SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2001
Commission file number: 000-21377
ROFIN-SINAR TECHNOLOGIES INC.
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(Exact name of Registrant as specified in its charter)
Delaware 38-3306461
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45701 Mast Street, Plymouth, MI 48170
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (734) 455-5400
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
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Common Stock, $.01 par value
Rights Associated with Common Stock, par value $.01 per Share
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 [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates of the
Registrant (based upon the closing price of the stock on the NASDAQ National
Market on December 17, 2001) was approximately $116,050,365.
11,547,300 shares of the Registrant's common stock, par value $.01 per share,
were outstanding as of December 17, 2001.
Documents Incorporated by Reference
-------------------------------------
Certain sections of the Company's Proxy Statement to be filed in connection
with the Company's 2002 Annual Meeting of Stockholders to be held in March
2002 are incorporated by reference herein at Part III, Items 10 - 13.
ROFIN-SINAR TECHNOLOGIES INC.
TABLE OF CONTENTS
Item Page
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PART I 1. Business 4
2. Properties 24
3. Legal Proceedings 25
4. Submission of Matters to a Vote of Security Holders 25
PART II 5. Market Price of the Registrant's Common
Equity and Related Stockholder Matters 25
6. Selected Financial Data 26
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
7A. Quantitative and Qualitative Disclosures about
Market Risk 32
8. Consolidated Financial Statements and
Supplementary Data 33
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 33
PART III 10. Directors and Executive Officers of the Registrant 33
11. Executive Compensation 34
12. Security Ownership of Certain
Beneficial Owners and Management 34
13. Certain Relationships and Related Transactions 34
14. Additional Information according to Rules and
Regulations Neuer Markt 34
PART IV 15. Exhibits, Consolidated Financial Statement
Schedules, and Reports on Form 8-K 35
SIGNATURES 38
PART I
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K constitute forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 (the "Reform Act"). Forward-looking statements include
all statements that do not relate solely to historical or current facts, and
can be identified by the use of words such as "may", "believe", "will",
"expect", "project" "anticipate", "estimate", "plan" or "continue". These
forward-looking statements are based on the current plans and expectations of
our management and are subject to a number of uncertainties and risks that
could significantly affect our current plans and expectations, as well as
future results of operations and financial condition. Some of these risks
and uncertainties are discussed under "Risk Factors", below. In making these
forward-looking statements, we claim the protection of the safe-harbor for
forward-looking statements contained in the Reform Act. We do not assume any
obligation to update these forward-looking statements to reflect actual
results, changes in assumptions, or changes in other factors affecting such
forward-looking statements.
ITEM 1. BUSINESS
COMPANY OVERVIEW
Rofin-Sinar Technologies Inc. (herein also referred to as "Rofin" or "RSTI"
or the "Company" or "we", "us" or "our") is a leader in the design,
development, engineering, manufacture and marketing of laser-based products,
primarily used for cutting, welding and marking a wide range of materials.
Lasers are a non-contact technology for material processing which have
several advantages that are desirable in industrial applications.
The Company believes it has a worldwide market share (based on sales volume)
of approximately 15% for laser products used for macro (cutting & welding)
and marking & micro applications and that it is among the largest suppliers
of laser products used for marking applications worldwide. The Company has
sold more than 15,000 laser sources since 1975 and currently has over 2,500
active customers (including multinational companies with multiple facilities
purchasing from the Company). During fiscal 2001, 2000, and 1999,
respectively, approximately 48%, 56%, and 71% of the Company's revenues came
from sales and servicing of laser products for macro applications and
approximately 52%, 44%, and 29% came from sales and servicing of laser
products for marking and micro applications.
Through its global manufacturing, distribution and service network, the
Company provides a comprehensive range of laser sources and laser based
system solutions to three principal target markets: the machine tool,
automotive, and semiconductor/electronics industries. The Company sells
directly to end-users, to original equipment manufacturers ("OEMs")
(principally in the machine tool industry) that integrate Rofin's laser
sources with other system components, and to distributors. Many of Rofin's
customers are among the largest global participants in their respective
industries. During the 2001, 2000, and 1999, fiscal years, 21%, 25%, and
25%, respectively, of the Company's sales were in North America, and 79%,
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75%, and 75%, respectively, in Europe/Asia.
The accompanying financial statements present the historical financial
information of Rofin-Sinar Technologies Inc. ("Rofin" or "RSTI" or "the
Company") and its wholly owned subsidiaries. Rofin consists of Rofin-Sinar
Inc. ("RSI") and Rofin-Sinar Technologies Europe S.L. ("RSTE"). RSTE, a
European holding company formed in 1999, owns 100% of Rofin-Sinar Laser GmbH
("RSL"), 80% of Dilas Diodenlaser GmbH ("Dilas"), 100% of Rofin-Baasel
Italiana S.r.l., 100% of Rofin-Baasel France S.A., 74% of Rofin-Sinar UK
Ltd., 100% of Rofin-Baasel UK Ltd., 100% of Rofin-Baasel Benelux B.V., 100%
of Rofin-Baasel Singapore Pte. Ltd., and 83% of Rofin-Baasel Espana S.L.
RSL includes the consolidated accounts of its 51% owned subsidiary Rofin-
Marubeni Laser Corporation (a Japanese corporation); its 100% owned
subsidiary Rasant-Alcotec Beschichtungstechnik GmbH; its 90.01% owned
subsidiary Carl Baasel Lasertechnik GmbH & Co. KG; and its 100% owned
subsidiary CBL Verwaltungsgesellschaft mbH.
CBL includes the consolidated accounts of its wholly owned subsidiaries
Rofin-Baasel Inc., Wegmann-Baasel Laser und elektrooptische Geraete GmbH, and
PMB Elektronik GmbH.
On May 10, 2000, the Company acquired 90.01% of the share capital of Carl
Baasel Lasertechnik GmbH ("Baasel Lasertech") through its wholly owned
subsidiary RSL, Germany for 44.3 million Euro in cash. Additionally, RSTI
refinanced 23.4 million Euro of the then outstanding debt of Baasel
Lasertech. RSTI has followed the purchase method in accounting for the
acquisition, and accordingly the accompanying results of operations include
the results of Baasel Lasertech for the period subsequent to the date of
acquisition. In connection with the acquisition and integration of Baasel
Lasertech into the Company's operations, including the consolidation of
certain product lines, RSTI has recorded a special charge of $2.8 million to
write-off certain of its inventories, which will be discontinued. In
September 2001 Carl Baasel Lasertechnik GmbH was transformed into Carl Baasel
Lasertechnik GmbH & Co. KG ("CBL"), a limited partnership. In addition the
Company and the minority shareholder are party to an option agreement for the
remaining share of capital held by the minority shareholder for a fixed price
of 6.3 million Euro
On February 28, 2001, the Company acquired 80% of the share capital of Z-
Laser S.A. through its wholly owned subsidiary Rofin-Baasel Espana, S.A.,
Barcelona, Spain for $3.3 million in cash. Rofin-Sinar Technologies Inc. has
followed the purchase method of accounting for the acquisition. At the end
of June 2001, Z-Laser S.A. was merged into Rofin-Baasel Espana S.L.. As a
result of this merger, the minority shareholder owns 17% of the total stock
of the new Spanish subsidiary.
On June 22, 2001, the shares of the common stock of Rofin-Sinar Technologies,
Inc. were admitted to the regulated market (Geregelter Markt) with trading on
the Neuer Markt of the Frankfurt Stock Exchange in Germany.
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THE COMPANY'S LASER PRODUCTS
The Company currently offers a comprehensive range of laser products and
related services for three principal material processing applications: (1)
macro; (2) micro; and (3) marking. Besides offering laser systems for some
specialized niche applications, the Company works directly with its customers
to develop and customize optimal solutions for their manufacturing
requirements. In developing its laser-based solutions, the Company offers
customers its expertise in: (i) product development and manufacturing
services based on more than 25 years of laser technology experience and
applications know-how; (ii) application and process development (i.e.,
developing new laser-based applications for manufacturing customers and
assisting them in integrating lasers into their production processes); (iii)
system engineering (i.e., advising customers on machine design, including
tooling, automation and controls for customers in need of "turn-key"
solutions); and (iv) extensive after-sales support of its laser products
(including technical support, field service, maintenance and training
programs, and rapid spare parts delivery).
The following table sets forth the Company's net sales of laser products used
for macro (cutting & welding) applications and of laser products used for
marking and micro applications in fiscal 2001, 2000, and 1999:
September 30,
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Product Category * 2001 2000 1999
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(in thousands)
Laser macro products $ 106,615 $ 95,195 $ 88,056
Laser marking and micro products 113,942 75,992 35,968
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Total sales, net $ 220,557 $171,187 $124,024
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* For each product category, net sales includes sales of services (including
training, maintenance and repair) and spare parts.
The Company from time to time reviews various opportunities to acquire
businesses, technologies or products complementary to the Rofin's present
business.
The laser sources sold by the Company consist of a laser head (containing the
lasing medium, resonator, source of excitation, resonator mirrors and cooling
mechanism), power supply, and microcontroller (for control and monitoring).
For a more detailed discussion of the components of a laser source, see
"Laser Technology". Products are offered in different configurations and
utilize different design principles according to the desired application.
The Company's engineers and other technical experts work directly with
customers in the Company's applications centers to develop and customize the
optimal solution for the customers' manufacturing requirements.
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LASER PRODUCTS FOR CUTTING AND WELDING APPLICATIONS - MACRO
The Company's family of CO2 laser products for macro applications, and their
principal markets and applications, are discussed below.
LASER SERIES POWER RANGE MODE OF EXCITATION
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DC Slab Series 1.0 kW - 4.0 kW High Frequency
HF/RF Series 4.0 kW - 8.0 kW High Frequency
TR Series 2.0 kW - 12.0 kW Direct Current
SC Series 100 W - 300 W High Frequency
The Company believes that it is the only laser manufacturer of diffusion
cooled, Slab-based lasers in the high-power range. In this laser design, a
radio-frequency (RF) excited gas discharge occurs between two water-cooled
electrodes which have a large surface area that permits maximum heat
dissipation. The core diffusion-cooled technology is protected by two
patents, and the Company has exclusive license rights to this technology on a
worldwide basis for power levels above 500 watts for material processing
applications. The Company's current focus with respect to its Slab Series
lasers is on continuing to both increase their power output and reduce their
manufacturing costs in order to achieve more attractive pricing. Principal
markets for the Slab Series lasers are the machine tool and automotive
industries.
The Company's HF Series lasers combine proven cross-flow design principles
with modern high-frequency (HF) discharge excitation technology. The Company
has shipped this product predominantly to customers in the automotive
industry, and their sub-suppliers, in the United States and Europe, where it
has been used in a significant number of welding applications, including
transmissions, tailored blanks, steel tubing and many other car parts and
components. The RF Series uses fast-axial flow technology in combination
with radio-frequency (RF) excitation and is especially designed for thick
metal cutting.
The Company's TR Series fast-axial flow CO2 laser is used for both cutting and
welding applications. In the fast-axial flow principle, the gas discharge
occurs in a tube in the same direction as the resonator, through which the
laser gas mixture flows at a high speed. TR Series products are used
primarily by the machine tool industry.
The Company's SC Series diffusion-cooled CO2 lasers are developed and produced
by RS UK. The SC Series are sealed-off lasers, which are also based on the
Slab laser principle used for the DC Slab Series. The lasers are used for
cutting and marking applications. Principal markets are the machine tool and
packaging industries. Rofin's current focus is on increasing the output
power to 600 watts.
The Company's family of solid-state laser products for macro applications,
and their principal markets, are discussed below.
LASER SERIES POWER RANGE MODE OF EXCITATION
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DY Series 550 W - 6.0 kW Laser Diodes
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Rofin's DY Series of continuous wave solid state lasers are designed
exclusively for use with flexible fiber-optic beam delivery systems, making
them particularly well suited for integration into complex production systems
for cutting and welding applications. The key competitive advantages of the
DY Series lasers are the fact that they are diode pumped and that they are
designed to allow multiple power output configurations. These configurations
include continuous wave and pulsed power ramping modes, which allows Rofin to
address a wide range of customer applications. Power ramping is particularly
suited for achieving smooth welds and avoiding cracks during the welding
process. In addition, several features of the DY Series laser such as the
simple modular resonator design, easily accessed power supply and PC-based
controller equipped with a modem, which allows easy communication with a
remote service center, are designed for easy maintenance. The diode pumping
technology is characterized by high beam quality, high efficiency, and long
service intervals. These lasers are used principally in the automotive
industry.
The Company's family of diode laser products for welding, soldering and
surface treatment applications, and their principal markets, are discussed
below.
LASER SERIES POWER RANGE MODE OF EXCITATION
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Diode Lasers 10 W - 6.0 kW Direct Current
The Company's diode lasers are designed to meet the requirements of a wide
range of welding, soldering, and surface treatment applications. The
Company's high-power laser diodes can be stacked into arrays achieving output
powers in the multiple kilowatt range. In addition to their use in the
automotive, machine tool and semiconductor/electronic markets, these lasers
are also sold into the medical device and research markets. Additionally,
laser diodes are sold as components both internally and externally.
LASER PRODUCTS FOR MARKING AND MICRO APPLICATIONS - MARKING / MICRO
The Company's family of laser marking products is as follows:
LASER SERIES POWER RANGE MODE OF EXCITATION
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PowerLine;
StarMark Series 3 W - 130 W Flash Lamp or Laser Diodes
CombiLine;
StarMark Systems 10 W - 130 W n.a.
MultiScan 100 W High Frequency
PowerLine/StarMark Series - The Company's standard PowerLine and StarMark
laser marking products consist of a CO2 or solid-state laser in the range of 3
watts to 130 watts, a galvo-head, a personal computer with state-of-the-art
processor, and Rofin's proprietary Laser Work Bench, VisualLaserMarker and
LaserCAD-Software. The modular design of the PowerLine and StarMark markers
enable customers to order the most suitable configuration for their
production processes or systems (e.g., OEM-customers may order the laser
head, power supply, and laser cooling assembly plates as subassemblies
without the cabinet for easier integration into the handling system specified
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by the enduser). The PowerLine and StarMark solid-state lasers incorporates
either a dual or single lamp ceramic cavity design using "long-life" lamps or
diode modules, both of which result in higher output power (and therefore
higher marking speeds), higher energy efficiency (and therefore reduced
operating costs), high beam quality (and therefore constant and reliable
marking quality), and longer service intervals. The Company's proprietary
Laser Work Bench, VisualLaserMarker and LaserCAD-Software provides operators
with a user-friendly desktop publishing environment that allows them to
manipulate fonts, import graphics, preview marking and control all laser
parameters and job programs. Special options and accessories include a
double-marking head allowing marking speeds of up to 1,200 characters per
second in certain applications (most notably marking of integrated circuits),
as well as beam-switching and -splitting options for marking of products in
multiple production lines using a single laser. Their main application,
besides a wide variety of possible applications, is the marking of plastics
and smart cards in the semiconductor/electronics industries.
CombiLine/StarMark Systems - Built on a modular design, the CombiLine and
StarMark Systems consists of a PowerLine or StarMark laser marker that can be
combined with a variety of parts handling systems developed by the Company,
including: motor driven positioning tables, foil handling systems for marking
labels, conveyor belts and pick-and-place systems. These allow the CombiLine
and StarMark Systems to be customized as a turn-key system.
MultiScan - This Dot-Matrix marker, introduced in fiscal 1999, utilizes a 100
watt sealed-off CO2 laser (SC Series) and features the ability to mark
components that are moving at high speeds. The principal market is the
packaging industry.
The Company's family of laser products for micro applications is as follows:
LASER SERIES POWER RANGE MODE OF EXCITATION
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P Series 500 W - 1.0 kW Flash Lamp
StarWeld Series 20 W - 500 W Flash Lamp
StarCut Series 150 W - 300 W Flash Lamp
PerfoLas Systems n.a. n.a.
Rofin's P Series of pulsed solid-state lasers are designed to meet the
requirements of a wide range of welding and cutting applications. Their high
peak power, flexible fiber-optic beam delivery system, and small-focused beam
spot size allow these lasers to be successfully applied in many cutting and
welding applications. The lasers' pulse shaping capability (achieved through
programming of the power supply) makes them particularly well-suited to the
processing of metallurgically difficult materials such as aluminum and its
various alloys. Principal markets for these lasers are the automotive and
precision welding markets.
StarWeld Series - Rofin's standard StarWeld laser products consist of pulsed
solid state lasers in the range of 20 watts to 500 watts. Their main
application, besides a wide variety of possible applications, is the fine-
welding of jewelry and dental parts. Principal markets for these lasers are
medical devices and the jewelry industry.
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StarCut Series - Rofin's StarCut laser products use pulsed solid state lasers
in the range of 150 watts to 300 watts. Their main application is the fine
cutting of medical devices and integrated circuits. Principal markets for
these lasers are medical devices and the semiconductor/electronics industry.
PerfoLas Systems - The PerfoLas Systems consist of a high power CO2 laser and
a special designed beam delivery and paper handling system including a laser
beam splitter (PerfoLas Multiplexer) which allows the customers to drill more
than 250,000 holes per second into paper or foils. The main application is
perforating of cigarette tip paper.
Applications Development
In addition to manufacturing and selling laser sources for macro (cutting and
welding) and laser marking and micro application products, Rofin operates
application centers in 10 countries where it develops laser-based solutions
for customers seeking alternatives to conventional manufacturing techniques.
More than 25 years of laser technology experience and know-how are embodied
in Rofin's applications groups, developed as a result of its participation in
a broad range of industrial markets.
Markets and Customers
Rofin is selling its laser products and laser-based system solutions to a
wide range of industries. Out of these, three industrial markets can be
clearly identified: the machine tool, automotive, and semiconductor
/electronics industries. The following table sets forth the distribution of
the Company's total sales among the Company's principal markets:
Fiscal Years
----------------------
Principal Market 2001 2000 1999 Primary Applications
- ---------------- ------ ------ ------ --------------------------------
Machine Tool 32% 27% 31% Cutting
Automotive 10% 16% 14% Welding and component marking
Semiconductor / Marking of integrated circuits
Electronics 16% 24% 14% and smart cards
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58% 67% 59%
The remaining 42%, 33%, and 41%, respectively, of laser sales in fiscal 2001,
2000, and 1999 were attributable to customers in a wide variety of other
industries (including aerospace, consumer goods, medical device
manufacturers, job shops, universities and institutes). No one customer
accounted for over 10% of total sales in any of such periods.
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Sales, Marketing and Distribution
Rofin sells its products in approximately 35 countries to OEMs and to major
end-users who have in-house engineering resources capable of integrating
Rofin's products into their own production systems. Laser sources for
cutting applications are marketed and sold principally to OEMs in the machine
tool industry who sell laser-cutting machines incorporating Rofin's products
without any substantial involvement by Rofin. Laser sources for welding
applications are marketed and sold both to systems integrators and to end-
users. Laser marking products are marketed and sold directly to end-users
and to OEMs for integration into their handling systems (mainly for
integrated circuit and smart card marking applications). Laser micro
products are marketed and sold directly to end-users and to distributors
(mainly for jewelry and dental applications). In the case of both welding
lasers and laser marking products, the end-user is significantly involved in
the selection of the laser component and will often specify to the OEM that
it desires a Rofin laser. In these cases, Rofin's application engineers work
directly with the end-user to optimize the application's performance and
demonstrate the advantages of the Company's products.
Rofin has approximately 100 direct sales engineers operating in 20 countries,
of which approximately 30 employees are dedicated to marketing laser macro
products and approximately 70 are dedicated to marketing laser marking and
micro products. In addition, Rofin has 12 independent distributors and
agents marketing the Company's laser products in Australia, Brazil, Denmark,
India, Israel, the Philippines, Thailand, the People's Republic of China,
Poland, Singapore, Sweden and Finland. Rofin directs its worldwide sales and
marketing of macro lasers from its offices in Hamburg, Germany and for laser
diode components from Mainz, Germany. Worldwide sales and marketing of laser
marking products is directed from Rofin's offices in Gunding-Munich, Germany
and for laser micro products it is directed from its offices in Starnberg,
Germany. U.S. sales of Rofin's macro and micro laser products are managed
out of the Company's Plymouth, Michigan facility and for marking products out
of its Boxborough, Massachusetts facility. The Company also maintains a
sales office in Tempe, Arizona to support the expansion of Rofin's laser
marking business in the North American market. In Europe, Rofin also
maintains sales and service offices in Italy, France, Spain, the United
Kingdom, the Netherlands, Belgium, Austria and Switzerland. Sales and
service offices are also maintained in South Korea, Taiwan and Singapore to
cover the Asia/Pacific region (other than Japan).
In Japan, the Company's principal distributor is its joint venture with
Marubeni Corporation and Nippei Toyama Corporation.
Customer Service and Replacement Parts
During fiscal 2001, 2000, and 1999 approximately 29%, 30%, and 31% of the
Company's revenues were generated from sales of after-sale services,
replacement parts and components for its laser products. The Company
believes that a high level of customer support is necessary to successfully
develop and maintain long-term relationships with its OEM and end-user
customers in its laser products and laser marking and micro systems business.
This close relationship is maintained as customers' needs change and evolve.
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Recognizing the importance of its existing and growing installed
multinational customer base, the Company has expanded into new geographic
regions by providing local service and support. Rofin has 230 customer
service personnel. The Company's field service and in-house technical
support personnel receive ongoing training with respect to the Company's
laser products, maintenance procedures, laser-operating techniques and
processing technology. Most of the Company's distributors also provide
customer service and support.
Many of Rofin's laser products are operated 24 hours a day in high speed,
quality-oriented manufacturing operations. Accordingly, the Company provides
24-hour, year-round service support to its customers in Germany, the United
States, and the majority of other countries in which it operates. The
Company plans to continue adopting similar service support elsewhere. In
addition, eight-hour response time is provided to certain key customers.
This support includes field service personnel who reside in close proximity
to the Company's installed base. The Company provides customers with process
diagnostic and verification techniques, as well as specialized training in
the operation and maintenance of its systems. The Company also offers
regularly scheduled and intensive training programs and customized
maintenance contracts for its customers.
Of Rofin's customer service personnel, approximately 165 employees operate in
the field in 50 countries. Field service personnel are also involved in the
installation of the Company's systems.
Rofin's approach to the sale of replacement parts is closely linked to the
Company's strategic focus on rapid customer response. The Company provides
around-the-clock order entry and provides same or next day delivery of parts
worldwide in order to minimize disruption to customers' manufacturing
operations. Rofin generally agrees to provide after sale parts and service
for 10 years, if requested by the customer. The Company's growing base of
installed laser sources and laser-based systems is expected to continue to
generate a stable source of parts and service sales.
COMPETITION
Laser Products for Cutting and Welding - Macro
The market for laser macro products and systems is fragmented, and includes a
large number of competitors, many of which are small or privately owned or
which compete with Rofin on a limited geographic, industry-specific or
application-specific basis. The Company also competes in certain target
markets with competitors that are part of large industrial groups and have
access to substantially greater financial and other resources than the
Company. Competition among laser manufacturers includes attracting and
retaining qualified engineering and technical personnel. The overall
competitive position of the Company will depend upon a number of factors,
including product performance and reliability, customer support,
manufacturing quality, the compatibility of its products with existing laser
systems, and to continue the successful development of products utilizing the
technologies of diode lasers and diode pumped, solid-state lasers.
- 12 -
Rofin believes it is among the top three suppliers of laser sources in the
worldwide market for macro applications. Companies such as Trumpf, Fanuc and
PRC (for high-power CO2 lasers), Excel/Synrad and Coherent (for low-power CO2
lasers), Trumpf-Haas (for solid-state lasers) and Optopower and Jenoptik (for
diode lasers and laser diodes) compete in certain of the markets in which
Rofin operates. However, in the Company's opinion, none of these companies
competes in all of the industries, applications and geographic markets
currently served by Rofin. Only Trumpf/Haas has a product range and
worldwide presence similar to those of the Company. The Company believes
that it has a competitive advantage over these companies due to its exclusive
access (for material applications of 500 watts and above) to the patented
diffusion cooling technology incorporated in its CO2 Slab lasers. See
"Intellectual Property".
Laser Marking and Micro Products
Significant competitive factors in the laser marking and micro market include
system performance and flexibility, cost, the size of each manufacturer's
installed base, capability for customer support, and breadth of product line.
Because many of the components required to develop and produce a laser
product for marking and micro applications are commercially available,
barriers to entry into this market are low, and the Company expects new
competitive product entries into this market. The Company believes that its
product range for marker and micro applications will compete favorably in
this market primarily due to the performance and price characteristics of
such products.
The Company's products compete in the laser marking market with conventional
ink-based and acid-etching technologies, as well as with laser mask-marking.
In the micro market the Company's products compete with conventional welding,
etching and spark erosion technologies. The Company believes that its
principal competitors in the laser marking and micro market include Trumpf-
Haas, GSI Lumonics, Unitek Miyachi, Lasag and Excel/Control Laser.
Rofin also competes with manufacturers of conventional non-laser products in
applications such as welding, drilling, soldering, cutting and marking. The
Company believes that as industries continue to modernize, seek to reduce
production costs and require more precise and flexible manufacturing, the
features of laser-based systems will become more desirable than systems
incorporating conventional manufacturing techniques and processes. The
increased acceptance of these laser applications by industrial users will be
enhanced by product line expansion to include lower and higher power C02
lasers, advancements in fiber-optic beam delivery systems, improvements in
reliability, and the introduction of diode lasers and diode pumped, solid-
state lasers capable of performing heavy industrial material processing and
marking and micro applications.
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MANUFACTURING AND ASSEMBLY
Rofin manufactures and tests its high-power CO2 and solid-state laser macro
products at its Hamburg, Aschheim-Munich, Germany; Plymouth, Michigan; and
Atsugi-shi, Japan facilities. The Company's laser marking products are
manufactured and tested at its facilities in Gunding-Munich, Starnberg,
Germany, Kingston upon Hull, UK, Singapore, and Boxborough, Massachusetts.
The products for micro applications are manufactured and tested in Starnberg,
Germany. The diode laser products are manufactured and tested at its Mainz,
Germany facility. Low-power CO2 laser products are manufactured and tested in
Kingston upon Hull, UK. Coating of the Slab laser electrodes is performed at
the Overath, Germany facility.
Given the competitive nature of the laser business, the Company focuses
substantial efforts on maintaining and enhancing the efficiency and quality
of its manufacturing operations. The Company utilizes just-in-time and cell-
based manufacturing techniques to reduce manufacturing cycle times and
inventory levels, thus enabling it to offer on-time delivery and high quality
products to its customers.
Rofin's in-house manufacturing includes only those manufacturing operations
that are critical to achieve quality standards or protect intellectual
property. These manufacturing activities consist primarily of product
development, testing of components and subassemblies (some of which are
supplied from within the Company and others of which are supplied by third
party vendors and then integrated into the Company's finished products),
assembly and final testing of the completed product, as well as proprietary
software design and hardware/software integration. The Company minimizes the
number of suppliers and component types; however, wherever practicable, it
has at least two sources of supply for key items. The Company has a
qualifying program for its vendors and generally seeks to build long-term
relationships with such vendors. The Company purchases certain major
components from single suppliers. The Company has reason to believe that it
could, if necessary, purchase such components from alternative sources of
supply following appropriate qualification of such new vendors. The Company
cannot assure, however, that alternative sources of supply could be obtained
on as favorable terms.
Rofin is committed to meeting internationally recognized manufacturing
standards. Its Hamburg, Gunding-Munich, Starnberg, Mainz and Plymouth
facilities are ISO 9001 certified. The Plymouth operation is qualified as a
"Q-1" supplier of Ford's "Q-1" quality management standards. In addition the
following facilities are ISO 9002 certified: Pamplona (Spain), Milan (Italy)
and Paris (France).
- 14 -
RESEARCH AND DEVELOPMENT
During fiscal 2001, 2000, and 1999, Rofin's net spending on research and
development was $14.8 million, $13.0 million, and $11.8 million,
respectively. The Company received funding under German government and
European Union grants totaling $1.2 million, $1.4 million, and $1.3 million,
in fiscal 2001, 2000, and 1999, respectively.
Rofin's research and development activities are directed at meeting
Customers' manufacturing needs and application processes. Core competencies
include CO2 gas lasers, solid-state lasers, diode lasers, precision optics,
electronic power supplies, fiber optics, beam delivery, control interfaces,
software programming and systems integration. The Company strives for
customer-driven development activities and promotes the use of alliances with
key customers and joint development programs in a wide range of its target
markets.
The Company's research and development activities are carried out in seven
centers in Hamburg, Aschheim-Munich, Gunding-Munich, Starnberg and Mainz (all
Germany), Kingston upon Hull (UK), and Plymouth, Michigan (USA) and are
centrally coordinated and managed. Rofin maintains close working
relationships with the leading industrial, government and university research
laboratories in Germany, including the Fraunhofer Institute for Laser
Technology in Aachen, the Institute for "Technische Physik" of the German
Space and Aerospace Research Center in Stuttgart, the Fraunhofer Institute
for Material Science in Dresden, the Laser Center in Hanover, and elsewhere
around the world, including the University of Alberta in Canada and the
University of Edinburgh, United Kingdom. These relationships include funding
of research, joint development programs, personnel exchange programs and
licensing of patents developed at such institutes.
INTELLECTUAL PROPERTY
Rofin owns intellectual property, which includes patents, proprietary
software, technical know-how and expertise, designs, process techniques and
inventions. While policies and procedures are in place to protect critical
intellectual properties, Rofin believes that its success depends to a larger
extent on the innovative skills, know-how, technical competence and abilities
of Rofin's personnel. The Company is also an exclusive licensee on a
worldwide basis of two U.S. patents and their corresponding foreign
counterparts, one of which expires in 2007 and one of which expires in 2009
(as to which the license is exclusive for the duration of the patent),
covering the diffusion-cooled technology used in its Slab Series CO2 lasers
for industrial material processing applications of 500 watts and above and a
non-exclusive license for application below 500 watts. In Rofin's view, the
technology protected by these two patents represents a significant step
forward in industrial laser technology for material processing and is an
important source of Rofin's future growth and profitability.
- 15 -
Rofin protects its intellectual property in a number of ways including, in
certain circumstances, patents. Rofin has sought patent protection primarily
in the United States, Europe and Japan. Rofin currently holds 69 separate
patents for inventions relating to lasers, processes and power supplies with
expiration dates ranging from 2004 to 2019. In addition, 47 patent
applications have been filed and are under review by the patent authorities.
Rofin requires its employees and certain of its customers, suppliers,
distributors, agents and consultants to enter into confidentiality agreements
to further safeguard Rofin's intellectual property.
Rofin from time to time receives notices from third parties alleging
infringement of such parties' patent or other intellectual property rights by
Rofin's products. While these notices are common in the laser industry and
Rofin has in the past been able to develop non-infringing technology or
license necessary patents or technology on commercially reasonable terms,
Rofin cannot assure that it would in the future prevail in any litigation
seeking damages or expenses from Rofin or to enjoin Rofin from selling its
products on the basis of such alleged infringement. Nor can Rofin assure
that it would be able to develop any non-infringing technology or to license
any valid and infringed patents on commercially reasonable terms. In the
event any third party made a valid claim against Rofin or its customers and a
license were not made available to Rofin on commercially reasonable terms,
Rofin would be adversely affected.
In July 1996, Rofin received notice of an opposition filed by a competitor in
the European Patent Office ("EPO") which challenges on a number of grounds
one of the two third-party patents licensed exclusively by Rofin covering
certain aspects of its diffusion-cooled CO2 Slab laser. The holder of the
patent has filed a response to the opposition, in response to which the party
opposing the patent has filed further submissions. The last submission in
the matter was made in September 1999. The Company has no information when a
decision can be expected. The U.S.-issued counterpart of this patent was
previously the subject of a reexamination proceeding in the U.S. Patent and
Trademark Office ("PTO"), at the conclusion of which the patent was upheld.
While the decision of the PTO is not binding on the EPO, based on the outcome
of the U.S. reexamination proceeding and management's review of the arguments
made in the opposing party's notice of opposition and subsequent submissions,
Rofin believes that such notice of opposition is without substantial merit
and that the patent will be upheld by the EPO. However, no assurance can be
given that there will be a successful outcome for the holder of the patent
and therefore for Rofin in this opposition proceeding. If the patent will
not be upheld by the EPO, Rofin can no longer use the technology in Europe on
an exclusive basis and, therefore, its business, results of operations and
future growth and profitability would be materially affected.
From time to time, Rofin files notices of opposition to certain patents on
laser technologies held by others, including academic institutions and
competitors of Rofin, which Rofin believes could inhibit its ability to
develop products in this area. In particular, Rofin had a notice of
opposition in the EPO against a patent held by a competitor which Rofin
believes conflicts with a third-party patent licensed by Rofin covering
certain aspects of its diffusion-cooled CO2 Slab laser. This case has been
settled out of court in July 2001.
- 16 -
A competitor sued A-B Laser, Inc., now Rofin-Baasel, Inc. in December 1999 in
U.S. federal court for alleged infringement of a U.S. patent that will expire
in 2002 concerning a method of marking semiconductor material. In February
2001, that competitor also filed a complaint against Carl Baasel Lasertechnik
GmbH, for alleged infringement of the same patent. From Rofin-Baasel, Inc.,
the competitor seeks an injunction, claims actual damages of $7 million (plus
interest) for past infringement and requests that the damages be increased to
three times its actual damages and that it be awarded its attorney fees for
alleged willful infringement of the patent. Because the case against Carl
Baasel Lasertechnik GmbH was only recently filed, no specific damages claim
has yet been made against that entity. Both cases, Rofin-Baasel, Inc. and
Carl Baasel Lasertechnik GmbH, are pending. The Company believes that these
lawsuits are without merit, that the patent is invalid and not infringed,
that the damages sought are excessive and that there was no willful
infringement of the patent. In the event the competitor prevails and his
claims are upheld as filed, this would have a material adverse effect on
Rofin's business, financial position and results of operations.
ORDER BACKLOG
The Company's order backlog was $53.0 million, $65.6 million, and $41.0
million, as of September 30, 2001, 2000, and 1999, respectively. The
Company's order backlog, which contains relatively little service, training
and spare parts, represents approximately three months of laser shipments.
The decrease in the Company's order backlog from September 30, 2000, to
September 30, 2001, was primarily attributable to lower order intake for
markers to the semiconductor and electronic industries in Europe and Asia.
The strengthening of the U.S. dollar in fiscal 2001 had a negative impact of
approximately $3.4 million on year-to-year order backlog. The increase in
the Company's order backlog from September 30, 1999 to September 30, 2000,
was primarily attributable to the adding of the backlog of the acquired
Baasel Lasertech group with $24.1 million and the higher order entry for
marking of integrated circuits and smart cards in fiscal 2000 in Europe and
Asia. The strengthening of the U.S. dollar in fiscal 2000 had a negative
impact of approximately $3.7 million on year-to-year order backlog.
An order is booked by Rofin when a purchase order with an assigned delivery
date has been received. Delivery schedules range from one week to six
months, depending on the size, complexity and availability of the product or
system ordered, although typical delivery dates for laser source products
range between 8-16 weeks from the date an order is placed. Orders in backlog
are subject to cancellation (subject to penalties), or rescheduling by the
customer. The Company's backlog on any particular date is not necessarily
indicative of actual sales for any future period.
The Company anticipates shipping the present backlog during fiscal 2002.
- 17 -
LASER TECHNOLOGY
The term "laser" is an acronym for "Light Amplification by Stimulated
Emission of Radiation". Lasers were first developed in the early 1960s in
the United States. A laser consists of an active lasing medium that gives
off its own light (radiation) when excited, an optical resonator with a
partially-reflective output mirror at one end, a fully-reflective rear mirror
at the other that permits the light to bounce back and forth between the
mirrors through the lasing medium, and an external energy source used to
excite the lasing medium. A laser works by causing the energy source to
excite (pump) the lasing medium, which converts the energy from the source
into an emission consisting of particles of light (photons). These photons
stimulate the release of more photons, as they are reflected between the two
mirrors, which form the resonator. The resulting build-up in the number of
photons is emitted in the form of a laser beam through an output port or
"window". By changing the energy and the lasing medium, different
wavelengths and types of laser light can be produced. The laser produces
light from the lasing medium to achieve the desired intensity, uniformity and
wavelength through a series of reflective mirrors. The heat generated by the
excitation of the lasing medium is dissipated through a cooling mechanism,
which varies according to the type of laser technology.
EMPLOYEES
At September 30, 2001, Rofin had 1,151 full-time employees, of which 785 were
in Germany, 157 were in the United States, 28 in France, 38 in Italy, 66 in
the United Kingdom, 23 in Spain, 8 in the Netherlands, 21 in Singapore and 25
in Japan, whereas at September 30, 2000, Rofin had 1,035 full-time employees,
of which 711 were in Germany, 170 were in the United States, 28 in France, 32
in Italy, 50 in the United Kingdom, 9 in Spain, 5 in the Netherlands, 10 in
Singapore and 20 in Japan. The average number of employees for the fiscal
year ended September 30, 2001 totaled 1,100.
While the Company's employees are not covered by collective bargaining
agreements and the Company has never experienced a work stoppage, slowdown or
strike, the Company's employees at its Hamburg, Gunding-Munich and Starnberg
facilities are each represented by a seven-person works council.
Additionally, Hamburg and Gunding-Munich are represented by a four-person
central works council. Matters relating to compensation, benefits and work
rules are negotiated and resolved between management and the works council
for the relevant location. The Company considers its relations with its
employees to be excellent.
GOVERNMENT REGULATION
The majority of the Company's laser products sold in the United States are
classified as Class IV Laser Products under applicable rules and regulations
of the Center for Devices and Radiological Health ("CDRH") of the U.S. Food
and Drug Administration. The same classification system is applied in the
European markets. Safety rules are formulated with Deutsche Industrie Norm
(i.e., German Industrial Standards) or ISO standards which are
internationally harmonized.
- 18 -
Such regulations generally require a self-certification procedure pursuant to
which a manufacturer must file with the CDRH with respect to each product
incorporating a laser device, periodic reporting of sales and purchases and
compliance with product labeling standards. The Company's laser products for
macro, micro and laser marking applications can result in injury to human
tissue if directed at an individual or otherwise misused. The Company
believes that its laser products for macro, micro and marking applications
are in substantial compliance with all applicable laws for the manufacture of
laser devices.
RISK FACTORS
Downturns in the industry, particularly in the machine tool, automotive and
semiconductor/electronics industries, may have, in the future, a material
adverse effect on our sales and profitability.
Our business depends substantially upon capital expenditures particularly by
manufacturers in the machine tool, automotive and semiconductor/electronics
industries. We estimate that approximately 58% of our laser sales during
fiscal 2001 were to these three industry markets. These industries are
cyclical and have historically experienced periods of oversupply,
resulting in significantly reduced demand for capital equipment, including
the products manufactured and marketed by us. For the foreseeable future,
our operations will continue to depend upon capital expenditures in these
industries, which, in turn, depend upon the market demand for their
products. Our net sales and results of operations may be materially
adversely affected if downturns or slowdowns in the machine tool,
automotive, and semiconductor/electronics industries occur in the future.
We depend on the ability of our OEM-customers to incorporate our laser products
into their systems.
Our net sales depend in part upon the ability of our OEM-customers to develop
and sell systems that incorporate our laser products. Adverse economic
conditions, large inventory positions, limited marketing resources and other
factors affecting these OEM-customers could have a substantial impact upon
our financial results. No assurances can be given that our OEM-customers
will not experience financial or other difficulties that could adversely
affect their operations and, in turn, our financial condition or results of
operations.
The Company experienced in the past, and expects to experience in the future,
fluctuations in its quarterly results. These fluctuations may increase the
volatility of the Company's stock price.
We have experienced and expect to continue to experience some fluctuations in
our quarterly results. We believe that fluctuations in quarterly results may
cause the market prices of our common stock, on the NASDAQ and the Neuer
Markt, to fluctuate, perhaps substantially. Factors which may have an
influence on the Company's operating results in a particular quarter include:
(i) the timing of the receipt of orders from major customers; (ii) product
mix; (iii) competitive pricing pressures; (iv) the relative proportions of
- 19 -
domestic and international sales; (v) our ability to design, manufacture and
introduce new products on a cost-effective and timely basis; and (vi) the
delayed effect of incurrence of expenses to develop and improve marketing and
service capabilities. These and other factors make it difficult for us to
release precise predictions regarding the results and the development of our
business.
In addition, our backlog at any given time is not necessarily indicative of
actual sales for any succeeding period. As our delivery schedule typically
ranges from one week to six months, our sales will often reflect orders
shipped in the same quarter that they are received. Moreover, customers may
cancel or reschedule shipments, and production difficulties could delay
shipments. Accordingly, the Company's results of operations are subject to
significant fluctuations from quarter to quarter. See also "Business-Order
Backlog."
Other factors that we believe may cause the market price of our common stock
to fluctuate, perhaps substantially, include announcements of new products,
technologies or customers by us or our competitors, developments with respect
to intellectual property and shortfalls in our operations relative to
analysts' expectations. In addition, in recent years, the stock market in
general, and the shares of technology companies in particular, have
experienced wide price fluctuations. These broad market and industry
fluctuations, particularly in the semiconductor/electronics and automotive
industries, may adversely affect the market prices of our common stock on the
NASDAQ and the Neuer Markt.
A high percentage of our sales are overseas and our results are therefore
subject to the impact of exchange rate fluctuations.
Although we report our results in U.S. dollars, approximately 74% of our
current sales are denominated in other currencies, including the Euro,
British pounds, Singapore dollars, Japanese yen and Taiwanese NT dollars.
The fluctuation of the Euro, and the other functional currencies, against the
U.S. dollar has had the effect of increasing and decreasing (as applicable)
reported net sales as well as cost of goods sold and gross margin and
selling, general and administrative expenses denominated in such foreign
currencies when translated into U.S. dollars as compared to prior periods.
Our subsidiaries will from time to time pay dividends in their respective
functional currencies, thus presenting another area of potential currency
exposure in the future.
We also face transaction risk from fluctuations in exchange rates between the
various currencies in which we do business. We believe that a certain
portion of the transaction risk of our operations in multiple currencies is
mitigated by our hedging activities, utilizing forward exchange contracts and
forward exchange options. We also continue to borrow in each operating
subsidiary's functional currency to reduce exposure to exchange gains and
losses. However, there can be no assurance that changes in currency exchange
rates will not have a material adverse effect on our business, financial
condition and results of operations.
- 20 -
The markets for our products are highly competitive. This competition
requires us to continue a high level of investment in engineering, research
and development, marketing and customer service in order to be able to
maintain our competitive position.
The laser industry is characterized by significant price and technical
competition. Our current and proposed laser products for laser macro and
laser marking and micro applications compete with those of several well-
established companies, some of which are larger and have substantially
greater financial, managerial and technical resources, more extensive
distribution and service networks and larger installed customer bases than
us.
We believe that competition will be particularly intense in the CO2, diode
laser and solid state laser markets, as many companies have committed
significant research and development resources to pursue opportunities in
these markets. There can be no assurance that we will successfully
differentiate our current and proposed products from the products of our
competitors or that the market place will consider our products to be
superior to competing products. Because many of the components required to
develop and produce a laser-based marking system are commercially available,
barriers to entry into this market are relatively low, and we expect new
competitive product entries in this market. To maintain our competitive
position in this market, we believe that we will be required to continue a
high level of investment in engineering, research and development, marketing
and customer service and support. There can be no assurance that we will
have sufficient resources to continue to make these investments, that we will
be able to make the technological advances necessary to maintain our
competitive position, or that our products will receive market acceptance.
See also "Business-Competition."
Our future growth and competitiveness depend upon our ability to develop new
and enhanced products to meet market demand and to integrate the acquired
Baasel Lasertech Group to substantially increase our market share for laser
marking and micro products.
If we are to increase our laser sales in the near term, these sales will have
to come through increases in market share for our existing products, through
the development of new products, or through the acquisition of competitors or
their products. To date, a substantial portion of our revenues has been
derived from sales of high-powered CO2 laser sources and solid state laser
sources. In order to meet increasing market demand, we intend to devote
substantial resources to: (i) broadening our CO2 laser product range; (ii)
increasing the output power of our CO2 laser sources, diode lasers and diode
pumped solid state laser products and (iii) continuing to reduce the
manufacturing costs of our product range to achieve more attractive pricing.
A large part of our growth strategy depends upon being able to integrate the
acquired Baasel Lasertech Group and streamline the existing laser marking
product portfolio to increase substantially our market share for laser
marking and micro products, particularly in the United States.
- 21 -
If we are unable to implement our strategy to develop new and enhanced
products, in the way described above, and to integrate the Baasel Lasertech
Group and streamline the laser marking and micro product portfolio, we may
not be able to increase our revenues. As a result, our business, operating
results and financial condition could be adversely affected. No assurance
can be given that we will successfully implement our business strategy or
that any of the newly developed or enhanced products will achieve market
acceptance or not be rendered obsolete or uncompetitive by products of other
companies. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business-Rofin's Laser Products".
While there are currently no commitments with respect to any future material
acquisitions, our business strategy includes the expansion of our products
and services, which may be effected through acquisitions. We, from time to
time, review various opportunities to acquire businesses, technologies or
products complementary to our present business. There can be no assurance
that we will be able to integrate any acquired business effectively or that
any acquisition will result in long-term benefits to us.
Our failure to avoid litigation for infringement or misappropriation of
propriety rights of third parties or to protect our propriety technology
could result in a loss of revenues and profits.
We, from time to time, receive notices from third parties alleging
infringement of such parties' patent or other proprietary rights by our
products. While these notices are common in the laser industry and we have
in the past been able to develop non-infringing technology or license
necessary patents or technology on commercially reasonable terms, there can
be no assurance that we would in the future prevail in any litigation seeking
damages or expenses from us or to enjoin us from selling its products on the
basis of such alleged infringement, or that we would be able to develop any
non-infringing technology or license any valid and infringed patents on
commercially reasonable terms. In the event any third party made a valid
claim against us or our customers and a license were not made available to us
on commercially reasonable terms, we would be adversely affected.
In particular, we are currently involved in a (i) proceeding pending before
the EPO concerning a notice of an opposition filed by a competitor which
challenges one of the two third-party patents licensed exclusively by us
covering certain aspects of our diffusion-cooled CO2 Slab laser, (ii)
proceeding pending before the EPO concerning a notice of opposition filed by
us against a patent held by a competitor which we believe conflicts with a
third-party patent licensed by us covering certain aspects of our diffusion-
cooled CO2 Slab laser, and (iii) proceedings in U.S. federal court concerning
lawsuits filed by a competitor for alleged infringement of a U.S. patent that
will expire in 2002 and covers a method of marking semiconductor material.
See "Business-Intellectual Property". In the event that the respective
competitors succeed in any of these proceedings, our business, financial
position and results of operations would be materially adverse affected.
- 22 -
Our future success depends in part upon our intellectual property rights,
including trade secrets, know-how and continuing technological innovation.
There can be no assurance that the steps taken by us to protect our
intellectual property rights will be adequate to prevent misappropriation or
that others will not develop competitive technologies or products.
We currently hold 69 United States and foreign patents on our laser sources,
with expiration dates ranging from 2004 to 2019. In addition, 47 patent
applications have been filed and are under review by the patent authorities.
There can be no assurance that other companies are not investigating or
developing other technologies that are similar to ours, that any patents will
issue from any application filed by us or that, if patents do issue, the
claims allowed will be sufficiently broad to deter or prohibit others from
marketing similar products. In addition, there can be no assurance that any
patents issued to us will not be challenged, invalidated or circumvented, or
that the rights thereunder will provide a competitive advantage to us. See
also "Business - Intellectual Property".
Our inability to manage the risks associated with our international operations
could adversely affect our business.
Our products are currently marketed in approximately 35 countries, with
Germany, the rest of Europe, the United States and the Asia/Pacific region
being our principal markets. Sales in our principal markets are subject to
risks inherent in international business activities, including the general
economic conditions in each such country or region, overlap of differing tax
structures, management of an organization spread over various jurisdictions,
unexpected changes in regulatory requirements and compliance with a variety
of foreign laws and regulations such as import and export licensing
requirements and trade restrictions. Our failure to manage the risks
associated with our international business operations could have a material
adverse effect on our sales and profitability.
Our profitability may be adversely affected by a prolonged economic slowdown
in the United States, Eastern Europe, or the Asia/Pacific region. A
recession in these economies could trigger a decline in laser sales to the
automotive and semicondutor/electronics industries, and any related
weaknesses in their respective currencies could adversely affect consumer
demand for our products, the U.S. dollar value of our foreign currency
denominated sales, and ultimately our consolidated results of operations.
The Euro is a new legal currency being introduced by certain European Union
member states. On January 1, 1999, eleven European countries established
fixed conversion rates between their existing currencies (legacy currencies)
and the Euro. As of that date, the legacy currencies of such countries are
not directly convertible into each other; instead a legacy currency must be
converted into the Euro, which then can be converted into a target legacy
currency. The legacy currencies and the Euro will both be used through
December 31, 2001, after which the legacy currencies will be withdrawn. Our
review indicates that our information systems can operate in the "Euro only"
environment.
- 23 -
We are currently unable to determine the ultimate long-term financial impact
of the exclusive use of the Euro on our markets and on the economies of the
countries in which we operate. This impact will depend upon the evolving
competitive situations and macro-economic impact of the introduction of the
Euro.
ITEM 2. PROPERTIES
The Company's manufacturing facilities include the following:
Owned or Size
Location of Facility Leased (sq. ft.) Primary Activity
- ------------------------ ---------- ----------- --------------------------
Hamburg, Germany Owned* 128,331 CO2 lasers,
solid-state lasers
Starnberg, Germany Leased 95.441 Laser marking and micro
products, power supplies
Gunding-Munich, Germany Leased 65,302 solid-state lasers,
laser marking products
Plymouth, Michigan Leased 58,075 CO2 lasers
Kingston upon Hull,
United Kingdom Leased 48,504 Low-power CO2 lasers
Aschheim-Munich, Germany Leased 23,080 CO2 lasers
Boxborough, Massachusetts Leased 22,500 Laser marking products
Mainz, Germany Leased 20,734 Diode lasers & components
Overath, Germany Leased 14,447 Coating of materials
Sakai Atsugi-shi, Japan Leased 11,245 CO2 lasers
Pamplona, Spain Owned 7,532 Laser marking systems
Singapore Leased 6,026 Laser marking products
* The facility is owned by RSL; the real property on which the facility
is located is leased by RSL under a 99-year lease.
The Company's leases of its facilities in Plymouth, Michigan are currently on
a month to month lease option until they relocate to their new facility in
2002. The Kingston upon Hull, United Kingdom facility lease expires in 2007,
with an option to purchase the facility in June 2002. The Gunding-Munich,
Germany facility lease expires in 2005 and 2007, with an optional yearly
notice of termination. The leases on its Japanese facilities in Atsugi-shi
expire in 2004 with a renewal option for three years. The Mainz, Germany
facility lease expires in 2010 and the Overath, Germany facility leases
expire in 2003 and 2004. The Singapore facility lease expires in 2003, with a
renewal option for three years. The Starnberg, Germany main facility is
leased until 2017, including a clause to terminate the lease contract within
a two-year notice period during the contract period. The Aschheim-Munich,
Germany facility lease expires in 2010, with a renewal option until 2015. The
leases on its U.S. facilities in Acton, Massachusetts, expired in October
2001, the new facilities are in Boxborough, Massachusetts and the lease
expires in 2006.
- 24 -
The Company maintains sales, administration and research and development
facilities at each of the Hamburg, Aschheim-Munich, Starnberg, Gunding-
Munich, Mainz, Kingston upon Hull and Plymouth locations. The Company also
maintains sales and service offices worldwide, all of which are leased.
The Company believes that its existing facilities are adequate to meet its
currently projected needs for the next 12 months and that suitable additional
or alternative space would be available, if necessary, in the future on
commercially reasonable terms. The Company expects to make additional
capital expenditures to support its diode laser and diode pumped, solid-state
laser development activities in Germany.
ITEM 3. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Company is a
party. See "Intellectual Property" for further discussion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders during the
fourth quarter of fiscal 2001.
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the NASDAQ National Market, and,
since July 2, 2001 also on the German Neuer Markt, under the symbols RSTI and
German securities identification number 902757, respectively. The table
below sets forth the high and low sales prices of the Company's common stock
for each quarter ended during the last two years as reported by the National
Association of Securities Dealers, Inc.:
Common Trade Prices
---------------------
Quarter ended High Low
--------------------- ---------- ---------
December 31, 1999 $ 8 1/2 $ 6
March 31, 2000 $ 17 $ 7 1/16
June 30, 2000 $ 14 3/4 $ 9
September 30, 2000 $ 16 $ 9 3/4
December 31, 2000 $ 12 2/5 $ 6 1/2
March 31, 2001 $ 10 7/8 $ 7 1/2
June 30, 2001 $ 14 1/50 $ 8 13/20
September 30, 2001 $ 13 1/20 $ 7 1/50
At December 17, 2001, the Company had eleven holders of record of its common
stock and 11,547,300 shares outstanding. The Company has not paid dividends
on its common stock and does not anticipate paying dividends in the
foreseeable future.
- 25 -
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
five fiscal years ended September 30, 2001. The information sets forth below
should be read in conjunction with the consolidated financial statements and
notes thereto filed as part of this annual report.
Year ended September 30,
--------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(in thousands, except share amounts)
STATEMENT OF INCOME DATA:
Net sales $220,557 $171,187 $124,024 $117,583 $129,393
Cost of goods sold 138,408 106,890 82,230 74,476 82,982
Gross profit 82,149 64,297 41,794 43,107 46,411
SG&A expenses 41,841 29,593 23,706 22,315 22,101
Amortization expense 3,653 1,701 341 341 --
R&D expenses 14,798 12,953 11,808 9,960 9,727
Special charge 700 2,812 -- -- 1,350
Income from operations 21,157 17,238 5,939 10,491 13,233
Net interest expense (income) 2,980 637 ( 702) ( 759) ( 854)
Income before income taxes 18,177 16,079 6,875 11,799 14,712
Net tax expense 10,962 8,202 3,242 5,118 5,758
Net income 7,215 7,877 3,633 6,681 8,954
Net income per common
share - Basic 0.62 0.68 0.32 0.58 0.78
Net income per common
share - Diluted 0.62 0.68 0.32 0.58 0.77
Shares used in computing net
income per share - Basic 11,547 11,538 11,527 11,517 11,505
Shares used in computing net
income per share - Diluted 11,601 11,622 11,527 11,615 11,606
OPERATING DATA (as percentage of sales):
Gross profit 37.2% 37.6% 33.7% 36.7% 35.9%
SG&A expenses 19.0% 17.3% 19.4% 19.3% 17.1%
R&D expenses 6.7% 7.6% 9.5% 8.5% 7.5%
Income from operations 9.6% 10.1% 4.8% 8.9% 10.2%
Income before income taxes 8.2% 9.4% 5.5% 10.0% 11.4%
BALANCE SHEET DATA:
Working capital $ 63,409 $ 62,648 $ 73,734 $ 67,119 $ 55,007
Total assets 224,750 218,414 147,213 143,742 132,189
Line of credit and loans 64,311 74,921 27,271 22,703 18,569
Stockholders' equity 99,051 90,719 90,676 90,765 81,925
- 26 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Rofin-Sinar Technologies Inc. ("Rofin" or "RSTI" or the "Company") is a
leader in the design, development, engineering, manufacture and marketing of
laser-based products used for cutting, welding and marking a wide range of
materials.
During fiscal year 2001, approximately 48% of the Company's revenues were
from sales and servicing of laser macro products and approximately 52% were
from sales and servicing of laser products for marking and micro
applications.
On May 10, 2000, the Company acquired 90.01% of the share capital of Carl
Baasel Lasertechnik GmbH ("Baasel Lasertech") through its wholly owned
subsidiary Rofin-Sinar Laser GmbH, Hamburg, Germany for 44.3 million Euro in
cash. Additionally, RSTI refinanced 23.4 million Euro of the then
outstanding debt of Baasel Lasertech. RSTI has followed the purchase method
in accounting for the acquisition, and accordingly the accompanying results
of operations include the results of Baasel Lasertech for the period
subsequent to the date of acquisition. In connection with the acquisition and
integration of Baasel Lasertech into the Company's operations, including the
consolidation of certain product lines, RSTI has recorded a special charge of
$2.8 million to write-off certain of its inventories, which will be
discontinued. In September 2001 Carl Baasel Lasertechnik GmbH was
transformed into Carl Baasel Lasertechnik GmbH & Co. KG, a limited
partnership. In addition the Company and the minority shareholder are party
to an option agreement for the remaining share of capital held by the
minority shareholder for a fixed price of 6.3 million Euro.
On February 28, 2001, the Company acquired 80% of the share capital of Z-
Laser S.A. through its wholly owned subsidiary Rofin-Baasel Espana, S.A.,
Barcelona, Spain for $3.3 million in cash. Rofin-Sinar Technologies Inc. has
followed the purchase method of accounting for the acquisition. At the end
of June 2001, Z-Laser S.A. was merged into Rofin-Baasel Espana S.L.. As a
result of this merger, the minority shareholder owns 17% of the total stock
of the new Spanish subsidiary.
The Company's business strategy continues to include the expansion of its
products and services, which may be effected through acquisitions. The
Company, from time to time, reviews various opportunities to acquire
businesses, technologies or products complementary to the Company's present
business.
- 27 -
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth the percentage of
net sales represented by the respective line items in the Company's
consolidated statements of operations.
Fiscal Year Ended September 30,
------------------------------
2001 2000 1999
-------- -------- --------
Net sales 100% 100% 100%
Cost of goods sold 63% 62% 66%
Gross profit 37% 38% 34%
Selling, general and administrative expenses 19% 17% 19%
Research and development expenses 7% 7% 10%
Goodwill amortization 1% 1% 0%
Special charge 0% 2% 0%
Income from operations 10% 10% 5%
Income before income taxes 8% 9% 6%
Net income 3% 5% 3%
FISCAL 2001 COMPARED TO FISCAL 2000
Net Sales - Net sales of $220.6 million represent an increase of $49.4
million and 29%, over the prior year. The increase is a result of the Baasel
Lasertech being included in the financial results for the entire fiscal year.
Net sales increased $46.3 million, or 36%, in Europe/Asia and an increase of
$3.1 million, or 7%, in the United States, as compared to the prior year.
The U.S. dollar strengthened against foreign currencies which had an
unfavorable effect on net sales of $14.1 million. Net sales of laser products
for macro applications increased by 12% to $106.6 million, over the prior
year. The Baasel Lasertech acquisition accounted for $7.9 million, or 69% of
the increase in net sales of laser macro products. Net sales of lasers for
marking and micro applications increased by 50% to $114.0 million compared to
fiscal 2000. In fiscal 2001, $41.4 million of the increase in marking and
micro revenue was due to the Baasel Lasertech acquisition, which was offset
by a lower demand for laser markers in the semiconductor and electronics
industry by $3.4 million.
Gross Profit - The Company's gross profit of $82.1 million increased by $17.9
million and 28%, over the prior year. As a percentage of sales gross profit
decreased from 38% to 37%. The lower percentage margin in fiscal 2001 was
primarily a result of a less favorable product mix. Gross profit was
unfavorably affected by $4.3 million in fiscal 2001 due to the strengthening
of the U.S. dollar.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased $12.2 million or 41% to $41.8 million,
compared to fiscal 2000 primarily due to increased sales activities of the
Rofin group and additional costs in connection with the Baasel Lasertech
group reorganization. As a percentage of net sales selling, general and
administrative expenses increased by 2% from 17% to 19%. Selling, general
and administrative expenses were favorably affected by $2.5 million in fiscal
2001 due to the strengthening of the U.S. dollar.
- 28 -
Research and Development - The Company spent net $14.8 million on research
and development, this represents an increase of 14.2% or $1.8 million over
fiscal 2000, mainly related to the Baasel Lasertech acquisition. Gross
research and development expenses for fiscal 2001 and 2000 were $16.0 million
and $14.4 million, respectively, and were reduced by $1.2 million and $1.4
million of government grants during the respective periods. Research and
development expenses were favorably affected by $1.1 million in fiscal 2001
due to the strengthening of the U.S. dollar.
Income Tax Expense - Income tax expense of $11.0 million in fiscal 2001 and
$8.2 million in fiscal 2000 represent effective tax rates of 60.3% and 51.0%,
respectively. The increase in effective tax rate was due primarily to higher
amounts of nondeductible goodwill, a higher portion of current year profit
generated in tax jurisdictions, such as Germany, with higher statutory tax
rates, and losses in certain countries, which currently do not generate tax
benefits.
Net Income - As a result of the foregoing factors, the Company's net income
of $7.2 million ($0.62 per diluted share) in fiscal 2001 decreased by $0.7
million over the prior year's net income of $7.9 million ($0.68 per diluted
share). As an effect of currency translation, net income increased by $0.5
million, or 9%, of fiscal 2001 net income.
FISCAL 2000 COMPARED TO FISCAL 1999
Net Sales - Net sales of $171.2 million represent an increase of $47.2
million and 38%, over the prior year. The increase resulted from an increase
in net sales of $35.9 million, or 39%, in Europe/Asia and an increase of
$11.2 million, or 36%, in the United States, as compared to the prior year.
The U.S. dollar strengthened against foreign currencies which had an
unfavorable effect on net sales of $13.3 million. Net sales of laser macro
products increased by 8% to $95.2 million over the prior year. The Baasel
Lasertech acquisition accounted for $4.1 million, or 58% of the increase in
net sales of laser macro products. Net sales of lasers for marking and micro
applications increased by 111% to $76.0 million compared to fiscal 1999. In
fiscal 2000, $23.2 million, or 58% of the increase in marking and micro
revenue was due to the Baasel Lasertech acquisition and $16.8 million, or 42%
was mainly to the high demand for laser markers in the semiconductor and
electronics industry and higher shipments to the Asian markets.
Gross Profit - The Company's gross profit of $64.3 million increased by $22.5
million and 54%, over the prior year. As a percentage of sales gross profit
increased from 34% to 38%. The higher percentage margin in fiscal 2000 was
primarily a result of favorable product mix, with a shift to higher margin
marking lasers and lower warranty costs. Gross profit was unfavorably
affected by $5.1 million in fiscal 2000 due to the strengthening of the U.S.
dollar.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased $5.7 million or 24% to $29.6 million,
compared to fiscal 1999 primarily due to the Baasel Lasertech acquisition.
As a percentage of net sales selling, general and administrative expenses
decreased by 2% from 19% to 17%.
- 29 -
Research and Development - The Company spent net $13.0 million on research
and development, this represents an increase of 10% or $1.1 million over
fiscal 1999, mainly related to the Baasel Lasertech acquisition. Gross
research and development expenses for fiscal 2000 and 1999 were $14.4 million
and $13.1 million, respectively, and were reduced by $1.4 million and $1.3
million of government grants during the respective periods.
Special Charge - In connection with the acquisition of Baasel Lasertech, the
companies have consolidated certain product lines. As a result, certain
inventories related to product lines, which will be discontinued, have been
written off. Therefore, the Company expensed $2.8 million, or 2% of net sales,
in fiscal year 2000.
Income Tax Expense - Income tax expense of $8.2 million in fiscal 2000 and
$3.2 million in fiscal 1999 represent effective tax rates of 51.0% and 47.2%,
respectively. The increase in effective tax rate was due primarily to higher
amounts of nondeductible goodwill and a higher portion of current year profit
generated in tax jurisdictions, such as Germany, with higher statutory tax
rates.
Net Income - As a result of the foregoing factors, the Company's net income
of $7.9 million ($0.68 per diluted share) in fiscal 2000 increased by $4.3
million over the prior year's net income of $3.6 million ($0.32 per diluted
share). The effect of currency translation was to decrease net income by
$0.8 million, or 9%, of fiscal 2000 net income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity at September 30, 2001 were cash
and cash equivalents of $13.5 million, an annually renewable $25.0 million
line of credit with Deutsche Bank AG and several other lines of credit to
support foreign subsidiaries in their local currencies in an aggregate amount
of $26.5 million (translated at the applicable exchange rate at September 30,
2001). As of September 30, 2001, $14.2 million was outstanding under the
Deutsche Bank facility and $9.6 million under other lines of credit.
Therefore, $27.7 million is unused and available under Rofin's lines of
credit.
Additionally, the Company maintains a credit facility with a German bank
which was used to finance part of the acquisition and refinancing the
existing debt of Baasel Lasertech. As at September 30, 2001, $40.5 million
was outstanding under this credit facility.
Cash and cash equivalents decreased by $15.5 million during fiscal 2001.
Approximately $9.1 million in cash and cash equivalents were provided by
operating activities, primarily as the result of net income and the increase
of depreciation/amortization and accrued liabilities but offset by the
increase in inventory and accounts receivable.
Uses of cash from investing activities totaled $7.1 million for the twelve
months ended September 30, 2001 and was due mainly to various additions to
property and equipment related to the business expansion ($4.7 million) and
the acquisition of 80% of Z-Laser S.A., Spain ($2.2 million, net of cash
acquired at the acquisition date).
- 30 -
Net cash used by financing activities totaled $17.8 million, which was
primarily related to current period bank repayments of $65.7 million and
borrowings from banks of $48.5 million to refinance, on a long-term basis,
the acquisition of Baasel Lasertech.
Management believes that the Company's cash flow from operations, along with
existing cash and cash equivalents and availability under its credit
facilities, will provide adequate resources to meet its capital requirements
and operational needs at least through 2002.
Currency Exchange Rate Fluctuations
Although the Company reports its' Consolidated Financial Statements in U.S.
dollars, approximately 74% of its sales are denominated in other currencies,
primarily German marks, as well as French francs, Italian lire, British
pounds, Singapore dollars, Dutch guilders and Japanese yen. Net sales and
costs and related assets and liabilities are generally denominated in the
functional currencies of the operations, thereby serving to reduce the
Company's exposure to exchange gains and losses.
Exchange differences upon translation from each operation's functional
currency to United States dollars are accumulated as a separate component of
equity. The currency translation adjustment component of shareholders'
equity had the effect of decreasing total equity by $10.6 million at
September 30, 2001 as compared to $12.6 million at September 30, 2000.
The fluctuation of the German Mark, Euro and the other relevant functional
currencies against the U.S. dollar has had the effect of increasing or
decreasing (as applicable) reported net sales, as well as cost of goods sold
and gross margin and selling, general and administrative expenses,
denominated in such foreign currencies when translated into U.S. dollars as
compared to prior periods.
The following table illustrates the effect of the changes in exchange rates
on the Company's fiscal 2001, 2000 and 1999 net sales, gross profit and
income from operations.
----------------- ----------------- -----------------
Fiscal 2001 Fiscal 2000 Fiscal 1999
----------------- ----------------- -----------------
At 2000 At 1999 At 1998
Exchange Exchange Exchange
Actual Rates Actual Rates Actual Rates
-------- -------- -------- -------- -------- --------
(in millions)
Net sales $220.6 $ 234.7 $ 171.2 $ 184.5 $ 124.0 $ 123.5
Gross profit 82.1 86.4 64.3 69.4 41.8 41.5
Income from operations 21.2 21.9 17.2 19.5 5.9 5.7
- 31 -
Between fiscal 2000 and 2001, the Euro yearly average weakened against the
U.S. dollar by approximately 8.2%. The impact of this weakening was to
decrease net sales, gross profit and income from operations by $14.1, $4.3
and $0.7 million, respectively.
Between fiscal 2000 and 1999, the Euro weakened against the U.S. dollar by
approximately 14.4%. The impact of this weakening was to decrease net sales,
gross profit and income from operations by $13.3, $5.1 and $2.3 million,
respectively. Between fiscal 1999 and 1998, the German mark yearly average
did not change against the U.S. dollar. However, the Japanese yen, during the
same period, strengthened against the U.S. dollar by approximately 11%. The
impact of this strengthening of the Japanese yen was to increase net sales,
gross profit and income from operations by $0.5, $0.3 and $0.2 million,
respectively.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 141, "Business Combinations", which requires the use of the
purchase method of accounting for business combinations after June 30, 2001.
It defines the methodology to be used in measuring goodwill and other
intangible assets and defines certain disclosure requirements for business
combinations. The Company has historically accounted for its acquisitions
under the purchase method.
On the same date, the FASB also issued Statement No. 142, "Goodwill and Other
Intangible Assets". Under Statement No. 142, goodwill will no longer be
subject to amortization, but will be subject to annual impairment tests.
Additionally, intangible assets that are not deemed to have an indefinite
life will continue to be amortized over their useful lives.
The Company is required to implement this new standard on October 1, 2002.
During fiscal 2002, the Company will determine the impact of this new
standard on its financial position and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk disclosures involves
forward looking statements. Actual results could differ materially from
those projected in the forward looking statements. The Company is exposed to
market risk related to changes in interest rates and foreign currency
exchange rates. The Company does not use derivative financial instruments
for speculative or trading purposes.
- 32 -
Interest Rate Sensitivity
As of September 30, 2001, the Company maintained a cash equivalents portfolio
of $2.1 million, consisting mainly of taxable interest bearing securities and
demand deposits all with maturities of less than three months. If short-
term interest rates were to increase or decrease by 10%, interest income
would increase or decrease by less than $0.1 million, accordingly.
At September 30, 2001, the Company had $23.3 million of annually adjusted
interest rate debt and $41.0 million of fixed rate debt (of which $4.2
million is due in 2002, $14.3 million is due in 2003, $4.3 million is due in
2004, $16.0 million is due in 2005 and $2.2 million in 2006). A 10% change
in the average cost of the Company's debt would result in an increase or
decrease in pre-tax interest expense of approximately $0.1 million.
Foreign Currency Exchange Risk
The Company enters into foreign currency forward contracts and forward
exchange options generally of less than six months duration to hedge a
portion of its foreign currency risk on sales transactions. At September 30,
2001, the Company held Japanese yen forward contracts with notional amounts
of 3.0 million Euro, an Euro forward contract with notional amount of $ 0.7
million and German Mark forward exchange options with notional amounts of
$0.9 million. The gains or losses resulting from a 10% change in currency
exchange rates would not be material.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14(a) for an index to the consolidated financial statements. No
supplementary financial information is required to be presented pursuant to
Item 302(a) of Regulation S-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is included in the "Election of
Directors", "Directors and Executive Officers" and "Section 16(a) Beneficial
Ownership Reporting Compliance" sections of the Company's Proxy Statement to
be filed in connection with the Company's 2002 Annual Meeting of Stockholders
to be held in March 2002, and is incorporated by reference herein.
- 33 -
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the "Executive
Compensation and Related Information" section of the Company's Proxy
Statement to be filed in connection with the Company's 2002 Annual Meeting of
Stockholders to be held in March 2002, and is incorporated by reference
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in the "Security Ownership
of Certain Beneficial Owners" and "Management" sections of the Company's
Proxy Statement to be filed in connection with the Company's 2002 Annual
Meeting of Stockholders to be held in March 2002, and is incorporated by
reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in the "Compensation
Committee", "Interlocks and Insider Participation" and "Certain Transactions"
sections of the Company's Proxy Statement to be filed in connection with the
Company's 2002 Annual Meeting of Stockholders to be held in March 2002, and
is incorporated by reference herein.
ITEM 14. ADDITIONAL INFORMATION ACCORDING TO RULES AND REGULATIONS NEUER
MARKT
The following table sets forth information as of September 30, 2001, with
respect to beneficial ownership of the Company's Common Stock and exercisable
options by each director. To the Company's knowledge, each of the directors
has sole voting and investment power with respect to the shares of common
stock he owns.
Number of Shares of Number of Percentage
Common Stock Excercisable of
Name Beneficially Owned (1) Options Owned Class
------------------ ------------------------ ------------- --------
Peter Wirth 3,300 95,300 *
Gunther Braun 6,000 62,000 *
Carl Baasel 42,000 -- *
William R. Hoover 37,500 -- *
Ralph E. Reins 14,000 -- *
Gary K. Willis 12,500 -- *
All directors and
Executive officers
as a group (6 persons) 115,300 157,300 2%
* Less than one (1) percent of class.
- 34-
PART IV
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
a. 1. Consolidated Financial Statements
The following financial statements are filed as part of this
annual report.
Independent Auditors' Report F-1
Consolidated Balance Sheets as of September 30, 2001 and 2000 F-2
Consolidated Statements of Operations for the years ended
September 30, 2001, 2000, and 1999 F-3
Consolidated Statements of Stockholders' Equity and
Comprehensive Income for the years ended
September 30, 2001, 2000, and 1999 F-4
Consolidated Statements of Cash Flows for the years ended
September 30, 2001, 2000, and 1999 F-5
Notes to Consolidated Financial Statements F-6
2. Financial Statement Schedules
Independent Auditors' Report F-26
Schedule II - Valuation and Qualifying Accounts F-27
Schedules not listed above have been omitted because the matter or
conditions are not present or the information required to be set
forth therein is included in the Consolidated Financial Statements
hereto.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed
or incorporated by reference as part of this annual report.
b. Reports on Form 8-K
During the third quarter ended June 30, 2001, the Company filed a
Current Report on Form 8-K with the SEC dated June 29, 2001.
- 35-
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------------
c. Exhibits
The exhibits listed in the accompanying index to exhibits are filed
or incorporated by reference as part of this annual report.
3.1 Certificate of Incorporation of the Company and Form of Certificate
of Amendment thereto (*)
3.2 By-Laws of the Company (**)
4.1 Form of Rights Agreement (*)
10.1 Form of Sale and Transfer Agreement between Siemens
Aktiengesellschaft and Rofin-Sinar Technologies Inc. (*)
10.2 Form of Sale and Transfer Agreement by and among Siemens Power
Corporation and Rofin-Sinar Technologies Inc. (*)
10.3 Form of Tax Allocation and Indemnification Agreement among Rofin-
Sinar Technologies Inc., Rofin-Sinar Inc., Siemens Corporation and
Siemens Power Corporation (*)
10.4 Joint Venture Agreement, dated as of May 27, 1992, by and among
Rofin-Sinar Laser GmbH, Marubeni Corporation and Nippei Toyama
Corporation (*)
10.5 Cooperation Agreement, dated as of May 27, 1992, among Nippei Toyama
Corporation, Rofin-Sinar Laser GmbH and Marubeni Corporation (*)
10.6 Cooperation Agreement, dated as of May 27, 1992, among Rofin-Sinar
Laser GmbH, Marubeni Corporation and Nippei Toyama Corporation (*)
10.7 Inheritable Building Right (Erbbaurecht), dated as of March 1, 1990,
between Rofin-Sinar Laser GmbH and Lohss GmbH (in German, English
summary provided) (*)
10.8 Lease Agreement, dated August 10, 1990, between Josef and Maria
Kranz and Rofin-Sinar Laser GmbH (in German, English summary
provided) (*)
10.9 Lease Agreement, dated June 14, 1989, between DR Group and Rofin-
Sinar Incorporated (Mast Street property) (*)
10.10 Lease Agreement, dated March 25, 1993 between DR Group and Rofin-
Sinar Incorporated (Plymouth Oaks Drive property) (*)
10.11 Rofin-Sinar Laser GmbH Pension Plan (in German, English summary
provided) (*)
10.12 Form of 1996 Equity Incentive Plan (*)
- 36-
10.13 Form of 1996 Non-Employee Directors' Stock Plan (*)
10.14 Deutsche Bank AG Commitment Letter dated August 22, 1996 (*)
10.15 Form of Employment Agreement, dated as of September 2, 1996, among
Peter Wirth, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies
Inc. (in German, English summary provided) (*)
10.16 Form of Employment Agreement, dated as of September 2, 1996, among
Hinrich Martinen, Rofin-Sinar Laser GmbH and Rofin-Sinar
Technologies Inc. (in German, English summary provided) (*)
10.17 Form of Employment Agreement, dated as of September 2, 1996, among
Gunther Braun, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies
Inc. (in German, English summary provided) (*)
10.18 English Translation of Acquisition Agreement, dated as of April 29,
2000, by and between Mannessmann Demag Krauss-Maffei AG and Rofin-
Sinar Laser GmbH (***)
10.19 English Translation of Option Agreement between Carl Baasel and
Rofin-Sinar Laser GmbH (+)
10.20 Lease Agreement between Carl Baasel and Rofin-Sinar Laser GmbH (+)
11.1 Statement of earnings per share
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule for fiscal year ended September 30, 2001
- ----------------------------------------------------------------------------
(*) Incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form S-1 (File No. 333-09539) which was
declared effective on September 25, 1996.
(**) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report for the period ended March 31, 1998.
(***) Incorporated by reference to the exhibit filed with the Company's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 24, 2000.
(+) To be filed by amendment
- 37-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: December 21, 2001 ROFIN-SINAR TECHNOLOGIES INC.
By: /s/ Peter Wirth
-------------------------------
Peter Wirth
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------------------- ----------------------------- -----------------
/s/ Peter Wirth Chairman of the Board of December 21, 2001
- --------------------- Directors, Chief Executive
Peter Wirth Officer and President
/s/ Gunther Braun Executive Vice President, December 21, 2001
- --------------------- Finance and Administration,
Gunther Braun Chief Financial Officer,
Principal Accounting Officer
and Director
/s/ William Hoover Director December 21, 2001
- ---------------------
William Hoover
/s/ Ralph Reins Director December 21, 2001
- ---------------------
Ralph Reins
/s/ Gary Willis Director December 21, 2001
- ---------------------
Gary Willis
/s/ Carl F. Baasel Director December 21, 2001
- ---------------------
Carl F. Baasel
- 38 -
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Rofin-Sinar Technologies Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Rofin-Sinar
Technologies Inc. and subsidiaries as of September 30, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended September 30, 2001. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rofin-
Sinar Technologies Inc. and subsidiaries as of September 30, 2001 and 2000,
and the results of their operations and their cash flows for each of the
years in the three-year period ended September 30, 2001, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Detroit, Michigan
November 2, 2001
F-1
ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30,
-----------------------
2001 2000
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 13,487 $ 28,973
Accounts receivable, trade 57,445 53,259
Less allowance for doubtful accounts ( 2,033) ( 1,957)
---------- ----------
Trade accounts receivable, net 55,412 51,302
Accounts receivable, related party 560 8
Other accounts receivable 1,973 2,021
Inventories (note 2) 70,328 56,584
Prepaid expenses 1,115 577
Deferred income tax assets - current (note 9) 5,222 5,673
---------- ----------
Total current assets 148,097 145,138
Property and equipment, at cost (note 3) 44,664 38,991
Less accumulated depreciation (21,818) ( 18,411)
---------- ----------
Property and equipment, net 22,846 20,580
Deferred income tax assets - noncurrent (note 9) 1,878 1,769
Goodwill, net (note 4) 51,445 50,343
Other assets 484 584
---------- ----------
Total assets $ 224,750 $ 218,414
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit and short term borrowings
(notes 6 and 7) $ 27,528 $ 34,749
Accounts payable, trade 12,325 10,591
Accounts payable to related party (note 12) 6,349 5,706
Income taxes payable (note 9) 5,133 4,580
Accrued liabilities (note 5) 31,353 26,864
---------- ----------
Total current liabilities 82,688 82,490
Long-term debt (notes 6 and 7) 36,784 40,172
Pension obligations (note 10) 5,120 4,180
Minority interests 859 844
Other long-term liabilities 248 9
--------- ---------
Total liabilities 125,699 127,695
Commitments and contingencies (note 8)
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $0.01 par value, 50,000,000 shares
authorized, 11,546,500 (11,538,200 at
September 30, 2000) shares issued
and outstanding 115 115
Additional paid-in capital 76,123 76,049
Retained earnings 34,360 27,145
Accumulated other comprehensive loss ( 11,547) ( 12,590)
---------- ----------
Total stockholders' equity 99,051 90,719
---------- ----------
Total liabilities and stockholders' equity $ 224,750 $ 218,414
========== ==========
See accompanying notes to consolidated financial statements
F-2
ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(dollars in thousands, except per share amounts)
Years ended September 30,
-------------------------------
2001 2000 1999
---------- ---------- ---------
Net sales $ 220,557 $ 171,187 $ 124,024
Cost of goods sold 138,408 106,890 82,230
---------- ---------- ---------
Gross profit 82,149 64,297 41,794
---------- ---------- ---------
Selling, general, and administrative expenses 41,841 29,593 23,706
Research and development expenses 14,798 12,953 11,808
Goodwill amortization 3,653 1,701 341
Special charges (note 1) 700 2,812 --
---------- ---------- ---------
Income from operations 21,157 17,238 5,939
Other expense (income):
Interest, net (note 12) 3,328 637 ( 702)
Minority interest 688 757 78
Miscellaneous ( 1,036) ( 235) ( 312)
---------- ---------- ---------
Total other expense (income), net 2,980 1,159 ( 936)
---------- ---------- ---------
Income before income taxes 18,177 16,079 6,875
Income tax expense (note 9) 10,962 8,202 3,242
---------- --------- ---------
Net income $ 7,215 $ 7,877 $ 3,633
========== ========= =========
Net income per share (note 11):
Basic $ 0.62 $ 0.68 $ 0.32
Diluted $ 0.62 $ 0.68 $ 0.32
========== ========= =========
Weighted average shares used in computing
net income per share (note 11):
Basic 11,546,500 11,538,200 11,527,400
Diluted 11,600,648 11,621,889 11,527,400
========== ========== ==========
See accompanying notes to consolidated financial statements
F-3
ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Years ended September 30, 1999, 2000, and 2001
(dollars in thousands)
Accumulated
Common Additional Other Total
Stock Paid-in Retained Comprehensive Stockholders'
Par Value Capital Earnings Income(loss) Equity
------------ ------------ ------------ ------------ ------------
BALANCES at September 30, 1998 $ 115 $ 75,861 $ 15,635 $ ( 846) $ 90,765
Comprehensive income:
Foreign currency translation adjustment -- -- -- ( 3,817) ( 3,817)
Net income -- -- 3,633 -- 3,633
------------
Total comprehensive income (loss) ( 184)
Common stock issued -- 95 -- -- 95
------------ ------------ ------------ ------------ ------------
BALANCES at September 30, 1999 $ 115 $ 75,956 $ 19,268 $ ( 4,663) $ 90,676
Comprehensive income:
Foreign currency translation adjustment -- -- -- ( 7,927) ( 7,927)
Net income -- -- 7,877 -- 7,877
------------
Total comprehensive income (loss) (50)
Common stock issued -- 93 -- -- 93
------------ ------------ ------------ ------------ ------------
BALANCES at September 30, 2000 $ 115 $ 76,049 $ 27,145 $ ( 12,590) $ 90,719
Comprehensive income:
Cumulative effect of change in
Accounting principle ( 188) ( 188)
Fair value of interest swap agreement -- -- -- ( 783) ( 783)
Foreign currency translation adjustment -- -- -- 2,014 2,014
Net income -- -- 7,215 -- 7,215
------------
Total comprehensive income (loss) 8,258
Common stock issued -- 74 -- -- 74
------------ ------------ ------------ ------------ ------------
BALANCES at September 30, 2001 $ 115 $ 76,123 $ 34,360 $ ( 11,547) $ 99,051
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements
F-4
ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(dollars in thousands)
Years ended September 30,
--------------------------
2001 2000 1999
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,215 $ 7,877 $ 3,633
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,186 4,883 3,085
Issuance of restricted stock 43 33 42
Provision for doubtful accounts ( 7) 672 182
Loss on disposal of property and equipment 127 115 21
Deferred income taxes 858 ( 864) ( 65)
Increase in minority interest 688 757 208
Change in operating assets and liabilities:
Trade accounts receivable ( 2,795) (14,256) ( 3,876)
Other accounts receivable 194 ( 375) 696
Inventories (11,293) ( 5,650) ( 3,897)
Prepaid expenses and other ( 472) ( 56) ( 46)
Accounts payable 1,366 5,102 614
Income taxes payable 456 3,769 ( 1,942)
Accrued liabilities and pension obligations 5,555 4,076 2,107
-------- -------- --------
Net cash provided by operating
activities 9,121 6,083 162
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ( 4,685) ( 3,923) ( 2,313)
Proceeds from the sale of property and equipment 105 186 66
Acquisition of business, net of cash acquired ( 2,565) (38,041) ( 165)
-------- -------- --------
Net cash used in investing activities ( 7,145) (41,778) ( 2,412)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from bank 48,538 51,683 23,552
Repayments to bank (65,743) (18,899) (19,182)
Repayments to related party -- ( 3,461) --
Payment to subsidiary's minority shareholders ( 608) ( 419) --
Other 43 89 52
-------- -------- --------
Net cash provided by (used in)
financing activities (17,770) 28,993 4 422
-------- -------- --------
Effect of foreign currency translation on cash 308 ( 1,130) ( 241)
-------- -------- --------
Net increase (decrease)
in cash and cash equivalents (15,486) ( 7,832) 1,931
Cash and cash equivalents at beginning of year 28,973 36,805 34,874
-------- -------- --------
Cash and cash equivalents at end of year $ 13,487 $ 28,973 $ 36,805
======== ======== ========
Cash paid during the year for interest $ 3,924 $ 2,217 $ 756
======== ======== ========
Cash paid during the year for income taxes $ 5,412 $ 4,954 $ 5,534
======== ======== ========
See accompanying notes to consolidated financial statements
F-5
ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999, 2000, and 2001
(dollars in thousands)
1. SUMMARY OF ACCOUNTING POLICIES
(a) Description of the Company and Business
The primary business of Rofin is to develop, manufacture and market
industrial lasers and supplies used for material processing applications.
The majority of the Company's customers are in the machine tool, automotive,
semiconductor/electronics industries and are located in the United States,
Europe, and Asia. For the year ended September 30, 2001, Rofin generated
approximately 71% of its revenues from the sale of new lasers and laser
systems and approximately 29% from aftermarket support for the Company's
existing laser products and from its components business.
The accompanying financial statements present the historical financial
information of Rofin-Sinar Technologies Inc. ("Rofin" or "RSTI" or "the
Company") and its wholly owned subsidiaries. Rofin consists of Rofin-Sinar
Inc. ("RSI") and Rofin-Sinar Technologies Europe S.L. ("RSTE"). RSTE, a
European holding company formed in 1999 owns 100% of Rofin-Sinar Laser GmbH
("RSL"), 80% of Dilas Diodenlaser GmbH ("Dilas"), 100% of Rofin-Baasel
Italiana S.r.l., 100% of Rofin-Baasel France S.A., 74% of Rofin-Sinar UK
Ltd., 100% of Rofin-Baasel UK Ltd., 100% of Rofin-Baasel Benelux B.V., 100%
of Rofin-Baasel Singapore Pte. Ltd., and 83% of Rofin-Baasel Espana
S.L.("RBE").
RSL includes the consolidated accounts of its 51% owned subsidiary Rofin-
Marubeni Laser Corporation (a Japanese corporation - "Rofin-Marubeni"); its
100% owned subsidiaries Rasant-Alcotec Beschichtungstechnik GmbH ("Rasant");
CBL Verwaltungsgesellschaft mbH; and its 90.01% owned subsidiary Carl Baasel
Lasertechnik GmbH & Co. KG.
CBL includes the consolidated accounts of its wholly owned subsidiaries
Rofin-Baasel Inc., Wegmann-Baasel Laser und elektrooptische Geraete GmbH, and
PMB Elektronik GmbH.
On June 22, 2001, the shares of the common stock of Rofin-Sinar Technologies,
Inc. were approved for trading on the Neuer Markt of the Frankfurt Stock
Exchange in Germany under the German Securities Identification Number 902
757. The Company incurred approximately $0.7 million in expenses related to
obtaining this additional listing.
All significant intercompany balances and transactions have been eliminated
in consolidation.
F-6
(b) Acquisitions
On February 28, 2001, the Company acquired 80% of the share capital of Z-
Laser S.A. through its wholly owned subsidiary Rofin-Baasel Espana, S.A.,
Barcelona, Spain for $3.3 million in cash. The Company has followed the
purchase method of accounting for the acquisition. Goodwill and other
intangibles, resulting from the acquisition, were $2.1 million and are being
amortized over a period of 15 years. At the end of June 2001, Z-Laser S.A.
was merged into RBE. As a result of this merger, the minority shareholder
owns 17% of the total stock of the new Spanish subsidiary.
Additionally, the Company and the minority shareholder are parties to a
put/call option agreement for the remaining 17% of share capital held by the
minority shareholder for a fixed price of 0.9 million Euro ($832) (see note
12). Accordingly, the accompanying financial statements present RBE as if it
was 100% owned.
On May 10, 2000, the Company acquired 90.01% of the share capital of Carl
Baasel Lasertechnik GmbH ("Baasel Lasertech") through its wholly owned
subsidiary RSL for 44.3 million Euro in cash. Additionally, RSTI refinanced
23.4 million Euro of the then outstanding debt of Baasel Lasertech. RSTI has
followed the purchase method in accounting for the acquisition, and
accordingly the accompanying results of operations include the results of
Baasel Lasertech for the period subsequent to the date of acquisition. In
connection with the acquisition and integration of Baasel Lasertech into the
Company's operations, including the consolidation of certain product lines,
RSTI has recorded a special charge of $2.8 million to write-off certain of
its inventories, which will be discontinued. In September 2001, Carl Baasel
Lasertechnik GmbH was transformed into Carl Baasel Lasertechnik GmbH & Co. KG
("CBL"), a limited partnership. In addition the Company and the minority
shareholder are party to an option agreement for the remaining share of
capital held by the minority shareholder for a fixed price of 6.3 million
Euro ($5,759) (see note 12). Accordingly the accompanying financial
statements present CBL as if it was 100% owned.
In July 1999, RSL acquired 94.19% of the common stock of Rasant-Alcotec
Beschichtungstechnik GmbH, a German limited liability company based in
Overath, Germany for $165. The primary business of Rasant involves the use
of advanced techniques in the coating of metals. RSL uses this technology to
coat the electrodes used in the CO2 Slab laser. The net assets and annual
revenues of Rasant are not material. In April 2001, Rofin acquired the
remaining 5.81% of the common stock of Rasant.
(c) Cash Equivalents
Cash equivalents consist of liquid instruments with an original maturity of
three months or less as well as taxable and tax-exempt variable rate demand
obligations, which are redeemable upon a five day minimum notice. Interest
income was $1,112, $2,354, and $1,697 for the years ended September 30, 2001,
2000, and 1999, respectively, and was offset by interest expense in the
accompanying consolidated statements of operations.
F-7
(d) Inventories
Inventories are stated at the lower of cost or market, after provisions for
excess and obsolete inventory salable at prices below cost. Costs are
determined using the first in, first out and weighted average cost methods.
(e) Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives, except for leasehold improvements, which are
amortized over the lesser of their estimated useful lives or the term of the
lease. The methods of depreciation are straight line for financial reporting
purposes and accelerated for income tax purposes. Depreciable lives for
financial reporting purposes are as follows:
Useful
Lives
----------
Buildings 40 Years
Machinery and equipment 3-10 Years
Furniture and fixtures 3-10 Years
Computers and software 3-4 Years
Leasehold improvements 3-15 Years
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
(f) Goodwill
Goodwill, which represents the excess of purchase price over the fair value
of the net assets acquired, in a purchase business combination, is amortized
on a straight-line basis over 15 years. The amount of goodwill impairment,
if any, is measured based on projected discounted future operating cash flow
using a discount rate reflecting the Company's average cost of funds. The
Company believes that no impairment exists at September 30, 2001.
F-8
(g) Revenue Recognition
Revenues are generally recognized upon delivery of product or the rendering
of services, when the sales price is fixed or determinable, and when
collectibility is reasonably assured. Specifically, product revenues are
recorded at the time of delivery or factory acceptance by the customer.
Spare parts sales are recorded at the time of shipment and service revenues
are recognized when performed. Maintenance service contracts are billed in
advance as deferred revenue and are recognized as the service is performed.
(h) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss tax carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
(i) Accounting for Warranties
The Company issues a standard warranty of one year for parts and labor on
lasers that are sold. Additionally, extended warranties are negotiated on a
contract-by-contract basis. The Company provides for estimated warranty
costs as products are shipped.
(j) Foreign Currency Translation
The assets and liabilities of the Company's operations outside the United
States are translated into U.S. dollars at exchange rates in effect on the
balance sheet date, and revenues and expenses are translated using a weighted
average exchange rate during the period. Gains or losses resulting from
translating foreign currency financial statements are recorded as a separate
component of stockholders' equity. Gains or losses resulting from foreign
currency transactions are included in net income.
(k) Net Earnings per Share (EPS)
Basic EPS is computed by dividing net income by the weighted average number
of common shares outstanding during the period. Diluted EPS reflects the
potential dilution from common stock equivalents (stock options).
F-9
(l) Comprehensive Income
Comprehensive income consists of net income, foreign currency translation
adjustments and fair value of interest rate swap agreements and is presented
in the consolidated statements of stockholders' equity and comprehensive
income. Other comprehensive income is comprised of the following:
September 30,
------------------------
2001 2000
----------- ---------
Foreign currency translation
adjustment $ ( 10,576) $ (12,590)
Fair value of interest swap
agreements ( 971) --
----------- ----------
Total comprehensive income $ ( 11,547) $ (12,590)
=========== ==========
(m) Research and Development Expenses
Research and development costs are expensed when incurred and are net of
German government and European grants of $1,221, $1,377, and $1,293 received
for the years ended September 30, 2001, 2000, and 1999, respectively. The
Company has no future obligations under such grants.
(n) Financial Instruments
The fair value of financial instruments, consisting principally of cash,
accounts receivable, accounts payable, and line of credits, approximate
carrying value due to the short-term nature of such instruments. The fair
value of long-term debt approximates the carrying value due to the variable
based interest on such debt.
(o) Derivative Financial Instruments
The Company uses derivative financial instruments to manage funding costs and
exposures arising from fluctuations in interest rates. These derivative
financial instruments consist primarily of interest rate swaps. The Company
does not use derivative financial instruments for trading purposes.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities". In June 2000, the
FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS
No. 138 require that all derivative instruments be recorded on the balance
sheet as either an asset or liability measured at their respective fair
values and that changes in the derivative instruments' fair value be
F-10
recognized in earnings. SFAS No. 133 and SFAS No. 138 are effective for all
fiscal quarters of all fiscal years beginning after June 30, 2000; the
Company adopted SFAS No. 133 and SFAS No. 138 on October 1, 2000. On the
date the derivative contract is entered into, the Company designates the
derivative as a hedge of the variability of cash flows to be paid related to
a recognized liability ("cash flow" hedge). Changes in the fair value of a
derivative that is highly effective and that is designated and qualifies as a
cash-flow hedge are recorded in other comprehensive income, until earnings
are affected by the variability in cash flows of the designated hedged item.
Interest differentials resulting from interest rate swap agreements
designated as hedges of the Company's financial liabilities are recorded on
an accrual basis as an adjustment to interest expense.
In accordance with the transition provisions of SFAS 133, the Company
recorded a net-of-tax cumulative-effect-type adjustment of $188 loss in
accumulated other comprehensive loss to recognize at fair value all
derivatives that are designated as cash-flow hedging instruments.
It is anticipated that approximately $0.5 million of net unrealized
gains/losses on derivatives included in accumulated OCI as of September 30,
2001 will be reclassified into income during the next year.
For the year ended September 30, 2000, prior to the adoption of SFAS No, 133,
the Company entered into interest rate swap agreements to reduce its exposure
to market risks from changing interest rates. For interest rate swaps, the
differential to be paid or received is accrued and recognized in interest
expense and may change as market interest rates change.
The Company enters into foreign currency forward contracts and forward
exchange options generally of less than six months duration to hedge a
portion of its sales transactions denominated in foreign currencies. At
September 30, 2001, the Company held Japanese yen forward contracts with
notional amounts of 3.0 million Euro, an Euro forward contract with a
notional amount of $0.7 million and German mark forward exchange options with
notional amounts of $0.9 million.
The Company manages exposure to counterparty credit risk by entering into
derivative financial instruments with highly rated institutions that can be
expected to fully perform under the terms of such agreements.
(p) Use of Estimates
Management of the Company make a number of estimates and assumptions relating
to the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in conformity
with accounting principles generally accepted in the United States of
America. Actual results could differ from these estimates.
F-11
2. INVENTORIES
Inventories are summarized as follows:
September 30,
----------------------
2001 2000
--------- ---------
Finished goods $ 7,612 $ 7,630
Work in progress 19,975 17,302
Raw materials and supplies 18,430 17,783
Demo inventory 9,325 5,975
Service parts 14,986 7,894
--------- ---------
Total inventories, net $ 70,328 $ 56,584
========= =========
3. PROPERTY AND EQUIPMENT
Property and equipment include the following:
September 30,
----------------------
2001 2000
--------- ---------
Buildings $ 17,671 $ 16,556
Technical machinery and equipment 10,251 8,127
Furniture and fixtures 7,851 6,601
Computers and software 5,048 4,157
Leasehold improvements 3,843 3,550
--------- ---------
Total property and equipment, at cost $ 44,664 $ 38,991
========= =========
4. GOODWILL
Goodwill, net is as follows:
September 30,
----------------------
2001 2000
--------- ---------
Goodwill $ 57,571 $ 52,668
Accumulated amortization 6,126 2,325
--------- ---------
Total goodwill, net $ 51,445 $ 50,343
========= =========
F-12
5. ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
September 30,
----------------------
2001 2000
--------- ---------
Employee compensation $ 8,577 $ 7,382
Warranty reserves 9,717 7,935
Other taxes payable 869 457
Customer deposits 4,738 4,600
Other 7,452 6,490
--------- ---------
Total accrued liabilities $ 31,353 $ 26,864
========= =========
6. LINE OF CREDIT
The Company maintains a $25,000 annually renewable line of credit with
Deutsche Bank AG to support its working capital needs. As of September 30,
2001 and 2000, $14,161 and $13,004, respectively, was outstanding under this
loan facility as a result of borrowings by RSL, BLT, Rofin-Marubeni, Rofin-
Baasel Italiana S.r.L., Rasant, Rofin-Sinar Uk Ltd., Dilas and Rofin-Baasel
Singapore Pte. Ltd. at an average fixed interest rate of 4.2% for fiscal 2001
and 4.0% for fiscal 2000.
In addition, the Company's non-U.S. subsidiaries have several lines of credit
which allow them to borrow in the applicable local currency. At September
30, 2001 and 2000, direct borrowings under these agreements totaled $9,098
and $4,166, respectively. The remaining unused portion of the lines of
credit, at September 30, 2001, was $16,617, in aggregate. Fixed interest
rates vary from 1.1% up to 7.0%, depending upon the country and usage of the
available credit.
The short-term portion of the refinancing of the acquisition of CBL and its
existing debt ($4.3 million) was reclassified to line of credit and short-
term borrowings (see note 7) in the accompanying consolidated balance sheet.
7. LONG-TERM DEBT
Rasant and Rofin-Baasel France S.A. maintain additional long-term credit
facilities of $752. As of September 30, 2001, $489 was borrowed against such
facilities at an average interest rate of 6.3%. The agreements relating to
these credit facilities expire in 2009 and 2003, respectively. As of
September 30, 2000, RSL, Rasant, Dilas and Rofin-Sinar France S.A. had long-
term credit facilities of $6,925 and $5,618 borrowed against such facilities
at an average interest rate of 4.2%.
F-13
On December 15, 2000, the Company refinanced its existing credit facilities
for the financing of the acquisition and the assumption of the debt of CBL.
As of September 30, 2001, four long-term borrowings amounting to $40,654 were
used against these credit facilities. These borrowings bear interest at 6
months Euribor and the interest rate of three of them is converted to fixed
rates of 6.02%, 6.73% and 6.46% with interest rate swap agreements.
Maturities of these loans are as follows: $4.3 million in 2002, $14.0 million
in 2003, $4.2 million in 2004, $16.0 million in 2005 and $ 2.1 million in
2006. Based on the above maturities, $4.3 million has been reclassified to
line of credit and short-term borrowings in the balance sheet (see note 6).
8. LEASE COMMITMENTS
The Company leases operating facilities and equipment under operating leases,
which expire at various dates through 2017. The lease agreements require
payment of real estate taxes, insurance and maintenance expenses by the
Company.
Minimum lease payments for future fiscal years under non-cancelable operating
leases as of September 30, 2001 are:
Fiscal Year Ending September 30, Total
-------------------------------- --------
2002 $ 3,562
2003 3,149
2004 2,259
2005 1,842
2006 and thereafter 5,240
Rent expense charged to operations for the years ended September 30, 2001,
2000, and 1999, approximated $3,373, $2,857, and $1,917, respectively.
9. INCOME TAXES
Income before income taxes is attributable to the following geographic
regions:
Years ended September 30,
------------------------------
2001 2000 1999
--------- -------- ---------
United States $ ( 515) $ ( 2,250) $ 412
Germany 15,512 16,341 6,732
France 800 728 431
Italy 646 190 354
Japan 361 534 ( 3)
United Kingdom 848 376 ( 1,051)
Other 525 160 --
--------- --------- ---------
Total income before income taxes $ 18,177 $ 16,079 $ 6,875
========= ========= =========
F-14
The provision for income tax expense is comprised of the following amounts:
Years ended September 30,
-------------------------------
2001 2000 1999
--------- -------- ---------
Current:
United States $ 34 $ 350 $ 425
Foreign 10,071 8,914 3,370
-------- --------- ---------
Total current 10,104 9,264 3,795
-------- --------- ---------
Deferred:
United States 795 ( 736) ( 170)
Foreign 63 ( 326) ( 383)
-------- --------- ---------
Total deferred 858 (1,062) ( 553)
-------- --------- ---------
Total income tax expense $10,962 $ 8,202 $ 3,242
======== ========= =========
Statutory tax rates in the U.S., U.K., Italy, France, Spain, the Netherlands,
Singapore and Japan approximate 34%, 30%, 41%, 35.33%, 35%, 35%, 24.5% and
45.32%, respectively. German corporate tax law applies the imputation system
with regard to the taxation of the income of a corporation (such as RSL, CBL,
and Dilas). In general, retained corporate income is subject to a municipal
trade tax (which approximates 17%), which is deductible for federal corporate
income tax purposes, a federal corporate income tax of 40% and a surcharge of
5.5% on the federal corporate income tax amount.
Profits which are distributed by a German corporate taxpayer in the form of a
dividend are subject to a reduced federal corporate income tax rate of 30%
plus the 5.5% surcharge on the federal corporate income tax amount calculated
at the reduced rate.
The federal corporate income tax rate, in Germany, was reduced to 25% in
2001. This reduction will be reflected by the Company in computing current
taxes in fiscal 2002. Deferred taxes have been adjusted in fiscal 2001 as
the tax rate change was enacted during fiscal 2001.
Tax expense and deferred taxes have been recorded at rates assuming all
earnings of RSL and Dilas will be dividended to Rofin-Sinar Technologies
Europe S.L..
F-15
The difference between actual income tax expense and the amount computed by
applying the U.S. federal income tax rate of 34% is as follows:
--------------------------
Years ended September 30,
--------------------------
2001 2000 1999
-------- -------- --------
Computed "expected" tax expense $ 6,180 $ 5,467 $ 2,338
Difference between U.S. and foreign
statutory rates 1,612 1,786 872
Non-deductible goodwill amortization 928 534 --
Adjustment of Valuation allowance 1,268 573 106
Adjustment of prior-year tax estimates 22 (191) --
Other 952 33 ( 74)
-------- -------- --------
Actual tax expense $10,962 $ 8,202 $ 3,242
======== ======== ========
The tax effects of temporary differences that give rise to the net deferred
tax assets are as follows:
September 30,
----------------------
2001 2000
--------- ---------
Deferred tax assets:
Foreign
German reorganization benefits $ 85 $ 457
Net operating loss carryforwards 561 591
Pension accrual 303 256
Inventory 1,993 1,191
Other, net 826 481
--------- ---------
Total Foreign 3,768 2,976
United States:
Net operating loss carryforwards 3,863 3,308
Property & equipment 222 151
Warranty accrual 580 918
Inventory 2,350 2,694
Allowance for bad debt 308 227
Pension accrual 175 88
Other 1,636 855
--------- ---------
Total United States 9,133 8,241
Gross deferred tax assets 12,901 11,217
Less: Valuation allowance ( 3,146) ( 2,063)
--------- ---------
Net deferred tax assets 9,755 9,154
--------- ---------
F-16
Deferred tax liabilities:
Foreign:
Property & equipment ( 1,340) ( 1,318)
Accrued liabilities ( 155) ( 394)
Allowance for bad debt ( 348) --
Other ( 812) --
--------- ---------
Total Foreign ( 2,655) ( 1,712)
--------- ---------
Net deferred income tax assets $ 7,100 $ 7,442
========= =========
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and projections for future
taxable income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the
existing valuation allowances at September 30, 2001.
At September 30, 2001, the Company has net operating loss carryforwards
available of $11,361 in the United States (which expire beginning in 2008),
$682 in the U.K. (which has no expiration date), and $1,296 in Germany (which
has no expiration date). The annual utilization by the Company of its U.S.
net operating loss carryforwards will be subject to certain annual
limitations under Section 382 of the Internal Revenue Code.
10. EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans for the RSL and RSI employees.
The Company's U.S. plan began in fiscal 1995 and is funded. As is the normal
practice with German companies, the German pension plan is unfunded. Any new
employees, hired after the acquisition of CBL, are not eligible for the RSL
pension plan.
F-17
The following table sets forth the funded status of the plans at the balance
sheet dates:
September 30,
----------------------
2001 2000
--------- ---------
Change in benefit obligation:
Benefit obligation at beginning of year $ 6,674 $ 7,155
Service cost 551 599
Interest cost 451 427
Actuarial (gains) and losses ( 135) ( 539)
Foreign exchange rate changes 178 ( 835)
Benefits paid ( 144) ( 133)
--------- ---------
Benefit obligation at end of year 7,575 6,674
--------- ---------
Change in plan assets:
Fair value of plan assets at beginning of year 2,654 2,165
Actual return on plan assets ( 484) 397
Employer contributions -- 208
Benefits paid ( 103) ( 115)
--------- ---------
Fair value of plan assets at end of year 2,067 2,655
--------- ---------
Funded status ( 5,508) ( 4,019)
Unrecognized net actuarial loss (gain) 111 ( 501)
Unrecognized prior service cost 277 340
--------- ---------
Accrued benefit cost $( 5,120) $( 4,180)
========= =========
Discount rate:
United States 7.5% 7.5%
Foreign 6.0% 7.0%
Expected return on plan assets -
United States only 8.0% 8.0%
Rate of compensation increase
United States 6.0% 6.0%
Foreign 2.0% 2.0%
F-18
The following table sets forth the components of net periodic benefit cost
for the respective fiscal years:
Years ended September 30,
-----------------------------------
2001 2000 1999
----------- ----------- -----------
Components of net periodic benefit cost:
Service cost $ 551 $ 598 $ 575
Interest cost 451 427 408
Expected return on plan assets ( 209) ( 177) ( 150)
Amortization of prior service cost 63 63 63
Recognized net actuarial loss ( 35) 6 7
--------- --------- ---------
Net periodic benefit cost $ 821 $ 917 $ 903
========= ========= =========
RSI and Rofin-Baasel Inc. have 401(k) plans for the benefit of all eligible
U.S. employees, as defined by the plan. Participating employees may
contribute up to 16% of their qualified annual compensation. The Companies
match 50% of the first 5 to 6% of the employees' compensation contributed as
a salary deferral. Company contributions for the years ended September 30,
2001, 2000, and 1999 were $130, $153, and $146, respectively.
11. NET INCOME PER COMMON SHARE
The calculation of the weighted average number of common shares outstanding
for each period is as follows:
Years ended September 30,
-----------------------------------
2001 2000 1999
----------- ----------- -----------
Weighted average number of
shares for BASIC net income
per common share 11,546,500 11,538,200 11,527,400
Potential additional shares
due to outstanding dilutive
stock options 54,148 83,689 --
----------- ----------- -----------
Weighted average number of
shares for DILUTED net
income per common share 11,600,648 11,621,889 11,527,400
=========== =========== ===========
Excluded from the calculation of diluted EPS for the year ended September 30,
2001, were 427,000 outstanding stock options. These could potentially dilute
future EPS calculations but were not included in the current period because
their effect on earnings per share would be antidilutive.
F-19
12. RELATED PARTY TRANSACTIONS
The Company had sales to its joint venture partners in Japan amounting to
$1,168, $49, and $511 in fiscal years 2001, 2000, and 1999, respectively.
The Company's purchases from and sales to related parties have generally been
on terms comparable to those available in connection with purchases from or
sales to unaffiliated parties.
The main facility in Starnberg is rented from the minority shareholder of
CBL. The Company paid rent expense of $419 and $158 to the minority
shareholder during fiscal years 2001 and 2000, respectively.
The Company has accrued $5,759 and $832 for the option purchase prices for
the minority interests in CBL and Rofin-Baasel Espana S.L., respectively (see
note 1). In fiscal year 2000, $5,524 was accrued related to the option
purchase price for the minority interest of CBL. These amounts are included
in accounts payable to related party in the accompanying consolidated balance
sheet. The corresponding interest on these obligations ($351 and $76,
respectively) is included in interest expense in the accompanying
consolidated statement of operations.
Accounts payable trade also includes short-term loans from the minority
shareholders of Dilas of $190.
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company manages its business under two primary geographic regions that
are aggregated together as one segment in the global industrial laser
industry. Sales from these regions have similar long-term financial
performance and economic characteristics. The products from these regions
utilize similar manufacturing processes and use similar production equipment,
which may be interchanged from group to group. The Company distributes,
sells and services final product to the same type of customers from both
regions.
Assets, revenues and income before taxes, by geographic region are summarized
below:
ASSETS September 30,
-----------------------
2001 2000
--------- ---------
United States $ 43,568 $ 56,393
Germany 162,637 157,864
Other 78,628 35,840
Intercompany eliminations ( 60,083) ( 31,683)
--------- ---------
Total assets $ 224,750 $ 218,414
========= =========
F-20
REVENUES TOTAL BUSINESS
Years ended September 30,
----------------------------------
2001 2000 1999
---------- ---------- ----------
United States $ 50,418 $ 43,020 $ 37,377
Germany 192,362 144,195 102,628
Other 60,650 36,551 23,748
Intercompany eliminations ( 82,873) ( 52,579) ( 39,729)
---------- ---------- ----------
$ 220,557 $ 171,187 $ 124,024
========== ========== ==========
INTERCOMPANY REVENUES
Years ended September 30,
-----------------------------------
2001 2000 1999
---------- --------- -----------
United States $ 4,767 $ 382 $ 5,952
Germany 67,835 48,053 31,440
Other 10,271 4,144 2,337
Intercompany eliminations ( 82,873) ( 52,579) ( 39,729)
---------- --------- ----------
$ -- $ -- $ --
========== ========= ==========
EXTERNAL REVENUES
Years ended September 30,
----------------------------------
2001 2000 1999
---------- ---------- ----------
United States $ 45,651 $ 42,638 $ 31,425
Germany 124,527 96,142 71,188
Other 50,379 32,407 21,411
---------- ---------- ----------
$ 220,557 $ 171,187 $ 124,024
========== ========== ==========
INCOME BEFORE INCOME TAXES
Years ended September 30,
----------------------------------
2001 2000 1999
---------- --------- ----------
United States $ ( 515) $ ( 2,250) $ 412
Germany 15,512 16,341 6,732
Other 3,180 1,988 ( 270)
---------- --------- ----------
$ 18,177 $ 16,079 $ 6,875
========== ========= ==========
F-21
14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
The following represents the Company's quarterly results (millions of
dollars, except per share amounts):
Quarters ended
----------------------------------------------
Dec.31, March 31, June 30, Sept. 30,
2000 2001 2001 2001
---------- ---------- ---------- ----------
Net sales $ 53.8 $ 58.3 $ 54.1 $ 54.4
Gross profit 21.0 23.0 21.0 17.1
Net income (loss) 3.0 3.1 2.4 ( 1.3)
Net income per share - Basic 0.26 0.27 0.21 ( 0.12)
Net income per share - Diluted 0.26 0.27 0.21 ( 0.12)
Quarters ended
----------------------------------------------
Dec.31, March 31, June 30, Sept. 30,
1999 2000 2000 2000
---------- ---------- ---------- ----------
Net sales $ 33.2 $ 34.6 $ 45.5 $ 57.9
Gross profit 11.1 13.0 17.7 22.5
Net income 1.6 1.9 0.6 3.9
Net income per share - Basic 0.14 0.16 0.05 0.33
Net income per share - Diluted 0.14 0.16 0.05 0.33
15. STOCK INCENTIVE PLANS
Directors' Plan
The Company has reserved 100,000 shares of common stock for the Directors'
Plan, which covers non-employee members of the Board of Directors. Under
this plan each member of the Board of Directors who is not an employee of the
Company and who is elected or continues as a member of the Board of Directors
is entitled to receive an initial grant of 1,500 shares of common stock and
thereafter an annual grant of 1,500 shares of common stock. The Directors'
Plan provides that non-employee directors aged 65 or older, upon their
appointment or election to the Board of Directors, will receive, in lieu of
such initial and annual grants of shares of common stock, 7,500 shares of
restricted stock which shall vest in five equal installments on the date of
grant and each of the following four anniversaries thereof. Prior to
vesting, no shares of restricted stock may be sold, transferred, assigned,
pledged, encumbered or otherwise disposed of, subject to certain exceptions.
The Directors' Plan will continue in effect until the earlier of ten years
from the date of the first grant or the termination of the Directors' Plan by
the Board of Directors. A total of 12,500 shares are issued and outstanding
under the plan at September 30, 2001.
F-22
Equity Incentive Plan
The Company maintained an Equity Incentive Plan, whereby incentive and
nonqualified stock options, restricted stock and performance shares may have
been granted to officers and other key employees to purchase a specified
number of shares of common stock at a price not less than the fair market
value on the date of grant. There were no incentive stock options,
restricted stock or performance shares granted in fiscal 2001, 2000 or 1999.
Nonqualified stock options were granted to officers and other key employees
in fiscal 2001 and 2000. Under the terms of the plan, no awards may be
granted after September 30, 2001, unless the plan is modified or amended with
shareholder approval. As of September 30, 2001, no amendments had yet been
approved by the shareholders, however, RSTI plans to present a new plan for
shareholder approval at the next annual meeting. Options generally vest over
five years and will expire not later than ten years after the date on which
they are granted. The balance of outstanding stock options for the three
year periods ended September 30, 2001, and all options activity for the
periods then ended are as follows:
Price per Share
--------------------------
Number Price Weighted
of Shares Range Average
--------- -------------- ----------
Outstanding at September 30, 1998 451,500 $9 1/2 - 16 7/8 $ 12 1/2
--------- -------------- ----------
Granted 36,000 $9 3/8
Forfeited ( 45,600)
--------- -------------- ----------
Outstanding at September 30, 1999 441,900 $9 3/8 - 16 7/8 $ 12 1/8
--------- -------------- ----------
Granted 191,000 $ 7 3/8
Granted 20,000 $12 5/8
Exercised ( 6,300)
Forfeited ( 41,800)
--------- -------------- ----------
Outstanding at September 30, 2000 604,800 $7 3/8 - 16 7/8 $ 11 1/19
--------- -------------- ----------
Granted 30,000 $15
Granted 215,000 $10 3/8
Exercised ( 3,800)
Forfeited ( 6,500)
--------- -------------- ----------
Outstanding at September 30, 2001 839,500 $7 3/8 - 16 7/8 $
--------- -------------- ----------
F-23
Outstanding Options Exercisable Options
------------------------------- -------------------
Remaining Weighted Weighted
Life Average Average
Shares (years) Price Shares Price
------ ---------- ----------- ------ -----------
221,000 5 $ 9 1/2 221,000 $ 9 1/2
163,000 6 $ 16 7/8 130,400 $ 16 7/8
36,000 7 $ 9 3/8 14,400 $ 9 3/8
155,500 8 $ 7 3/8 31,100 $ 7 3/8
20,000 8 $ 12 5/8 4,000 $ 12 5/8
30,000 9 $ 15 6,000 $ 15
214,000 9 $ 10 3/8 -- $ 10 3/8
The Company follows Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees", to account for stock options. No compensation
cost is recognized because the option exercise price is equal to the market
price of the underlying stock on the date of grant. Had compensation cost
for these plans, as prescribed by SFAS 123, been determined based on the
Black-Scholes value at the grant dates for awards, pro forma net income and
earnings per share would have been:
Year ended September 30,
----------------------------------
2001 2000 1999
---------- ---------- ----------
Pro forma net income $ 6,705 $ 7,357 $ 3,222
Pro forma earnings per share - BASIC $ 0.58 $ 0.64 $ 0.28
Pro forma earnings per share - DILUTED $ 0.58 $ 0.63 $ 0.28
---------- ---------- ----------
The pro forma disclosures above include the amortization of the fair value of
all options vested during 2001 and are not necessarily representative of
actual results which will be reported in future years.
2001 2001 2000 2000 1999
Grant Grant Grant Grant Grant
215,000) (30,000 (20,000 (191,000 (36,000
Shares) Shares) Shares) Shares) Shares)
------ ------- ------- ------- -------
Weighted Average Grant
Date Fair Value $5.25 $7.67 $7.26 $3.90 $5.23
Expected Life 5 Years 5 Years 5 Years 5 Years 5 Years
Volatility 50.0% 50.0% 59.3% 52.9% 57.9%
Risk-Free Interest Rate 5.7% 6.1% 6.6% 6.0% 6.0%
Dividend Yield 0% 0% 0% 0% 0%
Annual Forfeiture Rate 2.8% 2.8% 2.8% 2.8% 3.0%
F-24
16. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 141, "Business Combinations", which requires the use of the
purchase method of accounting for business combinations after June 30, 2001.
It defines the methodology to be used in measuring goodwill and other
intangible assets and defines certain disclosure requirements for business
combinations. The Company has historically accounted for its acquisitions
under the purchase method.
On the same date, the FASB also issued Statement No. 142, "Goodwill and Other
Intangible Assets". Under Statement No. 142, goodwill will no longer be
subject to amortization, but will be subject to annual impairment tests.
Additionally, intangible assets that are not deemed to have an indefinite
life will continue to be amortized over their useful lives.
The Company is required to implement the new standard on October 1, 2002.
During fiscal 2002, the Company will determine the impact of this new
standard on its financial position and results of operations.
F-25
Independent Auditors' Report
The Board of Directors and Stockholders
Rofin-Sinar Technologies Inc. and Subsidiaries:
On November 2, 2001 we reported on the consolidated balance sheets of Rofin-
Sinar Technologies Inc. and Subsidiaries as of September 30, 2001 and 2000,
and the related consolidated statements of operations, stockholders' equity
and comprehensive income, and cash flows for each of the years in the three-
year period ended September 30, 2001, which are included in the annual report
on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule in the annual report on Form 10-K. This financial
statement schedule, Valuation and Qualifying Accounts, is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Detroit, Michigan
November 2, 2001
F-26
ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts - Allowance for Doubtful Accounts
Years ended September 30, 1999, 2000 and 2001
(dollars in thousands)
Balance at Charged to Balance at
Beginning Acquired Costs and End of
Of Period Reserve Expenses Deductions Period
-------- -------- -------- ---------- -------
September 30,
1999 $ 1,093 $ -- $ 182 $ ( 68) $ 1,207
September 30,
2000 $ 1,207 $ 207 $ 672 $ ( 129) $ 1,957
September 30,
2001 $ 1,957 $ 448 $( 198) $ ( 174) $ 2,033
F-27
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- --------------------------------------------------------
11.1 Earnings Per Share Table
21.1 List of Subsidiaries of Rofin-Sinar Technologies Inc.
EARNINGS PER SHARE TABLE
Years ended September 30,
-----------------------------------
2001 2000 1999
----------- ----------- -----------
Net Income $ 7,215 $ 7,877 $ 3,633
Weighted average number of
shares for BASIC net income
per common share 11,546,500 11,538,200 11,527,400
Net income per share - BASIC $ 0.62 $ 0.68 $ 0.32
=========== =========== ===========
Weighted average number of
shares for DILUTED net
income per common share 11,600,648 11,621,889 11,527,400
Net income per share - DILUTED $ 0.62 $ 0.68 $ 0.32
=========== =========== ===========
Exhibit 21.1
LIST OF SUBSIDIARIES OF ROFIN-SINAR TECHNOLOGIES INC.
Rofin-Sinar, Inc.
Rofin-Sinar Technologies Europe S.L.
Rofin-Sinar Laser GmbH
Rofin-Marubeni Laser Corporation
Rasant-Alcotec Beschichtungstechnik GmbH
CBL Verwaltungsgesellschaft mbH
Carl Baasel Lasertechnik GmbH & Co. KG
Rofin-Baasel, Inc.
Wegmann-Baasel Laser GmbH
PMB Elektronic GmbH
Rofin-Baasel Italiana S.r.L.
Rofin-Baasel France S.A.
Rofin-Sinar U.K., Ltd.
Rofin-Baasel UK Ltd.
Rofin-Baasel Benelux B.V.
Rofin-Baasel Singapore PTE Ltd.
Rofin-Baasel Espana S.L.
DILAS Diodenlaser GmbH