UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM 10-Q ------------ (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ ------------ Commission File Number: 0-26462 ------------ PERCON INCORPORATED (Exact name of registrant as specified in its charter) Washington 91-1486560 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 1800 Millrace Drive Eugene, OR 97403 (Address of principal executive offices) (Zip code) 541-344-1189 (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 registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] ------------ The number of shares of common stock outstanding as of May 10, 1999: 3,858,381 PERCON INCORPORATED and SUBSIDIARIES FORM 10-Q March 31, 1999 INDEX Page PART I - FINANCIAL INFORMATION Reference - -------------------------------------------------------------------------------- Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998 (unaudited). 3 Condensed Consolidated Statements of Income for the three months ended March 31, 1999 and 1998 (unaudited). 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998 (unaudited). 5 Notes to Condensed Consolidated Financial Statements 6 - 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 13 PART II - OTHER INFORMATION - --------------------------- Item 6 - Exhibits and Reports on Form 8-K 14 Signatures 15 2 Part I - Financial Information Item 1 - Financial Statements Percon Incorporated Condensed Consolidated Balance Sheets, (Unaudited) (in thousands, except share data) PERCON INCORPORATED Consolidated Balance Sheets (in thousands) March 31, December 31, 1999 1998 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 5,668 $ 4,534 Accounts receivable, net 5,824 6,793 Inventories, net 3,650 3,742 Prepaid expenses and other 720 860 Deferred income tax asset 279 276 -------------- -------------- Total current assets 16,141 16,205 Property and equipment, net 2,654 2,758 Goodwill and intangibles, net 1,261 1,439 -------------- -------------- Total assets $ 20,056 $ 20,402 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 98 $ 104 Accounts payable 1,010 1,644 Accrued expenses 1,180 1,124 Deferred revenue 119 116 Income taxes payable 349 231 -------------- -------------- Total current liabilities 2,756 3,219 Deferred income taxes 434 468 Long-term debt, less current portion 619 703 Other 19 20 -------------- -------------- Total liabilities $ 3,828 $ 4,410 -------------- -------------- Commitments and contingencies Preferred stock, 5,000,000 shares authorized, none issued - - Common stock, no par value, 20,000,000 shares authorized, 3,918,781 and 3,976,061 shares issued and outstanding, respectively 9,319 9,319 Treasury stock, at cost (667) (597) Retained earnings 8,084 7,471 Accumulated other comprehensive income (508) (201) -------------- -------------- Total shareholders' equity 16,228 15,992 -------------- -------------- Total liabilities and shareholders' equity $ 20,056 $ 20,402 ============== ============== See accompanying notes. 3 Percon Incorporated Condensed Consolidated Statements of Income, (Unaudited) (in thousands, except per share data) For the three months ended March 31, 1999 1998 - -------------------------------------------------------------------------------------- Net sales $ 7,908 $ 7,058 Cost of goods sold 3,841 3,610 - -------------------------------------------------------------------------------------- Gross profit 4,067 3,448 Operating Expenses: Selling, marketing and customer service 1,585 1,225 General and administrative 846 674 Research and product development 478 401 Charges related to terminated acquisition 161 - - -------------------------------------------------------------------------------------- Operating income 997 1,148 Interest and other income (expense), net (3) 2 - -------------------------------------------------------------------------------------- Income before taxes 994 1,150 Provision for income taxes 381 424 - -------------------------------------------------------------------------------------- Net income $ 613 $ 726 - -------------------------------------------------------------------------------------- Net income per share: Net income per share - Basic $ 0.16 $ 0.18 - -------------------------------------------------------------------------------------- Net income per share - Diluted $ 0.16 $ 0.18 - -------------------------------------------------------------------------------------- Weighted average shares outstanding: Basic 3,917 3,993 Effect of dilutive securities: Warrants - 45 Options 8 110 - -------------------------------------------------------------------------------------- Diluted 3,925 4,148 - -------------------------------------------------------------------------------------- See accompanying notes. 4 Percon Incorporated Condensed Consolidated Statements of Cash Flows, (Unaudited) (in thousands) Three Months Ended March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents: Cash flows from operating activities: Net Income $ 613 $ 726 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 266 299 Deferred income taxes (36) (32) Change in operating assets and liabilities: Accounts receivable 969 57 Inventories 92 22 Prepaid expenses and other 140 (70) Accounts payable and accrued expenses (378) (417) - ------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,666 585 - ------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (71) (203) - ------------------------------------------------------------------------------------------------------- Net cash used in investing activities (71) (203) - ------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Principal paid on long-term debt (84) (24) Proceeds from stock issued - 227 Tax benefit from exercise or - 75 early disposition of certain stock options Cash used for purchase of treasury stock (70) - - ------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (154) 278 - ------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (307) (11) - ------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 1,134 649 Cash and cash equivalents at beginning of period 4,534 1,884 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 5,668 $ 2,533 - ------------------------------------------------------------------------------------------------------- Supplemental disclosure: Interest paid $ 18 $ 21 Taxes paid $ 373 $ 442 See accompanying notes. 5 Percon Incorporated And Subsidiaries Notes To Condensed Consolidated Financial Statements, (Unaudited) 1. Summary Of Significant Accounting Policies Principles Of Consolidation The condensed consolidated financial statements include the accounts of Percon Incorporated ("Percon" or the "Company") and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Basis Of Reporting The accompanying unaudited condensed consolidated financial statements have been prepared by the Company and in the opinion of management contain all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the results of the interim periods presented. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the three months ended March 31, 1999, are not necessarily indicative of the results to be expected for the full year. The accompanying interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1998. Basic earnings per share are based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are based on the weighted average number of shares of common stock and potentially dilutive securities outstanding during the period, computed in accordance with the treasury stock method. 2. Inventories Inventories are stated at the lower of cost (methods which approximate the first-in, first-out method) or market. Inventory costs include materials, labor, and overhead and consist of the following: (In thousands) March 31, 1999 December 31, 1998 -------------- ----------------- Finished goods $ 2,211 $ 2,258 Materials 1,964 2,053 Reserve (525) (569) - ------------------------------------------------------------------------------- $ 3,650 $ 3,742 - ------------------------------------------------------------------------------- 3. Stock Options During the first three months of 1999, the Company granted options to purchase an aggregate of 35,500 shares of common stock at an average price of $8.72 per share. The exercise prices are greater than or equal to the Company's market price on the date of grant. 6 Percon Incorporated And Subsidiaries Notes To Condensed Consolidated Financial Statements, Continued, (Unaudited) 4. Commitments And Contingencies In December 1997, the Company signed a ten year non-cancelable lease for a new headquarters facility, which contains a five year lease extension option. The lease contains provisions for the Company to pay certain ongoing costs, such as property taxes, insurance and support costs, which are not reflected in the minimum lease payments totaling approximately $5.5 million. The Company expects to sublease certain portions of the new facility as permitted under the lease agreement. On October 8, 1998 the Company announced that its Board of Directors had authorized the repurchase of up to 250,000 shares of its common stock. The shares may be repurchased from time to time through open market transactions, and funded from existing cash balances or from borrowings under bank credit arrangements. The number of shares held as treasury stock was 107,700 and 94,400 as of March 31, 1999 and December 31, 1998, respectively. As of May 10, 1999 the Company had repurchased a total of 154,800 shares. 5. Income Taxes The provision for income taxes has been recorded based on the Company's current estimate of the Company's annual effective tax rate. This rate differs from the combined federal and state statutory rate of approximately 38.5% primarily due to the benefit of the Company's foreign sales corporation and research and experimentation tax credits. 6. Comprehensive Income The Company adopted SFAS No. 130, "Reporting Comprehensive Income" on January 1, 1998. This statement establishes standards for reporting comprehensive income and its components in the condensed consolidated financial statements. The objective of SFAS 130 is to report changes in equity that result from transactions and economic events other than transactions with owners. Comprehensive income is the total of net income and all other non-owner changes in equity. Three months ended, March 31, (in thousands) 1999 1998 -------------- -------------- Net income $ 613 $ 726 Other comprehensive income net of tax - - Foreign currency translation adjustment (307) (94) - ------------------------------------------------------------------------------------ Comprehensive income $ 306 $ 632 - ------------------------------------------------------------------------------------ 7. Significant Customer Discussion No single customer represented more than 10% of the Company's total net sales for the three months ended March 31, 1999 and 1998. 7 Percon Incorporated And Subsidiaries Notes To Condensed Consolidated Financial Statements, Continued, (Unaudited) 8. Business Segment Information The Company operates in a single industry with two geographic operating segments - - North America and Europe. While the Company's chief operating decision maker monitors the revenue streams of the various products and geographic locations, operations are managed and financial performance is evaluated based upon the geographic locations because each operating segment represents a strategic business unit that serves different markets. The accounting policies of the operating segments are the same as those described in the summary of significant policies. The Company evaluates performance based on stand-alone operating segment net income and generally accounts for intersegment sales and transfers based upon internal transfer prices set by the Company. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. Identifiable assets are those tangible and intangible assets used in operations in each geographic area. Eliminated assets primarily represent the investment in the European subsidiary and the net result of operations since that time. Summarized data of the Company's operations, by geographic area, for the three months ended March 31, 1999 and 1998 are presented below (in thousands). Three months ended March 31, Percon 1999 Percon US Europe Elimination Consolidated - ----------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $ 5,537 $ 2,371 $ - $ 7,908 Intra-company transfers 575 - (575) - Gross profit 3,063 980 24 4,067 Income from operations 876 118 3 997 Interest & other income (expense), net 56 (59) - (3) Pretax income 931 60 3 994 Total assets $ 19,515 $ 6,015 $ (5,474) $ 20,056 Percon 1998 Percon US Europe Elimination Consolidated - ----------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $ 4,180 $ 2,878 $ - $ 7,058 Intra-company transfers 511 - (511) - Gross profit 2,263 1,186 (1) 3,448 Income from operations 825 344 (21) 1,148 Interest & other income (expense), net 31 (29) - 2 Pretax income 857 315 (21) 1,150 Total assets $ 17,178 $ 6,273 $ (5,949) $ 17,502 8 Item 2 - Management's Discussion And Analysis Of Financial Condition And Results Of Operations Overview Percon Incorporated ("Percon" or the "Company") develops, assembles, and markets a complete line of data collection hardware and data management software products. These products are primarily sold into the Automatic Data Collection ("ADC") industry. The Company's product offering includes radio frequency ("RF") and batch portable data collection terminals ("PDCT"), fixed station and integrated decoders, hand-held laser scanners, data management application software, and terminal emulation software. The Company also markets bar code input devices manufactured by others for use with the Company's fixed station decoders and PDCTs. The Company's products provide a rapid, accurate, and efficient means to collect, process, transmit, record, and manage data. The Company's products are used principally in point-of-sale, point-of-service, and inventory management applications in a wide variety of industries, including manufacturing, warehousing and distribution, package delivery, retail, education, and healthcare. Percon markets its products through a network of ADC distributors, value-added resellers ("VARs"), and systems integrators, which allows the Company's products to reach small and mid-size end users cost effectively. In addition, Percon markets its products to mid-size and large end users through its strategic relationships as an original equipment manufacturer ("OEM") with other sales organizations. The Company also distributes its products internationally primarily through VARs in Europe, Latin America, and Asia. The statements in this report concerning the Year 2000 issue and working capital requirements constitute forward-looking statements that are subject to risks and uncertainties. Factors that could materially affect the Year 2000 issue include, but are not limited to, unanticipated costs associated with any required modifications to the Company's information systems, its ancillary systems and associated software. Factors that could materially affect future working capital requirements include, but are not limited to, competitive market pressures (including increased competition, new product offerings by competitors and price pressures) and the availability of appropriate resources, unfavorable business conditions in the ADC industry and general economy. 9 Results of Operations The following table sets for the for the periods indicated selected statements of operations data, expressed as a percentage of sales, and the percentage change in dollar amounts of each of the items on the condensed consolidated statements of income. Three Months Ended Percentage March 31, change 1999 1998 in amount --------------------------------------------------- Net sales 100.0% 100.0% 12.0% Cost of goods sold 48.6% 51.1% 6.4% - ---------------------------------------------------------------------------------------------------------- Gross profit 51.4% 48.9% 17.9% Operating Expenses: Selling, marketing and customer service 20.0% 17.4% 29.4% General and administrative 10.7% 9.5% 25.5% Research and product development 6.0% 5.7% 19.2% Charges related to terminated acquisition 2.0% 0.0% 0.0% - ---------------------------------------------------------------------------------------------------------- Operating income 12.6% 16.3% -13.2% Interest and other income (expense), net 0.0% 0.0% -252.0% - ---------------------------------------------------------------------------------------------------------- Income before taxes 12.6% 16.3% -13.6% Provision for income taxes 4.8% 6.0% -10.1% - ---------------------------------------------------------------------------------------------------------- Net income 7.8% 10.3% -15.6% - ---------------------------------------------------------------------------------------------------------- Comparison of the three months ended March 31, 1999 and 1998. Net Sales Net sales for the three months ended March 31, 1999 increased $0.8 million (12.0%) to $7.9 million from $7.1 million for the three months ended March 31, 1998. Net sales of PDCTs increased $1.0 million (52.4%) over the same period in 1998, due to increased unit volume. Sales of other product lines were largely unchanged with the exception of input devices, which decreased $0.2 million (18.0%) due to lower unit volume. Net sales attributed to Percon Europe decreased $0.5 million (17.6%) to $2.4 million in 1999, largely due to decreased unit volume of the decoder product line. Net sales from Percon Europe represented approximately 30.0% and 40.8% of condensed consolidated net sales for the three months ended March 31, 1999 and 1998, respectively. Net sales from Percon's U.S. operations increased $1.3 million (32.5%) to $5.5 million. These increases were primarily due to increased unit volume of PDCTs, which increased $0.7 million (47.5%) over the same period in 1998, and increased unit volume of decoders, which increased $0.6 million (58.3%) over the same period in 1998. 10 Gross Profit Gross profit for the three months ended March 31, 1999 increased $0.6 million (17.9%) to $4.1 million from $3.5 million for the three months ended March 31, 1998, representing 51.4% and 48.9% of net sales, respectively. This increase resulted primarily from increased sales of PDCTs, increased service revenue, and a one-time payment of an OEM customer's minimum order requirement, offset in part by decreased sales of input devices. Gross profit attributed to Percon Europe decreased $0.2 million (17.4%) to $1.0 million in 1999, due to lower overall sales activity and associated lower cost of goods sold. As a percentage of net sales, gross profit remained nearly level at approximately 41% for both 1999 and 1998. Gross profit from Percon's U.S. operations increased $0.8 million (35.4%) to $3.1 million. This increase was primarily due to increased unit volume of PDCTs, a one-time payment of an OEM customer's minimum order requirement, and increased manufacturing efficiencies. As a percentage of net sales, gross profit increased for the three months ended March 31, 1999 to 55.3%, up from 54.1% for the same period in 1998. Cost of goods sold increased $0.6 million (29.1%) to $2.5 million from $1.9 million in 1998. Selling, Marketing and Customer Service Expenses Selling, marketing and customer service expenses for the three months ended March 31, 1999 increased $0.4 million (29.4%) to $1.6 million from $1.2 million for the three months ended March 31, 1998, representing 20.0% and 17.4% of net sales, respectively. These increases are primarily due to sales force expansion that occurred late in 1998 and marketing efforts to support new product introductions. General and Administrative Expenses General and administrative expenses are comprised of the costs associated with finance and executive activities, and the management of information technologies and general facilities. Direct facility and information technology costs are allocated to other departments. General and administrative expenses for the three months ended March 31, 1999 increased $0.2 million (25.5%) to $0.8 million from $0.7 million for the three months ended March 31, 1997, representing 10.7% and 9.5% of net sales, respectively. These increases are primarily due to increased wages and professional fees. Research and Product Development Expenses Research and product development expenses for the three months ended March 31, 1999 increased $0.1 million (19.2%) to $0.5 million from $0.4 million for the three months ended March 31, 1998, representing 6.0% and 5.7% of net sales, respectively. The increase for the three months ended March 31, 1999 was largely attributable to additional expenditures to support new product development. Charges Related to Terminated Acquisition The Company incurred charges related to a terminated acquisition of $0.2 million for the three months ended March 31, 1999, representing 2.0% of net sales with no comparable charge for the three months ended March 31, 1998. This charge is related to acquisitions which were pursued but were terminated during the quarter. 11 Interest and Other Income Interest and other income for the three months ended March 31, 1999 decreased $5,000 to ($3,000) from $2,000 for the three months ended March 31, 1998. The decreases for the three months ended March 31, 1999 were largely due to foreign currency transaction losses experienced by the Company's European subsidiary, offsetting interest earned by higher cash holdings. Provision for Income Taxes The provision for income taxes for the three months ended March 31, 1999 was $0.4 million, which represents an effective tax rate of 38.4%. Items which cause this rate to differ from the U.S. federal statutory rate of 34% include state and international taxes and benefits from domestic and foreign research credits and the Company's foreign sales corporation. The provision for income taxes for the three months ended March 31, 1998 was $0.4 million, which represents an effective tax rate of 36.9%. The increase in the effective tax rate is primarily related to increased foreign tax rates. Net Income Net income for the three months ended March 31, 1999 decreased $0.1 million to $0.6 million from $0.7 million for the three months ended March 31, 1998, representing 7.8% and 10.3% of net sales, respectively. The decrease was due to lower gross profit contribution from the Company's European subsidiary, increased operating expenses, and the terminated acquisition charge. Year 2000 Computer System Impact The Year 2000 issue relates to the inability of some computers and computer software programs to accurately recognize dates after 1999 expressed as a two-digit number. The inability to recognize date information accurately could affect computer operations and calculations or cause computer systems and computer-dependent mechanical systems not to operate properly. The Company's assessment of the potential impact of the Year 2000 problem consists of two phases. The detection phase identifies and catalogs all mechanical and operational systems owned or operated by the Company that rely on date related information to function properly. The Company has recently completed this phase for its domestic operations. A similar assessment of its European operations was completed April 16, 1999. The remediation phase will repair, replace, or retire any non-compliant systems. This phase began early in 1999 and is expected to be completed by July 30, 1999. The detection phase for domestic operations revealed that only minor upgrades and replacements are required to achieve full Year 2000 compliance. Specifically, software upgrades are required to bring the Company's general ledger, payroll, and fixed asset systems into compliance. The Company believes that the remainder of the domestic non-compliant systems require only incremental software upgrades or are non-critical in nature. Based upon the Company's current estimates, total incremental out-of-pocket costs of its Year 2000 program are expected to be approximately $25,000. These costs are primarily related to remediation of computer software. These costs do not include internal management time and the deferral of other projects, the effects of which are not expected to be material to the Company's results of operations or financial condition. Based on a recent assessment, the Company believes that modification to its product offering will not be required in order for its products to function properly with respect to dates in the Year 2000. The Company has undertaken measures to inform customers of Year 2000 related issues via its Year 2000 12 web site. However, it is not possible to anticipate all end user situations and/or Year 2000 related issues, particularly those involving third party products. At this stage of the process, the Company believes that it is difficult to specifically identify the cause of the most reasonable worst case Year 2000 scenario. A reasonable worst case scenario would be the failure of the Company's products to operate properly through the interaction with third party products causing customers' systems and/or operations that are dependent upon such products to fail or be disrupted. In case of such failures, customers may commence legal action against the Company or otherwise seek compensation for their losses associated with such failures. An additional worst case Year 2000 scenario would be the failure of key vendors and/or suppliers to have corrected their own Year 2000 issues which could cause disruption of the Company's operations and have a material adverse effect on the Company's financial condition. In a survey of major suppliers, no immediate problems in the delivery of materials required for the Company to sustain operations were discovered. Discussions with these key business partners will continue and contingency plans developed as needed based on assessments of their exposure and remediation plans. If major suppliers, customers, or economic conditions are negatively affected by the Year 2000, there may be a negative impact on the Company's performance and operational results. Disclosure Regarding Euro Conversion On January 1, 1999, eleven member countries of the European Community began a process to convert their existing sovereign currencies to a single common denomination, the euro. The process of conversion is gradual over the next three years, culminating in the eventual removal from circulation of all existing domestic currency for the participating countries. The Company's French subsidiary, Percon Europe, is located in a member country, France, and transacts business in all European countries. Prior to the January 1, 1999 conversion, new accounting and sales systems that allow for euro denominated transactions were successful installed. To date the Company has experienced no difficulty in adopting the new currency, nor are any future problems anticipated. The full impact of this currency transition on Company profitability, competitive position, and future prospects has not yet been fully evaluated but is anticipated to be neutral to positive on future Company performance. Liquidity and Capital Resources The Company's line of credit with a domestic bank permits it to borrow up to 80% of eligible accounts receivable and 25% of eligible inventory (as defined by the bank agreement) to a maximum of $1.0 million. Outstanding principal amounts thereunder bear interest at the bank's prime rate, which was 7.75% at March 31, 1999. The Company also has a line of credit and short-term borrowing arrangements with two foreign banks that allow it to borrow up to an aggregate of 2,000,000 French francs (approximately $327,000), collateralized by accounts receivable. Borrowings under these facilities bear interest at the banks' current interest rates, which were 8.1% and 10.1%, respectively, at March 31, 1999. No amounts were outstanding under any of these arrangements at March 31,1999. Assets and liabilities are translated at the rate of exchange in effect as of the balance sheet date. The gains and losses that result from this process are shown as accumulated other comprehensive income in the shareholders' equity section of the balance sheet. Operating transactions are translated at weighted average rates during the period. Transaction gains and losses are reflected in net income. Net cash provided by operations was $1.7 million for the three months ended March 31, 1999 compared to cash provided by operations of $0.6 million for the three months ended March 31, 1998. Significant changes for the three months ended March 31, 1999 relate to fluctuations in operating assets and liabilities. 13 For the three months ended March 31, 1999, net cash used in investing activities totaled $0.1 million compared to $0.2 million for the three months ended March 31, 1998. The Company made capital expenditures of $0.1 million for the three months ended March 31, 1999 compared to $0.2 million for the three months ended March 31, 1998. During the three months ended March 31, 1999, net cash used in financing activities totaled $0.2 million. Cash used in financing activities was related to the repayment of foreign long-term bank debt and the repurchase of the Company's common stock in open market transactions. During the three months ended March 31, 1998, net cash provided by financing activities totaled $0.3 million. Cash generated by financing activities was primarily related to the sale of the Company's common stock. The Company's current cash balances, together with the borrowings available under its line of credit agreements and cash generated from operations, are expected to be sufficient to meet the Company's liquidity requirements for at least the next 12 months. There is no assurance that additional financing will be available if required or on terms deemed favorable by the Company. 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule (b) Reports on Form 8-K None. 15 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. PERCON INCORPORATED by: JASON DAVIS ------------------------------ Jason Davis Chief Financial Officer (Principal Financial and Accounting Officer) Dated: May 14, 1999 16