-----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, GVd7MLIXpAa9tYVp0CjXnE5pOqD8YOKrmfZLLGnbXPbhSPDuxNJ5mU1CapR///Gc kaX/R5DHTtT1gITtR89xqQ== 0000950135-96-002020.txt : 19960625 0000950135-96-002020.hdr.sgml : 19960625 ACCESSION NUMBER: 0000950135-96-002020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COGNEX CORP CENTRAL INDEX KEY: 0000851205 STANDARD INDUSTRIAL CLASSIFICATION: 3845 IRS NUMBER: 042713778 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17869 FILM NUMBER: 96561709 BUSINESS ADDRESS: STREET 1: ONE VISION DR CITY: NATICK STATE: MA ZIP: 01760 BUSINESS PHONE: 5086503000 MAIL ADDRESS: STREET 1: ONE VISION DRIVE CITY: NATICK STATE: MA ZIP: 01760 10-Q 1 COGNEX CORPORATION 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934 for the quarterly period ended March 31, 1996 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 NUMBER 0-17869 ------- COGNEX CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2713778 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE VISION DRIVE NATICK, MASSACHUSETTS 01760-2059 (508) 650-3000 ------------------------------------------- (Address, including zip code, and telephone number, including area code, of principal executive offices) 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 --- --- As of April 28, 1996, there were 40,542,365 shares of Common Stock, $.002 par value, of the registrant outstanding. ================================================================================ 2 INDEX PART I FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statements of Income for the three months ended March 31, 1996 and April 2, 1995 Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 Consolidated Statement of Stockholders' Equity for the three months ended March 31, 1996 Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and April 2, 1995 Notes to Consolidated Financial Statements ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION ITEM 1. Legal Proceedings ITEM 2. Changes in Securities 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 3 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS COGNEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
THREE MONTHS ENDED MARCH 31, APRIL 2, 1996 1995 --------- -------- (UNAUDITED) Revenue....................................... $34,887 $19,437 Cost of revenue............................... 9,206 3,952 ------- ------- Gross margin.................................. 25,681 15,485 Research, development and engineering expenses.................................... 4,766 2,716 Selling, general and administrative expenses.. 6,345 5,071 ------- ------- Income from operations........................ 14,570 7,698 Other income.................................. 1,011 632 ------- ------- Income before provision for income taxes...... 15,581 8,330 Provision for income taxes.................... 4,752 2,457 ------- ------- Net income.................................... $10,829 $ 5,873 ======= ======= Net income per share.......................... $ .25 $ .14 ======= ======= Weighted average common shares outstanding.... 44,057 40,784 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 1 4 COGNEX CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
MARCH 31, DECEMBER 31, 1996 1995 --------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents............................................. $ 40,989 $ 23,911 Investments........................................................... 68,264 66,729 Accounts receivable, less reserves of approximately $553 and $709 in 1996 and 1995, respectively........................................ 22,075 24,312 Inventories........................................................... 12,610 12,567 Deferred contract costs............................................... 2,966 Deferred income taxes................................................. 1,933 1,811 Prepaid expenses and other............................................ 5,737 6,463 -------- -------- Total current assets.............................................. 154,574 135,793 -------- -------- Property, plant and equipment, net......................................... 23,818 22,133 Other assets............................................................... 3,976 4,169 Deferred income taxes...................................................... 77 -------- -------- $182,368 $162,172 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable...................................................... $ 1,627 $ 2,775 Accrued expenses...................................................... 8,441 9,333 Accrued income taxes.................................................. 7,430 3,111 Customer deposits..................................................... 1,533 867 Deferred revenue...................................................... 1,301 305 -------- -------- Total current liabilities......................................... 20,332 16,391 -------- -------- Other liabilities.......................................................... 1,920 1,865 Deferred income taxes...................................................... 27 Stockholders' equity: Common stock, $.002 par value - Authorized: 120,000,000 shares, issued: 40,483,756 and 39,039,675 shares in 1996 and 1995, respectively.............................. 81 78 Additional paid-in capital............................................ 74,553 71,171 Cumulative translation adjustment..................................... 52 40 Retained earnings..................................................... 86,292 73,516 Treasury stock, at cost, 80,918 shares in 1996 and 1995............... (889) (889) -------- -------- Total stockholders' equity........................................ 160,089 143,916 -------- -------- $182,368 $162,172 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 2 5 COGNEX CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Dollars in thousands)
COMMON STOCK ADDITIONAL CUMULATIVE TREASURY STOCK TOTAL -------------------- PAID-IN TRANSLATION RETAINED ---------------- STOCKHOLDERS' SHARES PAR VALUE CAPITAL ADJUSTMENT EARNINGS SHARES COST EQUITY ------ --------- ---------- ----------- -------- ------ ---- ------------- Balance at December 31, 1995....... 39,039,675 $78 $71,171 $40 $73,516 80,918 $(889) $143,916 Acquisition of Isys Controls, Inc. ............... 1,331,927 3 2,469 1,947 4,419 Issuance of stock under stock option plans.................. 112,154 283 283 Amortization of deferred compensation.................. 4 4 Tax benefit from the exercise of stock options.............. 626 626 Translation adjustment.......... 12 Net income...................... 10,829 10,829 ---------- --- ------- --- ------- ------ ----- -------- Balance at March 31, 1996 (unaudited)...................... 40,483,756 $81 $74,553 $52 $86,292 80,918 $(889) $160,089 ========== === ======= === ======= ====== ===== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 6 COGNEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
THREE MONTHS ENDED MARCH 31, APRIL 2, 1996 1995 --------- -------- (UNAUDITED) Cash flows from operating activities: Net income........................................................... $ 10,829 $ 5,873 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................................... 1,153 624 Loss on disposition of property, plant and equipment............... 13 Tax benefit from the exercise of stock options..................... 626 920 Deferred income tax provision...................................... (42) (91) Change in other current assets and current liabilities............. 6,703 (3,276) -------- -------- Net cash provided by operating activities............................ 19,282 4,050 -------- -------- Cash flows from investing activities: Purchase of investments.............................................. (11,434) (28,970) Maturities of investments............................................ 9,899 4,659 Purchase of property, plant and equipment............................ (2,010) (801) Cash assumed in acquisition of Isys Controls, Inc. .................. 918 Decrease in other assets............................................. 29 116 -------- -------- Net cash used in investing activities................................ (2,598) (24,996) -------- -------- Cash flows from financing activities: Issuance of stock under stock option plans........................... 283 761 -------- -------- Net cash provided by financing activities............................ 283 761 -------- -------- Effect of exchange rate changes on cash................................... 111 37 -------- -------- Net increase (decrease) in cash and cash equivalents...................... 17,078 (20,148) Cash and cash equivalents at beginning of period.......................... 23,911 56,326 -------- -------- Cash and cash equivalents at end of period................................ $ 40,989 $ 36,178 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 7 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - - ------------------------------------------ Basis of Presentation --------------------- As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, as filed with the Securities and Exchange Commission on March 28, 1996. In the opinion of the management of Cognex Corporation, the accompanying consolidated financial statements contain all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the Company's financial position at March 31, 1996 and December 31, 1995, and the results of its operations and changes in stockholders' equity and cash flows for the three months ended March 31, 1996 and April 2, 1995. The results disclosed in the Consolidated Statement of Income for the three months ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year. Certain amounts reported in prior periods have been reclassified to be consistent with the current period's presentation. Revenue Recognition ------------------- Revenue from product sales and software licenses is recognized upon shipment. Revenue from research and development contracts and long-term vision system construction projects is recognized on the percentage-of-completion method. Losses on contracts and projects, if any, are recorded when identified. Deferred contract costs arise from performance on projects in advance of billings. Deferred revenue and customer deposits arise from billings in advance of performance and are recognized as revenue during the period in which performance occurs. Service and maintenance revenue is recognized as earned. Net Income Per Share -------------------- Net income per share is calculated based on the weighted average number of common and dilutive common equivalent shares outstanding during the period. Primary and fully diluted net income per share are not materially different for each of the periods presented. Dilutive common equivalent shares consist of stock options, calculated using the treasury stock method. 5 8 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INVENTORIES - - ----------- Inventories consist of the following:
(In thousands) MARCH 31, DECEMBER 31, 1996 1995 --------- ------------ (UNAUDITED) Raw materials.......................... $ 6,834 $ 6,340 Work-in-process........................ 2,306 4,468 Finished goods......................... 3,470 1,759 ------- ------- $12,610 $12,567 ======= =======
ACQUISITION OF ISYS CONTROLS, INC. - - ---------------------------------- On February 29, 1996, the Company acquired Isys Controls, Inc. ("Isys"), a developer of ultra-high performance vision systems that automatically detect and classify surface flaws and defects on a variety of high value-added materials. Under the terms of the acquisition, accounted for as a pooling of interests, an aggregate of 1,078,380 shares of Cognex common stock were exchanged for Isys common shares, and 253,547 shares of Cognex common stock were exchanged for Isys restricted common shares, with similar restrictions. An additional 68,042 shares of Cognex common stock were reserved for issuance upon exercise of Isys options which as a result of the merger became options for the purchase of Cognex common stock. The exchange ratio was .1470 of a share of Cognex common stock for each share of Isys common stock. The results of operations of Isys for the full quarter are included in the consolidated financial statements of the Company for the quarter ended March 31, 1996. For all prior periods presented, the financial position and results of operations of Isys were not material to the previously reported financial position and results of operations of the Company, and therefore, prior periods have not been restated. 6 9 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS In February 1996, the Company acquired Isys Controls, Inc. ("Isys"), a developer of vision systems for surface inspection. The results of operations of Isys for the full quarter ended March 31, 1996 are included in the Company's results for the first quarter of 1996. The results of operations of Isys for the quarter ended April 2, 1995 were not material to the Company's previously reported results, and therefore, this prior period has not been restated. Sales of Isys products amounted to $3,150,000, or 9% of revenue, in the first quarter of 1996. Sales of these products to customers based in North America and Japan totaled $1,661,000 and $1,462,000, respectively. Isys products were sold entirely to the factory floor marketplace. Revenue for the quarter ended March 31, 1996 increased 79% to $34,887,000 from $19,437,000 for the quarter ended April 2, 1995. Revenue from international customers amounted to $19,595,000, or 56% of revenue, in the first quarter of 1996 compared to $11,132,000, or 57% of revenue, in the first quarter of 1995. Sales to customers based in North America, Japan, and Europe increased $6,987,000, $6,894,000, and $1,251,000, or 84%, 80%, and 55%, respectively, from the first quarter of 1995. The increase in worldwide revenue is due to increased volume generated from Original Equipment Manufacturer ("OEM") and factory floor customers. Sales to OEM customers increased $8,551,000, or 56%, from the first quarter of 1995 and over 15 new OEM customers were added worldwide in the first quarter of 1996. OEM relationships typically take two to five years to reach significant sales and volume levels. In addition, sales to factory floor customers increased $6,899,000, or 168%, from the first quarter of 1995 and grew to 32% of revenue in the first quarter of 1996 from 21% of revenue in the first quarter of 1995. Over 45 new factory floor customers were added worldwide in the first quarter of 1996. The combined sales of the Cognex 2000 and 3000 Series vision systems increased $2,906,000, yet decreased as a percentage of revenue to 22% for the first quarter of 1996 from 24% for the first quarter of 1995. Sales of the Cognex 4000 Series vision system increased $2,248,000, yet decreased as a percentage of revenue to 29% in the first quarter of 1996 from 41% in the first quarter of 1995. The decline in sales as a percentage of revenue of the Cognex 2000, 3000, and 4000 products reflects customers' continued transition to newer products. Sales of the Cognex 5000 Series vision system increased $4,072,000 and represented 26% of revenue in both periods. Checkpoint, the Company's "easy to use" vision system designed for the factory floor marketplace, increased $666,000 and represented 5% of revenue in both periods. Gross margin as a percentage of revenue was 74% for the quarter ended March 31, 1996 compared to 80% for the quarter ended April 2, 1995. Two percent of the decrease in the gross margin percentage from the first quarter of 1995 is due to sales of Isys products, which carry lower margins. The additional two percent decrease in the gross margin percentage is due primarily to price discounts to some of the Company's larger customers for obtaining certain volume thresholds, a shift in product mix to lower margin products, and redundant manufacturing costs incurred during the transition period to full turnkey manufacturing. Some of these influences may remain in place throughout 1996 and overall gross margin percentages are expected to be lower than experienced in 1995. Research, development and engineering expenses increased to $4,766,000 for the quarter ended March 31, 1996 from $2,716,000 for the quarter ended April 2, 1995. Expenses as a percentage of revenue were 14% in both periods. The increase in aggregate costs is due primarily to higher personnel-related costs to support the Company's investment in the research and development of new and existing products, including the addition of Isys and Acumen engineers to the Company's talent pool. 7 10 Selling, general and administrative expenses increased to $6,345,000 for the quarter ended March 31, 1996 from $5,071,000 for the quarter ended April 2, 1995. Expenses as a percentage of revenue were 18% in the first quarter of 1996 compared to 26% in the first quarter of 1995. The increase in aggregate costs is due primarily to higher personnel-related costs, both domestically and internationally, to support the Company's worldwide operations, combined with costs related to fluctuations in foreign currency exchange rates. In addition, costs incurred to effect the acquisition of Isys, primarily professional fees, were expensed in the first quarter of 1996. The decrease in expenses as a percentage of revenue is due primarily to the growth in revenue outpacing the growth in selling, general and administrative expenses. Other income increased to $1,011,000 for the quarter ended March 31, 1996 from $632,000 for the quarter ended April 2, 1995. The increase in other income is due primarily to an increase in interest income resulting from an increased investment base. The Company's effective tax rate was 30.5% for the quarter ended March 31, 1996 compared to 29.5% for the quarter ended April 2, 1995. The increase in the effective tax rate is due primarily to the fact that the full research and experimentation credit was not extended in 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's cash requirements during the quarter ended March 31, 1996 were met through cash flow generated from operations. Working capital at December 31, 1995 was $134,242,000, an increase of $14,840,000 from the working capital balance at December 31, 1995. Cash and investments increased $18,613,000 from December 31, 1995 primarily as a result of $19,282,000 of cash generated from operations, offset by $2,010,000 of capital expenditures. Cash generated from operations consist of net income, adjusted primarily for the effects of depreciation and amortization, the tax benefit from the exercise of stock options, and changes in current assets and liabilities, most notably decreases in accounts receivable and increases in accrued income taxes. As a result of the Company's transition to full turnkey manufacturing, inventory levels are expected to decline in 1996. At March 31, 1996, the Company had no outstanding short-term or long-term debt. The Company has a $1,000,000 unsecured demand line of credit with a bank which is available through November 15, 1996. There have been no borrowings under the line of credit. Capital requirements consist primarily of expenditures for computer hardware and software equipment, along with expenditures related to the expansion of the Company's office space to accommodate anticipated growth. Capital expenditures for the quarter ended March 31, 1996 amounted to $2,010,000, all of which were funded out of current operations. In 1995, the Company began work on a planned 50,000 square-foot addition to its headquarters building. Future cash requirements related to the addition are anticipated to approximate $6,000,000 and are expected to be paid out through the first quarter of 1997 with anticipated funding from cash generated from operations. In July 1995, the Company acquired Acumen, Inc. for approximately $14,000,000. The purchase price included $8,452,000 in cash, $1,798,000 of which, at March 31, 1996, remains to be paid out through the year 2000. The Company believes that the existing cash and investment balances, together with cash generated from operations, will be sufficient to meet the Company's planned working capital and capital expenditure requirements through 1996, including potential business acquisitions. 8 11 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 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule (electronic filing only) (b) Reports on Form 8-K On March 15, 1996, the Company filed a Current Report on Form 8-K for the acquisition of Isys Controls Inc. as follows: Item 2. Acquisition or Disposition of Assets Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired Report of Independent Accountants Consolidated Statements of Income for the quarter ended December 31, 1995 and 1994 (unaudited) and the year ended September 30, 1995 and 1994 Consolidated Balance Sheets at December 31, 1995 (unaudited), September 30, 1995, and September 30, 1994 Consolidated Statements of Stockholders' Equity for the quarter ended December 31, 1995 (unaudited) and the year ended September 30, 1995 and 1994 Consolidated Statements of Cash Flows for the quarter ended December 31, 1995 and 1994 (unaudited) and the year ended September 30, 1995 and 1994 Notes to Consolidated Financial Statements (b) Pro Forma Financial Information Introductory Information Unaudited Pro Forma Statements of Income for the year ended December 31, 1995, 1994, and 1993 Unaudited Pro Forma Balance Sheet at December 31, 1995 Notes to Unaudited Pro Forma Financial Information (c) Exhibits Exhibit 2 - Agreement and Plan of Merger dated as of February 29, 1996 among Cognex Corporation, Cognex Software Development, Inc., Isys Controls, Inc., and Richard Rombach Exhibit 27 - Financial Data Schedules (electronic filing only) 9 12 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. DATE: May 13, 1996 COGNEX CORPORATION /s/ Robert J. Shillman ------------------------------------------------ Robert J. Shillman President, Chief Executive Officer, and Chairman (principal executive officer) /s/ John J. Rogers, Jr. -------------------------------------------------- John J. Rogers, Jr. Executive Vice President, Chief Financial Officer, and Treasurer (principal financial and accounting officer) 10 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 COGNEX CORPORATION COMPUTATION OF PER SHARE EARNINGS Weighted average common and common share equivalents were computed as follows:
MARCH 31, APRIL 2, 1996 1995 ---------- ---------- (UNAUDITED) Weighted average common shares outstanding........ 40,326,678 37,540,984 Weighted average options outstanding.............. 7,167,555 7,796,488 Shares assumed to be purchased.................... (3,437,712) (4,553,874) ---------- ---------- Primary weighted average common and common equivalent shares outstanding................... 44,056,521 40,783,598 Dilutive effect of weighted average options....... 246,824 ---------- ---------- Fully diluted weighted average common and common equivalent shares outstanding................... 44,056,521 41,030,422 ========== ==========
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF COGNEX CORPORATION FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 40,989,000 68,264,000 22,628,000 553,000 12,610,000 154,574,000 30,471,000 6,653,000 182,368,000 20,332,000 0 0 0 81,0000 160,008,000 182,368,000 34,887,000 34,887,000 9,206,000 9,206,000 0 0 0 15,581,000 4,752,000 10,829,000 0 0 0 10,829,000 .25 .25
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