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Section 1: 10-Q (10-Q)

prcp-10q_20181231.htm
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UNITED STATES

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 December 31, 2018.

Commission file number:  0-20206

 

PERCEPTRON, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Michigan

(State or Other Jurisdiction of

Incorporation or Organization)

 

38-2381442

(I.R.S. Employer

Identification No.)

47827 Halyard Drive, Plymouth, Michigan

(Address of Principal Executive Offices)

 

48170-2461

(Zip Code)

 

(734) 414-6100

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes

No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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  such files).

 

Yes

No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes

No

 

The number of shares outstanding of each of the issuer’s classes of common stock as of February 6, 2019, was:

 

Common Stock, $0.01 par value

 

9,618,469

Class

 

Number of shares

 

1


PERCEPTRON, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarter Ended December 31, 2018

 

 

 

Page

Number

COVER

 

1

 

 

 

INDEX

 

2

 

 

 

PART I.  FINANCIAL INFORMATION

 

 

Item 1.  Financial Statements

 

3

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

36

Item 4.  Controls and Procedures

 

36

 

 

 

PART II.  OTHER INFORMATION

 

 

Item 1A.  Risk Factors

 

37

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

37

Item 6.     Exhibits

 

38

 

 

 

SIGNATURES

 

39

 

2


PERCEPTRON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

June 30,

 

(In Thousands, Except Per Share Amount)

 

2018

 

 

2018

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,899

 

 

$

5,830

 

Short-term investments

 

 

1,131

 

 

 

877

 

Receivables:

 

 

 

 

 

 

 

 

Billed receivables, net of allowance for doubtful accounts of $449 and $404,

   respectively

 

 

28,753

 

 

 

31,797

 

Unbilled receivables

 

 

4,635

 

 

 

-

 

Other receivables

 

 

284

 

 

 

346

 

Inventories, net of reserves of $1,874 and $2,115, respectively

 

 

11,143

 

 

 

13,829

 

Other current assets

 

 

1,900

 

 

 

1,327

 

Total current assets

 

 

54,745

 

 

 

54,006

 

 

 

 

 

 

 

 

 

 

Property and Equipment, Net

 

 

6,785

 

 

 

6,613

 

Goodwill

 

 

7,859

 

 

 

7,985

 

Intangible Assets, Net

 

 

3,428

 

 

 

3,820

 

Long-Term Investments

 

 

725

 

 

 

725

 

Long-Term Deferred Income Tax Asset

 

 

1,100

 

 

 

1,055

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

74,642

 

 

$

74,204

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Line of credit and short-term notes payable

 

$

69

 

 

$

175

 

Accounts payable

 

 

6,911

 

 

 

7,592

 

Accrued liabilities and expenses

 

 

4,177

 

 

 

4,256

 

Accrued compensation

 

 

1,940

 

 

 

3,155

 

Current portion of taxes payable

 

 

432

 

 

 

526

 

Income taxes payable

 

 

1,134

 

 

 

768

 

Reserves for restructuring and other charges

 

 

66

 

 

 

675

 

Deferred revenue

 

 

7,389

 

 

 

8,691

 

Total current liabilities

 

 

22,118

 

 

 

25,838

 

 

 

 

 

 

 

 

 

 

Long-Term Taxes Payable

 

 

250

 

 

 

450

 

Long-Term Deferred Income Tax Liability

 

 

1,718

 

 

 

1,717

 

Other Long-Term Liabilities

 

 

593

 

 

 

601

 

Total Liabilities

 

$

24,679

 

 

$

28,606

 

 

 

 

 

 

 

 

 

 

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

   9,618 and 9,554, respectively

 

 

96

 

 

 

96

 

Accumulated other comprehensive loss

 

 

(2,864

)

 

 

(2,098

)

Additional paid-in capital

 

 

48,753

 

 

 

48,110

 

Retained earnings (deficit)

 

 

3,978

 

 

 

(510

)

Total Shareholders' Equity

 

$

49,963

 

 

$

45,598

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders' Equity

 

$

74,642

 

 

$

74,204

 

The notes to the consolidated financial statements are an integral part of these statements.

3


PERCEPTRON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

(In Thousands, Except Per Share Amounts)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net Sales

 

$

21,553

 

 

$

20,433

 

 

$

42,995

 

 

$

39,702

 

Cost of Sales

 

 

13,703

 

 

 

13,026

 

 

 

26,853

 

 

 

24,645

 

Gross Profit

 

 

7,850

 

 

 

7,407

 

 

 

16,142

 

 

 

15,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

4,942

 

 

 

4,497

 

 

 

9,577

 

 

 

8,921

 

Engineering, research and development

 

 

2,080

 

 

 

1,797

 

 

 

4,278

 

 

 

3,530

 

Severance, impairment and other charges

 

 

(609

)

 

 

658

 

 

 

(609

)

 

 

606

 

Total operating expenses

 

 

6,413

 

 

 

6,952

 

 

 

13,246

 

 

 

13,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

1,437

 

 

 

455

 

 

 

2,896

 

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income and (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(29

)

 

 

(42

)

 

 

(56

)

 

 

(84

)

Foreign currency gain (loss), net

 

 

151

 

 

 

(57

)

 

 

(51

)

 

 

(79

)

Other income (expenses), net

 

 

5

 

 

 

(5

)

 

 

5

 

 

 

25

 

Total other income and (expenses)

 

 

127

 

 

 

(104

)

 

 

(102

)

 

 

(138

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

1,564

 

 

 

351

 

 

 

2,794

 

 

 

1,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax (Expense) Benefit

 

 

(17

)

 

 

15

 

 

 

(355

)

 

 

62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

1,547

 

 

$

366

 

 

$

2,439

 

 

$

1,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.04

 

 

$

0.25

 

 

$

0.20

 

Diluted

 

$

0.16

 

 

$

0.04

 

 

$

0.25

 

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,615

 

 

 

9,491

 

 

 

9,588

 

 

 

9,455

 

Dilutive effect of stock options

 

 

76

 

 

 

106

 

 

 

143

 

 

 

72

 

Diluted

 

 

9,691

 

 

 

9,597

 

 

 

9,731

 

 

 

9,527

 

 

The notes to the consolidated financial statements are an integral part of these statements.


4


PERCEPTRON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

(In Thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net Income

 

$

1,547

 

 

$

366

 

 

$

2,439

 

 

$

1,924

 

Other Comprehensive (Loss) Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(369

)

 

 

611

 

 

 

(766

)

 

 

1,406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income

 

$

1,178

 

 

$

977

 

 

$

1,673

 

 

$

3,330

 

 

The notes to the consolidated financial statements are an integral part of these statements.

5


PERCEPTRON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)

 

 

 

Six Months Ended

 

 

 

December 31,

 

(In Thousands)

 

2018

 

 

2017

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

2,439

 

 

$

1,924

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,134

 

 

 

1,139

 

Stock compensation expense

 

 

494

 

 

 

653

 

Asset impairment and related inventory write-down

 

 

-

 

 

 

(56

)

Deferred income taxes

 

 

(320

)

 

 

(449

)

(Gain) loss on disposal of assets

 

 

(32

)

 

 

4

 

Allowance for doubtful accounts

 

 

45

 

 

 

(13

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(385

)

 

 

4,963

 

Inventories

 

 

1,167

 

 

 

(3,532

)

Accounts payable

 

 

(568

)

 

 

689

 

Accrued liabilities and expenses

 

 

(1,141

)

 

 

(735

)

Deferred revenue

 

 

765

 

 

 

42

 

Other assets and liabilities

 

 

(1,178

)

 

 

(660

)

Net cash provided by operating activities

 

 

2,420

 

 

 

3,969

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(1,831

)

 

 

(2,981

)

Sales of short-term investments

 

 

1,621

 

 

 

1,802

 

Capital expenditures

 

 

(790

)

 

 

(501

)

Capital expenditures - intangibles

 

 

(222

)

 

 

-

 

Net cash used for investing activities

 

 

(1,222

)

 

 

(1,680

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Payments on lines of credit and short-term borrowings, net

 

 

(103

)

 

 

(1

)

Proceeds from stock plans

 

 

204

 

 

 

15

 

Cash payment for shares surrendered upon vesting of restricted stock

   units to cover taxes

 

 

(55

)

 

 

(19

)

Net cash provided by (used for) financing activities

 

 

46

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

 

(100

)

 

 

165

 

 

 

 

 

 

 

 

 

 

Net Increase in Cash, Cash Equivalents and Restricted Cash

 

 

1,144

 

 

 

2,449

 

Cash, Cash Equivalents and Restricted Cash, July 1

 

 

5,996

 

 

 

3,943

 

Cash, Cash Equivalents and Restricted Cash, December 31

 

$

7,140

 

 

$

6,392

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

53

 

 

$

100

 

Cash paid during the period for income taxes

 

$

506

 

 

$

422

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

June 30, 2018

 

Cash and Cash Equivalents

 

$

6,899

 

 

$

5,830

 

Restricted Cash included in Short-term Investments

 

 

241

 

 

 

166

 

Total Cash, Cash Equivalents and Restricted Cash

 

$

7,140

 

 

$

5,996

 

 

 

 

 

 

 

 

 

 

The notes to the consolidated financial statements are an integral part of these statements.

 

 

6


 

PERCEPTRON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

(In Thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

96

 

 

$

95

 

 

$

96

 

 

$

94

 

Issued

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

Ending balance

 

 

96

 

 

 

95

 

 

 

96

 

 

 

95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(2,495

)

 

 

(1,926

)

 

 

(2,098

)

 

 

(2,721

)

Other Comprehensive Income (Loss)

 

 

(369

)

 

 

611

 

 

 

(766

)

 

 

1,406

 

Ending balance

 

 

(2,864

)

 

 

(1,315

)

 

 

(2,864

)

 

 

(1,315

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional Paid-In Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

48,507

 

 

 

46,948

 

 

 

48,110

 

 

 

46,688

 

Stock-based compensation

 

 

283

 

 

 

265

 

 

 

494

 

 

 

396

 

Stock plans

 

 

(37

)

 

 

123

 

 

 

149

 

 

 

252

 

Ending balance

 

 

48,753

 

 

 

47,336

 

 

 

48,753

 

 

 

47,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained Earnings (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

2,431

 

 

 

(2,668

)

 

 

(510

)

 

 

(4,226

)

Adoption of ASC 606 - modified

   retrospective transition method

 

 

-

 

 

 

-

 

 

 

2,049

 

 

 

-

 

Net income

 

 

1,547

 

 

 

366

 

 

 

2,439

 

 

 

1,924

 

Ending balance

 

 

3,978

 

 

 

(2,302

)

 

 

3,978

 

 

 

(2,302

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Shareholders' Equity

 

$

49,963

 

 

$

43,814

 

 

$

49,963

 

 

$

43,814

 

 

The notes to the consolidated financial statements are an integral part of these statements.

7


PERCEPTRON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.Accounting Policies

Perceptron, Inc. (“Perceptron” “we”, “us” or “our”) develops, produces and sells a comprehensive range of automated industrial metrology products and solutions to manufacturers for dimensional gauging, dimensional inspection and 3D scanning.  Our products provide solutions for manufacturing process control as well as sensor and software technologies for non-contact measurement, scanning and inspection applications. We also offer value added services such as training and customer support.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and within the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.  Our Consolidated Financial Statements include the accounts of Perceptron and our wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.  In our opinion, these statements include all normal recurring 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 fiscal year.  The accompanying unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements in our 2018 Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

Use of Estimates

Management is required to make certain estimates and assumptions under U.S. GAAP during the preparation of these Consolidated Financial Statements.  These estimates and assumptions may affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Reclassification

 

Certain prior period amounts have been reclassified in the Consolidated Statements of Cash Flow to due to the adoption of Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18).

2.New Accounting Pronouncements  

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02 Leases (ASU 2016-2), which establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.  ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.  In January 2018, the FASB issued Accounting Standards Update No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which permits an entity to elect an optional transition practical expedient to not evaluate land easements under Topic 842.  A modified retrospective transition approach was originally required for lessees with capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.  In July 2018, the FASB issued ASU 2018-11 Leases (Topic 842): Targeted Improvements, which created an optional transition method to adopt ASU 2016-02. The optional method is a modified retrospective approach whereby an entity can initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to their opening balance of retained earnings.  We have commenced a detailed analysis of ASU 2016-02 (as amended) and have noted that not all of the items that we have been including in prior Annual Reports on Form 10-K as a “lease” meet the new definition.  Furthermore, we have determined that we will use the modified retrospective approach as our transition method.  Finally, we believe that our Consolidated Balance Sheet will be impacted as we record a ROU and lease liability for all leases that meet the new definition.

In June 2016, the FASB issued Account