SecProbe.io

<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
<PAGE>

                            [Perceptron Letterhead]

February 28, 2005

Mr. Daniel Gordon
Branch Chief
United States Securities and Exchange Commission
Washington, D.C. 20549

RE: PERCEPTRON, INC.
    FORM 10-K FOR THE YEAR ENDED JUNE 30, 2004

Dear Mr. Gordon:

Below are Perceptron's responses to your letter dated January 18, 2005.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

General

1.    We noted that you included a brief Overview section as an introduction to
      your MD&A. Consider enhancing your Overview section in future filings to
      address current events, including the following:

      -     The most important themes or other significant matters with which
            management is concerned primarily in evaluating the company's
            current financial condition;

      -     Further insight into current material opportunities, challenges and
            risks; and,

      -     A business analysis of the company's current approach to specific
            challenges and opportunities that lie ahead.

      Refer to SEC Release Nos. 33-8350, 34-48960, and FR-72.

      ANSWER: In future filings, Perceptron will expand the overview section to
      address current events of the business including the items listed above.
      The Company modified the overview section in its quarterly report on Form
      10-Q filed February 14, 2005 as shown below to address some of the items
      listed above. The Company will continue to evaluate the overview
      disclosure.

<PAGE>

      OVERVIEW

      Perceptron, Inc. ("Perceptron" or the "Company") designs, develops,
      manufactures and markets information-based measurement and inspection
      solutions for process improvement. Perceptron's product offerings are
      designed to improve quality, increase productivity and decrease costs in
      manufacturing and product development. The solutions offered by the
      Company are divided into three groups: 1) The Automated Systems Group made
      up of AutoGauge(R), AutoFit(R), AutoScan(R), AutoSpect(R) and AutoGuide(R)
      products; 2) The Technology Components Group made up of ScanWorks(TM),
      Non-Contact Wheel Alignment and TriCam(R) sensors for the forest products
      industry; and 3) The Value Added Services Group providing consulting,
      training and non-warranty support services. The Company services multiple
      markets, with the largest being the automotive industry. The Company's
      primary operations are in North America, Europe and Asia.

      The Company has a strong financial base, no debt and approximately $23.5
      million of cash at December 31, 2004, to support its growth plans. The
      Company's near-term focus for growth will remain on the successful
      introduction of its two new Automated Systems products, AutoFit(R) and
      AutoScan(R), which are designed to expand the Company's product offerings
      in its worldwide automotive markets, and the continued development of
      enhanced versions of its ScanWorks(TM) product line. In addition the
      Company believes there are growth opportunities in Asia and Eastern Europe
      related to the emerging automotive markets in those areas and the
      expansion of the Company`s business with current customers in Japan. The
      Company has plans to commit additional resources to support these efforts.
      The foregoing statements are "forward-looking statements" within the
      meaning of the Securities Exchange Act of 1934, as amended. See Item 2
      "Management's Discussion and Analysis of Financial Condition and Results
      of Operations - Safe Harbor Statement" for a discussion of a number of
      uncertainties which could cause actual results to differ materially from
      those set forth in the forward-looking statements.

      The Company's revenues are principally derived from the sale of products
      for use in the automotive industry. New vehicle tooling programs are the
      most important selling opportunity for the Company's automotive related
      sales. The number and timing of new vehicle tooling programs can be
      influenced by the state of the economy. Therefore, from a macro
      perspective the Company continues to assess the global economy and its
      likely effect on the Company's automotive customers and markets served.
      The Company is continuing its efforts to expand its opportunities outside
      the automotive industry, principally through its Technology Components
      Group and new product development efforts.

Results of Operations - Page 9

2.    In future filings, where changes in financial statement line items are the
      result of several factors; each significant factor should be separately
      quantified and discussed. For example, you state that the decrease in
      selling, general and administrative expenses "primarily reflected lower
      bad debt, Michigan single business tax, and legal expenses that were
      partially offset by salary and benefit increase and the impact of the
      strong Euro." However, you do not quantify the impact of each of these
      factors.

                                       2
<PAGE>

      ANSWER: As disclosed in the quarterly report on Form 10-Q filed February
      14, 2005, and in future filings, the Company will quantify to the extent
      practicable the individually significant factors that explain line item
      variances.

Critical Accounting Policies - Page 14

3.    Please tell us why you do not believe revenue recognition to be one of the
      company's critical accounting policies.

      ANSWER: Revenue recognition is a significant accounting policy for the
      Company. It was not classified as a critical accounting policy because
      management does not believe that the determination of revenue involves
      difficult, subjective or complex judgments or estimates by management.

      However, management believes that revenue recognition policies are very
      important for investors and others to understand when they review
      financial performance for all registrants. As a result, management has
      decided to add revenue recognition to its critical accounting policies in
      its annual report on Form 10-K for fiscal year 2005.

Market Risk Information

Foreign Currency Risk - Page 15

4.    Please revise future filings to provide the potential loss in future
      earnings of market risk sensitive instruments resulting from one or more
      selected hypothetical changes in foreign currency exchange rates over a
      selected period of time. You should select hypothetical changes in market
      rates or prices that are expected to reflect reasonably possible near-term
      changes in those rates and prices. Reference is made to Item 305 of
      Regulation S-K. For examples, see Appendix to Item 305 of Regulation S-K -
      Tabular disclosures.

      ANSWER: In future filings, the Company will provide the potential loss in
      future earnings that would result from the translation of foreign
      denominated revenues and costs into U.S. dollars for a selected
      hypothetical change or changes in foreign currency exchange rates or
      prices.

Note 1. Summary of Significant Accounting Policies

Revenue Recognition - Page 22

5.    We noted you sell your products to original equipment manufacturers,
      value-added resellers, system integrators, and directly to end users. Tell
      us and expand your revenue recognition policy to explain whether any of
      your product sales include price protection agreements or any obligations
      to buy back inventory from original equipment manufacturers or value-added
      resellers. If you have price protection agreements or are required to
      potentially buy back

                                       3
<PAGE>

      inventory, tell us how you recognize revenue and cite the specific
      accounting literature that you have relied upon.

      ANSWER: The Company does not have any price protection agreements nor does
      it have any obligation to buy back inventory from original equipment
      manufacturers or value-added resellers.

      In future filings, the Company will expand it revenue recognition policy
      to state that it does not have price protection agreements or requirements
      to buy back inventory.

6.    We also noted that you sell multiple element arrangements to your
      customers. Please tell us, and investors in future filings, if each
      delivered item has value to the customer on a stand-alone basis and
      whether the delivered items include general rights of return. In addition,
      please tell us the nature of your sales agreements and whether any
      delivered items are contingent upon the delivery of any undelivered
      additional items and the company's related revenue recognition policy.

      ANSWER: The Company's multiple element arrangements usually take the form
      of a purchase of equipment, future labor support such as during the launch
      period of the customer, and/or training. Each element has value on a
      stand-alone basis and is recorded as revenue when delivered. The delivered
      items do not include general rights of return. Delivered items are not
      contingent upon the delivery of any undelivered items. Customers that
      purchase equipment can choose to install the purchased equipment
      themselves, hire an independent contractor or hire the Company to perform
      the services. Customers can choose to train new employees on the function
      and use of the equipment themselves or they can hire the Company to
      conduct a training class for a group of their employees. As a result, each
      item could and is purchased as a stand-alone item without the other
      elements.

      In future filings, the Company will expand its revenue recognition policy
      to explain the nature of its multiple element arrangements.

7.    Please also tell us and expand your revenue recognition policies related
      to product returns, including the company's policy and related accounting.

      ANSWER: The Company's revenues from shipment of equipment reflect the sale
      of systems that have been jointly defined with the customer. The Company
      integrates proprietary components and configures systems to meet each
      customer's requirements. Because the systems are configured to meet
      specific customer requirements, the Company has virtually no history of
      returns because the Company's systems are critical to meeting the
      customer's process control goals. Accordingly, SFAS 48 is not applicable.
      If a customer were to ask to return a product and the Company agreed, the
      Company would generate a credit memo to cancel the outstanding receivable
      and reverse the revenue and would record a debit to inventory and a credit
      to cost of goods sold for the value of the inventory returned.

      In future filings, the Company will expand its revenue recognition policy
      to explain the nature and accounting of product returns.

                                       4
<PAGE>

8.    We noted your discussion regarding software products that you license to
      customers pursuant to license agreements in the business section. However,
      we did not note any discussion of such agreements in the footnotes to the
      financial statements. Please tell us, and investors in future filings, the
      nature of these agreements and the related accounting. Please also cite
      the related accounting guidance on which you based your accounting.

      ANSWER: Perceptron's products are designed to measure and/or inspect and
      provide information to the customer for process control and improvement.
      Perceptron's products include hardware (camera, lens, etc) for scanning an
      image and imbedded software (extraction software algorithms) to convey the
      results of the scan to the customer. The hardware and software operate as
      one product. Perceptron does not market its software algorithms as a
      separate item distinct from the scanning product. While the algorithm
      software is important to the functionality of the product, it is
      incidental to the product taken as a whole. The customer perceives that it
      is buying one product or scanning system not separate hardware and
      software. As an example, in an assembly line situation, the cost of the
      product to the customer is dependent upon how many measurement points the
      customer wants to capture. Each point would require a separate scanner or
      measurement collector. Therefore for one application the customer may
      purchase a five sensor system and for another application a 20 sensor
      system. The cost of the system is generally based on the number of sensors
      required.

      Perceptron has patents on many of the processes contained in the products
      it sells. Perceptron sells its products directly and thru value added
      resellers to customers for the customers' own use and not for the
      customers to resell to another. The licensing language is to convey the
      proprietary nature of Perceptron's product. The licensing is not the
      typical software licensing that is used by software companies where
      updates and maintenance are included. Accordingly, SOP 97-2 is not
      applicable to Perceptron's licensing situation.

      When Perceptron sells a product, revenue is recorded and the costs of the
      hardware components are recorded to cost of goods sold. There is no cost
      recorded for the imbedded software algorithms.

      In future filings, the Company will disclose the nature and accounting of
      its licensing agreements.

Foreign Currency - Page 22

9.    In future filings please disclose the aggregate transaction gain or loss
      included in determining net income for the period in the financial
      statements or footnotes to the financial statements. See paragraph 30 of
      SFAS 52.

      ANSWER: In future filings, the Company will disclose on its financial
      statement as a separate line item the aggregate foreign currency
      transaction gain or loss included in determining net income for the
      periods presented. In the Company's quarterly report on

                                       5
<PAGE>

      Form 10-Q dated February 14, 2005, the Company added a separate line item
      entitled foreign currency to its income statement.

Inventories - Page 23

10.   We noted that the company provides a reserve for obsolescence. Please
      provide us, and investors in future filings, with more information with
      regards to management's policy for reviewing inventory for obsolescence.
      Specifically, please provide more details of the "other matters" and
      discuss the frequency with which management reviews the reserve.

      ANSWER: On an annual basis, the Company performs a detailed review of
      inventory. This review encompasses running usage reports and reviewing any
      inventory that has no activity during a two year period. A further review
      of the inventory with no activity is performed to determine if the
      inventory has value for warranty or service related requirements. Any
      inventory that has no activity and has no value for warranty or service
      requirements is designated obsolete. If obsolete inventory can not be sold
      to another party, it is thrown out. Each quarter, the Company compares
      engineering change orders to the inventory listing to identify inventory
      obsolescence that has occurred since the annual review.

      In future filings, the Company will expand its footnote on inventories to