UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
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 No. 0-27122
ADEPT TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in its Charter)
California 94-2900635
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
150 Rose Orchard Way San Jose, California 95134
(Address of Principal Executive Offices) (Zip Code)
(408) 432-0888
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and, (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of the Registrant's common stock outstanding as of May 8,
2001 was 13,142,026.
ADEPT TECHNOLOGY, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
March 31, 2001 and June 30, 2000............................................ 3
Condensed Consolidated Statements of Operations
Three and nine months ended March 31, 2001 and April 1, 2000................ 4
Condensed Consolidated Statements of Cash Flows
Nine months ended March 31, 2001 and April 1, 2000.......................... 5
Notes to Condensed Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......... 31
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................... 32
Item 6. Exhibits and Reports on Form 8-K.................................... 32
Signatures.................................................................. 33
ADEPT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, June 30,
2001 2000
--------- ---------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 28,319 $ 13,487
Short-term investments 1,384 6,950
Accounts receivable, less allowance for doubtful accounts of
$637 at March 31, 2001 and June 30, 2000 23,160 25,527
Inventories 21,296 15,153
Deferred tax and other current assets 3,084 7,049
--------- ---------
Total current assets 77,243 68,166
Property and equipment at cost 36,311 25,675
Less accumulated depreciation and amortization 22,947 20,092
--------- ---------
Property and equipment, net 13,364 5,583
Goodwill and other intangibles, net 18,094 16,963
Other assets 3,976 2,811
--------- ---------
Total assets $ 112,677 $ 93,523
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,951 $ 10,841
Other accrued liabilities 10,395 10,732
--------- ---------
Total current liabilities 22,346 21,573
Long-term liabilities:
Deferred income tax -- 1,222
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
5,000 shares authorized, none issued and outstanding -- --
Common stock, no par value:
70,000 shares authorized, 12,988 shares issued and outstanding
at March 31, 2001; and 25,000 shares authorized, and
10,677 shares issued and outstanding at June 30, 2000 101,665 67,184
(Accumulated deficit) Retained earnings (11,334) 3,544
--------- ---------
Total shareholders' equity 90,331 70,728
--------- ---------
Total liabilities and shareholders' equity $ 112,677 $ 93,523
========= =========
<FN>
See accompanying notes.
</FN>
3
ADEPT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three months ended Nine months ended
------------------------ ------------------------
March 31, April 1, March 31, April 1,
2001 2000 2001 2000
-------- -------- -------- --------
Net revenues $ 23,913 $ 26,253 $ 79,568 $ 71,154
Cost of revenues 14,393 14,327 44,458 40,784
-------- -------- -------- --------
Gross margin 9,520 11,926 35,110 30,370
Operating expenses:
Research, development and engineering 5,182 3,708 15,056 10,283
Selling, general and administrative 9,297 7,450 25,504 21,683
Merger-related charges -- -- -- 988
Amortization of goodwill and other
intangibles 2,077 -- 5,020 --
-------- -------- -------- --------
Total operating expenses 16,556 11,158 45,580 32,954
-------- -------- -------- --------
Operating (loss) income (7,036) 768 (10,470) (2,584)
Interest income, net 165 80 420 215
-------- -------- -------- --------
(Loss) income before (benefit from) provision for
income taxes (6,871) 848 (10,050) (2,369)
(Benefit from) provision for income taxes 4,828 254 4,828 (691)
-------- -------- -------- --------
Net (loss) income $(11,699) $ 594 $(14,878) $ (1,678)
======== ======== ======== ========
Net (loss) income per share:
Basic $ (0.99) $ 0.06 $ (1.33) $ (0.17)
======== ======== ======== ========
Diluted $ (0.99) $ 0.06 $ (1.33) $ (0.17)
======== ======== ======== ========
Number of shares used in computing per share amounts:
Basic 11,795 9,788 11,147 9,621
======== ======== ======== ========
Diluted 11,795 10,460 11,147 9,621
======== ======== ======== ========
<FN>
See accompanying notes.
</FN>
4
ADEPT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine months ended
--------------------------
March 31, April 1,
2001 2000
-------- --------
Operating activities
Net loss $(14,878) $ (1,678)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 2,592 2,345
Amortization 5,114 106
Deferred tax asset 4,828 --
Loss (gain) on disposal of property and equipment 46 (29)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable 2,470 (678)
Inventories (6,143) (1,744)
Other prepaid expenses (569) 1,066
Other assets (402) (1,024)
Accounts payable 375 (288)
Accrued liabilities (1,490) (1,116)
-------- --------
Net cash used in operating activities (8,057) (3,040)
-------- --------
Investing activities
Business acquisitions (7,050) --
Purchase of property and equipment, net (10,109) (1,701)
Proceeds from the sale of property and equipment -- 88
Purchases of short-term available-for-sale investments (16,261) (42,917)
Sales of short-term available-for-sale investments 21,827 45,767
-------- --------
Net cash (used in) provided by investing activities (11,593) 1,237
-------- --------
Financing activities
Proceeds from issuance of common stock, net 32,424 --
Proceeds from employee stock incentive program and employee
stock purchase plan, net of repurchases and cancellations 2,058 1,563
-------- --------
Net cash provided by financing activities 34,482 1,563
-------- --------
Increase (decrease) in cash and cash equivalents 14,832 (240)
Cash and cash equivalents, beginning of period 13,487 11,816
-------- --------
Cash and cash equivalents, end of period $ 28,319 $ 11,576
======== ========
Supplemental disclosure of noncash activities:
Inventory capitalized into property and equipment including related tax $ -- $ 226
Cash paid during the period for:
Interest $ 10 $ --
Taxes $ 428 $ 582
<FN>
See accompanying notes.
</FN>
5
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. General
The accompanying condensed consolidated financial statements have been prepared
in conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in this report reflects all
adjustments which, in the opinion of management, are necessary for a fair
statement of the consolidated financial position, results of operations and cash
flows as of and for the interim periods. Such adjustments consist of items of a
normal recurring nature. The condensed consolidated financial statements
included herein should be read in conjunction with the audited financial
statements and notes thereto for the fiscal year ended June 30, 2000 included in
Adept's Form 10-K as filed with the Securities and Exchange Commission on
September 28, 2000. Results of operations for interim periods are not
necessarily indicative of the results of operations that may be expected for the
fiscal year ending June 30, 2001 or for any other future period.
Follow-on offering
On February 18, 2001, Adept completed a public offering of its common stock.
Adept sold a total of 2,000,000 shares of common stock at a price of $18.00 per
share. The offering resulted in net proceeds to Adept of approximately $32.4
million, net of an underwriting discount of $2.5 million and estimated offering
expenses of $1.1 million.
Net (Loss) Income per Share
Basic net (loss) income per share is based on the weighted average number of
shares of common stock outstanding during the period, excluding restricted
stock, while diluted net (loss) income per share is based on the weighted
average number of shares of common stock outstanding during the period and the
dilutive effects of common stock equivalents (mainly stock options), determined
using the treasury stock method, outstanding during the period, unless the
effect of including the common stock equivalents is anti-dilutive.
Derivative Financial Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133, as amended by SFAS No. 137 and
138, establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. Adept's foreign currency exchange rate hedging activities have been
insignificant to date, and the adoption of SFAS No. 133 did not have a material
impact on our financial position, results of operations or cash flows.
Adept's product sales are predominantly denominated in U.S. dollars. However,
certain international operating expenses are predominately paid in their
respective local currency. During 2000, Adept began a foreign currency hedging
program to hedge its exposure to foreign currency exchange risk on local
international operational expenses and revenues. Realized and unrealized gains
and losses on forward currency contracts that are effective as hedges of assets
and liabilities, are recognized in income. Adept recognized losses of $457,000
and $14,000 for the three and nine months ended March 31, 2001 and a gain of
$97,800 for the three and nine months ended April 1, 2000.
6
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
From time to time, Adept enters into foreign exchange contracts as a hedge
against foreign currency denominated receivables. Adept does not engage in
currency speculation. Market value gains and losses on contracts are recognized
currently, offsetting gains or losses on the associated receivables. Foreign
currency transaction gains and losses are included in current earnings. Foreign
exchange contracts totaled $3.2 million and $1.9 million at March 31, 2001 and
April 1, 2000, respectively.
2. Mergers and Acquisitions
HexaVision Technologies Inc.
On July 21, 2000, Adept acquired HexaVision Technologies Inc., now called Adept
Technology Canada Co. ("HexaVision"), a Canadian corporation. HexaVision is a
machine vision research and development company. Under the terms of the purchase
agreement, Adept paid $5.5 million in cash, which includes transaction costs of
$0.4 million. In addition, Adept agreed to issue shares of its common stock with
a value of $1.1 million and make two cash payments totaling approximately $1.6
million to the shareholders of HexaVision, contingent upon the continued
employment of more than 50% of selected HexaVision employees through July 2001.
Adept deposited $1.6 million into an escrow account pending resolution of the
contingencies. These contingent cash payments and share issuances will be
accounted for as additional purchase price when the contingencies have been
resolved. If the payments are made and the shares issued, these amounts will be
allocated to goodwill. The acquisition of HexaVision has been accounted for
under the purchase method of accounting. Adept has included the results of
operations of HexaVision in Adept's results of operations beginning July 21,
2000.
The purchase price of HexaVision was allocated, based on preliminary estimates
of fair value, to goodwill and other intangible assets. Goodwill represents the
excess of the purchase price of the net tangible and intangible assets acquired
over their estimated fair value. Other intangible assets primarily represent
developed technology and assembled workforce and non-compete covenants. The
allocation of the purchase price is subject to change based upon the completion
of an independent valuation of the assets and liabilities of HexaVision as well
as the determination of the final transaction costs.
For the HexaVision acquisition, below is a table of the preliminary acquisition
cost, preliminary purchase price allocation and annual amortization of the
intangible assets acquired:
Annual
Amortization Amortization
(in thousands) Acquisition Cost Life of Intangibles
------------------------- ------------------- ---------------------
Cash $ 5,100
Transaction costs..................... 352
----------------
Total acquisition cost........... $ 5,452
================
Purchase Price Allocation
Net liabilities assumed............ $ (205)
Developed and core technology...... 140 30 months $ 56
Non-compete covenant............... 130 30 months 52
Assembled workforce................ 254 30 months 102
Goodwill........................... 5,133 30 months 2,053
---------------- ----------------
Total............................ $ 5,452 $ 2,263
================ ================
7
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following pro forma data was prepared to illustrate the estimated effect of
the acquisition of HexaVision as if the acquisition of HexaVision had occurred
as of the beginning of the year ended June 30, 2000:
(in thousands):
Net revenues........................................ $ 99,331
Net loss............................................ (5,502)
Net loss (income) per share:
Basic............................................. $ (0.56)
Diluted........................................... $ (0.56)
The pro forma results of operation have been prepared for comparison purposes
only and do not necessarily indicate what results would have been if the
acquisition of HexaVision occurred at the beginning of the year ended June 30,
2000.
3. Financial Instruments
Adept considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Short-term investments
consist principally of commercial paper and tax exempt municipal bonds with
maturities between three and 12 months, market auction rate preferred stock and
auction rate notes with maturities of 12 months or less. Investments are
classified as held-to-maturity, trading, or available-for-sale at the time of
purchase.
At March 31, 2001 and June 30, 2000, all of Adept's investments in marketable
securities were classified as available-for-sale and were carried at fair market
value, which approximated cost. Material unrealized gains and losses, if any,
would be recorded in shareholders' equity. Fair market value is based on quoted
market prices on the last day of the fiscal period. The cost of the securities
is based upon the specific identification method. Realized gains or losses,
interest, and dividends are included in interest income. During fiscal year 2000
and the three and nine months ended March 31, 2001, realized and unrealized
gains and losses on available-for-sale investments were not material.
4. Inventories
Inventories are stated at the lower of standard cost, which approximates actual
(first-in, first-out method) or market (estimated net realizable value). The
components of inventory are as follows:
March 31, June 30,
(in thousands) 2001 2000
------- -------
Raw materials .......................... $ 9,331 $ 6,097
Work-in-process ........................ 5,222 3,036
Finished goods ......................... 6,743 6,020
------- -------
$21,296 $15,153
======= =======
8
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. Property and Equipment
Property and equipment are recorded at cost.
The components of property and equipment are summarized as follows:
March 31, June 30,
(in thousands) 2001 2000
------- -------
Cost:
Machinery and equipment ............................ $16,796 $13,303
Computer equipment ................................. 4,094 8,975
Office furniture and equipment ..................... 15,421 3,397
------- -------
36,311 25,675
Accumulated depreciation and amortization .......... 22,947 20,092
------- -------
Net property and equipment ......................... $13,364 $ 5,583
======= =======
6. Merger-Related Expenses
In July 1999, Adept incurred a merger-related charge of $988,000 relating to the
acquisition of BYE/Oasis and the closure of BYE/Oasis facilities in Texas.
Included in this amount were merger-related expenses of $558,000, expenses
relating to the closure of facilities in Texas of $195,000 and other
non-recurring expenses relating to the acquisition of $235,000. No
merger-related expenses were incurred during the three and nine months ended
March 31, 2001.
7. Income Taxes
Adept provides for income taxes during interim reporting periods based on an
estimate of its annual effective tax rate utilizing the liability method.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized. At March 31, 2001, Adept's net
deferred tax assets have been fully offset by a valuation allowance due to
uncertainties about Adept's ability to generate future taxable income. For the
three and nine months ended March 31, 2001, Adept recorded a provision for
income taxes of $4.8 million in order to establish this valuation allowance.
Management will continue to assess Adept's ability to realize its deferred tax
assets.
9
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
8. Net Income (Loss) per Share
Three months ended Nine months ended
-------------------------- --------------------------
March 31, April 1, March 31, April 1,
(in thousands, except per share data) 2001 2000 2001 2000
-------- -------- -------- --------
Net (loss) income ........................................... $(11,699) $ 594 $(14,878) $ (1,678)
Basic:
Weighted average shares outstanding ......................... 11,795 9,788 11,147 9,621
======== ======== ======== ========
Net (loss) income per share ................................. $ (0.99) $ 0.06 $ (1.33) $ (0.17)
======== ======== ======== ========
Diluted:
Weighted average shares outstanding ......................... 11,795 9,788 11,147 9,621
Effect of dilutive securities
- employee stock options .................................. N/A 672 N/A N/A
-------- -------- -------- --------
Adjusted weighted average shares outstanding
- assumed conversion ...................................... 11,795 10,460 11,147 9,621
======== ======== ======== ========
Net (loss) income per share ................................. $ (0.99) $ 0.06 $ (1.33) $ (0.17)
======== ======== ======== ========
9. Impact of Recently Issued Accounting Standards
Staff Accounting Bulletin No. 101 - Revenue Recognition
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" or SAB 101. SAB 101 provides guidance on
the recognition, presentation and disclosure of revenue in financial statements.
In recent actions, the SEC has further delayed the required implementation date
which, for Adept, will be the fourth quarter of fiscal 2001, retroactive to the
beginning of the fiscal year. Adept does not expect the impact of the adoption
of SAB 101 to have a material effect on its consolidated results of operations,
financial position, and cash flows based upon the most current information.
10. Segment Information
Adept adopted Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosures about Segments of an Enterprise and Related Information," in 1999.
SFAS 131 establishes standards for reporting information about operating
segments and related disclosures about products, geographic information and
major customers. Adept has three reportable business segments, the Assembly and
Material Handling ("AMH") operations segment, the Semiconductor operations
segment and the SILMA Software operations segment.
The AMH operations segment provides intelligent automation software and hardware
products for assembly, material handling and packaging applications.
The Semiconductor operations segment provides semiconductor contamination
control products, such as, standard and customized products for contamination
control (mini and micro environments), Standard Mechanical Interfaces ("SMIF")
wafer integration and front-end wafer handling solutions for semiconductor OEMs.
In addition, the segment provides end users guidance and inspection vision
products and robots.
10
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The SILMA Software ("SILMA") operations segment provides 3-D graphical
simulation tools for assembly process design, simulation and analysis.
The reportable segments are each managed separately because they manufacture and
distribute distinct products with different production processes.
Adept evaluates performance and allocates resources based on segment revenues
and segment operating (loss) income. Segment operating (loss) income comprises
income before unallocated research and development expenses, unallocated
selling, general and administrative expenses, amortization of intangibles,
interest income, interest and other expenses and income taxes.
Management does not fully allocate research and development expenses and
selling, general and administrative expenses when making capital spending
decisions, expense funding decisions or assessing segment performance. There
were no intersegment sales or transfers between segments.
Segment information for total assets and capital expenditures is not presented
as such information is not used in measuring segment performance or allocating
resources among segments.
Three months ended Nine months ended
---------------------------- ----------------------------
March 31, April 1, March 31, April 1,
(in thousands) 2001 2000 2001 2000
-------- -------- -------- --------
Revenue:
Assembly and Material Handling
Operations ...................................... $ 18,923 $ 21,286 $ 62,768 $ 59,023
Semiconductor operations ........................... 3,454 3,418 12,396 8,538
SILMA Software operations .......................... 1,536 1,549 4,404 3,593
-------- -------- -------- --------
Total revenue ...................................... $ 23,913 $ 26,253 $ 79,568 $ 71,154
======== ======== ======== ========
Operating (loss) income:
Assembly and Material Handling
Operations ...................................... $ 1,887 $ 5,553 $ 11,919 $ 12,471
Semiconductor operations ........................... 305 133 2,419 993
SILMA Software operations .......................... (129) 6 (434) (806)
-------- -------- -------- --------
Segment profit ..................................... 2,063 5,692 13,904 12,658
Unallocated research, development
and engineering and selling,
general and administrative ...................... (7,022) (4,924) (19,354) (15,242)
Amortization of goodwill and other
intangibles ..................................... (2,077) -- (5,020) --
Interest income .................................... 203 80 466 215
Interest expense ................................... (38) -- (46) --
-------- -------- -------- --------
(Loss) income before provision for
(benefit from) income taxes ..................... $ (6,871) $ 848 $(10,050) $ (2,369)
======== ======== ======== ========
11
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
11. Comprehensive Income (Loss)
For the three and nine months ended March 31, 2001 and April 1, 2000, there were
no significant differences between Adept's comprehensive (loss) income and its
net (loss) income.
12. Reclassification
Certain amounts presented in the financial statements for prior periods have
been reclassified to conform to the presentation for fiscal 2001.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements. These statements involve known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
o marketing and commercialization of our products under development;
o our estimates regarding our capital requirements and our needs for
additional financing;
o plans for future products and services and for enhancements of existing
products and services;
o our ability to attract customers and market our products;
o our intellectual property;
o our ability to establish relationships with suppliers, systems
integrators and original equipment manufactures, or OEMs, for the
supply and distribution of our products;
o plans for future acquisitions and for the integration of recent
acquisitions; and
o sources of revenues and anticipated revenues, including the
contribution from the growth of new products and markets.
In some cases, forward-looking statements can be identified by terms such as
"may," "intend," "might," "will," "should," "could," "would," "expect,"
"believe," "estimate," "predict," "potential," or the negative of these terms,
and similar expressions intended to identify forward-looking statements. These
statements reflect our current estimates and assumptions as of the date of this
report with respect to future events and are based on assumptions subject to
risks and uncertainties. See "Factors affecting Future Operation Results" for an
discussion of these risks. Given these uncertainties, undue reliance should not
be placed on these forward-looking statements.
OVERVIEW
We provide intelligent production automation solutions to our customers in many
industries including the semiconductor, wireless communications, photonics,
food, automotive, life sciences and electronics industries. We utilize our
comprehensive portfolio of high precision mechanical components and application
development software to deliver automation solutions that meet our customer's
increasingly complex manufacturing requirements. We offer our customers a
comprehensive and tailored automation solution that we call Rapid Deployment
Automation, or RDA, that reduces the time and cost to design, engineer and
launch products into high-volume production. We market and sell our products
worldwide through more than 300 system integrators, our direct sales force and
OEMs.
This discussion summarizes the significant factors affecting our consolidated
operating results, financial condition, liquidity and cash flow during the three
and nine months ended March 31, 2001. Unless otherwise indicated, references to
any quarter in this Management's Discussion and Analysis of Financial Condition
and Results of Operations refer to our fiscal quarter ended March 31, 2001. This
discussion should be read with the consolidated financial statements and
financial statement footnotes included in this Quarterly Report on Form 10-Q.
13
Results of Operations
Three Month and Nine Month Periods Ended March 31, 2001 and April 1, 2000
Net revenues. Our net revenues decreased by 8.9% to $23.9 million for the three
months ended March 31, 2001 from $26.3 million for the three months ended April
1, 2000. Our net revenues increased by 11.8% to $79.6 million for the nine
months ended March 31, 2001 from $71.2 million for the nine months ended April
1, 2000. The decrease in revenue for the three-month period as compared with the
same period last year was primarily the result of a slowdown in the automotive
and household, appliance and industrial markets which accounted for 58% and 32%
of the decrease respectively. The decrease in demand in these markets was offset
by 8.5% increase in sales to electronics markets which includes
telecommunications and photonics and a 2% increase in sales to the semiconductor
market compared to the same quarter a year ago. For the nine months ended March
31, 2001, our key growth markets of semiconductor and photonics represented 19%
and 4% of revenue, respectively. As indicated above, we are currently
experiencing reduced demand in some of the industries we serve, including the
electronics, automotive and semiconductor industries, will adversely affect our
sales in these markets over at least the next several quarters.
Our domestic sales totaled $16.0 million and $51.3 million for the three and
nine months ended March 31, 2001, compared with $13.5 million and $38.7 million
for the three and nine months ended April 1, 2000, an increase of 18.5% and
32.3%, respectively. The growth in domestic sales was principally attributable
to increased sales to the electronics markets which include telecommunications
and photonics. The growth in domestic sales was principally attributable to
increased sales to OEMs. Sales to the photonics market represented 11% and
semiconductor represented 21% of our total product revenues in the quarter ended
March 31, 2000, which were primarily made in the domestic market.
Our international sales totaled $7.9 million and $28.3 million for the three and
nine months ended March 31, 2001, compared with $12.7 million and $32.5 million
for the three and nine months ended April 1, 2000, representing a decrease of
38.1% and 12.9%, respectively. We continued to see pricing pressures due to the
strength of the U.S. dollar against the euro, which contributed to lower sales
in the quarter ended March 31, 2001. We may experience continued price pressure
in European markets, which may have a negative effect on future revenues.
Gross margin. Gross margin as a percentage of net revenue was 39.8% for the
three months ended March 31, 2000 compared to 45.4% for the three months ended
April 1, 2000. Gross margin as a percentage of net revenue was 44.1% for the
nine months ended March 31, 2001 compared to 42.7% for the nine months ended
April 1, 2000. The decrease in gross margin for the three months ended March 31,
2001 was the result of transitional cost associated with new product
introductions and lower volume over a relatively fixed manufacturing base,
particularly in the industrial and automotive markets. In addition, we
experienced a higher content of hardware in our product mix, which yielded lower
margins. The increase in gross margin for the nine months ended March 31, 2001
was a result of higher volumes. In addition improvement in gross margin during
the nine months ended March 31, 2001 was based on product cost reduction efforts
that began in prior periods during fiscal year 2001. As we enter new markets or
experience significant growth in existing markets, our acquisition of additional
manufacturing resources to meet those needs could negatively impact margins in
the future.
Research, Development and Engineering Expenses. Research, development and
engineering expenses increased by 38.9% to $5.2 million, or 21.7% of net
revenues, for the three months ended March 31, 2001 from $3.7 million, or 14.1%
of net revenues, for the three months ended April 1, 2000. Research, development
and engineering expenses increased by 46.4% to $15.1 million, or 18.9% of net
revenues, for the nine months ended March 31, 2001 from $10.3 million, or 14.5%
of net revenues, for the nine months ended April 1, 2000. The increase for both
periods was attributable primarily to increased personnel costs as research,
development and engineering headcount increased 102% from April 1, 2000 to March
31, 2001, with more than half of these employees being hired as a result of our
three acquisitions during calendar year 2000. We expect that project and
operating expenses will continue to increase as we continue to invest in the
photonics market as well as in new product development opportunities made
available through our recent acquisitions.
14
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 24.8% to $9.3 million, or 38.9% of net
revenues, for the three months ended March 31, 2001, as compared with $7.5
million, or 28.4% of net revenues, for the three months ended April 1, 2000.
Selling, general and administrative expenses increased 17.6% to $25.5 million,
or 32.1% of net revenues, for the nine months ended March 31, 2001, as compared
with $21.7 million, or 30.5% of net revenues, for the nine months ended April 1,
2000. The increased level of spending for the three and nine months ended March
31, 2001 was primarily attributable to increased headcount of 14% from April 1,
2000 to March 31, 2001 and compensation-related expenses and additional costs
from companies acquired. We expect that selling, general and administrative
expenses will continue to increase as we continue to invest in new product
marketing opportunities made available through our recent acquisitions.
Merger-Related Charges. We did not incur any merger-related expenses during the
three or nine months ended March 31, 2001. In the quarter ended October 2, 1999,
we incurred merger-related charges of $988,000 relating to the acquisition of
BYE/Oasis and the closure of BYE/Oasis facilities in Texas. Included in this
amount were merger-related expenses of $558,000, expenses relating to the
closure of facilities in Texas of $195,000, and other non-recurring expenses
relating to the BYE/Oasis acquisition of $235,000.
Amortization of Goodwill and Other Intangibles. We incurred non-cash expenses of
$2.1 million and $5.0 million due to the amortization of goodwill and other
intangibles relating to the acquisition of HexaVision, Nanomotion Incorporated
and Pensar-Tucson, Inc for the three and nine months ended March 31, 2001,
respectively. See note 2 (Mergers and Acquisitions) to our condensed
consolidated financial statements.
Interest Income, Net. Interest income, net, for the three months ended March 31,
2001 was $165,000 compared to $80,000 for the three months ended April 1, 2000.
Interest income, net for the nine months ended March 31, 2001 was $420,000
compared to $215,000 for the nine months ended April 1, 2001. The increases for
the three and nine month periods were due to increased interest income earned on
the proceeds from our public offering in February 2001.
(Benefit from) Provision for Income Taxes. At March 31, 2001, our net deferred
tax assets have been fully offset by a valuation allowance due to uncertainties
surrounding our ability to generate future taxable income. For the three and
nine months ended March 31, 2001, we recorded a provision for income taxes of
$4.8 million in order to establish this valuation allowance as compared to a
benefit from income taxes of 29% for the nine months ended April 1, 2000. We
will continue to assess our ability to realize our deferred tax assets on an
ongoing basis.
Derivative Financial Instruments. Our product sales are predominantly
denominated in U.S. dollars. However, certain international operating expenses
are predominately paid in their respective local currency. During 2000, we began
a foreign currency hedging program to hedge our exposure to foreign currency
exchange risk on local international operational expenses and revenues. Realized
and unrealized gains and losses on forward currency contracts that are effective
as hedges of assets and liabilities are recognized in income. We recognized
losses of $457,000 and $14,000 for the three and nine months ended March 31,
2001 and a gain $97,800 for the three and nine months ended April 1, 2000.
Impact of Inflation
The effect of inflation on our business and financial position has not been
significant to date.
Liquidity and Capital Resources
As of March 31, 2001, we had working capital of approximately $54.9 million,
including $28.3 million in cash and cash equivalents.
Cash and cash equivalents increased $14.8 million since June 30, 2000. Net cash
used in operating activities of $8.1 million was primarily attributable to the
net loss adjusted by depreciation, amortization, and an increase in
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valuation allowance for deferred taxes, offset by increased inventories and a
provision for income taxes. The increase in inventories of $6.1 million during
the nine months ended March 31, 2001 related primarily to new product
introductions and decrease of sales. Cash used in investing activities during
the nine months ended March 31, 2001 included $7.1 million in cash paid as part
of the purchase price for the acquisition of HexaVision, which was completed
during the first quarter. We added $10.1 million in fixed assets and capital
equipment, of which $2.0 million was related to test equipment and fixtures for
new product introductions, $1.6 million for development of fully automated and
semi-automated photonics demonstration equipment, $1.8 million related to
rollout of our enterprise resource planning software, and $1.1 million for
office space reconfiguration. In February 2001, we completed a public offering
of 2,000,000 shares of common stock at $18.00 per share. Realized net proceeds
to us were $32.4 million. Cash flows from financing activities during the nine
months consisted of the $32.4 million from the public offering, as well as $2.1
million in proceeds from our employee stock incentive plan.
We continue to pursue multiple options to address our capital requirements to
take advantage of opportunities in the semiconductor and photonics markets,
which may include acquisitions of complimentary products, technologies, or
businesses. However, we believe exclusive of these specific opportunities that
our existing cash and cash equivalent balances as well as short-term investments
and anticipated cash flow from operations will be sufficient to support our
normal capital requirements for at least the next 12 months.
Acquisitions
On July 21, 2000, we completed the acquisition of HexaVision Technologies Inc.,
now Adept Technology Canada Co., a Canadian corporation. HexaVision is a machine
vision research and development company. In connection with the acquisition, we
paid $5.5 million in cash, which includes transaction costs of $0.4 million, and
will be issuing shares of our common stock to the shareholders of HexaVision
with a value of $1.1 million, subject to certain conditions. In addition, the
terms of the acquisition provide that we will make two payments totaling
approximately $1.6 million to the shareholders of HexaVision contingent upon the
continued employment of selected HexaVision employees through July 2001. We
deposited $1.6 million into an escrow account pending resolution of these
contingencies. These contingent cash payments and share issuances will be
accounted for as additional purchase price when the contingencies have been
resolved. If the payments are made and the shares are issued, these amounts will
be allocated to goodwill. We have accounted for the acquisition under the
purchase method. We have included the results of operations of HexaVision in our
results of operations beginning July 21, 2000. We believe the acquisition of
HexaVision will enhance our machine vision products for all markets and
facilitate our entry into the PC-based machine vision market. HexaVision's core
technology incorporates techniques to achieve accuracies up to 1/40th of a pixel
with machine vision measurement algorithms that can increase our performance in
critical and demanding applications such as vision serving for the
microelectrical, fiber optic, semiconductor, metrology and photonics industries.
New Accounting Pronouncements
Staff Accounting Bulletin No. 101 - Revenue Recognition
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" or SAB 101. SAB 101 provides guidance on
the recognition, presentation and disclosure of revenue in financial statements.
In recent actions, the SEC has further delayed the required implementation date
which, for us, will be the fourth quarter of fiscal 2001, retroactive to the
beginning of the fiscal year. We do not expect the impact of the adoption of SAB
101 to have a material effect on our consolidated results of operations,
financial position and cash flows based upon the most current information.
Statement of Financial Accounting Standard No. 133 - Accounting for Derivative
Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, of SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133, as amended
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by SFAS No. 137 and 138, establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. Our foreign currency exchange rate hedging
activities have been historically insignificant, and the adoption of SFAS No.
133 did not have a material impact on our financial position, results of
operations or cash flows.
FACTORS AFFECTING FUTURE OPERATING RESULTS
RISKS RELATED TO OUR BUSINESS
You should not rely on our past results to predict our future performance
because our operating results fluctuate due to factors which are difficult to
forecast.
Our past revenue and other operating results may not be accurate indicators of
our future performance. Our operating results have been subject to significant
fluctuations in the past, and we expect this to continue in the future. The
factors that may contribute to these fluctuations include:
o fluctuations in capital spending, cyclicality and other economic
conditions domestically and internationally in one or more industries
in which we sell our products;
o changes in demand in the semiconductor and electronics industries;
o new product introductions by us or by our competitors;
o changes in product mix and pricing by us, our suppliers or our
competitors;
o availability of components and raw materials for our products;
o our failure to manufacture a sufficient volume of products in a timely
and cost-effective manner;
o our failure to anticipate the changing product requirements of our
customers;
o a change in market acceptance of our products or a shift in demand for
our products;
o changes in the mix of sales by distribution channels;
o exchange rate fluctuations;
o extraordinary events such as litigation or acquisitions; and
o slower than expected growth in the photonics industry.
Our gross margins may vary greatly depending on the mix of sales of lower margin
hardware products, particularly mechanical subsystems purchased from third party
vendors, and higher margin software products.
Our operating results may also be affected by general economic and other
conditions affecting the timing of customer orders and capital spending. For
example, our operations during the third and fourth quarters of fiscal 1998, the
first three quarters of fiscal 1999, the first quarter of fiscal 2000 and the
first three quarters of fiscal 2001 were adversely affected by a continuing
downturn in hardware purchases by customers in the electronics industry,
particularly disk-drive manufacturers and to a lesser extent communication
manufacturers. In addition, we have experienced reduced demand during the last
two quarters in our base industries, especially the semiconductor industry, as
OEMs reduced inventories as they shifted their businesses from a period of high
growth to moderate growth. We cannot estimate when or if a sustained revival in
these key hardware markets will occur.
17
We generally recognize product revenue upon shipment or, for certain
international sales, upon receipt by the customers. As a result, our net
revenues and results of operations for a fiscal period will be affected by the
timing of orders received and orders shipped during the period. A delay in
shipments near the end of a fiscal period, for example, due to product
development delays or delays in obtaining materials may cause sales to fall
below expectations and harm our operating results for the period.
In addition, our continued investments in research and development, capital
equipment and ongoing customer service and support capabilities result in
significant fixed costs that we cannot reduce rapidly. As a result, if our sales
for a particular fiscal period are below expected levels, our operating results
for the period could be materially adversely affected.
In the event that in some future fiscal quarter our net revenues or operating
results fall below the expectations of public market analysts and investors, the
price of our common stock may fall. We may not be able to increase or sustain
our profitability on a quarterly or annual basis in the future.
Sales of our products depend on the capital spending habits of our customers,
which tend to be cyclical; we are currently experiencing reduced demand in the
electronics and semiconductor industries, which may adversely affect our
revenues.
Intelligent automation systems using our products can range in price from
$75,000 to several million dollars. Accordingly, our success is directly
dependent upon the capital expenditure budgets of our customers. Our future
operations may be subject to substantial fluctuations as a consequence of
domestic and foreign economic conditions, industry patterns and other factors
affecting capital spending. Although the majority of our international customers
are not in the Asia-Pacific region, we believe that any instability in the
Asia-Pacific economies could also have a material adverse effect on the results
of our operations as a result of a reduction in sales by our customers to those
markets. Domestic or international recessions or a downturn in one or more of
our major markets, such as the electronics, wireless communications,
semiconductor, appliances, pharmaceutical, food processing or automotive
components industries, and resulting cutbacks in capital spending would have a
direct, negative impact on our business. We are currently experiencing reduced
demand in some of the industries we serve including the electronics and
semiconductor industries and expect this reduced demand to adversely affect our
revenues for at least the next quarter. During the third quarter of fiscal 2001,
Adept received fewer orders that expected, the delay of several orders, and some
order cancellations, and such changes in orders may adversely affect revenue for
future quarters.
We sell some of our products to the semiconductor industry, which is subject to
sudden, extreme, cyclical variations in product supply and demand. The timing,
length and severity of these cycles are difficult to predict. In some cases,
these cycles have lasted more than a year. Semiconductor manufacturers may
contribute to these cycles by misinterpreting the conditions in the industry and
over- or under-investing in semiconductor manufacturing capacity and equipment.
We may not be able to respond effectively to these industry cycles.
Downturns in the semiconductor industry often occur in connection with, or
anticipation of, maturing product cycles for both semiconductor companies and
their customers and declines in general economic conditions. Industry downturns
have been characterized by reduced demand for semiconductor devices and
equipment, production over-capacity and accelerated decline in average selling
prices. During a period of declining demand, we must be able to quickly and
effectively reduce expenses and motivate and retain key employees. Our ability
to reduce expenses in response to any downturn in the semiconductor industry is
limited by our need for continued investment in engineering and research and
development and extensive ongoing customer service and support requirements. The
long lead time for production and delivery of some of our products creates a
risk that we may incur expenditures or purchase inventories for products which
we cannot sell. A downturn in the semiconductor industry could therefore harm
our revenues and gross margin if demand drops or average selling prices decline.
Industry upturns have been characterized by abrupt increases in demand for
semiconductor devices and
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equipment and production under-capacity. During a period of increasing demand
and rapid growth, we must be able to quickly increase manufacturing capacity to
meet customer demand and hire and assimilate a sufficient number of qualified
personnel. Our inability to ramp-up in times of increased demand could harm our
reputation and cause some of our existing or potential customers to place orders
with our competitors.
Many of the key components and materials of our products come from single source
suppliers, their procurement requires lengthy lead times or supplies of such
components are limited.
We obtain many key components and materials and some significant mechanical
subsystems from sole or single source suppliers with whom we have no guaranteed
supply arrangements. In addition, some of our sole or single sourced components
and mechanical subsystems incorporated into our products have long procurement
lead times. Our reliance on sole or single source suppliers involves certain
significant risks including:
o loss of control over the manufacturing process;
o potential absence of adequate supplier capacity;
o potential inability to obtain an adequate supply of required
components, materials or mechanical subsystems; and
o reduced control over manufacturing yields, costs, timely delivery,
reliability and quality of components, materials and mechanical
subsystems.
We depend on Sanmina Corporation for the supply of our circuit boards, NSK
Corporation for the supply of our linear modules, which are mechanical devices
powered by an electric motor that move in a straight line, and which can be
combined as building blocks to form simple robotic systems, Yaskawa Electric
Corp. for the supply of our 6-axis robots, Samsung Electronics Co., Ltd. for the
supply of semiconductor robots, Hirata Corporation for the supply of our Adept
Cobra 600 robot mechanism and Adept Cobra 800 robot mechanisms and we are
transitioning from Imaging Technology Incorporated to Matrox Electronic Systems
Ltd. for the supply of our computer vision processors, which are used to
digitize images from a camera and perform measurements and analysis. If any one
of these significant sole or single source supplier were unable or unwilling to
manufacture the components, materials or mechanical subsystems we need in the
volumes we require, we would have to identify and qualify acceptable
replacements. The process of qualifying suppliers may be lengthy, and additional
sources may not be available to us on a timely basis, on acceptable terms or at
all. If supplies of these items were not available from our existing suppliers
and a relationship with an alternative vendor could not be developed in a timely
manner, shipments of our products could be interrupted and reengineering of
these products could be required. In the past, we have experienced quality
control or specification problems with certain key components provided by sole
source suppliers, and have had to design around the particular flawed item. We
have also experienced delays in filling customer orders due to the failure of
certain suppliers to meet our volume and schedule requirements. Some of our
suppliers have also ceased manufacturing components that we require for our
products, and we have been required to purchase sufficient supplies for the
estimated life of its product line. Problems of this nature with our suppliers
may occur in the future.
In addition, some of the components that we use in our products are in short
supply. Many of our products have longer lives than those of the components and
materials included in our products. As a result, supplies of components for our
products may not be available throughout the life span of our products.
Disruption or termination of our supply sources could require us to seek
alternative sources of supply, and could delay our product shipments and damage
relationships with current and prospective customers, any of which could have a
material adverse effect on our business. If we incorrectly forecast product mix
for a particular period and we are unable to obtain sufficient supplies of any
components or mechanical subsystems on a timely basis due to long procurement
lead times, our business, financial condition and results of operations could be
substantially impaired. Moreover, if demand for a product for which we have
purchased a substantial amount of components fails to meet our expectations, we
would be required to write off the excess
19
inventory. A prolonged inability to obtain adequate timely deliveries of key
components could have a material adverse effect on our business, financial
condition and results of operations.
Because our product sales are seasonal, we may not be able to maintain a steady
revenue stream.
Our product sales are seasonal. We have historically had higher bookings for our
products during the June quarter of each fiscal year and lower bookings during
the September quarter of each fiscal year, due primarily to the slowdown in
sales to European markets and summer vacations. In the event bookings for our
products in the June fiscal quarter are lower than anticipated and our backlog
at the end of the June fiscal quarter is insufficient to compensate for lower
bookings in the September fiscal quarter, our results of operations for the
September fiscal quarter and future quarters will suffer. For example, with the
exception of the quarter ending March 1999, our net revenues decreased as a
result of reduced product bookings in each of the two previous fiscal quarters
ending December 1999. In addition, during the quarter ending September 1999 our
revenue declined for similar reasons. As a whole, our revenues were adversely
affected by a decline in orders from customers primarily in the disk-drive
industry during fiscal 2000 and fiscal 1999 and, to a lesser extent, the
communications markets in fiscal 1999.
A significant percentage of our product shipments occur in the last month of
each fiscal quarter. Historically, this has been due in part, at times, to our
inability to forecast the level of demand for our products or of the product mix
for a particular fiscal quarter. To address this problem we periodically stock
inventory levels of completed robots, machine controllers and certain strategic
components. If shipments of our products fail to meet forecasted levels, the
increased inventory levels and increased operating expenses in anticipation of
sales that do not materialize could adversely affect our business.
Orders constituting our backlog are subject to changes in delivery schedules and
customer cancellations resulting in lower than expected revenues
Backlog should not be relied on as a measure of anticipated activity or future
revenues, because the orders constituting our backlog are subject to changes in
delivery schedules and in certain instances are subject to cancellation without
significant penalty to the customer. We have in the past experienced changes in
delivery schedules and customer cancellations that resulted in our revenues in a
given quarter being materially less than would have been anticipated based on
backlog at the beginning of the quarter. Similar delivery schedule changes and
order cancellations may adversely affect our operating results in the future.
Because we do not have long-term contracts with our customers, they may cease
purchasing our products at any time.
We generally do not have long-term contracts with our customers and existing
contracts may be cancelled. As a result, our agreements with our customers do
not provide any assurance of future sales. Accordingly our customers are not
required to make minimum purchases and may cease purchasing our products at any
time without penalty. Because our customers are free to purchase products from
our competitors, we are exposed to competitive price pressure on each order. Any
reductions, cancellations or deferrals in customer orders could have a negative
impact on our financial condition and results of operations.
We are expanding development of intelligent automation solutions for the
photonics industry, and our entry into this industry will require us to develop
significant new capabilities and may not be successful.
We are expanding development of our intelligent automation solutions targeted at
the photonics industry. We expect to devote significant financial, engineering
and management resources to expand our development and marketing of these
solutions. Our success in the photonics industry depends upon our ability to,
among other things:
o accurately determine the features and functionality that our photonics
customers require or prefer;
20
o successfully design and implement intelligent automation solutions that
include these features and functionality;
o enter into agreements with system integrators, manufacturers and
distributors; and
o achieve market acceptance for our photonics solutions.
Our photonics solutions may not achieve broad market acceptance for a variety of
reasons including:
o photonics companies may continue their current production methods and
may not adopt our intelligent automation solutions;
o photonics companies may determine that the costs and resources required
to switch to our intelligent automation solutions are unacceptable to
them;
o system integrators, manufacturers and OEMs may not enter into
agreements with us; and
o competition from traditional, well-established photonics manufacturing
methods.
We have limited experience in developing and marketing products for the
photonics industry. If we do not successfully develop and achieve market
acceptance of products for the photonics industry, our ability to increase our
revenue may be limited and our business and our results of operations will
suffer.
We charge a fixed price for certain products which may make us vulnerable to
cost overruns.
Our operating results fluctuate when our gross margins vary. Our gross margins
vary for a number of reasons, including:
o the mix of products we sell;
o the average selling prices of products we sell;
o the costs to manufacture, market, service and support our new products
and enhancements;
o the costs to customize our systems; and
o our efforts to enter new markets.
We charge a fixed price for certain of our products, including the products that
we added as a result of our acquisition of Pensar. If the costs we incur in
completing a customer order for these products exceed our expectations, we
generally cannot pass those costs on to our customer.
We have significant fixed costs which are not easily reduced during a downturn.
We continue to invest in research and development, capital equipment and
extensive ongoing customer service and support capability worldwide. These
investments create significant fixed costs that we may be unable to reduce
rapidly if we do not meet our sales goals. Moreover, if we fail to obtain a
significant volume of customer orders for an extended period of time, we may
have difficulty planning our future production and inventory levels, which could
also cause fluctuations in our operating results.
If our targeted photonics market develops more slowly than we expect, our
revenue will not grow as fast as anticipated, if at all.
Segments of the photonics market that we target as an element of our growth
strategy are either emerging or
21
rapidly changing and the potential size of these market segments and the timing
of their development are difficult to predict. If our targeted segments of this
market develop more slowly than we expect, our ability to increase our revenue
may be limited. We depend, in part, upon the broad acceptance by photonic
manufacturers of our material handling and component assembly solutions, as well
as our simulation software and robot vision and motion control technology.
We rely on systems integrators and OEMs to sell our products.
We believe that our ability to sell products to system integrators and OEMs will
continue to be important to our success. Our relationships with system
integrators and OEMs are generally not exclusive, and some of our system
integrators and OEMs may expend a significant amount of effort or give higher
priority to selling products of our competitors. In the future, any of our
system integrators or our OEMs may discontinue their relationships with us or
form additional competing arrangements with our competitors. The loss of, or a
significant reduction in revenues from, system integrators or OEMs to which we
sell a significant amount of our product could negatively impact our business,
financial condition or results of operations.
As we enter new geographic and applications markets, we must locate system
integrators and OEMs to assist us in building sales in those markets. We may not
be successful in obtaining effective new system integrators or OEMs or in
maintaining sales relationships with them. In the event a number of our system
integrators and/or OEMs experience financial problems, terminate their
relationships with us or substantially reduce the amount of our products they
sell, or in the event we fail to build an effective systems integrator or OEM
channel in any new markets, our business, financial condition and results of
operations could be adversely affected.
In addition, a substantial portion of our sales are to system integrators that
specialize in designing and building production lines for manufacturers. Many of
these companies are small operations with limited financial resources, and we
have from time to time experienced difficulty in collecting payments from
certain of these companies. As a result, we perform ongoing credit evaluations
of our customers. To the extent we are unable to mitigate this risk of
collections from system integrators, our results of operations may be harmed.
Our products generally have long sales cycles and implementation periods, which
increase our costs in obtaining orders and reduces the predictability of our
earnings.
Our products are technologically complex. Prospective customers generally must
commit significant resources to test and evaluate our products and to install
and integrate them into larger systems. Orders expected in one quarter may shift
to another quarter or be cancelled with little advance notice as a result of the
customers' budgetary constraints, internal acceptance reviews, and other factors
affecting the timing of customers' purchase decisions. In addition, customers
often require a significant number of product presentations and demonstrations,
in some instances evaluating equipment on site, before reaching a sufficient
level of confidence in the product's performance and compatibility with the
customer's requirements to place an order. As a result, our sales process is
often subject to delays associated with lengthy approval processes that
typically accompany the design and testing of new products. The sales cycles of
our products often last for many months or even years. In addition, the time
required for our customers to incorporate our products into their systems can
vary significantly with the needs of our customers and generally exceeds several
months, which further complicates our planning processes and reduces the
predictability of our operating results. Longer sales cycles require us to
invest significant resources in attempting to make sales, which may not be
realized and delay the generation of revenue.
If we are unable to identify and make acquisitions, our ability to expand our
operations and increase our revenue may suffer.
In the latter half of fiscal 2000, a significant portion of our growth was
attributable to acquisitions of other businesses and technologies. We expect
that acquisitions of complementary companies, products and technologies in the
future will play an important role in our ability to expand our operations, hire
additional personnel and increase our revenue. We are currently reviewing
several possible acquisition candidates as part
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of our strategy to market intelligent automation solutions targeted at the
photonics industry. If we are unable to identify suitable targets for
acquisition or complete acquisitions on acceptable terms, our ability to expand
our service offerings and increase our revenue may be impaired. Even if we are
able to identify and acquire acquisition candidates, we may be unable to realize
the benefits anticipated as a result of these acquisitions.
Any acquisitions we make could disrupt our business, increase our expenses and
adversely affect our financial condition or operations.
During fiscal 2000, we acquired Pensar, NanoMotion and BYE/Oasis. In July 2000,
we acquired HexaVision. These acquisitions introduced us to industries and
technologies in which we have limited previous experience. In the future we may
make material acquisitions of, or large investments in, other businesses that
offer products, services, and technologies that management believes will further
our strategic objectives. We cannot be certain that we would successfully
integrate any businesses, technologies or personnel that we might acquire, and
any acquisitions might divert our management's attention away from our core
business. Any future acquisitions or investments we might make would present
risks commonly associated with these types of transactions, including:
o difficulty in combining the product offerings, operations, or work
force of an acquired business;
o potential loss of key personnel of an acquired business;
o adverse effects on existing relationships with suppliers and customers;
o disruptions of our on-going businesses;
o difficulties in realizing our potential financial and strategic
position through the successful integration of the acquired business;
o difficulty in maintaining uniform standards, controls, procedures and
policies;
o potential negative impact on results of operations due to amortization
of goodwill, other intangible assets acquired or assumption of
anticipated liabilities;
o risks associated with entering markets in which we have limited
previous experience; and
o the diversion of management attention.
The risks described above, either individually or in the aggregate, could
significantly harm our business, financial condition and results of operations.
We expect that future acquisitions, if any, could provide for consideration to
be paid in cash, shares of our common stock, or a combination of cash and common
stock. In addition, we may issue additional equity in connection with future
acquisitions, which could result in dilution of our shareholders' equity
interest. Fluctuations in our stock price may make acquisitions more expensive
or prevent us from being able to complete acquisitions on terms that are
acceptable to us.
Our international operations may subject us to divergent regulatory requirements
and other risks that may harm our operating results.
International sales were $7.9 million and $28.3 million for the three and nine
months ended March 31, 2001, $44.9 million for the fiscal year ended June 30,
2000, and $41.3 million for the fiscal year ended June 30, 1999. This
represented 33.0%, 35.6%, 45.2%, and 47.2% of net revenues for the respective
periods. We also purchase some components and mechanical subsystems from foreign
suppliers. As a result, our operating results are subject to the risks inherent
in international sales and purchases, which include the following:
o unexpected changes in regulatory requirements;
o political and economic changes and disruptions;
23
o transportation costs and delays;
o foreign currency fluctuations;
o export/import controls;
o tariff regulations and other trade barriers;
o higher freight rates;
o difficulties in staffing and managing foreign sales operations;
o greater difficulty in accounts receivable collection in foreign
jurisdictions; and
o potentially adverse tax consequences.
Foreign exchange fluctuations may render our products less competitive relative
to locally manufactured product offerings, or could result in foreign exchange
losses. In calendar 2000, the value of major European currencies dropped against
the U.S. dollar. And in 2001 to date, the values of major European currencies
has dropped against the U.S. dollar. To date, we have not reflected that change
in currency value in our selling prices. In order to maintain a competitive
price for our products in Europe, we may have to provide discounts or otherwise
effectively reduce our prices, resulting in a lower margin on products sold in
Europe. Continued change in the values of European currencies, or changes in the
values of other foreign currencies could have a negative impact on our business,
financial condition and results of operations.
In addition, duty, tariff and freight costs can materially increase the cost of
crucial components for our products. We anticipate that past turmoil in Asian
financial markets and the deterioration of the underlying economic conditions in
certain Asian countries may continue to have an impact on our sales to customers
located in or whose projects are based in those countries due to the impact of
restrictions on government spending imposed by the International Monetary Fund
on those countries receiving the International Monetary Fund's assistance. In
addition, customers in those countries may face reduced access to working
capital to fund component purchases, such as our products, due to higher
interest rates, reduced bank lending due to contractions in the money supply or
the deterioration in the customer's or our bank's financial condition or the
inability to access local equity financing.
Maintaining operations in different countries requires us to expend significant
resources to keep our operations coordinated and subjects us to differing laws
and regulatory regimes that may affect our service offerings and revenue.
We may incur currency exchange-related losses in connection with our reliance on
our single or sole source foreign suppliers.
We make yen-denominated purchases of certain components and mechanical
subsystems from certain of our sole or single source Japanese suppliers.
Depending on the amount of yen-denominated purchases, we may engage in hedging
transactions in the future. However, notwithstanding these precautions, we
remain subject to the transaction exposures that arise from foreign exchange
movements between the dates foreign currency export sales or purchase
transactions are recorded and the dates cash is received or payments are made in
foreign currencies. Our current or any future currency exchange strategy may not
be successful in avoiding exchange-related losses. Any exchange-related losses
or exposure may negatively effect our business, financial condition or results
of operations.
If our hardware products do not comply with standards set forth by the European
Union, we will not be able to sell them in Europe.
Our hardware products are required to comply with European Union Low Voltage,
Electro-Magnetic
24
Compatibility, and Machinery Safety Directives. The European Union mandates that
our products carry the CE mark denoting that these products are manufactured in
strict accordance to design guidelines in support of these directives. These
guidelines are subject to change and to varying interpretation. New guidelines
impacting machinery design go into effect each year. To date, we have retained
TUV Rheinland to help certify that our controller-based products, including some
of our robots, meet applicable European Union directives and guidelines.
Although our existing certified products meet the requirements of the applicable
European Union directives, we cannot assure that future products can be
designed, within market window constraints, to meet the future requirements. If
any of our robot products or any other major hardware products do not meet the
requirements of the European Union directives, we would be unable to legally
sell these products in Europe. Thus, our business, financial condition and
results of operations could be harmed.
Our hardware and software products may contain defects that could increase our
expenses exposure to liabilities and harm our reputation and future business
prospects.
Our hardware and software products are complex and, despite extensive testing,
our new or existing products or enhancements may contain defects, errors or
performance problems when first introduced, when new versions or enhancements
are released or even after these products or enhancements have been used in the
marketplace for a period of time. We may discover product defects only after a
product has been installed and used by customers. We may discover defects,
errors or performance problems in future shipments of our products. These
problems could result in expensive and time consuming design modifications or
large warranty charges, expose us to liability for damages, damage customer
relationships and result in loss of market share, any of which could harm our
reputation and future business prospects. In addition, increased development and
warranty costs could reduce our operating profits and could result in losses.
The existence of any defects, errors or failures in our products could also lead
to product liability claims or lawsuits against us or against our customers. A
successful product liability claim could result in substantial cost and divert
management's attention and resources, which could have a negative impact on our
business, financial condition and results of operations. Although we are not
aware of any product liability claims to date, the sale and support of our
products entail the risk of these claims.
The success of our business depends on our key employees.
We are highly dependent upon the continuing contributions of our key management,
sales, and product development personnel. In particular, we would be adversely
affected if we were to lose the services of Brian Carlisle, Chief Executive
Officer and Chairman of the Board of Directors, who has provided significant
leadership to us since our inception, or Bruce Shimano, Vice President, Research
and Development and a Director, who has guided our research and development
programs since inception. In addition, the loss of the services of any of our
senior managerial, technical or sales personnel could impair our business,
financial condition, and results of operations. We do not have employment
contracts with any of our executive officers and do not maintain key man life
insurance on the lives of any of our key personnel.
Our future success depends on our continuing ability to attract, retain and
motivate highly-qualified managerial, technical and sales personnel.
Competition for qualified technical personnel in the intelligent automation
industry is intense. Our inability to recruit and train adequate numbers of
qualified personnel on a timely basis would adversely affect our ability to
design, manufacture, market and support our products.
In addition, our success will depend on our ability to hire additional
experienced engineers, senior management and sales and marketing personnel. The
robust economy and opportunities available in other high technology companies
has made and could continue to make recruiting and retaining employees,
especially design engineers, more difficult for us. Competition for these
personnel is intense, particularly in geographic areas recognized as high
technology centers such as the Silicon Valley area, where our principal offices
are located, and other locations where we maintain design sites. To attract and
retain individuals with the requisite expertise, we may be
25
required to grant large option or other stock-based incentive awards, which may
be dilutive to shareholders. We may also be required to pay significant base
salaries and cash bonuses, which could harm our operating results. If we do not
succeed in hiring and retaining candidates with appropriate qualifications, we
will not be able to grow our business and our operation results will be harmed.
If we become subject to unfair hiring claims, we could be prevented from hiring
needed personnel, incur liability for damages and incur substantial costs in
defending ourselves.
Companies in our industry whose employees accept positions with competitors
frequently claim that these competitors have engaged in unfair hiring practices
or that the employment of these persons would involve the disclosure or use of
trade secrets. These claims could prevent us from hiring personnel or cause us
to incur liability for damages. We could also incur substantial costs in
defending ourselves or our employees against these claims, regardless of their
merits. Defending ourselves from these claims could divert the attention of our
management away from our operations.
Our failure to protect our intellectual property and proprietary technology may
significantly impair our competitive advantage.
Our success and ability to compete depend in large part upon protecting our
proprietary technology. We rely on a combination of patent, trademark and trade
secret protection and nondisclosure agreements to protect our proprietary
rights. The steps we have taken may not be sufficient to prevent the
misappropriation of our intellectual property, particularly in foreign countries
where the laws may not protect our proprietary rights as fully as in the United
States. The patent and trademark law and trade secret protection may not be
adequate to deter third party infringement or misappropriation of our patents,
trademarks and similar proprietary rights. In addition, patents issued to Adept
may be challenged, invalidated or circumvented. Our rights granted under those
patents may not provide competitive advantages to us, and the claims under our
patent applications may not be allowed. We may be subject to or may initiate
interference proceedings in the United States Patent and Trademark Office, which
can demand significant financial and management resources. The process of
seeking patent protection can be time consuming and expensive and patents may
not be issued from currently pending or future applications. Moreover, our
existing patents or any new patents that may be issued may not be sufficient in
scope or strength to provide meaningful protection or any commercial advantage
to us.
We may in the future initiate claims or litigation against third parties for
infringement of our proprietary rights in order to determine the scope and
validity of our proprietary rights or the proprietary rights of our competitors.
These claims could result in costly litigation and the diversion of our
technical and management personnel.
We may face costly intellectual property infringement claims.
We have from time to time received communications from third parties asserting
that we are infringing certain patents and other intellectual property rights of
others or seeking indemnification against such alleged infringement. For
example, some end users of our products have notified us that they have received
a claim of patent infringement from the Jerome H. Lemelson Foundation, alleging
that their use of our machine vision products infringes certain patents issued
to Mr. Lemelson. In addition, we have been notified that other end users of our
AdeptVision VME line and the predecessor line of Multibus machine vision
products have received letters from the Lemelson Foundation which refer to Mr.
Lemelson's patent portfolio and offer the end user a license to the particular
patents. As claims arise, we evaluate their merits. Any claims of infringement
brought of third parties could result in protracted and costly litigation, that
damages for infringement, and the necessity of obtaining a license relating to
one or more of our products or current or future technologies, which may not be
available on commercially reasonable terms or at all. Litigation, which could
result in substantial cost to us and diversion of our resources, may be
necessary to enforce our patents or other intellectual property rights or to
defend us against claimed infringement of the rights of others. Any intellectual
property litigation and the failure to obtain necessary licenses or other rights
could have a material adverse effect on our business, financial condition and
results of operations. Some of our end users have notified us that they may seek
indemnification from us for damages or expenses resulting from any claims made
by the Jerome H. Lemelson Foundation. We cannot predict the outcome of this or
any similar litigation
26
which may arise in the future. Litigation of this kind may have a material
adverse effect on our business, financial condition or results of operations.
New accounting guidance could result in delayed recognition of our revenues.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." SAB 101 provides guidance on the
recognition, presentation and disclosure of revenue in financial statements. In
recent actions, the SEC has further delayed the required implementation date
which, for us, will be the fourth quarter of fiscal 2001, retroactive to the
beginning of the fiscal year. We are still assessing the impact of SAB 101 on
our consolidated results of operations, financial position, and cash flows based
upon the most current information. In certain situations, application of the new
accounting could delay the recognition of revenue that might otherwise have been
recognized in earlier periods. As a result, our reported revenue may fluctuate
more widely among fiscal periods in the future, and reported revenue for a
particular fiscal period may not meet expectations.
Risks Related to Our Industry
We face intense competition in the market for intelligent automation products.
The market for intelligent automation products is highly competitive. We believe
that the principal competitive factors affecting the market for our products
are:
o product functionality and reliability;
o customer service;
o price;
o delivery; and
o product features such as flexibility, programmability and ease of use.
We compete with a number of robot companies, motion control companies, machine
vision companies and simulation software companies. Many of our competitors have
substantially greater financial, technical and marketing resources than us. In
addition, we may in the future face competition from new entrants in one or more
of our markets.
Many of our competitors in the robot market are integrated manufacturers of
products that produce robotics equipment internally for their own use and may
also compete with our products for sales to other customers. Some of these large
manufacturing companies have greater flexibility in pricing because they
generate substantial unit volumes of robots for internal demand and may have
access through their parent companies to large amounts of capital. Any of our
competitors may seek to expand their presence in other markets in which we
compete.
Our current or potential competitors may develop products comparable or superior
in terms of price and performance features to those developed by us or adapt
more quickly than we can to new or emerging technologies and changes in customer
requirements. We may be required to make substantial additional investments in
connection with our research, development, engineering, marketing and customer
service efforts in order to meet any competitive threat, so that we will be able
to compete successfully in the future. We expect that in the event the
intelligent automation market expands, competition in the industry will
intensify, as additional competitors enter our markets and current competitors
expand their product lines. Increased competitive pressure could result in a
loss of sales or market share, or cause us to lower prices for our products, any
of which could harm our business.
27
We may not be able to keep up with the rapid pace of technological change and
new product development that characterize the intelligent automation industry.
The intelligent automation industry is characterized by rapid technological
change and new product introductions and enhancements. Our ability to remain
competitive depends greatly upon the technological quality of our products and
processes compared to those of our competitors and our ability both to continue
to develop new and enhanced products and to introduce those products at
competitive prices and on a timely and cost-effective basis. We may not be
successful in selecting, developing and manufacturing new products or in
enhancing our existing products on a timely basis or at all. Our new or enhanced
products may not achieve market acceptance. Our failure to successfully select,
develop and manufacture new products, or to timely enhance existing technologies
and meet customers' technical specifications for any new products or
enhancements on a timely basis, or to successfully market new products, could
harm our business. If we cannot successfully develop and manufacture new
products or meet specifications, our products could lose market share, our
revenues and profits could decline, or we could experience operating losses. New
technology or product introductions by our competitors could also cause a
decline in sales or loss of market acceptance for our existing products or force
us to significantly reduce the prices of our existing products.
From time to time we have experienced delays in the introduction of, and certain
technical and manufacturing difficulties with, some of our products, and we may
experience technical and manufacturing difficulties and delays in future
introductions of new products and enhancements. Our failure to develop,
manufacture and sell new products in quantities sufficient to offset a decline
in revenues from existing products or to successfully manage product and related
inventory transitions could harm our business.
Our success in developing, introducing, selling and supporting new and enhanced
products depends upon a variety of factors, including timely and efficient
completion of hardware and software design and development, implementation of
manufacturing processes and effective sales, marketing and customer service.
Because of the complexity of our products, significant delays may occur between
a product's initial introduction and commencement of volume production.
The development and commercialization of new products involve many difficulties,
including:
o the identification of new product opportunities;
o the retention and hiring of appropriate research and development
personnel;
o the determination of the product's technical specifications;
o the successful completion of the development process;
o the successful marketing of the product and the risk of having
customers embrace new technological advances; and
o additional customer service costs associated with supporting new
product introductions or required for field upgrades.
For example, we are currently in the process of releasing our new micro and nano
positioning mechanisms, NanoMotion process modules, SmartModules, Standard
Platforms and Semiconductor front-ends. These products include significant new
networking, hardware and software technology. The development of these products
may not be completed in a timely manner, and these products may not achieve
acceptance in the market. The development of these products has required, and
will require, that we expend significant financial and management resources. If
we are unable to continue to successfully develop these or other new products in
response to customer requirements or technological changes, our business may be
harmed.
If we fail to adequately invest in research and development, we may be unable to
compete effectively.
28
We have limited resources to allocate to research and development and must
allocate our resources among a wide variety of projects. Because of intense
competition in our industry, the cost of failing to invest in strategic products
is high. If we fail to adequately invest in research and development, we may be
unable to compete effectively in the intelligent automation markets in which we
operate.
If we do not comply with environmental regulations, our business may be harmed.
We are subject to a variety of environmental regulations relating to the use,
storage, handling, and disposal of certain hazardous substances used in the
manufacturing and assembly of our products. We believe that we are currently in
compliance with all material environmental regulations in connection with our
manufacturing operations, and that we have obtained all necessary environmental
permits to conduct our business. However, our failure to comply with present or
future regulations could subject us to a variety of consequences that could harm
our business, including:
o the imposition of substantial fines;
o suspension of production; and
o alteration of manufacturing processes or cessation of operations.
Compliance with environmental regulations could require us to acquire expensive
remediation equipment or to incur substantial expenses. Our failure to control
the use, disposal, removal, storage, or to adequately restrict the discharge of,
or assist in the cleanup of, hazardous or toxic substances, could subject us to
significant liabilities, including joint and several liability under certain
statutes. The imposition of liabilities of this kind could harm our financial
condition.
We rely on a continuous power supply to conduct our operations, and California's
current energy crisis could disrupt our operations and increase our expenses.
California is in the midst of an energy crisis that could disrupt our operations
and increase our expenses. In the event of an acute power shortage, that is,
when power reserves for the State of California fall below 1.5%, California has
on some occasions implemented, and may in the future continue to implement,
rolling blackouts throughout California. We currently do not have backup
generators or alternate sources of power in the event of a blackout, and our
current insurance does not provide coverage for any damages we or our customers
may suffer as a result of any interruption in our power supply. If blackouts
interrupt our power supply, we would be temporarily unable to continue
operations at our facilities. Any such interruption in our ability to continue
operations at our facilities could damage our reputation, harm our ability to
retain existing customers and to obtain new customers, and could result in lost
revenue, any of which could substantially harm our business and results of
operations.
Failure to obtain export licenses could harm our business.
We must comply with U.S. Department of Commerce regulations in shipping its
software products and other technologies outside the United States. Any
significant future difficulty in complying could harm our business, financial
condition and results of operations.
Risks Related to our Stock
Our stock price has fluctuated and may continue to fluctuate widely.
The market price of our common stock has fluctuated substantially in the past.
Between December 31, 1999 and December 31, 2000, the price of our common stock,
as reported on the Nasdaq National Market, has ranged from a low of $6.00 to a
high of $58.19. The market price of our common stock will continue to be subject
to significant fluctuations in the future in response to a variety of factors,
including:
29
o future announcements concerning our business or that of our competitors
or customers;
o the introduction of new products or changes in product pricing policies
by us or our competitors;
o litigation regarding proprietary rights or other matters;
o change in analysts' earnings estimates;
o developments in the financial markets;
o quarterly fluctuations in operating results; and
o general conditions in the intelligent automation industry.
Furthermore, stock prices for many companies, and high technology companies in
particular, fluctuate widely for reasons that may be unrelated to their
operating results. Those fluctuations and general economic, political and market
conditions, such as recessions or international currency fluctuations, may
adversely affect the market price of our common stock.
We may be subject to securities class action litigation if our stock price is
volatile, which could result in substantial costs, distract management and
damage our reputation.
In the past, securities class action litigation has often been brought against
companies following periods of volatility in the market price of their
securities. Companies, like us, that are involved in rapidly changing technology
markets are particularly subject to this risk. We may be the target of
litigation of this kind in the future. Any securities litigation could result in
substantial costs, divert management's attention and resources from our
operations and negatively affect our public image and reputation.
We may need to raise additional capital in the future, and if we are unable to
secure adequate funds on acceptable terms, we may be unable to execute our
business plan.
If our capital requirements vary significantly from those currently planned, we
may require additional financing sooner than anticipated. If our existing cash
balances and cash flow expected from future operations are not sufficient to
meet our liquidity needs, we will need to raise additional funds. If adequate
funds are not available on acceptable terms or at all, we may not be able to
take advantage of market opportunities, develop or enhance new products, pursue
acquisitions that would complement our existing product offerings or enhance our
technical capabilities, execute our business plan or otherwise respond to
competitive pressures or unanticipated requirements.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relates primarily to
our investment portfolio. We maintain an investment policy designed to ensure
the safety and preservation of our invested funds by limiting default risk,
market risk and reinvestment risk. The table below presents, as of June 30,
2000, principal amounts and related weighted-average interest rates by year of
maturity for our investment portfolio.
(in thousands) 2000 2001 2002 Total Fair
- -------------- ---- ---- ---- ----- ----
Cash equivalents
Fixed rate .......................................... $ 13,487 -- -- $ 13,487 $13,487
Average rate ........................................ 3.90% -- -- 3.90%
Auction rate securities
Fixed rate .......................................... $ 3,500 -- -- $ 3,500 $ 3,500
Average rate ........................................ 4.49% -- -- 4.49%
Auction rate preferred
Variable rate ....................................... $ 3,450 -- -- $ 3,450 $ 3,450
Average rate ........................................ 4.64% -- -- 4.64%
---------- ---- ---- ------------- -------
Total Investment Securities ...................... $ 20,437 -- -- $ 20,437 $20,437
---------- ---- ---- ------------- -------
Average rate ........................................ 4.13% -- -- 4.13%
We mitigate default risk by investing in high credit quality securities and by
positioning our portfolio to respond appropriately to a significant reduction in
a credit rating of any investment issuer of guarantor. Our portfolio includes
only marketable securities with active secondary or resale markets to ensure
portfolio liquidity and maintains a prudent amount of diversification. We
conduct business on a global basis. Consequently, we are exposed to adverse or
beneficial movements in foreign currency exchange rates. We enter into foreign
currency forward contracts to minimize the impact of exchange rate fluctuations
on certain foreign currency commitments and balance sheet positions and may
enter into foreign exchange forward contracts in the future. The realized gains
and losses on these contracts are deferred and offset against realized and
unrealized gains and losses when the transaction occurs.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are party to various legal proceedings or claims, either
asserted or unasserted, which arise in the ordinary course of our business.
Management has reviewed pending legal matters and believes that the resolution
of these matters will not have a material adverse effect on our business,
financial condition or results of operations.
Some end users of our products have notified us that they have received a claim
of patent infringement from the Jerome H. Lemelson Foundation, alleging that
their use of our machine vision products infringes certain patents issued to Mr.
Lemelson. In addition, we have been notified that other end users of our
AdeptVision VME line and the predecessor line of Multibus machine vision
products have received letters from Mr. Lemelson which refer to Mr. Lemelson's
patent portfolio and offer the end user a license to the particular patents.
Some of these end users have notified us that they might seek indemnification
from us for any damages or expenses resulting from this matter.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are filed as part of this report.
None
b) Reports on Form 8-K.
On January 25, 2001, a Form 8-K was filed by Adept announcing its financial
results for its second quarter ended December 30, 2000.
On February 8, 2001, a Form 8-k was filed by Adept announcing the filing of a
second amendment to its registration statement for a proposed public offering of
its common stock.
On February 16, 2001, a Form 8-K was filed by Adept announcing its entry into a
purchase agreement in connection with its public offering of common stock.
On February 22, 2001, a Form 8-K was filed by Adept announcing the completion of
its public offering of common stock.
On March 22, 2001, a Form 8-K was filed by Adept announcing a press release
related to Adept's revised outlook for its third quarter ending March 31, 2001.
On May 8, 2001, a Form 8-K was filed by Adept announcing its financial results
for its third quarter ending March 31, 2001.
32
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.
Date: May 15, 2001 ADEPT TECHNOLOGY, INC.
By: /s/ Michael W. Overby
-------------------------------
Michael W. Overby
Vice President, Finance and
Chief Financial Officer
33