964 |
|
|
|
|
|
W. Richard Marz |
|
|
7,388,225 |
|
|
|
512,047 |
|
|
|
|
|
Robert S. Oswald |
|
|
7,413,064 |
|
|
|
487,208 |
|
|
|
|
|
James A. Ratigan |
|
|
7,304,995 |
|
|
|
595,277 |
|
|
|
|
|
Harry T. Rittenour |
|
|
7,402,386 |
|
|
|
497,886 |
|
|
|
|
|
Terryll R. Smith |
|
|
7,005,848 |
|
|
|
894,424 |
|
|
|
|
|
2. The Shareholders ratified the selection of Grant Thornton LLP as the Companys independent
registered public accounting firm for fiscal 2010, and the results of the vote on this matter were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
|
Against |
|
|
Abstentions |
|
|
Broker Non-Votes |
|
|
|
|
7,833,227 |
|
|
|
47,464 |
|
|
|
19,579 |
|
|
|
|
|
|
|
|
|
|
|
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. |
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Perceptron, Inc.
(Registrant)
|
|
Date: February 12, 2010 |
By: |
/S/ Harry T. Rittenour
|
|
|
|
Harry T. Rittenour |
|
|
|
President and Chief Executive Officer |
|
|
|
|
Date: February 12, 2010 |
By: |
/S/ John H. Lowry III
|
|
|
|
John H. Lowry III |
|
|
|
Vice President and Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
Date: February 12, 2010 |
By: |
/S/ Sylvia M. Smith
|
|
|
|
Sylvia M. Smith |
|
|
|
Controller and Chief Accounting Officer
(Principal Accounting Officer) |
|
23