UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
Commission file number: 000-21377
ROFIN-SINAR TECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
Delaware 38-3306461
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40984 Concept Drive, Plymouth, MI 48170
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(Address of principal executive offices) (Zip Code)
(734) 455-5400
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] / No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes[ ] / No [X]
11,580,900 shares of the registrant's common stock, par value $0.01 per
share, were outstanding as of May 14, 2003.
ROFIN-SINAR TECHNOLOGIES INC.
INDEX
PART I FINANCIAL INFORMATION Page No.
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Item 1
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Condensed Consolidated Balance Sheets
March 31, 2003 and September 30, 2002 3
Condensed Consolidated Statements of Operations
Three months and six months ended
March 31, 2003 and 2002 5
Condensed Consolidated Statement of Stockholders'
Equity and Comprehensive Income
Six months ended March 31, 2003 and 2002 6
Condensed Consolidated Statements of Cash Flows
Six months ended March 31, 2003 and 2002 7
Notes to Condensed Consolidated Financial Statements 8
Item 2
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Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3
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Quantitative and Qualitative Disclosures about
Market Risk 17
Item 4
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Controls and Procedures 18
PART II OTHER INFORMATION 18
SIGNATURES 19
CERTIFICATIONS 20
PART I. FINANCIAL INFORMATION
Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
March 31, September 30,
2003 2002
(Unaudited) (Audited)
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ASSETS
Current Assets
Cash and cash equivalents $ 28,962 $ 20,312
Accounts receivable, trade, net 54,889 58,274
Inventories 85,254 74,290
Other current assets and prepaid expenses 12,368 11,016
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Total current assets 181,473 163,892
Property and equipment, net 26,776 24,689
Goodwill and other intangibles, net 54,306 49,925
Other assets 2,393 2,309
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Total assets $ 264,948 $ 240,815
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit and short term borrowings $ 26,095 $ 22,544
Accounts payable, trade 12,541 12,798
Accounts payable to related party 1,955 7,830
Accrued liabilities 46,640 39,059
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Total current liabilities 87,231 82,231
Long-term debt 44,721 40,591
Pension obligations 7,175 6,026
Minority interests 1,352 1,218
Other long-term liabilities 2,310 2,331
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Total liabilities 142,789 132,397
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Stockholders' equity
Preferred stock, 5,000,000 shares authorized,
none issued or outstanding 0 0
Common stock, $0.01 par value, 50,000,000 shares
authorized, 11,556,600 (11,551,800 at
September 30, 2002) issued and outstanding 116 115
Additional paid-in-capital 76,177 76,156
Retained earnings 46,177 39,361
Accumulated other comprehensive loss ( 311) ( 7,214)
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Total stockholders' equity 122,159 108,418
Total liabilities and stockholders' equity $ 264,948 $ 240,815
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See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Periods Ended March 31, 2003 and 2002
(dollars in thousands, except per share amounts)
Three Months Six Months
Ended March 31, Ended March 31,
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2003 2002 2003 2002
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Net sales $ 61,073 $ 53,430 $ 119,218 $ 102,169
Cost of goods sold 37,875 33,297 73,576 64,229
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Gross profit 23,198 20,133 45,642 37,940
Selling, general, and
administrative expenses 12,127 11,433 23,983 22,063
Research and development expenses 4,533 3,086 8,439 6,236
Goodwill and intangibles
amortization 350 896 717 1,817
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Income from operations 6,188 4,718 12,503 7,824
Other expense (income):
Interest income ( 88) ( 72) ( 176) ( 158)
Interest expense 923 1,009 1,921 2,104
Other expenses (income) ( 1,223) 311 ( 1,564) 167
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Income before income taxes
and minority interest 6,576 3,470 12,322 5,711
Income tax expense 2,978 2,147 5,202 3,790
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Income before minority
interest 3,598 1,323 7,120 1,921
Minority interest 240 222 304 543
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Net income $ 3,358 $ 1,101 $ 6,816 $ 1,378
========== ========== ========== ==========
Net income per common
share:
Basic $ 0.29 $ 0.10 $ 0.59 $ 0.12
Diluted $ 0.29 $ 0.10 $ 0.59 $ 0.12
========== ========== ========== ==========
Weighted average shares
used in computing net
income per share:
Basic 11,556,600 11,550,300 11,556,600 11,550,300
Diluted 11,590,038 11,623,115 11,567,219 11,593,004
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements Of Stockholders' Equity and
Comprehensive Income (Unaudited)
Six months ended March 31, 2003 and 2002
(dollars in thousands)
Accumulated
Common Additional Other Total
Stock Paid-in Retained Comprehensive Stockholders'
Par Value Capital Earnings Income(loss) Equity
------------ ------------ ------------ ------------ ------------
BALANCES at September 30, 2002 $ 115 $ 76,156 $ 39,361 $( 7,214) $ 108,418
Comprehensive income:
Foreign currency translation adjustment -- -- -- 7,046 7,046
Fair value of interest swap agreement -- -- -- ( 143) ( 143)
Net income -- -- 6,816 -- 6,816
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Total comprehensive income 13,719
Common stock issued 1 21 -- -- 22
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BALANCES at March 31, 2003 $ 116 $ 76,177 $ 46,177 $( 311) $ 122,159
============ ============ ============ ============ ============
BALANCES at September 30, 2001 $ 115 $ 76,123 $ 34,360 $( 11,547) $ 99,051
Comprehensive income:
Foreign currency translation adjustment -- -- -- ( 2,901) ( 2,901)
Fair value of interest swap agreement -- -- -- 331 331
Net income -- -- 1,378 -- 1,378
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Total comprehensive income (loss) ( 1,192)
Common stock issued -- 17 -- -- 17
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BALANCES at March 31, 2002 $ 115 $ 76,140 $ 35,738 $ ( 14,117) $ 97,876
============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31, 2003 and 2002
(dollars in thousands)
Six months
Ended March 31,
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2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,816 $ 1,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in operating assets and liabilities ( 2,593) 1,225
Other adjustments 3,748 3,776
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Net cash provided by operating activities 7,971 6,379
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 36 76
Additions to property and equipment ( 1,829) ( 2,107)
Cash proceeds from sale of medical laser business -- 938
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Net cash used in investing activities ( 1,793) ( 1,093)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from banks 2,434 5,503
Repayment to banks ( 2,507) ( 2,180)
Net borrowings (repayments) on line of credit 1,614 ( 6,699)
Other ( 139) 6
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Net cash used in financing activities 1,402 ( 3,370)
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Effect of foreign currency translation on cash
and cash equivalents 1,070 ( 481)
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Net increase in cash and cash equivalents 8,650 1,435
Cash and cash equivalents at beginning of period 20,312 13,487
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Cash and cash equivalents at end of period $ 28,962 $ 14,922
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See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(dollars in thousands)
1. Summary of Accounting Policies
The accompanying consolidated condensed financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, consistent with those reflected in the Company's
annual report to stockholders for the fiscal year ended September 30, 2002,
and should be read in conjunction with the Company's annual report on Form
10-K. All adjustments necessary for a fair presentation have been made which
comprise only normal recurring adjustments; however, interim results of
operations are not necessarily indicative of results to be expected for the
year. September 30, 2002 balances are derived from audited financial
statements; however, interim period amounts have not been audited.
2. Investments in Marketable Securities
On October 5, 2001, the Company sold the assets of its medical laser business
resulting in a gain of $0.7 million. As part of the proceeds from the sale,
the Company received marketable equity securities which have been classified
as trading securities, under "other current assets and prepaid expenses" in
the accompanying balance sheet, as the Company intends to sell these
securities in the near term. The Company recorded unrealized gains of $0.1
million and $0.4 million for the six-month periods ended March 31, 2003 and
2002, respectively, and no change for both of the three-month periods ended
March 31, 2003 and 2002. Additionally, during the second quarter of fiscal
2003, the Company received proceeds from sales of marketable equity
securities of $0.2 million.
3. Inventories
Inventories are stated at the lower of cost or market, after provisions for
excess and obsolete inventory salable at prices below cost. Costs are
determined using the first in, first out and weighted average cost methods
and are summarized as follows:
March 31, September 30,
2003 2002
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Finished goods $ 11,774 $ 11,188
Work in progress 22,829 20,255
Raw materials and supplies 25,433 20,169
Demonstration inventory 7,667 6,548
Service parts 17,551 16,130
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Total inventories, net $ 85,254 $ 74,290
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4. Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 142, "Goodwill and Other Intangibles", which was adopted by the
Company effective October 1, 2002. Under Statement No. 142, goodwill is no
longer subject to amortization, but will be subject to an annual impairment
test. Intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. At the date of adoption,
the Company's balance sheet included goodwill of $41 million and other
intangible assets of $8.9 million. Subsequent to adoption of Statement 142,
amortization of goodwill was ceased. Had Statement No. 142 been in effect as
of October 1, 2001 and goodwill was not amortized, net income and earnings
per share would have been $1.7 million and $0.15, respectively, for the three
months ended March 31, 2002 and $2.6 million and $0.22, respectively, for the
six months ended March 31, 2002.
The Company completed the initial goodwill impairment testing required by
Statement No. 142 and determined that the fair value of each reporting unit
exceeds its carrying value and that no impairment of goodwill exists.
Accordingly, the impairment provisions of Statement No. 142 had no impact
upon the consolidated financial statements upon adoption.
5. Guarantees
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" requires increased disclosures regarding certain guarantees and
requires the recognition at fair value in the balance sheet of certain
guarantees. The interpretation also requires disclosure of the accounting
policy and methodology used in determining product warranty liabilities, in
addition to a reconciliation of the changes in the liability during the
period. The disclosure requirement of Interpretation No. 45 were adopted by
the Company as of October 1, 2002 (see note 6). The recognition provisions
were adopted by the Company as of December 31, 2002 to guarantees issued or
modified after that date. The adoption of the recognition provisions of this
interpretation did not have a material effect on the Company's financial
position or results of operations as of the date of adoption.
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6. Product Warranties
The Company provides for the estimated costs of product warranties when
revenue is recognized. The estimate of costs to fulfill our warranty
obligations is based on historical experience and expectation of future
conditions. The change in warranty reserves for the six-months ended March
31, 2003 is as follows:
Balance at September 30, 2002 $ 10,036
Additional accruals for warranties during the period 3,927
Usage during the period ( 4,608)
Currency translation 787
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Balance at March 31, 2003 $ 10,142
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7. Stock Based Compensation
Effective January 1, 2003, the Company adopted the disclosure requirements of
SFAS No. 148 "Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of FAS 123". The following table illustrates the pro
forma effect on net income and earnings per share as if the fair value based
method had been applied to all outstanding and unvested awards in each
period:
Three Months Ended Six Months Ended
March 31, March 31,
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2003 2002 2003 2002
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Net income - as reported $ 3,358 $ 1,101 $ 6,816 $ 1,378
Deduct: Total stock-based
employee compensation
expense determined under
the fair value based
method for all awards, net
of related tax effects $ 169 $ 193 $ 337 $ 386
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Pro forma net income $ 3,189 $ 908 $ 6,479 $ 992
========== ========== ========== ==========
Earnings per share:
Basic - as reported $ 0.29 $ 0.10 $ 0.59 $ 0.12
Basic - pro forma $ 0.28 $ 0.08 $ 0.56 $ 0.09
Fully diluted - as reported $ 0.29 $ 0.10 $ 0.59 $ 0.12
Fully diluted - pro forma $ 0.28 $ 0.08 $ 0.56 $ 0.09
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8. Net Income Per Common Share
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per common share ("EPS") reflects the potential dilution
from common stock equivalents (stock options). The calculation of the
weighted average number of common shares outstanding for each period is as
follows:
Three Months Ended Six Months Ended
March 31, March 31,
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2003 2002 2003 2002
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Weighted average number of
shares for BASIC net income
per common share 11,556,600 11,550,300 11,556,600 11,550,300
Potential additional shares
due to outstanding dilutive
stock options 33,438 72,815 10,619 42,704
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Weighted average number of
shares for DILUTED net
income per common share 11,590,038 11,623,115 11,567,219 11,593,004
========== ========== ========== ==========
Excluded from the calculation of diluted EPS for the three months ended March
31, 2003 and 2002, were 948,600 and 424,000 outstanding stock options,
respectively. These could potentially dilute future EPS calculations but
were not included in the current period because their effect would have been
antidilutive.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 (the "Reform Act"). Forward-looking statements include
all statements that do not relate solely to historical or current facts, and
can be identified by the use of words such as "may", "believe", "will",
"expect", "project", "anticipate", "estimate", "plan" or "continue". These
forward looking statements are based on the current plans and expectations of
our management and are subject to a number of uncertainties and risks that
could significantly affect our current plans and expectations, as well as
future results of operations and financial condition. In making these
forward-looking statements, we claim the protection of the safe-harbor for
forward-looking statements contained in the Reform Act. We do not assume any
obligation to update these forward-looking statements to reflect actual
results, changes in assumptions, or changes in other factors affecting such
forward-looking statements.
Overview
Rofin-Sinar Technologies Inc. (herein also referred to as "Rofin-Sinar", or
the "Company" or "we", "us" or "our") is a leader in the design, development,
engineering, manufacture and marketing of laser-based products used for
cutting, welding and marking a wide range of materials.
During the second quarter of fiscal years 2003 and 2002, respectively, we
realized approximately 51% and 58% of revenues from the sale and servicing of
laser products for macro applications and approximately 49% and 42% from the
sale and servicing of laser products for marking and micro applications.
Management believes that the near term growth in the Company's macro
business, especially in North America, will be under continued pressure given
the current market environment for investment in capital goods and the
unknown influence to our business of the SARS epidemic, mainly in Asia. In
the Company's marking and micro business management sees some positive
developments from the semiconductor and electronics market which should lead
to slightly increased sales in the coming quarters. Our diode laser
products, which are sold primarily in our macro business, have experienced
quality issues that have affected the performance of certain units in the
field. Management has established reserves for the associated costs
estimated to be incurred during the coming quarters related to products that
have been sold prior to March 31, 2003. Management believes that the
Company's profitability on future sales of diode laser products may continue
to be affected in the near term as these issues are resolved.
- 12-
Through our global manufacturing, distribution and service network, we are
providing a comprehensive range of laser sources and laser based system
solutions to three principal target markets: the machine tool, automotive and
semiconductor/electronics industries. We sell our products directly to end-
users, to original equipment manufacturers ("OEMs") (principally in the
machine tool industry) that integrate Rofin-Sinar's laser sources with other
system components, and to distributors. Many of our customers are among the
largest global participants in their respective industries.
At March 31, 2003, Rofin-Sinar had 1,215 employees compared to 1,167
employees at March 31, 2002.
Results of Operations
For the periods indicated, the following table sets forth the percentage of
net sales represented by the respective line items in the Company's
consolidated statements of operations.
Three Months Six Months
Ended March 31, Ended March 31,
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2003 2002 2003 2002
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Net sales 100% 100% 100% 100%
Cost of goods sold 62% 62% 62% 63%
Gross profit 38% 38% 38% 37%
Selling, general and
administrative expenses 20% 21% 20% 21%
Research and development expenses 7% 6% 7% 6%
Goodwill and intangibles
amortization 1% 2% 1% 2%
Income from operations 10% 9% 10% 8%
Income before income taxes
and minority interest 11% 6% 10% 6%
Net income 5% 2% 6% 1%
Net Sales - Net sales of $61.1 million and $119.2 million represent increases
of $7.6 million (14%) and $17.0 million (17%) for the three months and six
months ended March 31, 2003, as compared to the corresponding periods of
fiscal 2002. The increase for the three-months ended March 31, 2003,
compared to fiscal 2002, resulted from a net sales increase of $10.7 million
(28%) in Europe/Asia, offset by a decrease of $3.0 million (20%), in the
United States. The increase for the six month period ended March 31, 2003,
compared to the same period in fiscal 2002, resulted from a net sales
increase of $21.9 million, or 30%, in Europe/Asia offset by a decrease of
$4.9 million, or 16%, in the United States. Fluctuations in the U.S. dollar
against foreign currencies, primarily against the Euro, had a favorable
effect on net sales of $8.4 million and $12.8 million for the three-month and
six-month periods ended March 31, 2003. Net sales of laser products for
macro applications were consistent at $31.0 million for the three-months
ended March 31, 2003 as compared to the corresponding period of fiscal 2002,
but increased 8% to $62.1 million for the six-month period ended March 31,
2003 as compared to
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the corresponding period of fiscal 2002. Net sales of lasers for marking and
micro-machining applications increased by 34% to $30.1 million for the three
months ended March 31, 2003 as compared to the corresponding period in fiscal
2002 and increased by 27% to $57.1 million for the six months ended March 31,
2003 as compared to the corresponding period in fiscal 2002. This increase
can be attributed primarily to a slight recovery in demand for the Company's
lasers for marking and micro applications from the semiconductor and
electronics industries.
Gross Profit - Our gross profit of $23.2 million and $45.6 million for the
three-months and six-months ended March 31, 2003 represent increases of $3.1
million (15%) and $7.7 million (20%) from the corresponding periods of fiscal
2002. As a percentage of sales compared to the corresponding six-month
period of fiscal 2002, gross profit increased from 37.1% to 38%. The higher
percentage margin was primarily a result of a favorable product mix, caused
by higher laser sales to the semiconductor and electronics industry and
higher service and spare parts business volume. In addition, gross profit
was favorably affected by $2.4 million and $3.8 million for the three-month
and six-month periods ended March 31, 2003 due to the weakening of the U.S.
dollar against foreign currencies, primarily against the Euro.
Selling, General and Administrative Expenses - Selling, general and
administrative ("SG&A") expenses of $12.1 million and $24 million for the
three-months and six-months ended March 31, 2003 increased by $0.7 million
(6%) and $1.9 million (9%) from the corresponding period of fiscal 2002.
SG&A, a significant portion of which is incurred in foreign currencies, was
unfavorably affected by $1.6 million and $2.4 million for the three-month and
six-month periods ended March 31, 2003 due to the fluctuations of the U.S.
dollar against foreign currencies, primarily against the Euro.
Research and Development - The Company spent net $4.5 million and $8.4
million on research and development during the three-month and six-month
periods ended March 31, 2003. This represents an increase of 47% and 35%,
for the three-month and six-month periods as compared to the corresponding
periods of the prior year. Gross research and development expenses for the
three-month period ended March 31, 2003 and 2002 were $4.8 million and $3.4
million, respectively, and were reduced by $0.3 million of government grants
in both periods. Gross research and development expenses for the six-month
period ended March 31, 2003 and 2002 were $9.0 million and $6.7 million,
respectively and were reduced by $0.6 million and $0.5 million of government
grants in each respective period. The increase is a result of ongoing work
in the area of diode pumped solid state lasers. R&D, a significant portion
of which is conducted in Europe, and therefore incurred in foreign
currencies, was unfavorably affected by $0.8 million and $1.2 million for the
three-month and six-month periods ended March 31, 2003, due to the
fluctuations of the U.S. dollar against foreign currencies, primarily against
the Euro.
Goodwill and intangibles amortization - As a result of adopting new
accounting rules regarding the amortization of goodwill, amortization expense
for the three-month and six-month periods ended March 31, 2003 amounted to
$0.4 million and $0.7 million and was lower by $0.5 million and $1.1 million
when compared to the same period last fiscal year.
- 14-
Other Expense (Income) - Net other (income) expense of ($0.4) million and
$0.2 million for the three-month and six-month periods ended March 31, 2003
represents an increase in income of $1.6 million and $1.9 million compared to
the corresponding period of fiscal 2002. The fluctuation in the six-month
period is primarily attributed to higher unrealized exchange gains resulting
from certain intercompany indebtedness. Additionally, during the first
quarter of fiscal year 2002, other income was significantly affected by a
one-time gain from the sale of the medical laser business.
Income Tax Expense - Income tax expense of $3.0 million and $5.2 million for
the three-months and six-months ended March 31, 2003 represent effective tax
rates of 45% and 42%, compared to the prior fiscal year corresponding
effective tax rates of 62% and 66%. This decrease is primarily due to higher
earnings and lower amounts of nondeductible expenses for tax purposes.
Net Income - As a result of the foregoing factors, the Company realized
consolidated net income of $3.4 million and $6.8 million for the three-months
and six-months ended March 31, 2003, which represents increases of $2.3
million and $5.4 million from the corresponding periods in fiscal 2002. For
the three-months ended March 31, 2003, both basic and diluted earnings per
share equaled $0.29 based upon 11.6 million common shares outstanding, as
compared to basic and diluted earnings per share of $0.10 for the same period
in fiscal 2002.
Liquidity and Capital Resources
The Company's primary sources of liquidity at March 31, 2003 were cash and
cash equivalents of $29.0 million, an annually renewable $25.0 million line
of credit with Deutsche Bank AG and several other lines of credit to support
foreign subsidiaries in their local currencies in an aggregate amount of
$32.5 million (translated at the applicable exchange rate at March 31, 2003).
As of March 31, 2003, $15.2 million was outstanding under the Deutsche Bank
facility and $15.0 million under other lines of credit. Therefore, $27.3
million is unused and available under Rofin's lines of credit.
Additionally, the Company has outstanding long-term debt with a German bank,
which was used to finance part of the acquisition, and to refinance the
existing debt, of Baasel Lasertech. At March 31, 2003, $40.6 million was
outstanding under this credit agreement.
Cash and cash equivalents increased by $8.6 million during the six-months
ended March 31, 2003. Approximately $8.0 million in cash and cash
equivalents were provided by operating activities, primarily as the result of
improved net income and a decrease in accounts receivable, trade.
Uses of cash from investing activities totaled $1.8 million for the six-
months ended March 31, 2003 and related primarily to the acquisition of
various additions to property and equipment.
Net cash provided by financing activities totaled $1.4 million and was
primarily related to current period borrowings of bank debt.
- 15-
Management believes that the cash flow from operations, along with existing
cash and cash equivalents and availability under the company's credit
facilities and lines of credit, will provide adequate resources to meet its
capital requirements and operational needs at least through 2003.
Currency Exchange Rate Fluctuations
Although the Company reports its Consolidated Financial Statements in U.S.
dollars, approximately 75% of its sales are denominated in other currencies,
primarily Euro, British pound, Singapore dollar, Taiwanese dollar, Korean won
and Japanese yen. Net sales and costs and related assets and liabilities of
the Company's operations are generally denominated in the functional
currencies of the relevant operating unit, thereby serving to reduce the
Company's exposure to exchange gains and losses.
Exchange differences upon translation from each operating unit's functional
currency to United States dollars are accumulated as a separate component of
equity. The currency translation adjustment component of shareholders'
equity had the effect of decreasing total equity by $0.3 million at March 31,
2003 as compared to $7.2 million at September 30, 2002.
The fluctuation of the Euro and the other relevant functional currencies
against the U.S. dollar has had the effect of increasing or decreasing (as
applicable) reported net sales, as well as cost of goods sold and gross
margin and selling, general and administrative expenses, denominated in such
foreign currencies when translated into U.S. dollars as compared to prior
periods.
Critical Accounting Policies
The Company's significant accounting policies are more fully described in
Note 1 of the consolidated financial statements and footnotes in its Annual
Report on 10-K for the fiscal year ended September 30, 2002. Certain of the
accounting policies require the application of significant judgment by
management in selecting appropriate assumptions for calculating financial
estimates. By their nature, these judgments are subject to an inherent
degree of uncertainty.
Allowance for Doubtful Accounts
The Company records allowances for uncollectible customer accounts
receivable based on historical experience. Additionally, an allowance
is made based on an assessment of specific customers' financial
condition and liquidity. If the financial condition of the Company's
customers were to deteriorate, additional allowances may be required.
- 16-
Inventory Valuation
The Company writes down inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about
future demand and market conditions. If actual market conditions are
less favorable than those projected by management, additional inventory
write-downs may be required.
Warranty Reserves
The Company provides for the estimated costs of product warranties when
revenue is recognized. Our estimate of costs to fulfill our warranty
obligations is based on historical experience and expectation of future
conditions. To the extent we experience increased warranty claim
activity or increased costs associated with servicing those claims,
revisions to the estimated warranty liability would be require.
Ownership of Common Stock By Directors
The following table sets forth information as of March 31, 2003, with respect
to beneficial ownership of the Company's Common Stock and exercisable options
by each director.
Number of Total Number of
Shares of Number of Exercisable
Common Stock Stock Options Stock Options
Beneficially Owned at Owned at
Name Owned March 31, 2003 March 31, 2003
- ---------------- -------------- ----------------- -----------------
Peter Wirth 3,300 232,000 140,000
Gunther Braun 6,000 166,000 86,000
Carl F. Baasel 50,000 40,000 7,000
William R. Hoover (1) 40,500 -- --
Ralph E. Reins (1) 15,500 -- --
Gary K. Willis (1) 14,000 -- --
(1) Outside, non-executive director
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For the period ended March 31, 2003, we did not experience any material
change in market risk exposures affecting the quantitative and qualitative
disclosures as presented in our Annual Report on Form 10-K for the fiscal
year ended September 30, 2002.
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Item 4. Controls and Procedures
In the 90-day period before the filing of this report, the Chief Executive
Officer and Chief Financial Officer of the Company (collectively, the
"certifying officers") have evaluated the effectiveness of the Company's
disclosure controls and procedures (as such term is defined in Rules 13a-
14(c) and 15d-14(c) under the Securities and Exchange Act of 1934, as
amended). These disclosure controls and procedures are designed to ensure
that the information required to be disclosed by the Company in its periodic
reports filed with the Securities and Exchange Commission (the "Commission")
is recorded, processed, summarized and reported within the time periods
specified by the Commission's rules and forms, and that the information is
communicated to the certifying officers on a timely basis.
The certifying officers concluded, based on their evaluation, that the
Company's disclosure controls and procedures are effective in ensuring that
material information relating to the Company, including its consolidated
subsidiaries, is made known to them in a timely fashion, taking into
consideration the size and nature of the Company's business and operations.
There were no significant changes in the Company's internal controls or in
other factors, nor any significant deficiencies or material weaknesses
requiring corrective action, that could significantly affect the Company's
internal controls subsequent to the date when the internal controls were
evaluated.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
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Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
The Registrant did not file any Current Reports on Form 8-K
during the quarter ended March 31, 2003.
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.
Rofin-Sinar Technologies Inc.
---------------------------------
(Registrant)
Date: May 14, 2003 /s/ Gunther Braun
---------------------------------
Gunther Braun
Executive Vice President,
Finance and Administration, and
Chief Financial Officer
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CERTIFICATIONS
I, Peter Wirth, Chairman of the Board of Directors and Chief Executive
Officer and President, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rofin-Sinar
Technologies Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
- 20
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 14, 2003
/s/ Peter Wirth
-------------------------------
Peter Wirth
Chairman of the Board, Chief
Executive Officer and President
- 21-
CERTIFICATION
I, Gunther Braun, Executive Vice President, Finance and Administration, Chief
Financial Officer, Principal Accounting Officer and Director, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rofin-Sinar
Technologies Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
- 22-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 14, 2003
/s/ Gunther Braun
-------------------------------
Gunther Braun
Executive Vice President,
Finance and Administration,
Chief Financial Officer,
Principal Accounting Officer
and Director
- 22 -