SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Check One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
COMMISSION FILE NUMBER 0-16577
CYBEROPTICS CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota 41-1472057
- --------- ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5900 Golden Hills Drive, Minneapolis, Minnesota 55416
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(Address of principal executive offices)
(763) 542-5000
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(Issuer's telephone number)
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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At November 13, 2002, 8,220,716 shares of the issuer's Common Stock, no par
value, were outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CYBEROPTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
SEPT. 30, 2002 DEC. 31, 2001
(Unaudited)
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ASSETS
Cash and cash equivalents $ 5,790 $ 12,323
Marketable securities 7,294 8,407
Accounts receivable, net 6,321 2,740
Inventories 7,996 9,667
Income tax Receivable 2,453 2,076
Other current assets 811 738
Deferred tax assets -- 1,684
- ---------------------------------------------------------------------------------------------
Total current assets 30,665 37,635
Marketable securities 5,703 7,830
Equipment and leasehold improvements, net 2,555 3,375
Intangible and other assets, net 5,491 6,464
Goodwill, net 5,478 5,048
Deferred tax assets -- 829
- ---------------------------------------------------------------------------------------------
Total assets $ 49,892 $ 61,181
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,609 $ 1,787
Accrued expenses 2,807 2,356
- ---------------------------------------------------------------------------------------------
Total current liabilities 4,416 4,143
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par value, 5,000 shares
authorized, none outstanding
Common stock, no par value, 37,500 shares
authorized, 8,221 and 8,124 shares issued
and outstanding, respectively 41,952 41,176
Retained earnings 4,065 15,954
Accumulated other comprehensive (loss) (541) (92)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 45,476 57,038
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Total liabilities and stockholders' equity $ 49,892 $ 61,181
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SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
2
CYBEROPTICS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS ENDED SEPTEMBER 30,
2002 2001
- -------------------------------------------------------------------------------------
Revenues $7,476 $6,189
Cost of revenues 4,163 3,691
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Gross margin 3,313 2,498
Research and development expenses 1,725 2,023
Selling, general and administrative expenses 3,028 3,924
Restructuring and severance costs 169
Amortization of intangibles 281 592
- -------------------------------------------------------------------------------------
Loss from operations (1,721) (4,210)
Interest income and other (343) 311
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Loss before income taxes (2,064) (3,899)
Income tax (benefit) provision 3,331 (1,950)
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Net loss ($5,395) ($1,949)
=====================================================================================
Net loss per share - Basic ($0.66) ($0.24)
Net loss per share - Diluted ($0.66) ($0.24)
=====================================================================================
Weighted average shares outstanding - Basic 8,195 8,052
Weighted average shares outstanding - Diluted 8,195 8,052
=====================================================================================
NINE MONTHS ENDED SEPTEMBER 30,
2002 2001
- -------------------------------------------------------------------------------------
Revenues $17,920 $34,160
Cost of revenues 10,868 15,791
- -------------------------------------------------------------------------------------
Gross margin 7,052 18,369
Research and development expenses 6,300 6,473
Selling, general and administrative expenses 10,292 12,952
Restructuring and severance costs 1,647 419
Amortization of goodwill and other intangibles 843 1,759
- -------------------------------------------------------------------------------------
Loss from operations (12,030) (3,234)
Interest income and other (508) 1,103
- -------------------------------------------------------------------------------------
Loss before income taxes (12,538) (2,131)
Income tax benefit (649) (1,140)
- -------------------------------------------------------------------------------------
Net Loss (11,889) (991)
=====================================================================================
Net loss per share - Basic ($1.46) ($0.12)
Net loss per share - Diluted ($1.46) ($0.12)
=====================================================================================
Weighted average shares outstanding - Basic 8,155 8,000
Weighted average shares outstanding - Diluted 8,155 8,000
=====================================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
3
CYBEROPTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
NINE MONTHS ENDED SEPTEMBER 30,
2002 2001
- ----------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income loss ($11,889) ($991)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 2,207 3,239
Provision for losses on inventories 1,138 535
Provision for doubtful accounts 73 (2)
Deferred income taxes 2,513
Amortization of restricted stock and other 98 30
Equity in losses of Avanti 1,055
Changes in operating assets and liabilities
excluding impact of acquisitions:
Accounts receivable (3,654) 8,795
Inventories 533 (761)
Other current assets (309) 613
Accounts payable (178) (1,658)
Income taxes receivable (376) (2,588)
Accrued expenses 451 (2,469)
- ----------------------------------------------------------------------------------------
Net cash provided (used)
by operating activities (8,338) 4,743
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities 8,854 11,781
Purchases of marketable securities (5,614) (11,436)
Loan to related party (1,500) --
Purchases of businesses and technology, net of
cash acquired -- (1,264)
Additions to equipment and leasehold improvements (398) (1,177)
Additions to patents (215) (157)
- ----------------------------------------------------------------------------------------
Net cash provided (used) in
investing activities 1,127 (2,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 187 446
Proceeds from issuance of common stock
under employee stock purchase plan 491 371
- ----------------------------------------------------------------------------------------
Net cash provided by financing
activities 678 817
Increase (decrease) in cash and cash equivalents (6,533) 3,307
Cash and cash equivalents - beginning
of period 12,323 13,097
- ----------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $5,790 $16,404
========================================================================================
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
4
CYBEROPTICS CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
1. INTERIM REPORTING:
The interim consolidated financial statements presented herein as of September
30, 2002, and for the nine and three month periods ended September 30, 2002 and
2001, are unaudited; however, in the opinion of management, the interim
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of financial
position, results of operations and cash flows for the periods presented.
The results of operations for the nine and three month periods ended September
30, 2002, do not necessarily indicate the results to be expected for the full
year. The December 31, 2001, consolidated balance sheet data was derived from
audited consolidated financial statements, but does not include all disclosures
required by generally accepted accounting principles. These unaudited interim
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and notes thereto, contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.
2. ACCOUNTING CHANGES:
In June 2001, the Financial Accounting Standards Board issued FAS 142, Goodwill
and Other Intangible Assets ("FAS 142"). Under FAS 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are reviewed at least
annually for impairment. With respect to goodwill amortization, CyberOptics
adopted FAS 142 effective January 1, 2002. Actual results of operations for the
nine and three months ended September 30, 2002, and pro forma results of
operations for the nine and three months ended September 30, 2001 and the three
years ended December 31, 2001, 2000 and 1999, had CyberOptics applied the
non-amortization provisions of SFAS No. 142 follow (in thousands, except per
share amounts):
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 30, 2002 SEPT. 30, 2001 SEPT. 30, 2002 SEPT. 30, 2001
-------------- -------------- -------------- --------------
Reported net loss ($5,395) ($1,949) ($11,889) ($991)
Add back amortization of
goodwill, net of tax 301 900
------- -------
Adjusted net loss ($5,395) ($1,648) ($11,889) ($91)
BASIC EARNINGS PER SHARE:
Reported net loss ($0.66) ($0.24) ($1.46) ($0.12)
Add back amortization of goodwill, net of tax $0.04 $0.11
Adjusted net loss ($0.66) ($0.20) ($1.46) ($0.01)
DILUTED EARNINGS PER SHARE:
Reported net loss ($0.66) ($0.24) ($1.46) ($0.12)
Add back amortization of goodwill, net of tax $0.04 $0.11
Adjusted net loss ($0.66) ($0.20) ($1.46) ($0.01)
5
12 MONTHS ENDED
---------------
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- ----------------- -----------------
Reported net income (loss) ($4,164) $7,089 ($5,496)
Add back amortization of
goodwill, net of tax $1,208 $983 $696
------ ---- ----
Adjusted net income (loss) ($2,956) $8,072 ($4,800)
BASIC EARNINGS PER SHARE:
Reported net income (loss) ($0.52) $0.91 ($0.74)
Add back amortization of goodwill, net of tax $0.15 $0.13 $0.09
Adjusted net income (loss) ($0.37) $1.04 ($0.65)
DILUTED EARNINGS PER SHARE:
Reported net income (loss) ($0.52) $0.81 ($0.74)
Add back amortization of goodwill, net of tax $0.15 $0.12 $0.09
Adjusted net income (loss) ($0.37) $0.93 ($0.65)
At September 30, 2002, CyberOptics had net goodwill of $5.5 million. Pursuant to
FAS 142, CyberOptics completed its transitional test for goodwill impairment
during the second quarter of 2002. The Company's methodology for estimating fair
value included utilizing several valuation methodologies, including discounted
cash flows, in determining a reasonable valuation. The result of the tests
performed indicates goodwill was not impaired as of January 1, 2002.
Accordingly, no impairment charge has been recognized upon adoption. CyberOptics
will perform reviews for the possible impairment of Goodwill on an annual basis.
3. CERTAIN BALANCE SHEET COMPONENTS (IN THOUSANDS):
Inventories consisted of the following:
SEPT. 30, DECEMBER 31,
2002 2001
---------------------------
Raw materials $3,703 $4,979
Work in process 971 673
Finished goods 3,322 4,015
---------------------------
Total inventories $7,996 $9,667
===========================
6
Intangible and other assets include the following:
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------- ------------
Gross intangibles:
Developed technology $ 7,275 $ 7,275
Patents and trademarks 1,408 1,226
Customer Base 280 280
Workforce -- 560
-------- --------
8,963 9,341
Accumulated amortization:
Developed technology (2,770) (1,989)
Patents and trademarks (1,013) (859)
Customer base (134) (82)
Workforce -- (130)
-------- --------
(3,917) (3,060)
Avanti note receivable, net 445
Other non-current assets 183
-------- --------
Total intangibles
and other assets, net $ 5,491 $ 6,464
======== ========
In connection with adopting SFAS 142, CyberOptics reassessed the useful lives
and the classification of identifiable intangible assets and determined that as
of January 1, 2002, with the exception of reclassifying workforce into goodwill,
they continue to be appropriate. Estimated aggregate amortization expense based
on current intangibles for the next five years is as follows: $1.3 million in
2002, $1.3 million in 2003, $1.1 million in 2004, $1.0 million in 2005 and $0.6
million in 2006.
4. NET INCOME (LOSS) PER SHARE:
Basic net income per share has been computed using the weighted average number
of shares outstanding during the period presented. The diluted net income per
share includes the effect of common stock equivalents for each period. The
shares used in the basic and diluted net income per share computation for the
three and nine month periods ended September 30, 2002 and 2001 are the same, as
additional shares in the denominator would be anti-dilutive due to the Company's
net loss. Weighted average shares for which the option price exceeds the average
market price were 1,550,000 and 1,178,000 for the three and nine month periods
ended September 30, 2002, respectively. Weighted average shares for which the
option price exceeds the average market price were 862,000 and 490,000 for
the three and nine month periods ended September 30, 2001, respectively.
5. COMPREHENSIVE INCOME (LOSS):
Statement of Financial Accounting Standards No. 130 requires that unrealized
gains and losses on the Company's available-for-sale marketable securities and
certain foreign currency translation adjustments be included as a component of
other comprehensive income.
During the nine month periods ended September 30, 2002 and 2001, total
comprehensive income (loss) amounted to ($449,000) and ($844,000), respectively.
During the three month periods ended September 30, 2002 and 2001, total
comprehensive income (loss) amounted to $44,000 and ($1,796,000), respectively.
Accumulated other comprehensive loss at September 30, 2002 and December 31, 2001
was ($541,000) and ($92,000), respectively.
7
6. INCOME TAXES:
In accordance with Statement of Financial Accounting Standards No. 109, as the
result of US based operating losses incurred over the past three years and
continued weakness in the markets served by CyberOptics and the resulting impact
on order rates, the Company has reduced its effective tax rate to reflect only a
current benefit resulting from the ability to carry-back losses to prior periods
and recorded a valuation allowance against its deferred tax assets. The income
tax provision for the quarter ended September 30, 2002 reflects the
establishment of a valuation allowance against deferred tax assets of $4.1
million, which includes $2.5 million of deferred tax assets recorded as of
December 31, 2001 and $1.6 million of deferred tax assets generated during the 9
month period ended September 30, 2002. During the remainder of 2002, the Company
will record income tax expense or benefit on its profit and loss statement
relating the change in its income tax receivable as the result of being able to
carry-back losses generated during 2002 to prior years. Following the 2002
fiscal year, the Company does not expect to record tax expense or benefit until
the Company is consistently profitable on a quarterly basis. At that time, the
valuation allowance will be reassessed and could be eliminated, resulting in the
recognition of the deferred tax assets.
7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," on January 1, 2001. The adoption of SFAS No. 133 did not
materially impact the Company's financial position as of September 30, 2001 or
its results of operations or cash flows for the nine months then ended.
The Company enters into foreign currency swap agreements to hedge short term
inter-company financing transactions with its subsidiary in the United Kingdom.
These currency swap agreements are structured to mature on the last day of each
quarter and are designated as cash flow hedges. At September 30, 2002,
CyberOptics had one open swap agreement that was purchased on that date. As a
result, there were no material unrealized gains or losses as of September 30,
2002. During the nine months ended September 30, 2002 CyberOptics recognized a
loss of approximately $518,000 from the settlement of foreign currency swap
agreements which offset the $415,000 translation gain on the underlying
inter-company balance.
The Company's foreign currency swap agreements contain credit risk to the extent
that its bank counter-parties may be unable to meet the terms of the agreements.
The Company minimizes such risk by limiting its counter-parties to major
financial institutions. Management does not expect material losses as a result
of defaults by other parties.
8. RESTRUCTURING AND SEVERANCE:
In January 2002, CyberOptics incurred approximately $847,000 of severance and
costs associated with cost reduction measures. Cost reduction measures included
a workforce reduction, discretionary spending reductions and the consolidation
of semiconductor product manufacturing in Portland, Oregon. Severance costs were
associated with a workforce reduction of 22 people. Approximately $611,000 of
these costs were paid as of September 30, 2002. Facility exit and severance
costs of approximately $236,000 were accrued as of September 30, 2002, and with
the exception of facility exit costs totaling approximately $215,000, will be
substantially paid over the next three months. The facility exit costs,
consisting of idle facilities for which lease obligations will continue through
September 2004, will be paid over the term of the lease.
In June 2002, CyberOptics incurred approximately $800,000 of severance and
related costs associated with additional cost reduction measures. Cost reduction
measures included a workforce reduction and discretionary spending reductions.
Severance costs were associated with a workforce reduction of 48 people.
Approximately $557,000 of these costs were paid as of September 30, 2002.
Severance costs of approximately $243,000 were accrued as of September 30, 2002,
and will be substantially paid over the next nine months.
8
9. RELATED PARTY TRANSACTION:
In May 2002, CyberOptics funded a $1.5 million term loan to Avanti Optics
Corporation ("Avanti"). The loan bears interest at three percent above the prime
rate over its twelve-month term and is secured by all the intellectual property
assets of Avanti. The term loan and any accrued interest will automatically
convert to the type of equity shares Avanti issues at the closing of the next
qualifying equity financing occurring on or before the maturity date of the
loan. The conversion to equity will be at 80% of the price in that equity round,
and if there is a change of control prior to maturity, CyberOptics will receive
payment of two times the loan balance and accrued interest as payment on the
loan. As consideration for the loan, CyberOptics received a five year warrant to
purchase the number of shares of Avanti's equity securities as is equal to
$450,000 divided by the price at which the next equity securities of Avanti are
sold, which will be exercisable at the price of that equity round. In addition,
the Company has obtained the exclusive rights to manufacture and distribute
manual and semi-automated equipment for the assembly of surface mountable
optical components being developed by Avanti. Avanti's chief executive officer
is Steven K. Case, Ph. D., who is also the chairman and founder of CyberOptics.
The transaction was approved by the Board of CyberOptics without the
participation of Dr. Case or any other party who had a material interest in
Avanti. CyberOptics believes the loan is on terms at least as favorable to
CyberOptics as would have been obtained from an unaffiliated party.
CyberOptics had acquired 19% of the outstanding capital stock of Avanti in 2000
for cash and other assets. CyberOptics carrying value for accounting purposes
for such investment had been reduced to zero in the first quarter of 2001 by its
equity in the losses of Avanti. During the three months ended September 30,
2002, CyberOptics reduced the carrying value of the term loan by $410,000 to
reflect CyberOptics equity in the cumulative losses of Avanti and a reduction of
the investment to reflect its net realizable value as of September 30, 2002. At
September 30, 2002, the carrying value of the loan is $445,000. CyberOptics will
recognize future reductions in the carrying value of the loan by an amount equal
to CyberOptics' equity interest in the losses of Avanti or the net realizable
value of the loan, whichever results in a lower carrying value.
10. RECENT ACCOUNTING DEVELOPMENTS:
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset
Retirement Obligations" which provides accounting requirements for retirement
obligations associated with tangible long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002. Management believes
the adoption of SFAS No. 143 will not have a material impact on CyberOptics'
financial position or results of operations.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (the
"Statement"). This Statement addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This Statement also eliminates
the exception to the consolidation for a subsidiary for which control is likely
to be temporary. CyberOptics adopted the Statement on January 1, 2002. The
adoption of the Statement did not have a material impact on either the financial
position or operating results of CyberOptics.
11. SUBSEQUENT EVENT:
In October 2002, the CyberOptics Board of Directors authorized the repurchase of
up to 1,000,000 shares of CyberOptics common stock. The shares will be
repurchased from time to time in the open market or through negotiated
transactions. Shares repurchased will be used for employee compensation plans
and other corporate purposes.
9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS:
The following is management's discussion and analysis of certain significant
factors that have affected the Company's results and financial position during
the periods included in the accompanying financial statements or that could have
an impact on future results. This discussion should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 2001
and the Company's interim consolidated financial statements and associated
notes.
The following Management's Discussion and Analysis contains "forward looking
statements" within the meaning of federal securities laws which represent
management's expectations or beliefs relating to future events, including
statements regarding trends in the industries in which CyberOptics functions,
levels of orders, research and development expenses, taxation levels, the
sufficiency of cash to meet operating and capital expenses and the ability to
continue to price foreign transactions in U.S. currency. These and other forward
looking statements made by CyberOptics, must be evaluated in the context of a
number of factors that may affect CyberOptics financial condition and results of
operations, including the following:
- -- The cyclical nature of capital expenditures in the electronics and
semiconductor industry, which represents the end market for the majority of the
Company's current products;
- -- The affects of world events and economic conditions on CyberOptics and its
customers;
- -- The dependence of such operations on orders of one sensor product line from
large OEM's of component placement machines in the surface mount electronics
assembly industry;
- -- The dependence of such operations on orders from two OEM customers;
- -- The significant proportion of the Company's revenue that is derived from
export sales;
- -- The dependence of the Company's manufacturing on outside contractors and
suppliers, many of which require significant lead time;
- -- The degree to which the Company is successful in protecting its technology
and enforcing its technology rights in the United States and other countries;
- -- The dependence of the Company's operations on several key personnel;
- -- The ability of the Company to effectively integrate the operations of
acquired companies and product lines;
- -- The ability to effectively commercialize significant new products introduced
in 2000 and 2001, and those planned to be introduced in 2002;
- -- The speed of changes in technology in the microelectronics manufacturing
industry from which most of the Company's sales are derived;
- -- Competition for the functions that the Company's products perform by larger
"vision" companies, by other optical sensor companies, and by large
multinational systems companies, many of which have greater resources and larger
sales and distribution networks than CyberOptics;
- --Movement of electronics assembly business to Asia where CyberOptics has only
recently opened a sales office
10
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The preparation of the financial information contained in this 10-Q required
CyberOptics' management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. CyberOptics' management evaluates these
estimates on an ongoing basis, including those related to allowances for
doubtful accounts, for warranty expense, and for obsolete inventory, the
carrying value and any impairment of intangible assets, and the valuation
allowance for deferred tax assets (see further discussion of valuation allowance
for deferred tax assets below). These critical accounting policies are discussed
in more detail in the Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in CyberOptics' Form 10-K for the
year ended December 31, 2001.
CyberOptics is required to assess the realizability of deferred tax assets and
the need for a valuation allowance against those assets based on Statement of
Financial Accounting Standards No. 109. As the result of US based operating
losses incurred over the past three years and continued weakness in the markets
served by CyberOptics and the resulting impact on order rates, the Company has
reduced the current tax benefit recorded during the nine months ended September
30, 2002 to reflect only the amounts to be realized by carrying losses back to
prior periods and recorded a valuation allowance against its deferred tax
assets. The result is a charge to CyberOptics Statement of Operations of $4.1
million during the three months ended September 30, 2002. During the remainder
of 2002, the Company will record income tax expense or benefit on its profit and
loss statement relating the change in its income tax receivable as the result of
being able to carry-back losses generated during 2002 to prior years. Following
the 2002 fiscal year, the Company does not expect to record tax expense or
benefit until the Company is consistently profitable on a quarterly basis. At
that time, the valuation allowance will be reassessed and could be eliminated,
resulting in the recognition of the deferred tax assets.
11
RESULTS OF OPERATIONS:
CyberOptics results of operations over the past three years have been
significantly influenced by cyclical fluctuations in the markets for surface
mount technology and semiconductor fabrication capital equipment (electronics
capital equipment markets). We generate approximately 80-90% of revenues from
the sales and service of sensors and system products directly to these market
places. These markets have historically been very volatile, with periods of
rapid growth followed by periods of significant contraction. Although the
electronics capital equipment markets experienced rapid growth from the second
half of 1999 through 2000, during the first half of 2001 they declined
significantly and have remained at depressed levels. The affect of this dramatic
fall-off in market activity caused a dramatic decline in portions of the
Company's business and quarterly losses beginning in the second quarter of 2001
through the current quarter. The most dramatic impact was seen in our electronic
assembly sensors product line where our customers purchased inventory in excess
of their production needs resulting in further reductions in orders beginning in
the second half of 2001.
CyberOptics revenue levels reached their low point of $4.3 million in the fourth
quarter of 2001 and have been growing quarter over quarter since that point to
$7.5 million in the third quarter of 2002. This sequential growth has been the
result of our OEM electronic assembly and semiconductor customers reducing their
inventory levels and ordering new sensors at higher levels, market acceptance of
our new SMT end-user inspection system products and capacity expansion in Asia
where we have experienced market success and revenue growth in our SMT end-user
product line. CyberOptics currently believes that business activity levels in
the electronics capital equipment markets have stabilized and expects these
markets will experience moderate growth in the next several quarters, however,
visibility into near-term orders remains limited.
REVENUES
The following table sets forth revenues by product line for the periods
indicated (in Thousands):
Nine months ended Three months ended
September 30, September 30,
2002 2001 2002 2001
------- ------- ------- -------
OEM Solutions:
Electronic Assembly Sensors (EAS)
Products $5,203 $19,033 $2,474 $2,345
Semiconductor Products 4,973 5,492 1,756 1,343
End-User Systems Products 7,744 9,635 3,246 2,501
------- ------- ------- -------
Total $17,920 $34,160 $7,476 $6,189
Revenues from EAS products decreased 73% during the nine months ended September
30, 2002 from the nine months ended September 30, 2001, reflecting the continued
weak global market for electronic assembly equipment, which began to deteriorate
in early 2001. Revenues did however, increase 6% during the three months ended
September 30, 2002 from the same three months ended September 30, 2001 and
increased 63% in the third quarter of 2002 compared to the second quarter of
2002. Increased revenues in the third quarter of 2002 reflect the fact that our
two largest EAS customers have begun ordering product at higher levels after
suspending or significantly decreasing their order rates beginning in the second
half of 2001. The Company's two largest EAS customers accounted for
approximately 22% of total revenues for the nine months ended September 30,
2002, and 44% of revenues for the comparable period in 2001. These customers
accounted for approximately 30% of revenues in the third quarter of 2002
compared to 27% in the third quarter of 2001.
12
Semiconductor product revenues decreased 9% during the nine months ended
September 30, 2002 from the nine months ended September 30, 2001. This
decreasing revenue in 2002 from 2001 is primarily due to a weakening demand in
the semiconductor capital equipment market, which began in early 2001 and is
consistent with the decline in the overall electronics capital equipment market.
Revenues did, however, increase 31% during the three months ended September 30,
2002 from the three months ended September 30, 2001 and were consistent with
revenue levels in the second quarter of 2002. Beginning in 2002, demand for
products in the semiconductor capital equipment market was showing modest
recovery, however, as revenues have flattened in the third quarter of 2002
compared to the second quarter of 2002, and order rates have decreased,
CyberOptics would expect revenues in the fourth quarter of 2002 to be lower than
the third quarter of 2002.
End-User Systems product revenues decreased 20% during the nine months ended
September 30, 2002 from the nine months ended September 30, 2001, as the
weakened electronic assembly market has negatively affected capital spending by
electronic manufacturing services (EMS) customers and other manufacturers of
printed circuit board assemblies. Revenues did, however, increase 30% during the
three months ended September 30, 2002 from the three months ended September 30,
2001 and increased 24% from revenues in the second quarter of 2002. CyberOptics
has introduced several new inspection systems and is beginning to see increased
revenues from the sales of End-User Systems products to EMS customers located in
Asia - the largest market for new circuit board assembly production capacity. In
addition, CyberOptics believes that production difficulties associated with
smaller and more complex components and increased production speeds is driving
an investment in inspection equipment on production lines currently using manual
inspection or no inspection at all.
International revenues comprised approximately 64% and 69% of total revenues
during the nine month periods ended September 30, 2002 and 2001, respectively,
and approximately 69% and 53% of revenues during the three month periods ended
September 30, 2002 and 2001, respectively. The international markets in Europe,
Japan and the rest of Asia account for a significant portion of the capital
equipment market for the manufacture of electronics, the primary market for the
Company's EAS sensors and End-User systems product lines.
Revenues generated from products used primarily for SMT electronic assembly
production (revenues from OEM sensors and End-User systems) were approximately
72% and 84% of revenues for the nine month periods ended September 30, 2002 and
2001, respectively, reflecting the level of orders from CyberOptics' two largest
EAS customers.
GROSS MARGIN
Gross margin for the nine months ended September 30, 2002 decreased as a percent
of revenues to 39% compared to 54% during the nine months ended September 30,
2001. For the three months ended September 30, 2002, gross margin increased to
44% of revenues compared to 40% during the three months ended September 30,
2001. Gross margin is highly dependent on the level of revenues and resulting
production levels over which to spread fixed manufacturing costs such as
facilities and other compensation and non-compensation expenses that do not vary
with activity levels. In addition, with higher production volumes, manufacturing
processes become more efficient and reduce the overall cost of producing
products for sale. Revenue levels were 48% lower in the nine month period ended
September 30, 2002 than during the same periods in 2001, and although
CyberOptics has reduced fixed costs as part of its cost reduction actions, the
magnitude of the revenue decline had a significant impact on gross margin.
During the three month period ended September 30, 2002, revenues were 21% higher
than the same period in 2001 and consequently, gross margin comparisons are
favorable.
The mix of products sold also has an impact on gross margins as a percentage of
sales. During 2002, gross margins were negatively impacted by the increase in
new-generation End-User Systems product revenues as a percentage of total sales
and increased expense for obsolete inventory. End-User System product gross
margins have been negatively impacted by higher production costs associated with
new product introductions and by significant price pressure being experienced as
several equipment suppliers compete for fewer sales opportunities. In addition,
with the decision in the third quarter of 2002 to, over time, discontinue the
sales of certain older version systems, CyberOptics recorded increased reserves
for Obsolete inventory. There can be no assurance that selling prices for
End-User System products will fully recover when the electronic assembly market
improves. In addition, CyberOptics is beginning to experience price pressure in
its other product lines, as production equipment suppliers to the electronic
assembly market (primary customers for EAS sensors) come under competitive price
pressure and attempt to reduce the cost of their machines. CyberOptics does
expect to see modest improvement in gross margin in the second half of 2002 as
revenue levels increase and cost reduction measures are implemented.
13
RESEARCH AND DEVELOPMENT
Research and development expenses decreased 3% to $6.3 million during the nine
months ended September 30, 2002 from the nine months ended September 30, 2001,
and decreased 15% to $1.7 million in the three months ended September 30, 2002
from the three months ended September 30, 2001. As a percentage of revenue,
research and development expenses increased to 35% during the nine months ended
September 30, 2002 from 19% during the comparable period in 2001, but decreased
to 23% in the third quarter of 2002 compared to 33% in the same period in 2001.
Research and development expenses were maintained at relatively high levels
during the first half of 2002 as CyberOptics continued to fund new product
development on important new products even as revenues levels were significantly
lower than the prior year. During the three month period ended September 30,
2002 cost reduction measures initiated in the second quarter of 2002, enabled
CyberOptics to significantly reduce research and development expenses to levels
it anticipates maintaining over the next several quarters.
Research and development expenses during the nine months ended September 30,
2002 were primarily focused on continued engineering development of the new high
speed solder paste inspection system, the SE 300, and KS series AOI systems,
next generation LaserAlign products, board alignment and on-head linescan
cameras and enhancements to the semiconductor wafer mapping sensor product
family. Customer funded research and development is recognized as a reduction of
research and development expense. During the nine months ended September 30,
2002, customer funded research and development recognized as a reduction of
research and development expense totaled $75,000 compared to $604,000 during the
nine months ended September 30, 2001.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 21% to $10.3 million
during the nine month period ended September 30, 2002 compared to $13.0 million
during the nine months ended September 30, 2001, and decreased 23% to $3.3
million during the three months ended September 30, 2002 from the three months
ended September 30, 2001. As a percentage of revenue, selling, general and
administrative expenses increased to 57% during the nine month period ended
September 30, 2002 from 38% in 2001, and for the third quarter decreased to 41%
in 2002 from 63% in 2001. Decreased selling, general and administrative expenses
in 2002 are primarily the result of cost reduction measures implemented
throughout 2001 and early 2002, which primarily included workforce reductions
and related costs.
RESTRUCTURING AND SEVERANCE COSTS
As of June 30, 2002, CyberOptics has implemented four workforce reductions
designed to reduce the losses and negative cash flow resulting from the severe
decline in its revenues caused by the depressed capital equipment markets for
suppliers to electronics manufacturing. Two of those workforce reductions were
completed during the year ended December 31, 2001.
In January 2002, CyberOptics incurred approximately $847,000 of severance and
costs associated with cost reduction measures. Cost reduction measures included
a workforce reduction, discretionary spending reductions, and the consolidation
of semiconductor product manufacturing in Portland, Oregon. Severance costs were
associated with a workforce reduction of 22 people. Approximately $611,000 of
these costs were paid as of September 30, 2002. Facility exit and severance
costs of approximately $236,000 were accrued as of September 30, 2002, and with
the exception of facility exit costs totaling approximately $215,000, will be
substantially paid over the next three months. The facility exit costs,
consisting of idle facilities for which lease obligations will continue through
September 2004, will be paid over the term of the lease.
In June 2002, CyberOptics incurred approximately $800,000 of severance and
related costs associated with cost reduction measures. Cost reduction measures
included a workforce reduction, and discretionary spending reductions. Severance
costs were associated with a workforce reduction of 48 people. Approximately
$557,000 of these costs were paid as of September 30, 2002. Severance costs of
approximately $243,000 were accrued as of September 30, 2002, and will be
substantially paid over the next nine months.
14
AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS
Amortization of acquired intangible assets was approximately $843,000 and
$281,000 for the nine and three month periods ended September 30, 2002 compared
to $1,759,000 and $592,000 during the comparable periods of 2001. The decrease
in amortization for the nine and three month periods ending September 30, 2002
is attributed to the adoption of the goodwill non-amortization provisions of FAS
142. Without the impact of adoption of FAS 142, amortization of intangible
assets would have been approximately $1,843,000 and $616,000 for the nine and
three month periods ended September 30, 2002, respectively. Amortization is
primarily attributable to developed technology, patents and trademarks resulting
from CyberOptics' acquisition of technology and other assets of Kestra Ltd. and
HAMA Laboratories Inc. during the second quarter of 1999 and CyberOptics'
acquisition of Imagenation Corporation during the fourth quarter of 2000.
Amortization of these intangible assets is expected to approximate $280,000 per
quarter over the remaining life of the intangible assets.
INTEREST AND OTHER
Interest income and other primarily includes interest earned on investments.
Interest income declined for the nine and three month periods ended September
30, 2002 compared to the same period in 2001 as a result of a lower investment
balance and declining interest rates. In addition, CyberOptics reduced the
carrying value of the $1.5 million loan to Avanti described below under
"Transactions with Interested Parties" by its ownership percentage in the
cumulative losses of Avanti and to reduce the loan value to its realizable value
as of September 30, 2002. These reductions in carrying value resulted in a
charge of $1,055,000 and $410,000 in the nine and three month periods ended
September 30, 2002, respectively. Avanti is a development stage company and is
projecting continuing losses. Consequently, it is likely that the $445,000
carrying value of the Avanti loan will be required to be reduced in future
periods to reflect the liquidation value of Avanti (consisting primarily of cash
balances).
PROVISION FOR INCOME TAXES AND EFFECTIVE INCOME TAX RATE
CyberOptics recorded tax expense (provision) of approximately $3.3 million
during the three month period ended September 30, 2002 compared to a tax benefit
of $2.0 million for the same period in 2001. Tax expense recorded in the third
quarter of 2002 is the result of reducing the 2002 effective tax benefit rate
and establishing a valuation allowance against deferred tax assets (see
disclosure in "Critical Accounting Policies and Estimates"). For the nine month
period ended September 30, 2002, CyberOptics has recorded a tax benefit. For the
nine and three month periods ended September 30, 2001, the tax benefit of $1.1
million and $2.0 million reflects the expected annual effective rate, including
the effect of benefits from CyberOptics' foreign sales corporation and research
and development tax credits.
ORDER RATE AND BACKLOG
CyberOptics' orders totaled $19.2 million during the nine month period ended
September 30, 2002 compared to $25.1 million during the nine month period ended
September 30, 2001. For the three month period ended September 30, 2002, orders
totaled $7.0 million compared to $4.6 million for the three months ended
September 30, 2001. Backlog totaled $4.3 million and $2.7 million at September
30, 2002 and 2001, respectively. The scheduled shipment of the September 30,
2002 backlog is as follows (in thousands):
4th Quarter 2002 $ 4,129
1st Quarter 2003 and after 143
-------
Total backlog $ 4,272
15
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and marketable securities decreased $9.8 million to
$18.8 million as of September 30, 2002 from $28.6 million as of December 31,
2001, primarily due to $8.3 million of cash used by operations.
CyberOptics used $8.3 million of cash in operations during the first nine months
of 2002, primarily due to a net loss of $11.9 million, which included $7.1
million of non-cash expenses for depreciation and amortization, provision for
inventory obsolescence, equity in losses of Avanti, establishing a valuation
allowance on deferred tax assets previously discussed under "Provision for
Income Taxes and Effective Income Tax Rate" and other non-cash items. The cash
used by operations included a $3.7 million increase in accounts receivable, a
$376,000 increase in taxes receivable and a $309,000 increase in other assets.
The increase in accounts receivable is primarily due to growing revenues and the
increase in taxes receivable were a result of estimated tax losses for the
period which are expected to be collected as a refund from taxes paid in
previous years, offset by tax refunds of approximately $3.1 million received in
the nine months ended September 30, 2002. These items were offset somewhat by an
increase in accrued expenses of $451,000 and a decrease in inventory of
$533,000. Increased accrued expenses are primarily due to approximately $479,000
of facilities and severance costs associated with the workforce reductions and
other cost reduction measures implemented during 2002. The reduction in
inventory is the result of increasing revenue in the third quarter of 2002.
During the first nine months of 2001, CyberOptics generated $4.7 million of cash
from operations, primarily due to $3.8 million of non-cash expenses and a $8.8
million reduction in accounts receivable. These items offset a net loss of
$991,000 during the nine months ended September 30, 2001 and a $6.9 million net
use of cash from changes in operating assets.
CyberOptics generated $1.1 million of cash in investing activities during the
nine months ended September 30, 2002 compared to using $2.3 million during the
same period in 2001. Changes in the level of investment in marketable securities
resulting from the purchases and maturities of those securities, generated $3.2
million of cash in 2002, and compared to $345,000 in 2001, net of maturities. In
addition, CyberOptics used $1.5 million of cash for the Avanti loan in 2002 and
$1.3 million of cash to purchase businesses and technology in 2001. CyberOptics
used approximately $613,000 and $1.3 million of cash for the purchase of fixed
assets and the acquisition of technology and other intangible assets during the
nine months ended September 30, 2002 and 2001, respectively.
CyberOptics generated $678,000 of cash from financing activities during the nine
months ended September 30, 2002 and $817,000 in the same period during 2001.
Cash generated from financing activities represents cash from stock option
exercises and issuance of common stock under the Employee Stock Purchase Plan.
In October 2002, the CyberOptics Board of Directors authorized the repurchase of
up to 1,000,000 shares of CyberOptics common stock. The shares will be
repurchased from time to time in the open market or through negotiated
transactions. Shares repurchased will be used for employee compensation plans
and other corporate purposes.
Except for the share repurchase program discussed above, CyberOptics had no
material commitments for capital expenditures as of September 30, 2002. While
there were no material commitments, CyberOptics routinely evaluates investment
opportunities that come to its attention and could make a significant commitment
in the future. CyberOptics cash and equivalents and investments totaled $18.8
million at September 30, 2002. With this level of cash and cash equivalents, and
the reduced level of cash expenditures resulting from higher revenue and the
last workforce reduction in June 2002, management believes that CyberOptics'
cash and cash equivalents would be adequate to fund cash flow needs for at least
24 months, even if the severity of the downturn in the electronics capital
equipment industries continues unabated. If the economic conditions appear to be
continuing over the next year, management would seek bank financing or make
other adjustments in expense levels.
In May 2002, CyberOptics expended $1.5 million by making a term loan to Avanti
Optics Corporation. CyberOptics has no further commitment to fund the operations
of Avanti and does not have any current intention of making any additional
contributions, as loans or equity, to Avanti.
At September 30, 2002, CyberOptics did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance of special purpose entities, which would have
been established for the purpose of establishing off-balance sheet arrangements
or other contractually narrow or limited purposes. As such, CyberOptics is not
materially exposed to any financing, liquidity, market or credit risk that could
arise if CyberOptics had engaged in such relationships.
16
OTHER FACTORS
Changes in revenues have resulted primarily from changes in the level of unit
shipments and new product introductions. CyberOptics believes that inflation has
not had any significant effect on operations. Most of CyberOptics' international
export sales are negotiated, invoiced and paid in U.S. dollars. Accordingly,
although currency fluctuations do not have a significant effect CyberOptics'
revenue and income per unit, they can influence the price competitiveness of
CyberOptics' products relative to other technologies and the willingness of
existing and potential customers to purchase products and services.
As a result of the Kestra Ltd. acquisition CyberOptics has an operating unit
located in the UK. CyberOptics does not believe that currency fluctuations will
have a material impact on its consolidated financial statements.
TRANSACTIONS WITH INTERESTED PARTIES
On April 30, 2002, CyberOptics loaned $1.5 million to Avanti Optics Corporation
("Avanti"), a company founded by Steven K. Case, the Chairman, founder and a
significant shareholder of CyberOptics. Erwin Kelen, a director of CyberOptics,
also serves as director of Avanti, is a shareholder in Avanti, and is a
representative of one of the principal venture capital investors in Avanti.
CyberOptics held approximately 12% of the outstanding capital stock of Avanti
prior to the loan, which it had acquired in consideration of the contribution of
$190,000 cash and intellectual property to Avanti when it was formed. The loan
transaction was approved by the Board of Directors of CyberOptics without the
participation of Dr. Case or Mr. Kelen and only after a determination that the
loan was in the best interests of CyberOptics.
The loan is represented by a convertible promissory note that bears interest at
3% above the prime rate of interest and is repayable on April 30, 2003, or upon
an earlier event of default. The loan is secured by all of the intellectual
property of Avanti (consisting primarily of rights in United States patents and
patent applications in the area of photonics component manufacture). The loan
and any accrued interest will automatically convert to the type of equity shares
Avanti issues at the closing of the next qualifying equity financing occurring
on or before the maturity date of the loan. The conversion to equity will be at
80% of the price in that equity round, and if there is a change of control prior
to conversion, CyberOptics is entitled to receive twice the principal and
interest then outstanding on the loan.
In consideration of the loan, CyberOptics also received a five-year warrant to
purchase the number of shares of Avanti equity securities as is equal to
$450,000 (30% warrant coverage) divided by the price per share in the next
equity financing of Avanti. The exercise price of the warrant will be equal to
the price in such next equity financing.
The loan was made in part to acquire the exclusive rights to manufacture and
distribute manual and semi-automated equipment for the assembly of surface
mountable optical components that are currently under development by Avanti.
Although there is a high degree of risk involved in the completion of Avanti's
development of this technology, the Board of CyberOptics concluded that there is
substantial potential for these manual and semi-automated assembly machines.
17
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
CyberOptics has a policy of using forward exchange contracts to hedge net
exposures related to inter-company financing transactions with its subsidiary in
the United Kingdom. The primary objective of these hedging activities is to
maintain an approximately balanced foreign currency position so that gains and
losses resulting from exchange rate changes, net of related tax effects, are
minimized (see footnote 7).
CyberOptics invests excess funds not required for current operations in
marketable securities. The investment policy dictates that these securities
consist of U.S. Government or U.S. Government agency securities or certain
approved corporate instruments with maturities of three years or less and an
average portfolio maturity of not more than 18 months. All marketable securities
are classified as available for sale and carried at fair market value.
ITEM 4 - CONTROLS AND PROCEDURES
a. Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) as
of September 30, 2002 (the "Evaluation Date"). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures are effective in timely
alerting them to the material information relating to us (or our consolidated
subsidiaries) required to be included in our periodic SEC filings.
b. Changes in internal controls.
There were no significant changes made in our internal controls during the
period covered by this report or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
a. Exhibits
99.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 2002,
or during the period from September 30, 2002 to the date of this quarterly
report on Form 10-Q.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYBEROPTICS CORPORATION
/S/ STEVEN M. QUIST
-------------------
STEVEN M. QUIST, PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER AND
DULY AUTHORIZED OFFICER)
/S/ SCOTT G. LARSON
-------------------
SCOTT G. LARSON, CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING OFFICER AND
DULY AUTHORIZED OFFICER)
Dated: November 13, 2002
19
CERTIFICATION
I, Steven M. Quist, Chief Executive Officer of CyberOptics Corporation, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of CyberOptics
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Steven M. Quist
--------------------------------
Steven M. Quist
20
CERTIFICATION
I, Scott G. Larson, Chief Financial Officer of CyberOptics Corporation, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of CyberOptics
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
b) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
d) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
c) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
d) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Scott G. Larson
---------------------------
Scott G. Larson
21