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EXCEL - IDEA: XBRL DOCUMENT - PERCEPTRON INC/MI | Financial_Report.xls |
EX-32 - EXHIBIT 32 - PERCEPTRON INC/MI | c24632exv32.htm |
EX-31.1 - EXHIBIT 31.1 - PERCEPTRON INC/MI | c24632exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - PERCEPTRON INC/MI | c24632exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended September 30, 2011.
Commission file number: 0-20206
PERCEPTRON, INC.
(Exact Name of Registrant as Specified in Its Charter)
Michigan | 38-2381442 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
47827 Halyard Drive, Plymouth, Michigan | 48170-2461 | |
(Address of Principal Executive Offices) | (Zip Code) |
(734) 414-6100
(Registrants Telephone Number, Including Area Code)
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ | No o |
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes þ | No o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o | No þ |
The number of shares outstanding of each of the issuers classes of common stock as of November 7, 2011, was:
Common Stock, $0.01 par value | 8,421,064 | |
Class | Number of shares |
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 2011
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 2011
Page | ||||||||
Number | ||||||||
COVER |
1 | |||||||
INDEX |
2 | |||||||
3 | ||||||||
13 | ||||||||
19 | ||||||||
19 | ||||||||
20 | ||||||||
20 | ||||||||
20 | ||||||||
21 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
2
Table of Contents
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amount)
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amount)
September 30, | June 30, | |||||||
(In Thousands, Except Per Share Amount) | 2011 | 2011 | ||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 17,425 | $ | 12,105 | ||||
Short-term investments |
5,358 | 12,697 | ||||||
Receivables: |
||||||||
Billed receivables, net of allowance for doubtful accounts of $323 and $314, respectively |
11,985 | 15,941 | ||||||
Unbilled receivables |
694 | 690 | ||||||
Other receivables |
328 | 917 | ||||||
Inventories, net of reserves of $1,631 and $1,645, respectively |
7,564 | 6,773 | ||||||
Deferred taxes |
3,828 | 3,828 | ||||||
Other current assets |
2,465 | 1,235 | ||||||
Total current assets |
49,647 | 54,186 | ||||||
Property and Equipment |
||||||||
Building and land |
6,365 | 6,103 | ||||||
Machinery and equipment |
14,192 | 14,423 | ||||||
Furniture and fixtures |
1,015 | 973 | ||||||
21,572 | 21,499 | |||||||
Less Accumulated depreciation and amortization |
(15,423 | ) | (15,266 | ) | ||||
Net property and equipment |
6,149 | 6,233 | ||||||
Long-term Investments |
2,192 | 2,192 | ||||||
Deferred Tax Asset |
8,700 | 7,380 | ||||||
Total Assets |
$ | 66,688 | $ | 69,991 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | 1,990 | $ | 2,162 | ||||
Accrued liabilities and expenses |
2,607 | 3,162 | ||||||
Accrued compensation |
1,024 | 1,922 | ||||||
Income taxes payable |
413 | 442 | ||||||
Deferred revenue |
6,944 | 6,823 | ||||||
Liability for discontinued operations (Note 13) |
1,937 | | ||||||
Total current liabilities |
14,915 | 14,511 | ||||||
Shareholders Equity |
||||||||
Preferred stock no par value, authorized 1,000 shares, issued none |
| | ||||||
Common stock, $0.01 par value, authorized 19,000 shares, issued
and outstanding 8,459 and 8,566, respectively |
85 | 86 | ||||||
Accumulated other comprehensive income |
250 | 1,106 | ||||||
Additional paid-in capital |
38,662 | 39,288 | ||||||
Retained earnings |
12,776 | 15,000 | ||||||
Total shareholders equity |
51,773 | 55,480 | ||||||
Total Liabilities and Shareholders Equity |
$ | 66,688 | $ | 69,991 | ||||
The notes to the consolidated financial statements are an integral part of these statements.
3
Table of Contents
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended | ||||||||
September 30, | ||||||||
(In Thousands, Except Per Share Amounts) | 2011 | 2010 | ||||||
Net Sales |
$ | 11,319 | $ | 12,753 | ||||
Cost of Sales |
7,968 | 8,035 | ||||||
Gross Profit |
3,351 | 4,718 | ||||||
Operating Expenses |
||||||||
Selling, general and administrative |
3,491 | 3,422 | ||||||
Engineering, research and development |
1,834 | 2,118 | ||||||
Total operating expenses |
5,325 | 5,540 | ||||||
Operating Loss |
(1,974 | ) | (822 | ) | ||||
Other Income and (Expenses) |
||||||||
Interest income, net |
66 | 45 | ||||||
Foreign currency gain (loss) |
(142 | ) | 221 | |||||
Total other income (expense) |
(76 | ) | 266 | |||||
Loss from Continuing Operations Before Income Taxes |
(2,050 | ) | (556 | ) | ||||
Income Tax Benefit |
783 | 204 | ||||||
Loss from Continuing Operations |
(1,267 | ) | (352 | ) | ||||
Discontinued Operations |
||||||||
Litigation Settlement from Forest Products Business Unit
net of $493 of taxes (Note 13) |
(957 | ) | | |||||
Net Loss |
$ | (2,224 | ) | $ | (352 | ) | ||
Basic Earnings (Loss) Per Common Share |
||||||||
Continuing operations |
($0.15 | ) | ($0.04 | ) | ||||
Discontinued operations |
(0.11 | ) | | |||||
Net Loss |
($0.26 | ) | ($0.04 | ) | ||||
Diluted Earnings (Loss) Per Common Share |
||||||||
Continuing operations |
($0.15 | ) | ($0.04 | ) | ||||
Discontinued operations |
(0.11 | ) | | |||||
Net Loss |
($0.26 | ) | ($0.04 | ) | ||||
Weighted Average Common Shares Outstanding |
||||||||
Basic |
8,519 | 8,979 | ||||||
Dilutive effect of stock options |
| | ||||||
Diluted |
8,519 | 8,979 | ||||||
The notes to the consolidated financial statements are an integral part of these statements.
4
Table of Contents
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Three Months Ended | ||||||||
September 30, | ||||||||
(In Thousands) | 2011 | 2010 | ||||||
Cash Flows from Operating Activities |
||||||||
Net loss |
$ | (2,224 | ) | $ | (352 | ) | ||
Adjustments to reconcile net loss to net cash provided from
(used for) operating activities: |
||||||||
Depreciation and amortization |
282 | 265 | ||||||
Stock compensation expense |
79 | 133 | ||||||
Deferred income taxes |
(1,357 | ) | (370 | ) | ||||
Disposal of assets and other |
31 | 30 | ||||||
Allowance for doubtful accounts |
| (3 | ) | |||||
Changes in assets and liabilities |
||||||||
Receivables, net |
4,445 | 3,789 | ||||||
Inventories |
(870 | ) | (222 | ) | ||||
Accounts payable |
(196 | ) | (935 | ) | ||||
Other current assets and liabilities |
(543 | ) | (256 | ) | ||||
Net cash provided from (used for) operating activities |
(353 | ) | 2,079 | |||||
Cash Flows from Financing Activities |
||||||||
Proceeds from stock plans |
42 | 72 | ||||||
Repurchase of company stock |
(748 | ) | | |||||
Net cash provided from (used for) financing activities |
(706 | ) | 72 | |||||
Cash Flows from Investing Activities |
||||||||
Purchases of short-term investments |
(3,159 | ) | (2,752 | ) | ||||
Sales of short-term investments |
10,216 | 3,058 | ||||||
Capital expenditures |
(217 | ) | (317 | ) | ||||
Net cash provided from (used for) investing activities |
6,840 | (11 | ) | |||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
(461 | ) | 347 | |||||
Net Increase in Cash and Cash Equivalents |
5,320 | 2,487 | ||||||
Cash and Cash Equivalents, July 1 |
12,105 | 9,789 | ||||||
Cash and Cash Equivalents, September 30 |
$ | 17,425 | $ | 12,276 | ||||
The notes to the consolidated financial statements are an integral part of these statements.
5
Table of Contents
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying Consolidated Financial Statements should be read in conjunction with the Companys
2011 Annual Report on Form 10-K. In the opinion of management, the unaudited information furnished
herein reflects all adjustments necessary for a fair presentation of the financial statements for
the periods presented. The results of operations for any interim period are not necessarily
indicative of the results of operations for a full year.
2. New Accounting Pronouncements
On July 1, 2011, the Company adopted guidance issued by the Financial Accounting Standards Board
(FASB) on disclosure requirements related to fair value measurements. The guidance requires the
disclosure of roll-forward activities on purchases, sales, issuance, and settlements of the assets
and liabilities measured using significant unobservable inputs (Level 3 fair value measurements).
Adoption of this new guidance did not have a material impact on the Companys financial statements.
In June 2011, the Financial Accounting Standards Board (FASB) issued ASU 2011-05 to provide
guidance on the presentation of comprehensive income. The new guidance eliminates the current
option to report other comprehensive income and its components in the statement of changes in
equity. Instead, an entity will be required to present either a continuous statement of net income
and other comprehensive income or in two separate but consecutive statements. The new guidance
will be effective for the Company beginning July 1, 2012 and will have presentation changes only.
In May 2011, the FASB issued ASU 2011-04 to amend the accounting and disclosure requirements on
fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial
assets, permits certain financial assets and liabilities with offsetting positions in market or
counterparty credit risks to be measured at a net basis, and provides guidance on the applicability
of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3
inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as
description of the valuation processes and the sensitivity of the fair value to changes in
unobservable inputs. The new guidance will be effective for the Company beginning January 1, 2012.
Other than requiring additional disclosures, the Company does not anticipate material impacts on
its financial statements upon adoption.
3. Revenue Recognition
Revenue related to products is recognized upon shipment when title and risk of loss has passed to
the customer, there is persuasive evidence of an arrangement, the sales price is fixed or
determinable, collection of the related receivable is reasonably assured and customer acceptance
criteria have been successfully demonstrated. Revenue related to services is recognized upon
completion of the service.
The Company also has multiple element arrangements in its Automated Systems product line that may
include purchase of equipment, labor support and/or training. Each element has value on a
stand-alone basis. For multiple element arrangements, the Company defers from revenue recognition
the greater of the fair value of any undelivered elements of the contract or the portion of the
sales price of the contract that is not payable until the undelivered elements are completed.
Delivered items are not contingent upon the delivery of any undelivered items nor do the delivered
items include general rights of return.
When available, the Company allocates arrangement consideration to each element in a multiple
element arrangement based upon vendor specific objective evidence (VSOE) of fair value of the
respective elements. When VSOE cannot be established, the Company attempts to establish the
selling price of each element based on relevant third-party evidence. Because the Companys
products contain a significant level of proprietary technology, customization or differentiation
such that comparable pricing of products with similar functionality cannot be obtained, the Company
uses, in these cases, its best estimate of selling price (BESP). The Company determines the BESP
for a product or service by considering multiple factors including, but not limited to, pricing
practices, internal costs, geographies and gross margin.
6
Table of Contents
The Companys Automated Systems products are made to order systems that are designed and configured
to meet each customers specific requirements. Timing for the delivery of each element in the
arrangement is primarily determined by the customers requirements and the number of elements
ordered. Delivery of all of the multiple elements in an order will typically occur over a three to
15 month period after the order is received.
The Company does not have price protection agreements or requirements to buy back inventory. The
Companys history demonstrates that sales returns have been insignificant.
4. Financial Instruments
For a discussion on the Companys fair value measurement policies for Financial Instruments, refer
to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2011.
The Company has not changed its valuation techniques in measuring the fair value of any financial
assets and liabilities during the period.
The following table presents the Companys investments at September 30, 2011 and June 30, 2011 that
are measured and recorded at fair value on a recurring basis consistent with the fair value
hierarchy provisions of ASC 820.
(in thousands) | September 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Short-Term Investments |
$ | 2,188 | $ | 68 | $ | 2,120 | | |||||||||
Long-Term Investments |
$ | 2,192 | | | $ | 2,192 |
(in thousands) | June 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Short-Term Investments |
$ | 32 | $ | 32 | | | ||||||||||
Long-Term Investments |
$ | 2,192 | | | $ | 2,192 |
The Companys Level 3 investments consist of preferred stock investments (see Note 6 Short-Term
and Long-Term Investments) and are measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) as defined in ASC 820, Fair Value Measurements and Disclosures.
Fair value estimates are made at a specific point in time based on relevant market information and
information about the financial instruments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.
5. Inventory
Inventory is stated at the lower of cost or market. The cost of inventory is determined by the
first-in, first-out (FIFO) method. The Company provides a reserve for obsolescence to recognize
the effects of engineering change orders, age and use of inventory that affect the value of the
inventory. When the related inventory is disposed of, the obsolescence reserve is reduced. A
detailed review of the inventory is performed annually with quarterly updates for known changes
that have occurred since the annual review. Inventory, net of reserves of $1.6 million at
September 30, 2011 and June 30, 2011 respectively, is comprised of the following (in thousands):
September 30, | June 30, | |||||||
Inventory | 2011 | 2011 | ||||||
Component parts |
$ | 2,783 | $ | 2,388 | ||||
Work in process |
347 | 257 | ||||||
Finished goods |
4,434 | 4,128 | ||||||
Total |
$ | 7,564 | $ | 6,773 | ||||
7
Table of Contents
6. Short-Term and Long-Term Investments
The Company accounts for its investments in accordance with ASC 320, Investments Debt and
Equity Securities. Investments with a maturity of greater than three months to one year are
classified as short-term investments. Investments with maturities beyond one year may be classified
as short-term if the Company reasonably expects the investment to be realized in cash or sold or
consumed during the normal operating cycle of the business. Investments available for sale are
recorded at market value using the specific identification method. Investments expected to be held
to maturity or until market conditions improve are measured at amortized cost in the statement of
financial position if it is the Companys intent and ability to hold those securities long-term.
Each balance sheet date, the Company evaluates its investments for possible other-than-temporary
impairment which involves significant judgment. In making this judgment, management reviews factors
such as the length of time and extent to which fair value has been below the cost basis, the
anticipated recovery period, the financial condition of the issuer, the credit rating of the
instrument and the Companys ability and intent to hold the investment for a period of time which
may be sufficient for recovery of the cost basis. Any unrealized gains and losses on securities are
reported as other comprehensive income as a separate component of shareholders equity until
realized or until a decline in fair value is determined to be other than temporary. Once a decline
in fair value is determined to be other-than-temporary, an impairment charge is recorded in the
income statement. If market, industry, and/or investee conditions deteriorate, future impairments
may be incurred.
At September 30, 2011, the Company had $5.4 million of short-term investments, of which $3.0
million were in time deposits.
At September 30, 2011, the Company holds long-term investments in preferred stock investments that
are not registered under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration requirements. The Company
estimated that the fair market value of these investments at September 30, 2011 was $2.2 million
based on an internal valuation model and an independent valuation completed in fiscal 2009 by an
external independent valuation firm. The fair market analysis considered the following key inputs,
(i) the underlying structure of each security; (ii) the present value of the future principal and
dividend payments discounted at rates considered to reflect current market conditions; and (iii)
the time horizon that the market value of each security could return to its cost and be sold.
Under ASC 820, Fair Value Measurements, such valuation assumptions are defined as Level 3 inputs.
The following table summarizes the Companys changes in Level 3 financial instruments that are
measured at fair value on a recurring basis:
Three Months Ended September 30, 2011
Preferred Stock | Total | |||||||
Balance, beginning of period |
$ | 2,192 | $ | 2,192 | ||||
Total realized and unrealized gains (losses): |
||||||||
Included in other income (expense) |
0 | 0 | ||||||
Included in other comprehensive income |
0 | 0 | ||||||
Balance, end of period |
$ | 2,192 | $ | 2,192 | ||||
Change in unrealized gains
(losses) included in other in other income (expense) related to
assets held as of September 30, 2011 |
$ | 0 | $ | 0 |
Three Months Ended September 30, 2010
Preferred Stock | Total | |||||||
Balance, beginning of period |
$ | 2,192 | $ | 2,192 | ||||
Total realized and unrealized gains (losses): |
||||||||
Included in other income (expense) |
0 | 0 | ||||||
Included in other comprehensive income |
0 | 0 | ||||||
Balance, end of period |
$ | 2,192 | $ | 2,192 | ||||
Change in unrealized gains
(losses) included in other in other income
(expense) related to assets held as of September 30, 2010 |
$ | 0 | $ | 0 |
8
Table of Contents
7. Foreign Exchange Contracts
The Company may use, from time to time, a limited hedging program to minimize the impact of foreign
currency fluctuations. These transactions involve the use of forward contracts, typically mature
within one year and are designed to hedge anticipated foreign currency transactions. The Company
may use forward exchange contracts to hedge the net assets of certain of its foreign subsidiaries
to offset the translation and economic exposures related to the Companys investment in these
subsidiaries.
At September 30, 2011 and 2010, the Company had no forward exchange contracts outstanding.
8. Comprehensive Income
Comprehensive income is defined as the change in common shareholders equity during a period from
transactions and events from non-owner sources, including net income. Other items of comprehensive
income include revenues, expenses, gains and losses that are excluded from net income. Total
comprehensive income, net of tax, for the applicable periods is as follows (in thousands):
Three Months Ended September 30, | 2011 | 2010 | ||||||
Net Loss |
$ | (2,224 | ) | $ | (352 | ) | ||
Other Comprehensive Income: |
||||||||
Foreign currency translation adjustments |
(856 | ) | 1,629 | |||||
Total Comprehensive Income (Loss) |
$ | (3,080 | ) | $ | 1,277 | |||
9. Credit Facilities
The Company had no debt outstanding at September 30, 2011.
The Company has a $6.0 million secured Credit Agreement which expires on November 1, 2012.
Proceeds under the Credit Agreement may be used for working capital and capital expenditures.
Security under the Credit Agreement is substantially all non-real estate assets of the Company held
in the United States. Borrowings are designated as a Libor-based Advance or as a Prime-based
Advance if the Libor-based Advance is not available. Interest on Libor-based Advances is
calculated currently at 2.35% above the Libor Rate offered at the time for the period chosen, and
is payable on the last day of the applicable period. The Company may not select a Prime-based rate
for Advances except during a period of time during which the Libor-based rate is not available as
the applicable interest rate. Interest on Prime-based Advances is payable on the first business
day of each month commencing on the first business day following the month during which such
Advance is made and at maturity and is calculated daily, using the interest rate established by
Comerica Bank as its prime rate for its borrowers. Quarterly, the Company pays a commitment fee of
0.15% per annum on the average daily unused portion of the revolving credit commitment. The Credit
Agreement prohibits the Company from paying dividends but permits the Company to repurchase up to
$5.0 million of its common stock through December 31, 2011. In addition, the Credit Agreement
requires the Company to maintain a minimum Tangible Net Worth, as defined in the Credit Agreement,
minus the aggregate amount paid by the Company to redeem its shares of its common stock during the
period beginning October 18, 2010 and ending December 31, 2011. The Credit Agreement also requires
the Company to have no advances outstanding for 30 days each calendar year. At September 30, 2011,
the Credit Agreement required a Tangible Net Worth of not less than $31.6 million and supported
outstanding letters of credit totaling $311,000.
At September 30, 2011, the Companys German subsidiary (GmbH) had an unsecured credit facility
totaling 300,000 euros (equivalent to approximately $408,000). The facility may be used to finance
working capital needs and equipment purchases or capital leases. Any borrowings for working
capital needs will bear interest at 9.0% on the first 100,000 euros of borrowings and 2.0% for
borrowings over 100,000 euros. The German credit facility is cancelable at any time by either GmbH
or the bank and any amounts then outstanding would become immediately due and payable. At
September 30, 2011, GmbH had no borrowings outstanding.
9
Table of Contents
10. Stock-Based Compensation
The Company uses the Black-Scholes model for determining stock option valuations. The
Black-Scholes model requires subjective assumptions, including future stock price volatility and
expected time to exercise, which affect the calculated values. The expected term of option
exercises is derived from historical data regarding employee exercises and post-vesting employment
termination behavior. The risk-free rate of return is based on published U.S. Treasury rates in
effect for the corresponding expected term. The expected volatility is based on historical
volatility of the Companys stock price. These factors could change in the future, which would
affect the stock-based compensation expense in future periods.
The Company recognized operating expense for non-cash stock-based compensation costs in the amount
of $79,000 and $133,000 in the three months ended September 30, 2011 and 2010, respectively. As of
September 30, 2011, the total remaining unrecognized compensation cost related to non-vested stock
options amounted to $479,000. The Company expects to recognize this cost over a weighted average
vesting period of 2.9 years.
The Company maintains a 1992 Stock Option Plan (1992 Plan) and 1998 Global Team Member Stock
Option Plan (1998 Plan) covering substantially all company employees and certain other key
persons and a Directors Stock Option Plan (Directors Plan) covering all non-employee directors.
During fiscal 2005, shareholders approved a new 2004 Stock Incentive Plan that replaced the 1992
and Directors Plans as to future grants. No further grants are permitted to be made under the
terms of the 1998 Plan. Options previously granted under the 1992, Directors and 1998 Plans will
continue to be maintained until all options are exercised, cancelled or expire. The 2004, 1992 and
Directors Plans are administered by a committee of the Board of Directors, the Management
Development, Compensation and Stock Option Committee. The 1998 Plan is administered by the
President of the Company.
Awards under the 2004 Stock Incentive Plan may be in the form of stock options, stock appreciation
rights, restricted stock or restricted stock units, performance share awards, director stock
purchase rights and deferred stock units; or any combination thereof. The terms of the awards will
be determined by the Management Development, Compensation and Stock Option Committee, except as
otherwise specified in the 2004 Stock Incentive Plan. As of September 30, 2011, the Company has
only issued awards in the form of stock options. Options outstanding under the 2004 Stock
Incentive Plan and the 1992 and 1998 Plans generally become exercisable at 25% per year beginning
one year after the date of grant and expire ten years after the date of grant. All options
outstanding under the 1992 and Directors Plans are vested and expire ten years from the date of
grant. Option prices for options granted under these plans must not be less than fair market value
of the Companys stock on the date of grant.
The estimated fair value as of the date options were granted during the periods presented, using
the Black-Scholes option-pricing model, was as follows:
Three Months Ended | Three Months Ended | |||||||
September 30, 2011 | September 30, 2010 | |||||||
Weighted Average Estimated Fair
Value Per Share of Options
Granted During the Period |
$ | 2.50 | | |||||
Assumptions: |
||||||||
Amortized Dividend Yield |
| | ||||||
Common Stock Price Volatility |
46.14 | % | | |||||
Risk Free Rate of Return |
0.90 | % | | |||||
Expected Option Term (in years) |
5 | |
The Company received $10,000 in cash from option exercises under all share-based payment
arrangements for the three months ended September 30, 2011.
10
Table of Contents
11. Earnings Per Share
Basic earnings per share (EPS) is calculated by dividing net income by the weighted average
number of common shares outstanding during the period. Other obligations, such as stock options,
are considered to be potentially dilutive common shares. Diluted EPS assumes the issuance of
potential dilutive common shares outstanding during
the period and adjusts for any changes in income and the repurchase of common shares that would
have occurred from the assumed issuance, unless such effect is anti-dilutive. The calculation of
diluted shares also takes into effect the average unrecognized non-cash stock-based compensation
expense and additional adjustments for tax benefits related to non-cash stock-based compensation
expense.
Options to purchase 820,000 and 817,000 shares of common stock outstanding in the three months
ended September 30, 2011 and 2010, respectively, were not included in the computation of diluted
EPS because the effect would have been anti-dilutive.
12. Commitments and Contingencies
Management is currently unaware of any significant pending litigation affecting the Company, other
than the matters set forth below.
The Company was a party to a suit filed by Industries GDS, Inc., Bois Granval GDS Inc., and Centre
de Preparation GDS, Inc. (collectively, GDS) on or about November 21, 2002 in the Superior Court
of the Judicial District of Quebec, Canada against the Company, Carbotech, Inc. (Carbotech), and
U.S. Natural Resources, Inc. (USNR), among others. The suit alleged that the Company breached
its contractual and warranty obligations as a manufacturer in connection with the sale and
installation of three systems for trimming and edging wood products. The suit also alleged that
Carbotech breached its contractual obligations in connection with the sale of equipment and the
installation of two trimmer lines, of which the Companys systems were a part, and that USNR, which
acquired substantially all of the assets of the Forest Products business unit from the Company in
March 2002, was liable for GDS damages. USNR sought indemnification from the Company under the
terms of existing contracts between the Company and USNR. Carbotech filed for bankruptcy
protection and therefore did not defend the matter. GDS sought compensatory damages against the
Company, Carbotech and USNR of approximately $5.0 million using a September 30, 2011 exchange rate,
plus interest and costs. As a result of discussions by the parties, their counsel and the court at
a court ordered settlement conference held on September 28, 2011 and to avoid the extensive costs
of preparing for, and conducting, a trial estimated to last five weeks in Quebec City, Quebec,
Canada, the Company, GDS and USNR agreed to settle all claims arising from this litigation. The
Company did not admit liability in resolving the matter. The Company believes it was in the best
interest of Perceptron and its shareholders to settle the case and remove the uncertainty and
considerable expense associated with continuing litigation. Pursuant to the settlement, the
Company agreed to pay GDS $2 million Canadian dollars (equivalent to approximately $1.9 million
using a September 30, 2011 exchange rate), in one installment within thirty days of the settlement.
GDS and USNR fully released the Company from any further claims relating to this matter. The
Company funded the settlement from available cash on October 28, 2011.
The Company was a party to a suit filed by i-CEM Service, Inc. and 3CEMS Prime on or about July 1,
2010 in the Federal Court for the Northern District of Illinois. The suit alleged that the Company
breached its contractual and common law indemnification obligations by failing to pay for component
parts used to manufacture optical video scopes. The suit sought damages of not less than $4
million. On October 27, 2011, the Federal Court granted the Companys motion to reconsider the
granting of i-CEMs motion to add 3CEMS Prime as a party to the suit. Because the Federal Court
did not allow 3CEMS Prime to join the suit as a third party plaintiff, and i-CEM was not a party to
the contract at issue, the Federal Court terminated the suit.
The Company may, from time to time, be subject to other claims and suits in the ordinary course of
its business.
To estimate whether a loss contingency should be accrued by a charge to income, the Company
evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability
to make a reasonable estimate of the amount of the loss. Since the outcome of claims and litigation
is subject to significant uncertainty, changes in these factors could materially impact the
Companys financial position or results of operations.
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13. Discontinued Operations
In the first quarter of fiscal 2012, the Company recorded a $957,000 loss from discontinued
operations, net of $493,000 in taxes, that related to a settlement of a lawsuit filed in 2002
involving the Companys discontinued Forest Product Business Unit. See Commitment and
Contingencies above for further information on the lawsuit. The Company agreed to settle the suit
for $2.0 million Canadian dollars (approximately $1.9 million using a September 30, 2011 exchange
rate). The Company also had accruals related to this matter of approximately $500,000. The Company paid the
litigation settlement in full for $2.0 million on October 28, 2011.
14. Segment Information
The Companys reportable segments are strategic business units that have separate management teams
focused on different marketing strategies. The IBU segment markets its products primarily to
industrial companies directly or through manufacturing line builders, system integrators, original
equipment manufacturers (OEMs) and value-added resellers (VARs). Products sold by IBU include
Automated Systems products consisting of AutoGauge®, AutoGauge® Plus,
AutoFit®, AutoScan®, and AutoGuide® that are primarily
custom-configured systems typically purchased for installation in connection with new automotive
model retooling programs, value added services that are primarily related to Automated Systems
products, and Technology Components consisting of ScanWorks®, ScanWorks®xyz,
WheelWorks® and Multi-line Sensor products that target the digitizing, reverse
engineering, inspection and original equipment manufacturers wheel alignment markets. The CBU
segment products are designed for sale to professional tradesmen in the commercial market and are
sold to and distributed through strategic partners.
The accounting policies of the segments are the same as those described in the summary of
significant policies. The Company evaluates performance based on operating income, excluding
unusual items. Company-wide costs are allocated between segments based on revenues and/or labor as
deemed appropriate.
Commercial | ||||||||||||
Industrial | Products Business | |||||||||||
Reportable Segments ($000) | Business Unit | Unit | Consolidated | |||||||||
Three months ended September 30, 2011 |
||||||||||||
Net sales |
$ | 9,145 | $ | 2,174 | $ | 11,319 | ||||||
Operating loss |
(1,398 | ) | (576 | ) | (1,974 | ) | ||||||
Assets |
44,609 | 22,079 | 66,688 | |||||||||
Accumulated depreciation and amortization |
14,567 | 856 | 15,423 | |||||||||
Three months ended September 30, 2010 |
||||||||||||
Net sales |
$ | 9,753 | $ | 3,000 | $ | 12,753 | ||||||
Operating loss |
(215 | ) | (607 | ) | (822 | ) | ||||||
Assets |
41,573 | 24,278 | 65,851 | |||||||||
Accumulated depreciation and amortization |
14,084 | 439 | 14,523 |
15. Subsequent Events
The Company has evaluated subsequent events through the date that the consolidated financial
statements were issued. No events have taken place that meet the definition of a subsequent event
that requires disclosure in this filing.
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ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
SAFE HARBOR STATEMENT
We make statements in this Managements Discussion and Analysis of Financial Condition and Results
of Operations that may be forward-looking statements within the meaning of the Securities
Exchange Act of 1934, including the Companys expectation as to its fiscal year 2012 and future new
order bookings, revenue, expenses, net income and backlog levels, trends affecting its future
revenue levels, the rate of new orders, the timing of revenue and net income increases from new
products which we have recently released or have not yet released, the timing of the introduction
of new products and our ability to fund our fiscal year 2012 and future cash flow requirements. We
may also make forward-looking statements in our press releases or other public or shareholder
communications. When we use words such as will, should, believes, expects, anticipates,
estimates or similar expressions, we are making forward-looking statements. We claim the
protection of the safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995 for all of our forward-looking statements. While we believe that our
forward-looking statements are reasonable, you should not place undue reliance on any such
forward-looking statements, which speak only as of the date made. Because these forward-looking
statements are based on estimates and assumptions that are subject to significant business,
economic and competitive uncertainties, many of which are beyond our control or are subject to
change, actual results could be materially different. Factors that might cause such a difference
include, without limitation, the risks and uncertainties discussed from time to time in our reports
filed with the Securities and Exchange Commission, including those listed in Item 1A Risk
Factors in the Companys Annual Report on Form 10K for fiscal year 2011. Other factors not
currently anticipated by management may also materially and adversely affect our financial
condition, liquidity or results of operations. Except as required by applicable law, we do not
undertake, and expressly disclaim, any obligation to publicly update or alter our statements
whether as a result of new information, events or circumstances occurring after the date of this
report or otherwise. The Companys expectations regarding future bookings and revenues are
projections developed by the Company based upon information from a number of sources, including,
but not limited to, customer data and discussions. These projections are subject to change based
upon a wide variety of factors, a number of which are discussed above. Certain of these new orders
have been delayed in the past and could be delayed in the future. Because the Companys Industrial
Business Unit segment products are typically integrated into larger systems or lines, the timing of
new orders is dependent on the timing of completion of the overall system or line. In addition,
because the Companys Industrial Business Unit segment products have shorter lead times than other
components and are required later in the process, orders for the Companys Industrial Business Unit
segment products tend to be given later in the integration process. The Companys Commercial
Products Business Unit segment products are subject to the timing of firm orders from its
customers, which may change on a monthly basis. In addition, because the Companys Commercial
Products Business Unit segment products require short lead times from firm order to delivery, the
Company purchases long lead time components before firm orders are in hand. A significant portion
of the Companys projected revenues and net income depends upon the Companys ability to
successfully develop and introduce new products, expand into new geographic markets and
successfully negotiate new sales or supply agreements with new customers. Because a significant
portion of the Companys revenues are denominated in foreign currencies and are translated for
financial reporting purposes into U.S. Dollars, the level of the Companys reported net sales,
operating profits and net income are affected by changes in currency exchange rates, principally
between U.S. Dollars and euros. Currency exchange rates are subject to significant fluctuations,
due to a number of factors beyond the control of the Company, including general economic conditions
in the United States and other countries. Because the Companys expectations regarding future
revenues, order bookings, backlog and operating results are based upon assumptions as to the levels
of such currency exchange rates, actual results could differ materially from the Companys
expectations.
OVERVIEW
Perceptron, Inc. (Perceptron or the Company) develops, produces and sells non-contact
measurement and inspection solutions for industrial and commercial applications. The Companys
primary operations are in North America, South America, Europe and Asia. The Company has two
operating segments, the Industrial Business Unit (IBU) and the Commercial Products Business Unit
(CBU). The IBUs non-contact measurement solutions are further segmented into Automated Systems
and Technology Components. Automated Systems products consist of a number of complete metrology
solutions for industrial process control AutoGauge®, AutoGauge® Plus,
AutoFit®, AutoScan®, and AutoGuide® that are primarily used by
the Companys customers to improve product quality, shorten product launch cycles, reduce overall
manufacturing costs, and manage complex manufacturing processes. Technology Components products
include ScanWorks®, ScanWorks®xyz, ToolKit, WheelWorks® and
Multi-line Sensor products that target the digitizing, reverse engineering, inspection and original
equipment manufacturers (OEMs) wheel alignment markets. Additionally, the IBU provides a number
of Value Added Services that are primarily related to the Automated Systems line of products. The
largest market served by IBU is the automotive market.
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The products of the CBU segment are designed for sale to professional tradesmen in four specific
strategic commercial markets. These products are sold to and distributed through leading strategic
partners in each of these markets. The four strategic markets include the electrical, mechanical,
plumbing, and construction markets. All CBU sales are recorded in the Americas.
In the IBU segment, new vehicle tooling programs represent the most important selling opportunity
for the Companys automotive-related sales. The number and timing of new vehicle tooling programs
varies in accordance with individual automotive manufacturers plans. The existing installed base
of Automated Systems products also provides a continuous revenue stream in the form of system
additions, upgrades and modifications, and Value Added Services such as customer training and
service. Opportunities for Technology Component products include the expansion of the
ScanWorks® reseller channel as well as new OEM customers for WheelWorks®. The
recently released multi-line WheelWorks® sensor provides a more scalable and flexible
solution for OEM manufacturers of production wheel alignment systems. Furthermore, the
ScanWorks®xyz product opens up a new market opportunity by allowing customers to add
scanning capability to their existing coordinate measuring machines.
During the first quarter of fiscal 2012, IBU advanced its Helix 3D Metrology Solution product
development initiative towards commercialization by installing its first Helix system in a
production environment and completing additional application testing. Helix is an innovative and
versatile 3D metrology platform that enables manufacturers to perform their most challenging
measurement tasks with unparalleled ease and precision. It combines more than 25 years of
laser-triangulation and 3D metrology experience with recent technological advances to create the
most unique and powerful solution in the market. Helix solutions will offer the worlds only
sensors with Intelligent Illumination, a patent-pending breakthrough that will allow users to
control virtually every aspect of the sensors calibrated light source. By customizing the
quantity, density, and orientation of the sensors laser lines through a simple user interface,
image acquisition is optimized on a feature-by-feature basis. The user can configure tightly spaced
laser lines for small, complex features, increase the number of laser lines to robustly measure
challenging materials, and alter the orientation of the laser lines to accommodate the differences
between multiple parts manufactured on the same assembly line. Although the Companys first Helix
product is in a limited production phase, the Company has received orders from three customers, one
from each global region. The latest order was received in the first quarter of fiscal 2012 for a
Helix system in North America. The Company expects limited first generation Helix product sales in
the second quarter of fiscal 2012. Additional products will be released for field installation in
phases in the future.
In the first quarter of fiscal 2012, CBU began shipping the new Rothenberger Module 25/16 and the
new Rothenberger Module Roloc Plus for the plumbing market. The Module 25/16 is a 16 meter imager
system incorporating the Companys patented Up is Up visualization technology and a built-in SONDE
transmitter. The Roloc Plus is a line detector accessory that connects to the Roscope®
1000 creating a tool to locate pipes and cables buried underground. The Roloc Plus works in
conjunction with the Module 25/16 to provide a complete plumbing diagnostic and location system.
CBU also expects to begin shipping the new BK8000 wireless touchscreen borescope for the mechanics
market in the second quarter of fiscal 2012.
In the first quarter of fiscal 2012, the Company recorded a $957,000, net of tax, loss from
discontinued operations that primarily related to a settlement of a lawsuit filed in 2002 involving
the Companys discontinued Forest Product Business Unit. The Company agreed to settle the suit for
$2.0 million Canadian dollars (approximately $1.9 million using a September 30, 2011 exchange
rate). By settling the lawsuit, the Company was able to avoid the cost of preparing for and
completing what was estimated to be a five week trial in Quebec City, and eliminate any future
uncertainty as to the outcome. GDS was seeking approximately $5.0 million in compensatory damages.
The Company also had accruals related to this matter of approximately $500,000. On October 28,
2011, the Company paid the litigation settlement in full for $2.0 million.
Outlook The Company expects higher sales in each of the remaining three quarters of fiscal 2012
as it fulfills its record high backlog. Sales in the second and third quarter are expected to be
particularly good. IBUs bookings received during the early part of the second quarter continued
to be very good. IBUs backlog is expected to be worked down from its record level over the next
several quarters. The Company is concerned about CBUs bookings levels and continues to work with
its strategic partners in each of its four markets to address booking levels. Due to the
uncertainty of the global economic picture and the Companys limited experience with recently
introduced CBU products, it is difficult to forecast specific revenue growth levels for fiscal
2012. However, based on the current strength of the business, the Company expects to be profitable in fiscal 2012 despite the impact of the GDS legal settlement.
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The Companys financial base remains strong with no debt and approximately $22.8 million of cash,
cash equivalents and short-term investments at September 30, 2011 to support growth plans.
Near-term, the Company will continue to focus on releasing new Helix sensors and associated
software, and geographic growth, principally in Asia.
RESULTS OF OPERATIONS
Overview For the first quarter of fiscal 2012, the Company reported a net loss from continuing
operations of $1.3 million, or $0.15 per diluted share, compared to a net loss of $352,000 or $0.04
per diluted share, for the first quarter of fiscal 2011. In the quarter ended September 30, 2011,
the Company recorded a $957,000 loss from discontinued operations, net of taxes, or $0.11 per
diluted share, related to the settlement of a lawsuit filed in 2002 involving the Companys
discontinued forest products business. See Note 12 to the Consolidated Financial Statements,
Commitments and Contingencies and Note 13, Discontinued Operations, for further information on
the lawsuit and discontinued operations. The Company sold substantially all of the assets of its
forest products business unit in March 2002. The Companys net loss for the first quarter of
fiscal 2012 was $2.2 million, or $0.26 per diluted share compared to a net loss of $352,000 or
$0.04 per diluted share for the first quarter of fiscal 2011. Specific line item results are
described below.
Sales Sales decreased 11.7% or $1.5 million to $11.3 million in the first quarter of fiscal 2012
compared to net sales of $12.8 million in the same period one year ago. The following tables show
comparative data regarding the Companys net sales by segment and geographic location.
First | First | |||||||||||||||||||||||
Sales (by segment) | Quarter | Quarter | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | Increase/(Decrease) | |||||||||||||||||||||
Industrial Business Unit |
$ | 9.1 | 80.5 | % | $ | 9.8 | 76.6 | % | $ | (0.7 | ) | (7.1 | )% | |||||||||||
Commercial Products
Business Unit |
2.2 | 19.5 | % | 3.0 | 23.4 | % | (0.8 | ) | (26.7 | )% | ||||||||||||||
Totals |
$ | 11.3 | 100.0 | % | $ | 12.8 | 100.0 | % | $ | (1.5 | ) | (11.7 | )% | |||||||||||
First | First | |||||||||||||||||||||||
Sales (by location) | Quarter | Quarter | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | Increase/(Decrease) | |||||||||||||||||||||
Americas |
$ | 4.8 | 42.5 | % | $ | 5.9 | 46.1 | % | $ | (1.1 | ) | (18.6 | )% | |||||||||||
Europe |
4.1 | 36.3 | % | 4.8 | 37.5 | % | (0.7 | ) | (14.6 | )% | ||||||||||||||
Asia |
2.4 | 21.2 | % | 2.1 | 16.4 | % | 0.3 | 14.3 | % | |||||||||||||||
Totals |
$ | 11.3 | 100.0 | % | $ | 12.8 | 100.0 | % | $ | (1.5 | ) | (11.7 | )% | |||||||||||
Sales in the IBU segment decreased $700,000, primarily due to lower sales of Technology Components
products and to a lesser extent, lower sales of Value Added Services that were partially offset by
increased sales of Automated Systems products. Due to the cyclical nature of IBUs business and
the timelines of its customers, it is not unusual for sales levels to fluctuate from quarter to quarter.
Sales in the CBU segment decreased $800,000 primarily from lower sales in the mechanics market and,
to a lesser extent, lower sales in the plumbing market that were partially offset by increased
sales in the construction market. The decrease in CBU sales was also the primary reason for the
decrease in the Americas. Sales in Europe were lower primarily due to lower Technology Components
sales and to a lesser extent lower Value Added Services, partially offset by higher sales of
Automated Systems. The stronger euro currency rate had the effect of mitigating the lower sales by
approximately $350,000. The sales in Asia increased primarily due to higher Technology Component
sales, partially offset by lower Automated Systems products sales.
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Bookings Bookings represent new orders received from customers. The Company had $19.7 million
of new order bookings during the first quarter of fiscal 2012, an increase of 32.2% over new order
bookings of $14.9 million for the same quarter one year ago. The amount of new order bookings
fluctuates from one period to another and is not necessarily indicative of the future operating
performance of the Company. The following tables show comparative data regarding the Companys
bookings by segment and geographic location.
First | First | |||||||||||||||||||||||
Bookings (by segment) | Quarter | Quarter | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | Increase/(Decrease) | |||||||||||||||||||||
Industrial Business Unit |
$ | 18.4 | 93.4 | % | $ | 14.0 | 94.0 | % | $ | 4.4 | 31.4 | % | ||||||||||||
Commercial Products
Business Unit |
1.3 | 6.6 | % | 0.9 | 6.0 | % | 0.4 | 44.4 | % | |||||||||||||||
Totals |
$ | 19.7 | 100.0 | % | $ | 14.9 | 100.0 | % | $ | 4.8 | 32.2 | % | ||||||||||||
First | First | |||||||||||||||||||||||
Bookings (by location) | Quarter | Quarter | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | Increase/(Decrease) | |||||||||||||||||||||
Americas |
$ | 8.1 | 41.1 | % | $ | 4.4 | 29.5 | % | $ | 3.7 | 84.1 | % | ||||||||||||
Europe |
6.9 | 35.0 | % | 7.0 | 47.0 | % | (0.1 | ) | (1.4 | )% | ||||||||||||||
Asia |
4.7 | 23.9 | % | 3.5 | 23.5 | % | 1.2 | 34.3 | % | |||||||||||||||
Totals |
$ | 19.7 | 100.0 | % | $ | 14.9 | 100.0 | % | $ | 4.8 | 32.2 | % | ||||||||||||
IBU bookings increased $4.4 million primarily as a result of higher Automated Systems products
bookings which were partially offset by lower Technology Component bookings. CBU bookings
increased $400,000 primarily from increased bookings in the construction market and to a lesser
extent increased bookings in the mechanics market. Partially offsetting CBU increased bookings
were lower bookings in the electrical market. IBU bookings in the Americas increased by $3.7
million primarily from Automated Systems products that were partially offset by lower bookings for
Technology Component products. European IBU bookings were essentially flat when compared to the
prior year and represented increased bookings of Automated Systems products being offset by lower
bookings of Technology Component products. The increase in Asian bookings was primarily for
Automated Systems products.
Backlog Backlog represents orders or bookings received by the Company that have not yet been
filled. The Companys backlog was a record $34.8 million as of September 30, 2011 compared to
$22.1 million as of September 30, 2010. The level of backlog during any particular period is not
necessarily indicative of the future operating performance of the Company. Most of the backlog is
subject to cancellation by the customer. The Company expects to be able to fill substantially all
of the orders in its backlog during the following eighteen months. The following tables show
comparative data regarding the Companys backlog by segment and geographic location.
First | First | |||||||||||||||||||||||
Backlog (by segment) | Quarter | Quarter | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | Increase/(Decrease) | |||||||||||||||||||||
Industrial Business Unit |
$ | 33.2 | 95.4 | % | $ | 21.0 | 95.0 | % | $ | 12.2 | 58.1 | % | ||||||||||||
Commercial Products
Business Unit |
1.6 | 4.6 | % | 1.1 | 5.0 | % | 0.5 | 45.5 | % | |||||||||||||||
Totals |
$ | 34.8 | 100.0 | % | $ | 22.1 | 100.0 | % | $ | 12.7 | 57.5 | % | ||||||||||||
First | First | |||||||||||||||||||||||
Backlog (by location) | Quarter | Quarter | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | Increase/(Decrease) | |||||||||||||||||||||
Americas |
$ | 13.4 | 38.5 | % | $ | 7.2 | 32.6 | % | $ | 6.2 | 86.1 | % | ||||||||||||
Europe |
11.5 | 33.1 | % | 10.4 | 47.1 | % | 1.1 | 10.6 | % | |||||||||||||||
Asia |
9.9 | 28.4 | % | 4.5 | 20.3 | % | 5.4 | 120.0 | % | |||||||||||||||
Totals |
$ | 34.8 | 100.0 | % | $ | 22.1 | 100.0 | % | $ | 12.7 | 57.5 | % | ||||||||||||
The backlog on September 30, 2011 of $34.8 million was a record high backlog for the Company.
IBUs backlog of $33.2 million was also a record high for this business unit. The increase in IBU
backlog primarily related to an increase in the backlog of Automated Systems products that was
partially offset by lower backlog in Technology Component products. CBUs backlog increased
$500,000 as a result of increased backlog in the mechanics market and to a lesser extent increased
backlog in the plumbing market. Partially offsetting the CBU backlog increases were lower backlogs
in the construction and electronics market.
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Gross Profit Gross profit was $3.4 million, or 29.6% of sales, in the first quarter of fiscal
year 2012, as compared to $4.7 million, or 37.0% of sales, in the first quarter of fiscal year
2011. The reduction in gross margin primarily reflected the effect of the lower sales in fiscal
2012. Also contributing to the reduction in gross margin was higher personnel related costs and
outside labor costs related to deferred revenue in IBU. The higher personnel related costs include
merit increases that were not effective until the third quarter of fiscal 2011 and the
reinstatement of the 401k match in fiscal 2012. Mitigating the lower margin was the effect of the
stronger euro rate in the current quarter that had the effect of increasing gross profit by approximately
$260,000. CBU had higher depreciation expense related to tooling in the first quarter of fiscal
2012 that was offset by lower warranty and scrap expenses as compared to the first quarter of
fiscal 2011.
Selling, General and Administrative (SG&A) Expenses SG&A expenses were $3.5 million in the
quarter ended September 30, 2011 compared to $3.4 million in the first quarter a year ago. The
$69,000 increase in SG&A expenses in fiscal 2012 was primarily due to higher salaries and benefit
expenses that were offset by lower advertising expenses. The stronger euro rate in the current
quarter also negatively impacted the comparison by approximately $70,000.
Engineering, Research and Development (R&D) Expenses Engineering and R&D expenses were $1.8
million in the quarter ended September 30, 2011 compared to $2.1 million in the first quarter a
year ago. The decrease primarily related to lower engineering materials and less outside
contractor costs.
Interest Income, net Net interest income was $66,000 in the first quarter of fiscal 2012
compared with net interest income of $45,000 in the first quarter of fiscal 2011. The increase was
primarily due to higher interest rates in the first quarter of fiscal 2012 compared to the first
quarter of fiscal 2011.
Foreign Currency There was a net foreign currency loss of $142,000 in the first quarter of
fiscal 2012 compared with a net foreign currency gain of $221,000 in the first quarter of fiscal
2011. The difference relates primarily to foreign currency changes in the euro and to a lesser
extent the Indian Rupee within the respective quarters.
Income Tax Benefit The effective tax rate for the first quarter of fiscal 2012 was 38.2%
compared to 36.6% in the first quarter of fiscal 2011 and primarily reflected the effect of the mix
of operating profit and loss among the Companys various operating entities and their countries
respective tax rates. The effective tax rates in the United States were 33.8% and 31.9% on a
pretax loss in the fiscal 2012 and 2011 quarters, respectively. The foreign subsidiaries combined
effective tax rates were 6.4% and 30.1% on combined pretax income in the fiscal 2012 and 2011
quarters, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Companys cash and cash equivalents were $17.4 million at September 30, 2011, compared to $12.1
million at June 30, 2011. The cash increase of $5.3 million for the quarter ended September 30,
2011 resulted primarily from $7.1 million generated from the net sales/maturities of investments
which was partially offset by the use of cash to repurchase $748,000 of the Companys stock,
$353,000 used in operating activities, a reduction in cash of $461,000 related to the effect of
exchange rates changes and $217,000 for capital expenditures.
The $353,000 of cash used for operations was primarily related to the net loss for
the quarter of $2.2 million and adjustments for non-cash items of $965,000 that
was partially offset by favorable changes in assets and liabilities of $2.8 million. The $2.8
million change in assets and liabilities resulted primarily from cash collections of receivables of
$4.4 million, partially offset by an increase in inventory of $870,000, a reduction in other
current assets and liabilities of $543,000 and a reduction in accounts payable of $196,000. The
increase in inventory was due to purchases of items required to fill orders in backlog. The
reduction in current assets and liabilities primarily represented a reduction in accrued
compensation related to the payment of the fiscal 2011 profit sharing amount. The change in
accounts payable related to normal fluctuations in the timing of payments.
The Company provides a reserve for obsolescence to recognize the effects of engineering change
orders and other matters that affect the value of the inventory. A detailed review of the
inventory is performed yearly with quarterly updates for known changes that have occurred since the
annual review. When inventory is deemed to have no further use or value, the Company disposes of
the inventory and the reserve for obsolescence is reduced. During the first quarter of
fiscal 2012, the Companys reserve for obsolescence decreased by $14,000 which resulted from additional
reserves for obsolescence of approximately $36,000 that were offset by $50,000 of disposals and the effect
of changes in foreign currency on inventory.
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The Company determines its allowance for doubtful accounts by considering a number of factors,
including the length of time trade accounts receivable are past due, the Companys previous loss
history, the customers current ability to pay its obligation to the Company, and the condition of
the general economy and the industry as a whole. The Company writes-off accounts receivable when
they become uncollectible, and payments subsequently received on such receivables are credited to
the allowance for doubtful accounts. The Company increased its allowance for doubtful
accounts by a net $9,000 in the first quarter of fiscal 2012.
The Company had no debt outstanding at September 30, 2011. The Company has a $6.0 million secured
Credit Agreement which expires on November 1, 2012. Proceeds under the Credit Agreement may be
used for working capital and capital expenditures. Security under the Credit Agreement is
substantially all non-real estate assets of the Company held in the United States. Borrowings are
designated as a Libor-based Advance or as a Prime-based Advance if the Libor-based Advance is not
available. Interest on Libor-based Advances is calculated currently at 2.35% above the Libor Rate
offered at the time for the period chosen, and is payable on the last day of the applicable period.
The Company may not select a Prime-based rate for Advances except during a period of time during
which the Libor-based rate is not available as the applicable interest rate. Interest on
Prime-based Advances is payable on the first business day of each month commencing on the first
business day following the month during which such Advance is made and at maturity and is
calculated daily, using the interest rate established by Comerica Bank as its prime rate for its
borrowers. Quarterly, the Company pays a commitment fee of 0.15% per annum on the average daily
unused portion of the revolving credit commitment. The Credit Agreement prohibits the Company from
paying dividends but permits the Company to repurchase up to $5.0 million of its common stock
through December 31, 2011. In addition, the Credit Agreement requires the Company to maintain a
minimum Tangible Net Worth, as defined in the Credit Agreement, minus the aggregate amount paid by
the Company to redeem its shares of its common stock during the period beginning October 18, 2010
and ending December 31, 2011. The Credit Agreement also requires the Company to have no advances
outstanding for 30 days each calendar year. At September 30, 2011, the Credit Agreement required a
Tangible Net Worth of not less than $31.6 million and supported outstanding letters of credit
totaling $311,000.
At September 30, 2011, the Companys German subsidiary (GmbH) had an unsecured credit facility
totaling 300,000 euros (equivalent to approximately $408,000). The facility may be used to finance
working capital needs and equipment purchases or capital leases. Any borrowings for working
capital needs will bear interest at 9.0% on the first 100,000 euros of borrowings and 2.0% for
borrowings over 100,000 euros. The German credit facility is cancelable at any time by either GmbH
or the bank and any amounts then outstanding would become immediately due and payable. At
September 30, 2011, GmbH had no borrowings outstanding.
For a discussion of certain contingencies relating to the Companys liquidity, financial position
and results of operations, see Note 12 to the Consolidated Financial Statements, Commitments and
Contingencies, contained in this Quarterly Report on Form 10-Q, Item 3, Legal Proceedings and
Note 6 to the Consolidated Financial Statements, Contingencies, of the Companys Annual Report on
Form 10-K for fiscal year 2011. See also, Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations Critical Accounting Policies Litigation and
Other Contingencies of the Companys Annual Report on Form 10-K for fiscal year 2011.
At September 30, 2011, the Company had short-term investments totaling $5.4 million and long-term
investments valued at $2.2 million. See Note 6 to the Consolidated Financial Statements,
Short-Term and Long-Term Investments, for further information on the Companys investments and
their current valuation. The market for the long-term investments is currently illiquid.
On October 28, 2011, the Company paid the GDS litigation settlement in full for $2.0 million.
On October 19, 2010, the Companys Board of Directors (Board) approved a stock repurchase program
authorizing the Company to repurchase up to $5.0 million of the Companys Common Stock through
December 31, 2011. See also, Part II Item 2, Unregistered Sales of Equity Securities and Use of
Proceeds of this Quarterly Report on Form 10-Q and Part II Item 5, Market for the Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of the
Companys Annual Report on Form 10-K for the fiscal year 2011 for further information on this
program. Pursuant to the authorization, the Company has repurchased 121,845 shares of Common Stock
at an average price of $6.09 per share during the three months ended September 30, 2011 for total
cash of $748,349 which includes commissions and fees.
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The Company expects to spend approximately $2.3 million during fiscal year 2012 for capital
equipment, although there is no binding commitment to do so. Based on the Companys current
business plan, the Company believes that available cash on hand, short-term investments and
existing credit facilities will be sufficient to fund anticipated fiscal year 2012 cash flow
requirements, except to the extent that the Company implements business development opportunities,
which would be financed as discussed below. The Company does not believe that inflation has
significantly impacted historical operations and does not expect any significant near-term
inflationary impact.
The Company will consider evaluating business opportunities that fit its strategic plans. There
can be no assurance that the Company will identify any opportunities that fit its strategic plans
or will be able to enter into agreements with identified business opportunities on terms acceptable
to the Company. The Company anticipates that it would finance any such business opportunities from
available cash on hand, issuance of additional shares of its stock or additional sources of
financing, as circumstances warrant.
CRITICAL ACCOUNTING POLICIES
A summary of critical accounting policies is presented in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations Critical Accounting Policies of the
Companys Annual Report on Form 10-K for fiscal year 2011.
New Accounting Pronouncements
For a discussion of new accounting pronouncements, see Note 2 to the Consolidated Financial
Statements, New Accounting Pronouncements.
ITEM 4. | CONTROLS AND PROCEDURES |
The Company carried out an evaluation, under the supervision and with the participation of the
Companys management, including its Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures
pursuant to Rule 13a-15 (b) of the Securities Exchange Act of 1934 (the 1934 Act). Based upon
that evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that,
as of September 30, 2011, the Companys disclosure controls and procedures were effective. Rule
13a-15(e) of the 1934 Act defines disclosure controls and procedures as controls and other
procedures of the Company that are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is accumulated and communicated to the
Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
There have been no changes in the Companys internal controls over financial reporting during the
quarter ended September 30, 2011 identified in connection with the Companys evaluation that has
materially affected, or is reasonably likely to materially affect, the Companys internal controls
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was a party to a suit filed by Industries GDS, Inc., Bois Granval GDS Inc., and Centre
de Preparation GDS, Inc. (collectively, GDS) on or about November 21, 2002 in the Superior Court
of the Judicial District of Quebec, Canada against the Company, Carbotech, Inc. (Carbotech), and
U.S. Natural Resources, Inc. (USNR), among others. The suit alleged that the Company breached
its contractual and warranty obligations as a manufacturer in connection with the sale and
installation of three systems for trimming and edging wood products. The suit also alleged that
Carbotech breached its contractual obligations in connection with the sale of equipment and the
installation of two trimmer lines, of which the Companys systems were a part, and that USNR, which
acquired substantially all of the assets of the Forest Products business unit from the Company in
March 2002, was liable for GDS damages. USNR sought indemnification from the Company under the
terms of existing contracts between the Company and USNR. Carbotech filed for bankruptcy
protection and therefore did not defend the matter. GDS sought compensatory damages against the
Company, Carbotech and USNR of approximately $5.0 million using a September 30, 2011 exchange rate,
plus interest and costs.
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As a result of discussions by the parties, their counsel and the court at a court ordered settlement conference held on September 28, 2011 and to avoid the extensive costs
of preparing for, and conducting, a trial estimated to last five weeks in Quebec City, Quebec,
Canada, the Company, GDS and USNR agreed to settle all claims arising from this litigation. The
Company did not admit liability in resolving the matter. The Company believes it was in the best
interest of Perceptron and its shareholders to settle the case and remove the uncertainty and
considerable expense associated with continuing litigation. Pursuant to the settlement, the
Company agreed to pay GDS $2 million Canadian dollars (equivalent to approximately $1.9 million
using a September 30, 2011 exchange rate), in one installment within thirty days of the settlement.
GDS and USNR fully released the Company from any further claims relating to this matter. The
Company funded the settlement from available cash on October 28, 2011.
The Company was a party to a suit filed by i-CEM Service, Inc. and 3CEMS Prime on or about July 1,
2010 in the Federal Court for the Northern District of Illinois. The suit alleged that the Company
breached its contractual and common law indemnification obligations by failing to pay for component
parts used to manufacture optical video scopes. The suit sought damages of not less than $4
million. On October 27, 2011, the Federal Court granted the Companys motion to reconsider the
granting of i-CEMs motion to add 3CEMS Prime as a party to the suit. Because the Federal Court
did not allow 3CEMS Prime to join the suit as a third party plaintiff, and i-CEM was not a party to
the contract at issue, the Federal Court terminated the suit.
ITEM 1A. RISK FACTORS
There have been no material changes made to the risk factors listed in Item 1A Risk Factors of
the Companys Annual Report on Form 10-K for fiscal year 2011.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information concerning the Companys repurchases of its Common Stock
during the quarter ended September 30, 2011. All shares were purchased pursuant to the Companys
stock repurchase program described below.
(c) Total Number | ||||||||||||||||
of Shares | (d) Approximate | |||||||||||||||
(a) Total | Purchased as | Dollar Value of Shares | ||||||||||||||
Number of | (b) Average | Part of Publicly | that May Yet Be | |||||||||||||
Shares | Price Paid | Announced | Purchased Under the | |||||||||||||
Period | Purchased | per Share | Program | Program | ||||||||||||
July 1-29, 2011 |
29,596 | $ | 6.27 | 29,596 | $ | 1,641,390 | ||||||||||
August 1-31, 2011 |
49,880 | $ | 6.16 | 49,880 | $ | 1,334,075 | ||||||||||
September 1-30, 2011 |
42,369 | $ | 5.88 | 42,369 | $ | 1,084,845 | ||||||||||
Total |
121,845 | $ | 6.09 | 121,845 | $ | 1,084,845 | ||||||||||
On October 19, 2010, the Companys Board of Directors (Board) approved a stock repurchase program
authorizing the Company to repurchase up to $5.0 million of the Companys Common Stock through
December 31, 2011. The Company was authorized to buy shares of its Common Stock on the open market
or in privately negotiated transactions from time to time, based on market prices. The program may
be discontinued at any time. The Company also announced that it had entered into a Rule 10b5-1
trading plan (Repurchase Plan) with Barrington Research Associates, Inc. to purchase up to $5.0
million of the Companys Common Stock through December 31, 2011 (less the dollar amount of
purchases by the Company outside the Repurchase Plan), in open market or privately negotiated
transactions, in accordance with the requirements of Rule 10b-18. Pursuant to the authorization,
the Company repurchased 121,845 shares of Common Stock at an average price of $6.09 per share
during the quarter ended September 30, 2011.
ITEM 6. EXHIBITS
31.1
|
Certification by the Chief Executive Officer of the Company pursuant to Rule 13a 14(a) of the Securities Exchange Act of 1934. | |
31.2
|
Certification by the Chief Financial Officer of the Company pursuant to Rule 13a 14(a) of the Securities Exchange Act of 1934. | |
32
|
Certification pursuant to 18 U.S.C. Section 1350 and Rule 13a 14(b) of the Securities Exchange Act of 1934. | |
101.INS*
|
XBRL Instance Document | |
101.SCH*
|
XBRL Taxonomy Extension Schema | |
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase | |
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase | |
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase |
* | XBRL (Extensible Business Reporting Language) information is furnished and not filed
herewith, is not a part of a registration statement or prospectus for purposes of
sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of
section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to
liability under these sections. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Perceptron, Inc. (Registrant) |
||||
Date: November 11, 2011 | By: | /S/ Harry T. Rittenour | ||
Harry T. Rittenour | ||||
President and Chief Executive Officer | ||||
Date: November 11, 2011 | By: | /S/ John H. Lowry III | ||
John H. Lowry III | ||||
Vice President and Chief Financial Officer (Principal Financial Officer) |
||||
Date: November 11, 2011 | By: | /S/ Sylvia M. Smith | ||
Sylvia M. Smith | ||||
Vice President, Controller and Chief Accounting
Officer (Principal Accounting Officer) |
21