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Adept Technology Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 9, 2009 06:19PM

Adept Technology Inc. (ADEP) filed Quarterly Report for the period ended 2009-09-26. Adept Technology, Inc. designs, manufactures and markets robotic systems, motion control and machine vision technology for global markets including automotive, consumer electronics, consumer goods, disk drive, food, industrial tooling, medical devices, and pharmaceutical. Adept robots, controllers, and software are used for small parts assembly, material handling and packaging. Adept intelligent automation product lines include industrial robots, configurable linear modules, machine controllers for robot mechanisms and other flexible automation equipment, machine vision, and systems and applications software. Adept Technology Inc. has a market cap of $24 million; its shares were traded at around $2.89 with and P/S ratio of 0.6.

Highlight of Business Operations:

Total international revenues were $8.5 million for the three months ended September 26, 2009, down 15% compared with $10.0 million for the three months ended September 27, 2008. Lower international revenues primarily resulted from decreased sales in Europe, although demand was down across all major international regions with the exception of Asia compared with the previous year. European sales fell 26%, from $7.0 million in the first quarter of fiscal 2009 to $5.1 million in the first quarter of fiscal 2010, primarily as a result of decreased demand from the automotive electronics and industrial markets in Germany. Overall demand from the European packaging market remained strong in the first quarter of 2010, although variability exists in the timing and size of orders from different regions. Specifically, packaging sales to France decreased in the quarter while sales to Germany increased. Sales to European solar cell manufacturers continued to be depressed in the first quarter of fiscal 2010, as the worldwide solar market continued to restrict capital spending in light of the global recession.

SG&A expenses were $4.3 million, or 37% of revenues, for the three months ended September 26, 2009, down 36% from $6.8 million, representing 47% of revenues for the three months ended September 27, 2008. Lower SG&A expenses in the first quarter of fiscal 2010 compared with the prior year period were the result of cost reductions implemented by Adept during fiscal 2009, including salary reductions for all employees offset by bad debt expense of $395,000 related to specific French receivables for which collectibility is in doubt. As full salaries are gradually restored during fiscal 2010, we expect that SG&A expenses will increase. We also expect that participation in industry trade shows and selective investments in our sales and marketing resources will increase SG&A expenses going forward.

Interest Income (Expense), Net. We recorded interest expense, net of $1,000 for the three months ended September 26, 2009 compared with interest income, net of $43,000 for the three months ended September 27, 2008. Lower interest income in the first quarter of fiscal 2010 was the result of lower cash balances in the period.

Foreign Currency Exchange Gain (Loss). Adept’s foreign subsidiaries’ balance sheet accounts are translated at current period ending exchange rates and statements of operations are translated at the average rate for the period. Translation gains and losses are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity. We recorded foreign currency transaction gains of $179,000 for the three months ended September 26, 2009 and foreign currency transaction losses of $586,000 for the three months ended September 27, 2008, and are included in the condensed consolidated statements of operations. The foreign currency transaction gains (losses) recorded in the periods were primarily realized and unrealized gains (losses) related to the non-permanent intercompany debt. As we conduct business on a global basis we are exposed to adverse or beneficial movements in foreign currency exchange rates. The dollar/euro and the dollar/yen markets currently present the largest exchange rate risk for Adept. We do not currently employ a currency hedging strategy.

Cash and Cash Equivalents: As of September 26, 2009, cash and cash equivalents were $7.1 million, a decrease of $440,000 from $7.5 million as of June 30, 2009. The cash decrease was partially offset by approximately $131,000 resulting from a 5% gain in the exchange rate of the euro versus the U.S. dollar in the three-month period following June 30, 2009.

Operating Activities: Adept’s cash remained neutral from operating activities for the three months ended September 26, 2009. Net loss of $82,000 was partially offset by non-cash charges, including depreciation of $382,000, stock-based compensation of $341,000, and by other uses of cash in operating activities. Included in other uses of cash in operating activities was a net increase in accounts receivable of $3.3 million substantially due to the large disk drive or

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