-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FDmYrPdvXl5XLhQ4lYts65l5M1oQqtnKbTsC4QPPhx7ZBqiE3AnkBFaxVG6CB8bT 9wWP3Bgu8rpDfxonaw39zQ== 0000704460-99-000019.txt : 19990915 0000704460-99-000019.hdr.sgml : 19990915 ACCESSION NUMBER: 0000704460-99-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPT VISION INC CENTRAL INDEX KEY: 0000704460 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 411413345 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11518 FILM NUMBER: 99711051 BUSINESS ADDRESS: STREET 1: 12988 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6129425747 MAIL ADDRESS: STREET 1: 10321 W 70TH ST CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: PATTERN PROCESSING TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PATTERN PROCESSING CORP DATE OF NAME CHANGE: 19840318 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q --------- QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended July 31, 1999 Commission File Number 0-11518 PPT VISION, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) MINNESOTA 41-1413345 ---------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 12988 Valley View Road Eden Prairie, Minnesota 55344 ---------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (612) 996-9500 ---------------------------------------------------------------------- (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 last 90 days. Yes X No Shares of $.10 par value common stock outstanding at September 14, 1999: 5,255,675 Total pages this report: 12 INDEX PPT VISION, INC. Part I. Financial Information Page - ------- --------------------- ---- Item 1. Financial Statements Balance Sheets as of July 31, 1999 and October 31, 1998......................................... 3 Income Statements for the Three and Nine Months Ended July 31, 1999 and July 31, 1998........................ 4 Statements of Cash Flows for the Nine Months Ended July 31, 1999 and July 31, 1998.......................... 5 Notes to Interim Financial Statements--July 31, 1999..... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 6 Item 3. Quantitative and Qualitative Disclosures about Market Risk ............................................. 10 Part II. Other Information........................................ 10 - -------- ----------------- Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures............................................... 12 ---------- PPT VISION, INC. BALANCE SHEETS July 31, 1999 October 31, 1998 Note A Note A ------------ ------------ (unaudited) ASSETS Cash and cash equivalents............. $ 2,588,000 $ 1,986,000 Investments........................... 9,266,000 15,009,000 Accounts receivable, net.............. 3,904,000 2,841,000 Inventories: Manufactured and purchased parts.... 1,667,000 1,648,000 Work-in-process..................... 386,000 339,000 Finished goods...................... 26,000 20,000 ------------ ------------ Inventories, net...................... 2,079,000 2,007,000 Other current assets.................. 125,000 254,000 ------------ ------------ Total current assets............. 17,962,000 22,097,000 Fixed assets, net..................... 3,251,000 2,254,000 Other assets, net..................... 3,258,000 3,536,000 Deferred income taxes................. 2,274,000 1,688,000 ------------ ------------ Total assets..................... $26,745,000 $29,575,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities................... $ 1,163,000 $ 1,602,000 Deferred rent......................... - 102,000 Shareholders' equity: Common stock.......................... 547,000 544,000 Capital in excess of par value........ 29,671,000 29,725,000 Accumulated (deficit)................. (4,569,000) (2,407,000) Unrealized gain (loss), investments... (67,000) 9,000 ------------ ------------ Total shareholders' equity....... 25,582,000 27,871,000 ------------ ------------ Total liabilities and shareholders' equity............. $26,745,000 $29,575,000 ============ ============ PPT VISION, INC. INCOME STATEMENTS (UNAUDITED) Three Months Ended Nine Months Ended July 31, July 31, ------------------------ -------------------------- 1999 1998 1999 1998 ----------- ----------- ------------ ------------ Net revenues............. $2,915,000 $3,185,000 $ 7,897,000 $10,367,000 Cost of sales............ 1,323,000 1,349,000 3,600,000 4,283,000 ----------- ----------- ------------ ------------ Gross profit............. 1,592,000 1,836,000 4,297,000 6,084,000 Expenses: Selling................ 1,131,000 1,063,000 3,241,000 3,134,000 General and administrative........ 509,000 318,000 1,237,000 947,000 Research and development........... 1,158,000 850,000 3,138,000 2,549,000 ----------- ----------- ------------ ------------ Total expenses......... 2,798,000 2,231,000 7,616,000 6,630,000 ----------- ----------- ------------ ------------ Loss from operations.............. (1,206,000) (395,000) (3,319,000) (546,000) Interest income.......... 161,000 231,000 554,000 766,000 Other income............. - 4,000 17,000 8,000 ----------- ----------- ------------ ------------ Net income (loss) before taxes........... (1,045,000) (160,000) (2,748,000) 228,000 Income tax benefit (expense).............. - 61,000 587,000 (86,000) ----------- ----------- ------------ ------------ Net income (loss)........ $(1,045,000) $ (99,000) $ (2,161,000) $ 142,000 =========== =========== ============ ============ Per share data: Common shares outstanding 5,440,000 5,448,000 5,418,000 5,415,000 Common and common equivalent shares outstanding............ 5,440,000 5,448,000 5,418,000 5,544,000 Basic earnings (loss) per share.............. $ (0.19) $ (0.02) $ (0.40) $ 0.03 =========== =========== ============ ============ Diluted earnings (loss) per share............... $ (0.19) $ (0.02) $ (0.40) $ 0.03 =========== =========== ============ ============ PPT VISION, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Nine Months Ended Ended July 31, 1999 July 31, 1998 ---------------- ---------------- Net income(loss)............................... $(2,161,000) $ 142,000 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization.................. 730,000 468,000 Deferred rent.................................. (102,000) (26,000) Deferred income tax (benefit).expense.......... (586,000) 16,000 Accrued interest income........................ 53,000 (148,000) Realized gain on sale of investments........... (14,000) (2,000) Change in assets and liabilities Accounts receivable............................ (1,063,000) 159,000 Inventories.................................... (72,000) (506,000) Other assets................................... 129,000 57,000 Accounts payable and accrued expenses.......... (439,000) (914,000) ---------- ---------- Total adjustments............................. (1,364,000) (896,000) ---------- ---------- Net cash used in operating activities......................... (3,525,000) (754,000) Cash flows from investing activities: Purchase of fixed assets....................... (1,442,000) (842,000) Purchase of investments........................ (8,842,000) (16,526,000) Sales and maturities of investments............ 14,468,000 18,267,000 Net investment in other long-term assets....... (5,000) (2,165,000) ---------- ---------- Net cash provided by (used in) investing activities......................... 4,179,000 (1,266,000) Cash flows from financing activities Proceeds from issuance of common stock......... 363,000 283,000 Repurchases of common stock.................... (415,000) -- ---------- ---------- Net cash (used in) provided by financing activities......................... (52,000) 283,000 ---------- ---------- Net increase (decrease) in cash and cash equivalents............................... 602,000 (1,737,000) Cash and cash equivalents at beginning of year.. 1,986,000 4,027,000 ---------- ---------- Cash and cash equivalents at end of period...... $ 2,588,000 $ 2,290,000 ========== ========== Supplemental disclosure of cash flow information: Cash paid during the year for: Income tax.................................... $ -- $ 70 Interest...................................... -- -- PPT VISION, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) July 31, 1999 NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Balance Sheet at October 31, 1998 has been derived from the Company's audited financial statements for the fiscal year ended October 31, 1998 but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended October 31, 1998. NOTE B - RECLASSIFICATIONS Certain reclassifications have been made to the 1998 financial statements to conform to the July 31, 1999 presentation. Item 2 - ------ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Net Revenues: Net revenues decreased 8% to $2,915,000 for the three-month period ended July 31, 1999, compared to net revenues of $3,185,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, net revenues decreased 24% to $7,897,000 compared to net revenues of $10,367,000 for the same period in fiscal 1998. Unit sales of the Company's machine vision systems increased to 118 for the third quarter of fiscal 1999 versus 115 for the same period in fiscal 1998. Unit sales were positively impacted by the new Passport and Scout DSL digital vision system sales and the introduction of the Scout 1 vision system in the third quarter. The Scout 1 vision system represents a lower cost single camera solution. The Company's average selling price per machine vision system sold during the three-month period ended July 31, 1999 decreased 10% compared to the same period in fiscal 1998. This decrease is attributable to the naturally lower average selling price on our newly introduced Scout 1 vision system. For the nine-month period ended July 31, 1998, unit sales decreased to 279 compared to 390 for the same period in fiscal 1998. Gross revenues for the first nine months of fiscal 1999 decreased 14% in North America and 39% outside North America. Sales to customers outside North America represented 30% of gross revenues for the first nine months of fiscal 1999, compared to 37% for the same period in fiscal 1998. The decrease in net revenues for the first nine months of fiscal 1999 was primarily the result of declines in the electronics segment as well as new product introduction delays experienced in the first quarter of fiscal 1999. Gross Profit: Gross profit decreased 13% to $1,592,000 for the three-month period ended July 31, 1999, compared to $1,836,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, gross profit decreased 29% to $4,297,000, compared to $6,084,000 for the same period in fiscal 1998. As a percentage of net revenues, the gross profit for the third quarter of fiscal 1999 decreased to 55%, compared to 58% for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, gross profit as a percentage of net revenues decreased to 54%, compared to 59% for the same period in fiscal 1998. This decrease in gross profit in absolute dollars for the first nine months of fiscal 1999 is primarily due to the decrease in sales volumes and additional costs associated with the introduction of new products. The decrease in gross profit as a percentage of net revenues is mainly a factor of unfavorable manufacturing variances resulting from decreased production volumes. The Company anticipates that the gross profit as a percentage of net revenues may fluctuate and may decline temporarily at certain times in the remainder of fiscal 1999 due to shifts in geographic and product mix as well as normal start- up costs associated with new product introductions. Selling Expenses: Selling expenses increased 6% to $1,131,000 for the three- month period ended July 31, 1999, compared to $1,063,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, selling expenses increased 3% to $3,241,000, compared to $3,134,000 for the same period in fiscal 1998. As a percentage of net revenues, selling expenses increased to 39% for the third quarter of fiscal 1999, compared to 33% for the third quarter of fiscal 1998. For the nine-month period ended July 31, 1999, selling expenses as a percentage of net revenues increased to 41%, compared to 30% for the same period in fiscal 1998. The increase in expenses as a percentage of net revenues is mainly related to the decline in net revenues. Although the Company will limit the rate of growth in selling expenses, it is anticipated that selling expenses may increase somewhat in the remainder of fiscal 1999 as the Company makes the necessary investments to support strategic initiatives. General and Administrative Expenses: General and administrative expenses increased 60% to $509,000 for the three-month period ended July 31, 1999, compared to $318,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, general and administrative expenses increased 31% to $1,237,000, compared to $947,000 for the same period in fiscal 1998. As a percentage of net revenues, general and administrative expenses increased to 17% for the third quarter of fiscal 1999, compared to 10% for the third quarter of fiscal 1998. For the nine-month period ended July 31, 1999, general and administrative expenses as a percentage of net revenues increased to 16%, compared to 9% for the same period in fiscal 1998. The increase in expenditures is primarily attributable to increased expenses associated with operating the Company as it prepares for continued growth. The increase in expenses as a percentage of net revenues is primarily related to the decline in net revenues. Research and Development Expenses: Research and development expenses increased 36% to $1,158,000 for the three-month period ended July 31, 1999, compared to $850,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, research and development expenses increased 23% to $3,138,000, compared to $2,549,000 for the same period in fiscal 1998. As a percentage of net revenues, research and development expenses increased to 40% for the third quarter of fiscal 1999, compared to 27% for the third quarter of fiscal 1998. For the nine-month period ended July 31, 1999, research and development expenses as a percentage of net revenues increased to 40%, compared to 25% for the same period in fiscal 1998. The increase in expenditures is mainly due to resource commitments required to support new product development programs. The increase in expenses as a percentage of net revenues is primarily due to the decline in net revenues. The Company believes that during the remainder of fiscal 1999, research and development expenses may increase slightly as the Company commits the resources necessary to support strategic initiatives. Interest income decreased 30% to $161,000 for the three-month period ended July 31, 1999, compared to $231,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, interest income decreased 28% to $554,000, compared to $766,000 for the same period in fiscal 1998. The decrease in interest income is primarily related to a reduction in the balances in cash and cash equivalents and short-term investments. Income Tax Benefit (Expense): The Company did not record an income tax benefit for the three-month period ended July 31, 1999, compared to $61,000 for the same period in fiscal 1998. For the nine-month period ended July 31, 1999, income tax benefit of $587,000 was recorded, compared to income tax expense of $86,000 for the same period in fiscal 1998. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital decreased to $16,799,000 at July 31, 1999 from $20,495,000 at October 31, 1998. The Company financed its operations during the first nine months of fiscal 1999 through internally generated cash flow and existing cash and cash equivalents. Net cash used by operating activities during the first nine months of fiscal 1999 was $3,525,000. Accounts receivable increased $1,063,000 primarily due to product shipments near the end of July 1999 and slower than expected payments by certain customers. The Company expects a substantial portion of the slower than expected payments to be collected by the end of September 1999. Inventories increased only slightly by $72,000 during the first nine months of fiscal 1999. Net cash provided by investing activities was $4,179,000, primarily due to sales and maturities of investments. The Company used $1,442,000 of cash for the purchase of fixed assets, mainly consisting of computer, new office facility related costs, lab equipment and manufacturing equipment. Investments consist of short-term investment grade securities. Net cash used by financing activities was $52,000. The Company realized proceeds from the exercise of common stock options of $363,000 in the first nine months of fiscal 1999. In September of 1999 the Board of Directors of PPT Vision, Inc. authorized the Company to repurchase up to 750,000 shares of its Common Stock. The Company used $415,000 of cash to repurchase 83,000 shares of its Common Stock in the first nine months of fiscal 1999. In addition, the Company used $834,000 in August and September 1999 to repurchase 212,500 shares of its common stock. The Company entered into a ten-year lease in May 1999 for approximately 59,000 square feet of office and manufacturing space in Eden Prairie, Minnesota. The lease commenced in May 1999 at an initial monthly rate of approximately $51,000. As part of the lease, beginning with lease month 42 through lease month 60 the Landlord has agreed to lease and the Company has agreed to accept an additional approximately 21,000 square feet of contiguous office space for the remainder of the original lease term. Until the date of occupancy of the additional space the Company will accrue an obligation of $4,000 per month for the additional space. The monthly rate of the additional office space upon occupancy will be the same as the currently occupied space. At September 14, 1999, the Company had commitments for approximately $115,000 of capital equipment. The Company believes that its cash flow from operations, existing cash and cash equivalents, and investments at July 31, 1999 will provide adequate liquidity to meet the Company's normal working capital and capital resource needs for at least the next twelve months. YEAR 2000 READINESS - ------------------- The Company has analyzed the potential impact of the year 2000 issue on both the Company's products and on critical business systems and development systems used in the Company's internal operations. In response to the year 2000 issue, the Company upgraded its current enterprise resource planning ("ERP") system to the most recent revision level, which is year 2000 compliant. The cost of this upgrade was included in the normal annual maintenance fee that the Company pays to the provider of the software. Regarding its own product offerings, the Company has tested the software and hardware included in its products and believes that all products currently being shipped are year 2000 compliant. The Company also has available low-cost alternatives to retrofit systems in the field for year 2000 compliance. To date, the incremental costs to the Company associated with the year 2000 issue have been minimal. The Company believes that the costs of addressing any remaining year 2000 issues will not have a material adverse impact on the Company's financial position. Based on the Company's review of its own products and critical business systems and development systems, the Company has not felt it necessary to put in place formal contingency plans. However, the Company will take appropriate and timely action to resolve any significant year 2000 issues that become apparent. FORWARD LOOKING STATEMENTS - -------------------------- Certain of the statements contained in this Form 10-Q that relate to expectations regarding future sales and profitability contain forward-looking statements regarding future performance of the Company. The Company's actual results could differ materially from the estimates made in the forward-looking statements as a result of a number of factors, including (i) risks and uncertainty in the market for machine vision, (ii) cyclicality of capital spending by customers, (iii) quarterly fluctuations in operating results by the Company due to the long selling cycle for machine vision products, (iv) dependence on principal customers, including the Company's international distributors, (v) competition in the Company's principal markets, (vi) the Company's ability to obtain intellectual property protection for its proprietary technology and protect itself against adverse intellectual property claims from third parties and (vii) the Company's ability to continue to enhance its current products and develop new products that keep pace with technological developments and evolving industry standards. The Company wishes to caution readers not to place undue reliance upon any such forward-looking statement, which speak only as of the date made. A more detailed presentation of certain factors is included in the Company's Annual Report on Form 10-K for the year ended October 31, 1998. Item 3: Quantitative and Qualitative Disclosures about Market Risk. The Company does not have material exposure to quantitative and qualitative market risks because it does not own any risk sensitive financial instruments. PART II. Other Information Item 1: LEGAL PROCEEDINGS ----------------- In July 1999, the Company was served by National Instruments Corporation ("NIC") of Austin, Texas, in a patent infringement lawsuit filed in United States District Court for the Western District of Texas. NIC has alleged that the Company's Vision Program Manager software ("VPM") infringes certain United States patents held by NIC related to graphical programming concepts. The Company has filed a counterclaim and requested that the Court declare the NIC patents invalid or determine that the Company does not infringe the NIC patents. There has been no discovery to date and a trial has not yet been scheduled in this action. The Company believes that it has meritorious defenses to the lawsuit and intends to defend itself vigorously. On July 9, 1999 Integrated Electronic Technologies, Inc. ("IET") of Cicero, New York, filed a complaint against the Company in the United States District Court for the Northern District of New York (Case No. 99-CV-1067). IET is asserting breach of contract and related claims in connection with the proposed purchase by the Company of certain handling systems to be manufactured by IET. The Company has filed an answer denying all liability and has asserted counterclaims seeking damages from IET. There has been no discovery to date and a trial has not yet been scheduled in the action. The Company believes that it has meritorious defenses to the lawsuit and intends to defend itself vigorously. For further information see "Patents and Proprietary Rights" and "Important Factors Regarding Forward-Looking Statements- Proprietary Technology" in Part 1, Item 1 of the Company's Annual Report on Form 10-K for the year ended October 31, 1998. Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS ----------------------------------------- None Item 3: DEFAULTS UPON SENIOR SECURITIES ------------------------------ Not Applicable Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None Item 5: OTHER INFORMATION ----------------- In September of 1998 the Board of Directors of PPT Vision, Inc. authorized the Company to repurchase up to 750,000 shares of its Common Stock. The Company used $415,000 of cash to repurchase 83,000 shares of its Common Stock in the first nine months of fiscal 1999. In addition, the Company used $834,000 in August and September 1999 to repurchase 212,500 shares of its common stock. Item 6: EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits: Page The following exhibits are filed as part of this Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1999: ..................................... 12 27.1 Financial Data Schedule (b) Reports on Form 8-K A Form 8-K dated June 21, 1999 was filed with the Securities and Exchange Commission to announce the adoption of a Preferred Stock Purchase Rights Plan. 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. PPT VISION, INC. Date: September 14, 1999 /s/Richard R. Peterson ----------------------------- Richard R. Peterson (Principal Accounting Officer) Chief Financial Officer EX-27 2
5 1000 3-MOS OCT-31-1999 JUL-31-1999 2588 9266 3904 0 2079 17962 6747 3496 26745 1163 0 0 0 25649 (67) 25582 2915 2915 1323 2798 0 0 (161) (1045) 0 (1045) 0 0 0 (1045) (.19) (.19)
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