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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 December 27, 1997
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 December
27, 1997 was 8,445,340.
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ADEPT TECHNOLOGY, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
December 27, 1997 and June 30, 1997......................................................... 3
Condensed Consolidated Statements of Income
Three and six month periods ended December 27, 1997 and December 28, 1996................... 4
Condensed Consolidated Statements of Cash Flows
Three and six month periods ended December 27, 1997 and December 28, 1996................... 5
Notes to Condensed Consolidated Financial Statements.......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................................ 14
Signatures...................................................................................... 15
Index to Exhibits............................................................................... 16
2
ADEPT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 27, June 30,
1997 1997 (1)
------- -------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $18,124 $11,101
Short term investments 4,449 7,366
Accounts receivable, less allowance for doubtful accounts of
$499 at December 27, 1997 and $449 at June 30, 1997 20,235 17,250
Inventories 14,419 13,096
Deferred tax assets and prepaid expenses 3,326 2,517
------- -------
Total current assets 60,553 51,330
Property and equipment at cost 20,418 18,412
Less accumulated depreciation and amortization 14,408 13,184
------- -------
Net property and equipment 6,010 5,228
Long term investments -- 1,000
Intangible assets related to acquisition of SILMA Incorporated, net of
accumulated amortization of $781 at December 27, 1997 552 774
and $642 at June 30, 1997
Other assets 789 1,161
------- -------
Total assets $67,904 $59,493
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,974 $ 3,927
Other accrued liabilities 8,617 8,445
Current portion of obligations under capital leases 6 27
------- -------
Total current liabilities 16,597 12,399
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
5,000 shares authorized, none issued and outstanding -- --
Common stock, no par value:
25,000 shares authorized; 8,445 issued and outstanding
at December 27, 1997 and 8,240 at June 30, 1997 48,570 46,897
Retained earnings 2,737 197
------- -------
Total shareholders' equity 51,307 47,094
------- -------
Total liabilities and shareholders' equity $67,904 $59,493
======= =======
<FN>
(1) Amount derived from the Company's audited financial statements for the year
ended June 30, 1997
See accompanying notes to condensed consolidated financial statements.
</FN>
3
ADEPT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
-------------------------- --------------------------
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
------- ------- ------- -------
Net revenues $26,464 $18,887 $52,446 $37,324
Cost of revenues 14,945 11,239 29,916 22,298
------- ------- ------- -------
Gross margin 11,519 7,648 22,530 15,026
Operating expenses:
Research, development and engineering 2,647 2,054 5,029 4,030
Selling, general and administrative 6,499 5,328 13,078 10,480
Nonrecurring compensation charge 675 -- 675 --
------- ------- ------- -------
Total operating expenses 9,821 7,382 18,782 14,510
------- ------- ------- -------
Operating income 1,698 266 3,748 516
Interest income, net 230 163 486 297
------- ------- ------- -------
Income before provision for income taxes 1,928 429 4,234 813
Provision for income taxes 771 155 1,694 293
------- ------- ------- -------
Net income $ 1,157 $ 274 $ 2,540 $ 520
======= ======= ======= =======
Net income per share $ .14 $ .03 $ .31 $ .07
======= ======= ======= =======
Net income per share - assuming dilution $ .13 $ .03 $ .29 $ .06
======= ======= ======= =======
Shares used in computing basic net income per share 8,375 8,039 8,320 7,984
======= ======= ======= =======
Shares used in computing diluted net income per share 8,961 8,393 8,895 8,382
======= ======= ======= =======
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
4
ADEPT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
-------------------------
December 27, December 28,
1997 1996
-------- --------
Operating activities
Net income $ 2,540 $ 520
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,471 1,327
Loss on disposal of property and equipment 96 34
Tax benefit from stock plans 53 73
Nonrecurring compensation charge 675
Changes in operating assets and liabilities:
Accounts receivable (2,985) 3,327
Inventories (1,622) 645
Deferred tax assets and prepaid expenses (809) (442)
Other assets 372 (51)
Accounts payable 4,047 (1,553)
Other accrued liabilities 231 (66)
-------- --------
Total adjustments 1,529 3,294
-------- --------
Net cash provided by operating activities 4,069 3,814
-------- --------
Investing activities
Purchase of property and equipment, net (1,931) (1,145)
Proceeds from sale of property and equipment 44
Proceeds from sale of long term available for sale investments 1,000
Purchases of short term available for sale investments (7,012) (11,771)
Proceeds from sale of short term available for sale investments 9,929 5,900
-------- --------
Net cash provided by (used in) investing activities 2,030 (7,016)
-------- --------
Financing activities
Principal payment for capital lease obligations (21) (54)
Proceeds from employee stock incentive program
and employee stock purchase plan 945 779
-------- --------
Net cash provided by financing activities 924 725
-------- --------
Increase (decrease) in cash and cash equivalents 7,023 (2,477)
Cash and cash equivalents, beginning of period 11,101 8,075
-------- --------
Cash and cash equivalents, end of period $ 18,124 $ 5,598
======== ========
Supplemental disclosure of noncash activities:
Inventory capitalized into property, equipment and related tax $ 324 $ 369
Cash paid during the period for:
Interest $ 9 $ 9
Taxes $ 3,022 $ 230
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
5
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
(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, 1997 included in the Company's Form 10-K as filed with
the Securities and Exchange Commission on September 26, 1997. 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, 1998 or for any other future period.
2. Financial Instruments
The Company 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 twelve months,
market auction rate preferred stock and auction rate notes with
maturities of twelve months or less. Long-term investments consist of
U.S. government agency securities with maturities exceeding twelve
months. Investments are classified as held-to-maturity, trading, or
available-for-sale at the time of purchase.
At December 27 and June 30, 1997, all of the Company'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 have been 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 1997 and the six months ended December 27, 1997, realized
and unrealized gains and losses on available for sale investments were
not material.
3. Inventories
Inventories are summarized as follows:
December 27, June 30,
1997 1997
--------- ---------
Raw materials $ 7,563 $ 6,323
Work-in-process 4,215 3,509
Finished goods 2,641 3,264
--------- ---------
$ 14,419 $ 13,096
========= =========
6
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
(unaudited)
4. Property and Equipment
Cost of property and equipment is summarized as follows:
December 27, June 30,
1997 1997
--------- ---------
Machinery and equipment $ 11,672 $ 11,008
Computer equipment 6,467 5,211
Office furniture and equipment 2,279 2,193
--------- ---------
$ 20,418 $ 18,412
========= =========
5. Stock Compensation
The Company reported a charge of $675,000 in the second quarter of
fiscal 1998 for compensation expense related to the Emerging Issues
Task Force Issue No. 97-12, "Accounting for Increased Share
Authorizations in an IRS Section 423 Employee Stock Purchase Plan under
APB Opinion No. 25, Accounting for Stock Issued to Employees" which was
approved by the EITF in September 1997. This nonrecurring, non-cash
charge represented the difference between 85% of the fair market value
of common stock on the date of the beginning of the offering period and
the fair market value of common stock on the date the shareholders
approved the increase in shares authorized for issuance, multiplied by
the number of shares in the 1995 Employee Stock Purchase Plan ("ESPP")
that had been subscribed for purchase by employees, but not authorized
by the shareholders, prior to the Company's annual meeting of
shareholders. Shareholder approval was granted to make available for
issuance an additional 500,000 shares under the ESPP on October 31,
1997.
6. Income Taxes
The Company provides for income taxes during interim reporting periods
based upon an estimate of its annual effective tax rate. This estimate
reflects the utilization of tax credits, offset by taxes on the
Company's foreign operations.
7. Net Income per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share". Statement 128 replaced the previously reported primary and
fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the
previously recorded fully diluted earnings per share. All earnings per
share amounts for all periods have been restated to conform to the
Statement 128 requirement.
7
ADEPT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
(unaudited)
The following table sets forth the computation of basic and diluted
earnings per share:
Three months ended Six months ended
------------------------- -------------------------
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
------ ------ ------ ------
Numerator:
Net income $1,157 $ 274 $2,540 $ 520
------ ------ ------ ------
For basic and diluted earnings per share
-income available to common stockholders $1,157 $ 274 $2,540 $ 520
====== ====== ====== ======
Denominator:
For basic earnings per share
- weighted average shares 8,375 8,039 8,320 7,984
Effect of dilutive securities
- employee stock options 586 354 575 398
------ ------ ------ ------
For diluted earnings per share
- adjusted weighted average shares and
assumed conversion 8,961 8,393 8,895 8,382
====== ====== ====== ======
8. Contingencies
The Company has from time to time received communications from third
parties asserting that the Company is infringing certain patents and
other intellectual property rights of others or seeking indemnification
against such alleged infringement. There is presently no litigation
involving such claims, and the Company believes that the ultimate
resolution, if any, of these matters will not have a material adverse
effect on its financial position, results of operations or cash flows.
9. Reclassification
Certain amounts presented in the financial statements for fiscal 1997
have been reclassified to conform to the presentation for fiscal 1998.
8
ADEPT TECHNOLOGY, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in the following Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: the potential fluctuations in the Company's
quarterly and annual results of operations; the cyclicality of capital spending
of the Company's customers; the Company's dependence on the continued growth of
the intelligent automation market; the risks associated with sole or single
sources of supply and lengthy procurement lead times; the Company's highly
competitive industry; rapid technological change within the Company's industry;
the lengthy sales cycles for the Company's products; the risks associated with
reliance on system integrators; the risks associated with international sales
and purchases; the risks associated with potential acquisitions and the need to
manage growth; the risks associated with new product development and the need to
manage product transitions, including any difficulties or delays in the
development, production, testing and marketing of the Company's new products
under development; the Company's dependence on retention and attraction of key
employees; the risks associated with product defects; the Company's dependence
on third-party relationships; the uncertainty of patent and proprietary
technology protection and third party intellectual property claims; changes in,
or failure or inability to comply with, government regulations; general economic
and business conditions; the failure of any new products to be accepted in the
marketplace; decreased investment in robotics generally, and in the Company's
intelligent automation products particularly, as a result of general or specific
economic conditions or conditions affecting any of the Company's primary
markets; decreased acceptance of the Company's current products in the
marketplace; and the other factors referenced in this Management's Discussion
and Analysis of Financial Condition and Results of Operations and the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997, in
particular the section titled "Significant Fluctuations in Operating Results".
OVERVIEW
The Company designs, manufactures and markets intelligent automation software
and hardware products for assembly, material handling and packaging
applications. The Company's products currently include machine controllers for
robot mechanisms and other flexible automation equipment, machine vision
systems, simulation software and a family of mechanisms including robots, linear
modules, vision-based flexible part feeders, as well as a line of Cartesian
scalable robots targeted for the electronics and assembly applications markets.
In recent years, the Company has expanded its robot product lines, developed
advanced software and sensing technologies that have enabled robots to perform a
wider range of functions, and the Company has expanded its channel of system
integrators. The Company has also expanded its international sales and marketing
operations. As a result of these developments, the nature and composition of the
Company's revenues have changed over time. Specifically, software license and
service revenues, although still relatively insignificant, have increased as a
percentage of total revenues, and international sales comprise a significant
portion of the Company's revenues.
9
ADEPT TECHNOLOGY, INC.
The Company sells its products through system integrators, its direct sales
force and original equipment manufacturers ("OEMs"). System integrators and OEMs
add application-specific hardware and software to the Company's products,
thereby enabling the Company to provide solutions to a diversified industry
base, including the electronics, telecommunications, appliances, pharmaceutical,
food processing and automotive components industries. Net revenues have
increased in each of the Company's last three fiscal years; however, there can
be no assurance that the Company's net revenues will continue to grow or that
the Company will be profitable in future periods. Accordingly, the Company's
historical results of operations should not be relied upon as an indication of
future performance.
Results of Operations
Three Month and Six Month Periods Ended December 27, 1997 and December 28, 1996
Net revenues. The Company's net revenues increased by 40.1% to $26.5 million for
the three months ended December 27, 1997 from $18.9 million for the three months
ended December 28, 1996. The Company's net revenues increased by 40.5% to $52.5
million for the six months ended December 27, 1997 from $37.3 million for the
six months ended December 28, 1996. The growth in net revenues for the three and
six months ended December 27, 1997 was primarily due to increased product sales,
including robot and motion controller sales, and to a lesser extent, to
increased service and upgrade revenues, including revenues from the Company's
recently formed Rapid Deployment Automation (RDA) Services group which provides
engineering contract services.
International sales, including sales to Canada, were $10.1 million or
approximately 38.3% of net revenues for the three months ended December 27, 1997
as compared with $7.5 million or 39.7% of net revenues for three months ended
December 28, 1996. International sales, including sales to Canada, were $20.4
million or approximately 38.9% of net revenues for the six months ended December
27, 1997 as compared with $14.1 million or 37.7% of net revenues for six months
ended December 28, 1996.
Gross margin. Gross margin percentage was 43.5% for the three months ended
December 27, 1997 compared to 40.5% for the three months ended December 28,
1996. Gross margin percentage was 43.0% for the six months ended December 27,
1997 compared to 40.3% for the three months ended December 28, 1996. The
increase in gross margin for the three and six months ended December 27,1997 was
attributable primarily to increased sales of higher margin products, including
mechanism systems, motion controllers, and to a lesser extent, to increased
service and upgrade revenues, including the Company's new RDA engineering
contract services. In addition, the Company experienced a decrease in sales to
the computer disk-drive industry, which are generally at lower margins. The
Company anticipates that sales to the disk-drive industry may continue to be
weak in the near term. The Company expects to continue to experience quarterly
fluctuations in its gross margin percentage due to changes in its sales and
product mix.
Research, Development and Engineering. Research, development and engineering
expenses increased by 28.9% to $2.6 million for the three months ended December
27, 1997 from $2.1 million for the three months ended December 28, 1996.
Research, development and engineering expenses increased by 24.8% to $5.0
million for the six months ended December 27, 1997 from $4.0 million for the six
months ended December 28, 1996. The increase in both the three and six month
periods was primarily due to increases in compensation related expenses,
information system related expenses and a lower level of third party development
funding, and to a lesser extent, to increases in project material spending.
Research, development and engineering expenses for the three months ended
December 27, 1997 were partially offset by $161,000 of third party development
funding as compared with $285,000 of third party development funding for the
three months ended December 28, 1996. Research, development and engineering
expenses for the six months ended December 27, 1997 were partially offset by
10
ADEPT TECHNOLOGY, INC.
$325,000 of third party development funding as compared with $512,000 of third
party development funding for the six months ended December 28, 1996. The
Company expects that it will continue to receive third party development funding
from the federal and California state governments during fiscal 1998. There can
be no assurance, however, that any funds budgeted by either government for the
Company's development projects will not be curtailed or eliminated at any time.
As a percentage of net revenues, research, development and engineering expenses
decreased to 10.0% for the three months ended December 27, 1997 from 10.9% for
the three months ended December 28, 1996. As a percentage of net revenues,
research, development and engineering expenses decreased to 9.6% for the six
months ended December 27, 1997 from 10.8% for the six months ended December 28,
1996. Research, development and engineering expenses as a percentage of net
revenues decreased due to the relative growth in the level of net revenues in
the three and six months ended December 27, 1997 as compared to the same periods
in the prior year.
Selling, General and Administrative. Selling, general and administrative
expenses increased 22.0% to $6.5 million or 24.6% of net revenues for the three
months ended December 27, 1997, as compared with $5.3 million or 28.2% of net
revenues for the three months ended December 28, 1996. Selling, general and
administrative expenses increased 24.8% to $13.1 million or 24.9% of net
revenues for the six months ended December 27, 1997, as compared with $10.5
million or 28.1% of net revenues for the six months ended December 28, 1996. The
increased level of spending for both the three and six months ended December 27,
1997 was primarily attributable to increased headcount and compensation related
expenses, including an employee incentive bonus plan accrual, and to a lesser
extent, to higher travel expenses and bad debt provisions for doubtful accounts
receivable. The decline in selling, general and administrative expenses as a
percentage of total revenue in the three and six month periods ended December
27, 1997 as compared to the same periods in the prior year was due to the growth
in total revenues. The Company expects that selling, general and administrative
expenses will continue to increase in absolute dollars in future periods,
although as a percentage of net revenues, selling, general and administrative
expenses may fluctuate.
Compensation charge. The Company reported a charge of $675,000 in the second
quarter of fiscal 1998 for compensation expense related to the Emerging Issues
Task Force Issue No. 97-12, "Accounting for Increased Share Authorizations in an
IRS Section 423 Employee Stock Purchase Plan under APB Opinion No. 25,
Accounting for Stock Issued to Employees" which was approved by the EITF in
September 1997. This nonrecurring, non-cash charge represented the difference
between 85% of the fair market value of common stock on the date of the
beginning of the offering period and the fair market value of common stock on
the date the shareholders approved the increase in shares authorized for
issuance, multiplied by the number of shares in the 1995 Employee Stock Purchase
Plan ("ESPP") that had been subscribed for purchase by employees, but not
authorized by the shareholders, prior to the Company's Annual Meeting of
Shareholders. Shareholder approval was granted to make available for issuance an
additional 500,000 shares under the ESPP on October 31, 1997.
Interest Income, Net. Interest income, net for the three months ended December
27, 1997 was $230,000, compared to $163,000 for the three months ended December
28, 1996. Interest income, net for the six months ended December 27, 1997 was
$486,000, compared to $297,000 for the six months ended December 28, 1996. The
increase in net interest income was due to increased cash levels generated
primarily from operating activities.
Provision for Income Taxes. The Company's effective tax rate for the three and
six month periods ended December 27, 1997 was 40%, as compared with 36% for the
three and six month periods ended December 28, 1996. The Company's tax rate
differs from the statutory income tax rate primarily due to the benefit of
federal and state tax credits.
11
ADEPT TECHNOLOGY, INC.
Derivative Financial Instruments. The Company's product sales are predominantly
denominated in U.S. dollars. However, certain international operating expenses
are predominately paid in their respective local currency. The Company generally
does not hedge its exposure to foreign currency exchange risk on local
operational expenses and revenues. Although the Company believes that unhedged
risk associated with foreign currency fluctuations for those transactions have
not been material to date, there can be no assurance that such risk will not
become material in the future or that the Company will not incur foreign
exchange transaction losses which will have an adverse effect on the Company's
results of operations. The Company makes yen-denominated purchases of certain
components and mechanical subsystems from Japanese suppliers. Current exchange
rate fluctuations are not expected to result in material unfavorable foreign
exchange transactions included in cost of revenues. From time to time, the
Company manages the currency risk associated with the yen-denominated purchases
using forward rate currency contracts.
Significant Fluctuations in Operating Results
The Company's operating results have historically been, and will continue to be,
subject to significant quarterly and annual fluctuations due to a number of
factors, including fluctuations in capital spending domestically and
internationally or in one or more industries to which the Company sells its
products, new product introductions by the Company or its competitors, changes
in product mix and pricing by the Company, its suppliers or its competitors,
availability of components and raw materials, failure to manufacture a
sufficient volume of products in a timely and cost-effective manner, failure to
introduce new products on a timely basis, failure to anticipate changing
customer product requirements, lack of market acceptance or shifts in the demand
for the Company's products, changes in the mix of sales by distribution channel,
changes in the spending patterns of the Company's customers, and extraordinary
events such as litigation or acquisitions. The Company's gross margins may vary
greatly depending on the mix of sales of lower margin hardware products,
particularly mechanical subsystems sourced from third parties, and higher margin
software products. The Company's operating results will also be affected by
general economic and other conditions affecting the timing of customer orders
and capital spending. The Company generally recognizes product revenue upon
shipment or, for certain international sales, upon receipt by the customer. The
Company's net revenues and results of operations for a period will therefore be
affected by the timing of orders received and orders shipped during such period.
A delay in shipments near the end of a period, due for example to delays in
product development or delays in obtaining materials, could materially adversely
affect the Company's business, financial condition and results of operations for
such period. Moreover, continued investments in research and development,
capital equipment and ongoing customer service and support capabilities will
result in significant fixed costs which the Company will not be able to reduce
rapidly and, therefore, if the Company's sales for a particular period are below
expected levels, the Company's business, financial condition and results of
operations for such period could be materially adversely affected. In addition,
while in some years revenue from international sales has helped buffer the
Company against slowdowns in U.S. capital spending, in other years the higher
costs associated with international sales, combined with downturns in
international markets, have adversely affected the Company's results of
operations. There can be no assurance that the Company will be able to increase
or sustain profitability on a quarterly or annual basis in the future.
The Company has experienced and is expected to continue to experience
seasonality in product bookings. The Company has typically had higher bookings
for its products during the June quarter of each year and lower bookings during
the September quarter of each year, due primarily to the slowdown in sales to
European markets. The Company has generally been able to maintain revenue levels
during the September quarter by utilizing backlog from the June quarter. In the
event bookings for the Company's products in the June quarter are lower than
anticipated and the Company's backlog at the end of the June quarter is
insufficient to compensate for lower bookings in the September quarter, the
Company's results of operations for the September quarter and future quarters
could be materially adversely affected. In fact, in the September quarter of
fiscal 1997, sales to European and other international markets decreased
substantially, as several large orders were delayed by customers. The decrease
in product bookings resulted in decreased net revenues for the September quarter
of fiscal 1997. In contrast however, entering into fiscal 1998, the Company's
backlog was up significantly from
12
ADEPT TECHNOLOGY, INC.
where it began the prior year. In the event product bookings and net revenues
for any quarter are insufficient to compensate for the lower product bookings in
a prior quarter, the Company's results of operations for that quarter and future
quarters could be materially adversely affected.
In addition, a significant percentage of the Company's product shipments occur
in the last month of each quarter. Historically this has been due to a lack of
component availability from sole or single source suppliers or, with respect to
components with long procurement lead times, due to inaccurate forecasting of
the level of demand for the Company's products or of the product mix for a
particular quarter. The Company has therefore from time to time been required to
utilize components and other materials for current shipments which were
scheduled to be incorporated into products to be shipped in subsequent periods.
If the Company were unable to obtain additional components or mechanical
subsystems to meet increased demand for its products, or to meet demand for a
product mix which differed from the forecasted product mix, or if for any reason
the Company failed to ship sufficient product prior to the end of the quarter,
the Company's business, financial condition and results of operations could be
materially adversely affected.
Liquidity and Capital Resources
As of December 27, 1997, the Company had working capital of approximately $44.0
million, including $18.1 million in cash and cash equivalents and $4.4 million
in short term investments.
The Company's cash requirements during the six months ended December 27, 1997
were met primarily through cash provided by operations and investing activities,
and to a lesser extent, to financing activities. Cash, cash equivalents and
investments increased $3.1 million from June 30, 1997, primarily as a result of
$4.1 million of cash generated from operating activities, $924,000 from
financing activities, offset by $1.9 million of capital expenditures.
Net cash provided by operating activities was primarily attributable to net
income adjusted by depreciation and amortization, the nonrecurring compensation
charge, increased accounts payable, offset by higher accounts receivable arising
from increased revenue, and higher inventory levels. Financing activities
consisted mainly of proceeds from employee stock incentive purchase plans.
The Company currently anticipates capital expenditures of approximately $3.8
million during fiscal 1998, including approximately $1.1 million for test
fixtures, tooling and other factory investments, approximately $1.0 million for
MIS equipment and approximately $1.7 million for laboratory and other equipment.
Included in the MIS expenditures are costs associated with an enterprise
resource planning software system which is intended in part to address issues
concerning Year 2000 compliance with the Company's internal MIS systems. This
system, if successfully implemented, is expected to make the Company compliant
in regards to Year 2000 for its internal MIS systems.
The Company believes that the existing cash and cash equivalent balances as well
as short term investments and anticipated cash flow from operations will be
sufficient to support the Company's working capital requirements for at least
the next twelve months.
New Accounting Pronouncement
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share". Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously recorded fully diluted earnings per share. All earnings per share
amounts for all periods have been restated to conform to the Statement 128
requirement.
13
ADEPT TECHNOLOGY, INC.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) The Exhibits listed on the accompanying index immediately
following the signature page are filed as part of this report.
b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended December 27, 1997.
14
ADEPT TECHNOLOGY, INC.
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.
ADEPT TECHNOLOGY, INC.
Date: February 10, 1998 By: /s/ Brian R. Carlisle
---------------------
Brian R. Carlisle
Chairman of the Board and Chief
Executive Officer
Date: February 10, 1998 By: /s/ Betsy A. Lange
------------------
Betsy A. Lange
Vice President of Finance and Chief
Financial Officer
15
ADEPT TECHNOLOGY, INC.
INDEX TO EXHIBITS
SEQUENTIALLY
NUMBERED
EXHIBITS PAGE
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27.1 Financial Data Schedule. 17
16