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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 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 0-8623
ROBOTIC VISION SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-2400145
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Rabro Drive East, Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 273-9700
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Securities registered pursuant to Section 12(b) of the Act:
Name or each exchange on which
Title of each class registered
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None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of class)
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(Title of class)
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K |_|
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
are reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes |_| No |_|
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The number of shares outstanding of the Registrant's common stock is
20,736,251 (as of 12/13/96).
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant is $286,939,967 (as of 12/13/96).
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement for its Annual Meeting of Stockholders scheduled to
be convened in April 1997.
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<PAGE>
PART I
Item 1. Description of Business.
(a) General Development of Business
Robotic Vision Systems, Inc. ("RVSI" or the "Company"), either
through its electronics division or through its wholly owned subsidiaries,
Acuity Imaging, Inc. ("Acuity"), International Data Matrix, Inc. ("I.D.
Matrix"), Computer Identics Corporation ("CI") and Systemation Engineered
Products, Inc. ("Systemation"), designs, manufactures, markets and sells
automated 2-dimensional ("2-D") and 3-dimensional ("3-D") machine vision-based
products and systems for inspection, measurement and identification, and is a
leader in advanced electro-optical sensor technology. RVSI's aircraft safety
division is developing an ice detection product for the aviation industry.
On August 30, 1996, RVSI consummated a merger with CI, a publicly
owned company located in Canton, Massachusetts, pursuant to which CI became a
wholly-owned subsidiary of RVSI ("CI Merger"). CI designs, manufactures, markets
and services standard barcode products, data collection networks, and systems
for the data collection and material handling/industrial markets. The CI Merger
was structured as a tax free reorganization and accounted for as a pooling of
interests. As a consequence of the CI Merger, RVSI issued approximately
2,127,000 shares of its Common Stock in exchange for all the outstanding shares
of CI Common Stock.
On October 1, 1996, RVSI consummated a merger with Systemation, a
privately owned company located in New Berlin, Wisconsin, pursuant to which
Systemation became a wholly-owned subsidiary of RVSI ("Systemation Merger").
Systemation is widely recognized as a world leader in tape-and-reel, as well as
tube and tray based component processing systems for the semi-conductor and
electronics industries. The Systemation Merger was structured as a tax free
reorganization and accounted for as a pooling of interests. As a consequence of
the Systemation Merger, RVSI issued 1,740,000 shares of its Common Stock in
exchange for all the outstanding shares of Systemation Common Stock. The 1996
financial results included herein do not include those of the Company's
Systemation subsidiary, since that acquisition was completed after the
completion of the 1996 fiscal year.
<PAGE>
RVSI was incorporated in New York in 1976 and reincorporated in
Delaware in 1977. Its executive offices are located at 425 Rabro Drive East,
Hauppauge, New York 11788; telephone (516) 273-9700.
Unless otherwise noted, all subsequent references to RVSI or to the
Company in this Annual Report shall be deemed to refer to RVSI or the Company,
as applicable, and its consolidated subsidiaries as a single enterprise.
(b) Financial Information About Industry Segments
For the purpose of segment reporting, management considers the
Company to operate in one industry, the machine vision industry.
(c) Narrative Description of Business
(i) Principal Products and Product Development
A. RVSI Electronics and Aircraft Safety Divisions
I. Semiconductor Lead Inspection Systems
RVSI's electronics division supplies inspection equipment to the
semiconductor industry. The electronics division's LS-Series lead scanning
systems offer automated, high-speed, 3-D semiconductor package lead inspection
with the added feature of non-contact scanning of the packages in their shipping
trays ("in-tray scanning"). The systems use a laser-based, non-contact, 3-D
measurement technique to inspect and sort quad flat packs, thin quad flat packs,
chip scale packages ("CSP"), ball grid arrays ("BGA") and thin small outline
packs in their carrying trays. The system measurements include coplanarity,
total package height, true position spread and span, as well as lead angle,
width, pitch and gap.
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The division's LS-3000 Series lead scanning systems are an outgrowth
of its prior LS-2000 Series, introduced in October 1990 as the only reliable
high-speed automated semiconductor lead inspection system capable of inspecting
devices while they remain in their protective trays. In June 1992, the
electronic division introduced the LS-2000A, a higher accuracy version of the
LS-2000, as well as the LS-2700, a significantly faster version of the LS-2000
which also afforded a greater level of accuracy. The LS-3000 Series, introduced
at the Semicon West trade show in July 1994, are lighter and smaller than the
LS-2000A and the LS-2700. The flagship of the LS-3000 series, the LS3700, is
also significantly faster than the LS-2700. The LS-3700DB and the LS-3900DB,
introduced at Semicon West in July 1995 and 1996, respectively, are each
significantly faster than their immediate predecessor models. In December 1995
RVSI introduced the GS-5000 Series, the first lead scanner designed exclusively
for BGA applications.
Systemation, which reports to the electronics division's senior
management, offers tape-and-reel component processing systems designed to handle
CSP and BGA. RVSI also believes that Systemation's historical expertise in
designing and manufacturing systems that handle components in tubes provides
RVSI with the means to further expand the breadth of its product offerings to
the semiconductor market.
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II. Aircraft Ice Detection System
In January 1993, RVSI's aircraft safety division announced the
completion of the initial development phase of its new ID-1 aircraft ice
detection system. The ID-1 is designed to make a major improvement in winter
flight safety and to fulfill the intent of strict new FAA regulations concerning
the inspection of wing surfaces in adverse weather conditions. The device is
also anticipated to reduce winter flying delays and their associated costs and
to diminish the environmental hazard posed by de-icing fluids.
The ID-1 is a full-wing electro-optical ice detection system that is
designed to provide a quick, clear and reliable indication of the presence or
absence of ice, snow or frost. The Aircraft Safety Division has been awarded two
patents and has additional patent applications pending for this technology. The
ID-1 system can be mounted on the bucket of a de-icing truck or other vehicle
and is designed to operate under conditions where visual inspection can be
ineffective or tactile inspection difficult. Its compact size and high degree of
mobility are also designed to allow the ID-1 to detect ice on aircraft surfaces
at any point between the gate and runway. Preliminary design and testing is
under way to adapt the technology to an on-aircraft product which will provide
both ground and airborne ice detection capability.
Extensive engineering testing of the ID-1 took place at several
field locations during the 1994-1995 winter ice season. In July 1996 the Federal
Aviation Administration approved the ID-1 as an acceptable means of compliance
with the inspection requirements of a major air carrier's de-icing plans. The
commercial viability of the ID-1 has not as yet been proven nor can it be
assured. Consequently, there can be no assurance that the ID-1 can be
commercially marketed at a profit at any time in the proximate future, if ever.
B. Acuity
Acuity, acquired by RVSI on September 20, 1995, designs,
manufactures and markets 2-D machine vision systems for use in industrial
automation. Acuity's products, which utilize a combination of software, an image
processing computer and electronic
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cameras, perform such functions as measurement, flaw detection, verification of
the presence and correctness of parts and subassemblies, and inspection of
manufactured products. Typically, they are utilized in hot, dusty, dirty or
other harsh industrial environments in applications where human inspection is
not practical or where the use of machine vision systems is faster, more
reliable and more economical than human inspection. Such applications include
assembly verification, date and lot code reading, flaw detection, gauging and
measurement, label verification and product indentification.
Acuity's principal product offerings are as follows:
o Powervision 900 (PV900 Series) is a high-resolution, gray scale
machine vision system featuring advanced image processing, analysis,
and graphics tools to meet demanding industrial vision needs. The
system's architecture, which is based on Apple's Power Macintosh
computer and Acuity's proprietary Image Analyst/Source software
package, is intended to offer an effective solution for a wide range
of measurement, inspection, assembly verification, and motion
guidance applications.
o IVS, an acronym for Intelligent Visual Sensors, is a high speed
gray scale machine vision system designed to address the broad
general industrial marketplace. Typical IVS systems, which are sold
as either a board-level product or as a stand-alone unit with a
self-contained power supply and input/output control, address the
low to medium price ranges of the market and are designed to appeal
to the broad requirements of most industrial customers who do not
have machine vision expertise.
o I-Pak is a product designed to meet the needs of the
pharmaceutical industry to verify that the correct label has been
applied to pharmaceutical products and that the lot and date code
printed on the label are legible. I-Pak, which operates at
manufacturing line speeds, employs
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a customized user interface specifically designed to meet label
inspection needs of pharmaceutical customers. I-Pak requires minimum
user programming and has been designed for ease of use and
integration into the manufacturing line.
o Data Matrix Readers read matrix-coded information at line speeds
and permit traceability of product, even with small, hard-to-mark
products (see "CI and I.D. Matrix," below). Unlike bar codes which
have rigid print tolerances, data matrix codes can be read more
easily and are applied directly to the surfaces being marked. In
general, manufacturers are requiring that more information be
encoded on their products. Data matrix codes allow large amounts of
coded information to be printed in a small space.
C. CI and I.D. Matrix
A bar code label consists of bars printed on a contrasting
background. By varying the width of the printed bars as well as the spaces
between them, a bar code can be encoded with information such as identification
number, origin, composition or destination of the product to which the label is
attached. Bar code scanners read bar codes with high intensity light and convert
the reflected light patterns into electrical impulses. These impulses are
transmitted to a decoding unit which translates them to conventional digital
information for use by a customer in accordance with specific application
requirements.
CI designs, manufactures or purchases for resale, and services a
broad line of bar code and data collection products. CI's customers encompass a
wide cross-section of businesses and institutions, including postal services,
freight companies, and manufacturers of electronics, pharmaceuticals, consumer
goods, textiles and automobiles. CI's principal product offerings are as
follows:
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o Material Handling Data Identification Products
CI manufactures a series of fixed position laser scanners for
automation and material handling applications found in
warehousing, distribution and manufacturing control
environments. In 1995, CI introduced the CiMAX(TM) 7500
scanner. The CiMAX 7500 is an intelligent, fixed position
laser scanner with Ethernet networking capabilities. It is
designed specifically for material handling applications where
high reading rates, high throughput, and local or networked
distributed processing and control are important to
application success. The CiMAX 7500 combines the capabilities
of a scanner, decoder, PC and PLC in one product. The OMNI
CIX(TM), an omni-directional fixed position laser scanner
designed specifically for material handling applications where
the bar code label or labeled item can be rotated at any
angle, was introduced in 1994. The Scanstar(TM) 10/15
miniature bar code scanner and the Scanstar 80/85 high
performance scanner are utilized in factories, warehouses and
distribution centers to identify, count, sort or direct
objects as they move throughout a facility on a conveyor
system. These series of scanners are available with a range of
sophisticated operational features whose physical
characteristics and built-in options address a wide variety of
customer requirements.
o Factory Data Collection Terminals and Networks
For factory data collection applications, which include
scanners, terminals and workstations, as well as networks to
provide data communications between the various units, CI
manufactures the Starnode(TM) Data Collection Network. This
system is used in a wide range of applications such as
production accounting, labor reporting and work-in-process
tracking where accurate data collection and management is
essential. The heart of the Starnode Data Collection Network
is an intelligent network
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controller which, when connected to a series of bar code data
collection terminals and scanning devices, provides the
necessary components for a turn-key data collection system for
a host computer. The Starnode(TM) Data Collection Network also
includes software to operate the system and assist in various
applications. In 1995, CI introduced the CiMAX 6000, an open
system based date collection terminal. The CiMAX 6000 is
suitable for applications such as quality control, work in
process and shipping and receiving. It interfaces to any host
computer using the established TCP/IP connectivity protocol
and Ethernet transport hardware. Additionally, the CiMAX 6000
is supported by CI's Starnode(TM) Data Collection Network
enabling users to select the computing environment that best
suits their requirements.
CI also manufactures or purchases for resale a range of bar code
data collection tools. Included in this category are bar code label printers,
decoders, hand held scanning devices, radio frequency devices and portable bar
code terminals.
I.D. Matrix, which markets a line of 2-D Data Matrix (TM) code readers and whose
operations have been integrated with those of CI, is the inventor of the Data
Matrix(TM) code - a 2-D code which resembles a scrambled checkerboard.
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In the industrial sector, the Data Matrix (TM) code is
becoming the 2-D code of choice because of its ability to be printed or marked
directly on parts and components, thereby eliminating the need for paper labels
and the high cost of labeling equipment. The small size of the Data Matrix (TM)
code allows its use in industries and in applications that were previously
impossible to satisfy with machine readable codes. Serialization and therefore
traceability is now possible in industries such as semiconductor, which have
recently seen a surge in the theft of memory chips and other high priced
computer components.
The Data Matrix(TM) code has recently been recommended for small
part identification by the Automotive Industry Action Group (AIAG). The
Semiconductor Equipment and Materials International (SEMI) has adopted Data
Matrix (TM) as its standard for coding silicon wafers and for wafer box labels,
and the Electronics Industry Association (EIA) is in the process of finalizing
similar recommendations regarding standardization.
(ii) Manufacturing
Each of the Company's production facilities are capable of
fabricating and assembling total electronic and electromechanical systems and
subsystems. Facilities include assembly and wiring departments that have the
capability of producing complex wiring harnesses, as well as intricate
electronic subassemblies. The Company maintains a comprehensive test and
inspection program to ensure that all systems meet exacting customer
requirements for performance and quality workmanship prior to delivery.
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(iii) Marketing and Sales
A. RVSI Electronics Division
The division's marketing strategy focuses on cultivating
long-term relationships with the leading manufacturers of electronic and
semiconductor inspection and quality control equipment. Its marketing efforts
rely heavily on direct sales methods. The selling cycle for its LS-3000 Series
and GS-5000 Series products has proven to be generally between six to nine
months from initial customer contact. A lengthy process is often the case in the
purchase of an initial unit. Subsequent purchases require less time and often
result in multiple orders. Typically, potential purchasers visit division
headquarters to receive a full demonstration of the product and to discuss the
merits of the product with the division's engineers before making a purchase
decision.
Sales activities in the domestic market are handled by direct
sales personnel. Due to the depth of analysis involved in the customer's
purchase decision, division management emphasizes active interaction between the
direct sales staff and the buyer throughout the selling process.
The division maintains distribution capabilities in both
Europe and the Far East, providing access to all major markets for electronic
and semiconductor test equipment. A sales and technical support office was
recently established in Singapore.
The division presently employs 8 persons primarily engaged in
sales. Lending further support to the sales effort is a 102 person engineering
and technical staff, which provides assistance in areas requiring in-depth
technical analysis.
B. Acuity
Acuity markets its products worldwide through a direct
marketing, sales and sales application engineering force of 30 persons and
through distributors and system integrators.
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Acuity has distributors in North America, Europe and Asia. Acuity
supports its distribution channels with regional sales managers and sales
application engineers who support and interface directly with the distributors.
In addition, Acuity provides sales and product training to its distributors as
well as technical product support.
C. CI
CI's product line is sold by its direct sales organizations in
the United States and its foreign subsidiaries in Belgium, France, Germany and
the United Kingdom. It also distributes its products in these areas and other
parts of the world through distributors, value added resellers and systems
integrators. CI also sells products and components to OEMs, including materials
handling equipment manufacturers and system integration firms. These firms
combine CI's products with other hardware and software to create customized
information and control systems for sales to end users.
(iv) Sources of Supply
To support its internal operations and to extend its overall
capacity, the Company purchases a wide variety of components, assemblies and
services from proven outside manufacturers, distributors and service
organizations. The Company has not experienced any significant difficulty in
obtaining adequate supplies to perform under its contracts.
Several of the Company's components and sub-systems are purchased
from single sources. The Company believes that alternative sources of supply
could be obtained, if necessary, without major interruption in production.
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(v) Proprietary Protection
At September 30, 1996 the Company owned 127 issued U.S. patents,
with expiration dates ranging from 1996 to 2016. The Company also has various
U.S. and foreign registered trade marks.
The Company does not believe that its present operations are
materially dependent upon the proprietary protection that may be available to
the Company by reason of any one or more of such patents. Moreover, as its
patent position has not been tested with the exception of the litigation
referred to elsewhere herein under "Legal Proceedings," no assurance can be
given as to the effectiveness of the protection afforded by its patent rights.
(vi) Customers
Intel accounted for approximately 15% and 11% of the Company's
consolidated sales during its fiscal years ended September 30, 1996 and 1995. No
other customers accounted for more than 10% of such sales during the fiscal
years ended September 30, 1996, 1995 and 1994, respectively.
(vii) Backlog
At September 30, 1996 the Company's backlog was approximately $7.2
million as contrasted with approximately $19.5 million and $11.8 million at
September 30, 1995 and 1994, respectively. The Company believes that most of its
backlog at September 30, 1996 will be completed prior to the close of fiscal
year 1997. The Company does not believe that its backlog at any particular time
is necessarily indicative of its future business.
(viii) Competition
The Company believes that machine vision has evolved into a new
industry over the past several years, in which a number of machine vision-based
firms have developed successful industrial applications for the technology. The
Company is aware that a large number of companies, estimated to be upward of 100
firms, entered
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the industry in the 1980's and that most of these were small private concerns.
Over the last several years the number of competitors has narrowed to less than
25. The Company believes this is attributable, to a large extent, to
consolidation within the industry. Based upon the breadth of its product lines,
its customer base, and its level of revenues, the Company believes that it is a
significant factor in the machine vision industry.
(ix) Research and Development
Company-sponsored research and development efforts over recent years
have been largely devoted to continued development of advanced 2-D and 3-D
vision technology and applications software for use in various inspection and
process control automation systems. Research and development expenditures, net
of capitalized software development costs, aggregated approximately $14,679,000,
$12,980,000 and $10,255,000 for the Company's fiscal years ended September 30,
1996, 1995 and 1994, respectively. In its fiscal years ended September 30, 1996,
1995 and 1994, the Company capitalized $2,630,000, $535,000 and $433,000,
respectively, of its software development costs in accordance with the
provisions of Statement of Financial Accounting Standards No. 86.
(x) Environmental Regulation
The Company believes that compliance with Federal, state, local and,
where applicable, foreign environmental regulations does not have any material
effect on its capital expenditures, earnings or competitive position.
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(xi) Employees
At November 30, 1996 the Company employed 509 persons, of whom 203
were engineering and other technical personnel. None of the Company's employees
is a member of a labor union.
(d) Financial Information Relating to Foreign and Domestic Operations and
Export Sales
Revenues from unaffiliated customers generated by the Company's European
subsidiaries were $16,226,000, $16,762,000 and $13,702,000 for the years ended
September 30, 1996, 1995 and 1994, respectively.
Total revenues to customers outside the U.S. were $70,975,000, $58,138,000
and $32,973,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
Export sales from the Company's United States operations to unaffiliated
customers were as follows:
(In Thousands)
Year Ended September 30,
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1996 1995 1994
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Europe $ 4,675 $ 6,122 $ 576
Asia/Pacific Rim 49,458 35,011 18,413
Other 1,173 298 282
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Total $55,306 $41,431 $19,271
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Item 2. Properties.
The Company's executive offices, as well as its electronics and
aircraft safety divisions, are located in Hauppauge, New York. Electronics
division operations are also conducted in New Berlin, Wisconsin.
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Acuity's operations are located in Nashua, New Hampshire while those of CI and
I.D. Matrix are located in Canton, Massachusetts. The Company also maintains
sales and service facilities in four European countries and in Singapore. All of
those premises are leased at an aggregate annual cost of approximately $2.4
million. Expiration dates of the respective leases range from 1998 to 2001.
Item 3. Legal Proceedings.
On or about October 22, 1992, the Company instituted an action in
the United States District Court for the Eastern District of New York against
defendant Cybo Systems, Inc., ("Cybo"), entitled Robotic Vision Systems, Inc. v.
Cybo Systems, Inc. a/k/a Cybot Systems, Inc., alleging that the defendant
breached certain agreements between the parties with respect to the sale by the
Company to the defendant of all of the assets of its welding and cutting systems
business.
On or about December 4, 1992, Cybo filed and served an answer
denying the substantive allegations of the Company's complaint. In addition,
Cybo asserted counterclaims against the Company alleging, among other things,
breach of contract and warranties, fraud, bad faith, trespass and conversion and
is seeking aggregate damages in excess of $10.0 million. Shortly thereafter, the
Company moved to dismiss certain of Cybo's counterclaims on the ground that Cybo
failed to plead fraud with the requisite particularity. By Order dated March 20,
1993, the Court (i) granted the Company's motion to dismiss without prejudice,
and (ii) granted Cybo leave to serve an amended answer with amended
counterclaims by April 19, 1993. Cybo has since served an amended answer and
counterclaims which purport to plead fraud with the requisite particularity. All
pre-trial discovery has been completed, and the Company has moved for partial
summary judgment to dismiss most of the damage claims. No decision has been
rendered as yet. The Company, upon the advice of its general counsel, believes
Cybo's counterclaims are without merit and that the ultimate outcome of this
matter will not have a material adverse effect on the Company's financial
position or results of operations. Except for certain
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matters relating to the issue of damages, the parties have completed discovery.
RVSI is a party to three separate law suits, two of which were
commenced by RVSI, in the United States District Court for the Central District
of California with View Engineering, Inc. ("View"), a company that competes with
RVSI in the assembly and distribution of 3-D machine vision-based products. The
law suits involve the question of whether View is infringing a number of RVSI
patents in the assembly and distribution of its own 3-D machine vision-based
products.
The first action was commenced by View seeking a declaratory
judgment that it was not infringing one of RVSI's patents. In June 1996, the
court granted View's motion for summary judgment and held that View's machines
did not infringe three of RVSI's patents. RVSI is appealing this decision. The
second action was commenced by RVSI against View alleging infringement by View
of another one of RVSI patents. In March 1996, the court dismissed the action
holding that one of the claims of the pertinent RVSI patent is invalid. RVSI has
appealed this decision. The third action was recently commenced by RVSI against
View alleging infringement by View of another one of RVSI patents. This action
is in its early stages. RVSI believes that the ultimate outcome of the three
proceedings will not have a material adverse effect upon RVSI.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
Item 5. Market for the Company's Common Stock and Related Security Holder
Matters.
(a) Market Information.
The Company's Common Stock is quoted on The Nasdaq National Market
under the symbol ROBV. The following table sets forth the high and low closing
prices for the Company's Common Stock for the periods indicated:
Fiscal Quarter Ended High Low
-------------------- ---- ---
September 30, 1996 $17-1/4 $12-13/16
June 30, 1996 20-5/16 14-1/2
March 31, 1996 24-1/2 12-7/8
December 31, 1995 27-1/8 19-3/8
September 30, 1995 $23-1/4 $13-1/4
June 30, 1995 14-7/8 6-3/4
March 31, 1995 7-1/2 5-11/16
December 31, 1994 8-1/16 5-3/4
On December 13, 1996 the closing price of the Company's Common Stock
was $14-1/4 per share.
(b) Holders
The number of holders of record of the Company's Common Stock as of
December 13, 1996 was approximately 6,200.
(c) Dividends
The Company has not paid any cash dividends since its inception and
does not contemplate doing so in the near future. Any decisions as to the future
payment of dividends will depend on the
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earnings and financial condition of the Company and such other factors as the
Board of Directors deems relevant at that time.
In addition, the payment of cash dividends is restricted under the
terms of the Company's revolving credit arrangements with its bank.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Statement of Operation Data:
(In Thousands, except per share amount)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $111,022 $93,005 $73,865 $ 61,530 $ 52,381
Income (loss) before
(provision) benefit from
income taxes, discontinued
operations and
extraordinary items $ 11,943 $ 8,881 $ 2,944 $ (200) $ (218)
(Provision) benefit from
income taxes $ 55 $ 635 $ 227 $ 335 $ (225)
Income (loss) before
discontinued operations and
extraordinary items $ 11,998 $ 9,516 $ 3,171 $ 135 $ (443)
Discontinued operations $ -- $ -- $ -- $ -- $ 1,214
Income before
extraordinary items $ 11,998 $ 9,516 $ 3,171 $ 135 $ 771
Extraordinary item $ -- $ -- $ -- $ -- $ 1,256(a)
Net income $ 11,988 $ 9,516 $ 3,171 $ 135 $ 2,027
Income (loss) per common share
before discontinued operations and
extraordinary items: $ 0.60 $ 0.52 $ 0.19 $ 0.02 $ (0.04)
Income per common share before
extraordinary items: $ 0.60 $ 0.52 $ 0.19 $ 0.02 $ 0.07
Net income per common share: $ 0.60 $ 0.52 $ 0.19 $ 0.02 $ 0.18
</TABLE>
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(a) Includes an extraordinary item of $1,138,000(net of income tax provision
of $97,000) relating to an agreement with General Motors Corporation, an
extraordinary item of $72,000 resulting from the utilization of net
operating loss carryforwards, and an extraordinary item of $46,000
resulting from the extinguishment of long-term debt.
Selected Balance Sheet Data:
(In Thousands)
At September 30,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total Assets $80,044 $61,126 $33,394 $26,130 $21,248
Current Liabilities $19,645 $21,678 $15,312 $17,782 $10,194
Total Liabilities $19,874 $21,813 $16,615 $18,101 $13,605
Stockholders' equity $60,170 $39,313 $16,779 $ 8,029 $ 7,643
Working capital $44,884 $30,637 $11,477 $ 4,196 $ 7,803
Reference is made to Item 7 below and the Notes to the Consolidated
Financial Statements for a discussion of the financial data presented above.
20
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Years Ended September 30, 1996 and 1995
Revenues of $111,022,000 for the year ended September 30, 1996
represent an increase of $18,017,000, or 19%, in comparison to revenues of
$93,005,000 for the year ended September 30, 1995. The increase in revenues was
primarily attributable to substantially increased shipments of RVSI's LS-3000
Series and GS-5000 Series semiconductor lead inspection systems.
The gross profit margin for each of the fiscal years ended September
30, 1996 and 1995 was 54%.
Continued development of the LS-3000 and GS-5000 Series of lead
scanning systems, the ID-1 aircraft wing ice detection systems, computerized
visual inspection equipment, and barcode scanning and data collection equipment
primarily accounted for $14,679,000 in research and development expense, net of
capitalized software development costs, during the year ended September 30,
1996, as contrasted with $12,980,000 during fiscal 1995. In its fiscal year
ended September 30, 1996, the Company capitalized $2,630,000 of its software
development costs as compared to $535,000 over the comparable 1995 period in
accordance with the provisions of Statement of Financial Accounting Standards
No. 86. Capitalized software development costs for the fiscal year ended
September 30, 1996 include $1,534,000 of costs related to certain acquired
subsidiaries. These subsidiaries had not capitalized any software development
costs in prior years because, prior to their respective acquisitions by the
Company, they had not utilized detailed program designs in the software
development process. In general, the software development costs incurred by
these subsidiaries between the time working models were available and the
related software projects were released to customers were not material.
Selling, general and administrative costs increased by $4,697,000,
or 17% for the year ended September 30, 1996 as compared to the prior fiscal
year, primarily as a result of
21
<PAGE>
increased marketing and distribution costs for the year ended September 30,
1996. The Company incurred $2,036,000 for merger expenses primarily relating to
the acquisition of Computer Identics by the Company on August 30, 1996. For the
year ended September 30, 1996, net interest income was $868,000 as compared to
$273,000 in the comparable period in 1995. The increase is a result of investing
additional available funds.
Net income for the year ended September 30, 1996 was $11,998,000 or
$.60 per share, as compared to net income of $9,516,000, or $.52, for the year
ended September 30, 1995.
During the fiscal years ended September 30, 1996 and 1995, the
Company recorded benefits from income taxes in the amounts of $55,000, and
$635,000, respectively. Such benefits were primarily the result of decreases in
the valuation allowances relating to deferred tax asset which emanated from the
Company's profitable operations in fiscal 1996 and 1995, and the extent to which
the Company can substantiate projected future earnings.
The deferred tax assets at September 30, 1996 and 1995 of $6,301,000
and $2,375,000, respectively, are equivalent to the benefit to be derived from
net operating loss carryforwards that were expected to be utilized to offset
future taxable income projected as of the respective balance sheet dates and
other temporary differences. The valuation allowance as of September 30, 1996
relates primarily to net operating loss carryforwards and tax credit
carryforwards of Acuity, IDM and CI which are subject to annual limitations as a
result of the changes in ownership.
22
<PAGE>
Years Ended September 30, 1995 and 1994
Revenues of $93,005,000 for the year ended September 30, 1995
represent an increase of $19,140,000, or 26%, in comparison to revenues of
$73,865,000 for the year ended September 30, 1994. The increase in revenues was
a result of substantially increased shipments of RVSI's LS-2000 and LS-3000
Series semiconductor lead inspection systems. Sales of the LS-2000 and LS-3000
Series accounted for revenues of $44,298,000 for the year ended September 30,
1995, representing an increase of $20,887,000, or 89%, as contrasted with
LS-2000 sales of $23,411,000 for the year ended September 30, 1994.
Gross profit margins for the fiscal years ended September 30, 1995
and 1994 were 54% and 51%, respectively. The increase in gross profit margins
during fiscal 1995 was primarily due to the improved profitability of the
LS-2000 and LS-3000 Series product lines.
Continued development of the LS-3000 Series of lead scanning
systems, the ID-1 aircraft wing ice detection systems, and computerized visual
inspection equipment, and barcode scanning and data collection equipment
primarily accounted for $12,980,000 in research and development expense, net of
capitalized software development costs, during the year ended September 30,
1995, as contrasted with $10,255,000 during fiscal 1994. In its fiscal year
ended September 30, 1995, the Company capitalized $535,000 of its software
development costs as compared to $433,000 over the comparable 1994 period in
accordance with the provisions of Statement of Financial Accounting Standards
No. 86.
Selling, general and administrative costs increased by $3,090,000,
or 13% for the year ended September 30, 1995 as compared to the prior fiscal
year, primarily as a result of increased marketing and distribution costs for
the year ended September 30, 1995. The Company incurred $1,305,000 for merger
expenses primarily relating to the acquisition of Acuity by the Company on
September 20, 1995. For the year ended September 30, 1995 interest income, net
of interest expense was $273,000 as compared to net interest expense of $90,000
in the comparable period in 1994. The increase is as a result of investing
additional available funds.
23
<PAGE>
Net income for the year ended September 30, 1995 was $9,516,000, or
$.52 per share, as compared to net income of $3,171,000, or $.19, for the year
ended September 30, 1994.
During the fiscal years ended September 30, 1995 and 1994, the
Company recorded benefits from income taxes in the amounts of $635,000, and
$227,000, respectively. Such benefits were primarily the result of decreases in
the valuation allowances relating to deferred tax asset which emanated from the
Company's profitable operations in fiscal 1995 and 1994, and the extent to which
the Company can substantiate projected future earnings.
The deferred tax assets at September 30, 1995 and 1994 of $2,375,000
and $1,163,000, respectively, are equivalent to the benefit to be derived from
net operating loss carryforwards that were expected to be utilized to offset
future taxable income projected as of the respective balance sheet dates. The
deferred tax assets at September 30, 1995 and 1994 have been limited to the
benefit to be derived from projected future income, due to the Company's
projected future profitability currently being primarily dependent on one
existing product line.
Liquidity and Capital Resources
The Company's operating, investing and financing activities for the year
ended September 30, 1996 utilized net cash and cash equivalents of $297,000 as
follows:
o Operating activities provided $3,449,000 during the fiscal
year ended September 30, 1996;
o $5,218,000 was used to purchase property and equipment,
primarily computer, engineering and demonstration equipment;
o $1,000,000 was received from the maturity of investments;
o $77,000 was to pay for the purchase of a business;
o $1,950,000 was used to repay short term borrowings;
24
<PAGE>
o Other financing activities provided $2,428,000 primarily
through the issuance of Common Stock upon the exercise of
stock options and warrants:
o The effect of exchange rate changes on cash and cash
equivalents was $71,000.
The Company's inventories at September 30, 1996 of $17,453,000 increased
by $5,367,000 from $12,086,000 as of September 30, 1995 primarily to support
higher production volumes and customer requirements for shorter leadtimes.
Accounts receivable at September 30, 1996 of $20,711,000 increased by $2,567,000
from $18,144,000 as of September 30, 1995 primarily due to higher operating
levels and increased sales to larger customers with longer payment terms.
The Company has a revolving line of credit from a bank that provides for
maximum borrowings of $6,000,000. The agreement expires on January 31, 1999.
Borrowings under the agreement are secured by all accounts receivable of the
Company and bear interest at the adjusted LIBOR rate, as defined, plus two
percent. The Company is required to pay a commitment fee of one quarter of one
percent per annum on any unused portion of the credit facility. The terms of the
agreement, among other matters, require the Company to maintain certain tangible
net worth, debt to equity, working capital, and earnings before depreciation and
amortization to long-term debt ratios and restrict the payment of cash
dividends. There were no borrowings outstanding under this agreement as of
September 30, 1996. CI has an unsecured line of credit arrangement with a
domestic bank which provides for borrowings up to $1,000,000. Borrowings under
the line of credit bear interest at prime plus 1/2 of 1 percent and are payable
on demand. At September 30, 1996, CI was in default of one of the loan covenants
which was subsequently waived by the bank. There were no borrowings outstanding
as of September 30, 1996. In addition, CI has an uncommitted line of credit in
the amount of DM 1,500,000 with the same bank. Borrowings under this line of
credit bear interest at the prevailing Lombard Rate plus 2 percent and are
payable on demand. Borrowings outstanding under this line of credit totaled DM
1,139,000 as of September 30, 1996 (approximately $759,000).
The Company anticipates that its working capital needs for fiscal 1997
will be satisfied by operating revenues and, if necessary, through borrowings
under the existing line of credit.
25
<PAGE>
Foreign Currency Transaction
The Company does not currently engage in international currency
hedging transactions to mitigate its foreign currency exposure. Included in the
foreign exchange gain (loss) are unrealized foreign exchange gains and losses
resulting from the currency remeasurement of the financial statements (primarily
inventories, accounts receivable and intercompany debt) of the foreign
subsidiaries of the Company into U.S. dollars. To the extent the Company is
unable to match revenue received in foreign currencies with expenses paid in the
same currency, it is exposed to possible losses on international currency
transactions.
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which must be adopted
by the Company in fiscal 1997. The Company has chosen not to implement the fair
value based accounting method for employee stock options, but has elected to
disclose, commencing with its fiscal 1997 consolidated financial statements, pro
forma net income and earnings per share as if such method has been used to
account for stock-based compensation cost as described in SFAS No. 123.
Effect of Inflation
Management believes that the effect of inflation has not been
material during each of the years ended September 30, 1996, 1995 and 1994,
respectively.
26
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Reference is made to Item 14(a)1 herein.
Item 9. Disagreements on Accounting and Financial Disclosure.
There have been no changes in the Company's independent auditors due
to disagreements on accounting and financial disclosure during the 24 months
prior to September 30, 1996.
27
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company.
Item 10 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1996.
Item 11. Executive Compensations.
Item 11 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1996.
Item 12. Security Ownership of certain Beneficial Owners & Management.
Item 12 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1996.
Item 13. Certain Relationships and Related Transactions.
Item 13 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1996.
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(i) Financial Statements.
Independent Auditors' Reports
Consolidated Balance Sheets at September 30, 1996 and
September 30, 1995
Consolidated Statements of Income for the Years Ended
September 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the Years
Ended September 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years Ended
September 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(ii) Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts
(iii) Exhibits.
3(a) The Company's Restated Certificate of Incorporation(A)
10(a) Agreement and Plan of Merger and Reorganization, dated
as of July 23, 1996 by and among the Company, Computer
Identics Corporation and RVSI Third Acquisition Corp.(A)
29
<PAGE>
10(b) Agreement and Plan of Merger and Reorganization dated as
of October 1, 1996 by and among the Company, Systemation
Engineered Products, Inc. and RVSI Fourth Acquisition
Corp.(B)
11 Computation of per share amounts
21 Subsidiaries of Company
23(a) Independent Auditors' Consent - Deloitte & Touche LLP
23(b) Consent of Independent Public Accountants - Arthur
Andersen LLP
23(c) Consent of Independent Public Accountants - Ernst &
Young LLP
27 Financial Data Schedule
- ----------
(A) Denotes document appended as an Exhibit to the Company's Registration
Statement on Form S-4 (File No. 333-08663) and incorporated herein by
reference.
(B) Denotes document filed as Exhibit to the Company's Current Report on Form
8-K dated October 9, 1996 and incorporated herein by reference.
(b) Reports on Form 8-K:
(i) September 13, 1996
(ii) Items 2 and 7
(iii) Financial Statements of CI.*
30
<PAGE>
(A) Report of Ernst & Young LLP, Independent Auditors,
dated February 8, 1996 (Page F-27);
(B) Report of Deloitte & Touche LLP, Independent
Auditors, dated January 28, 1994 (Page F-28);
(C) Consolidated Balance Sheets as of December 31,
1995 and 1994 of CI and Subsidiaries (Page F-29);
(D) Consolidated Statements of Operations of CI and
Subsidiaries for the Years Ended December 31,
1995, 1994 and 1993 (Page F-30);
(E) Consolidated Statements of Stockholders' Equity of
CI and Subsidiaries for the Years Ended December
31, 1995, 1994 and 1993 (Page F-31);
(F) Consolidated Statements of Cash Flows of CI and
Subsidiaries for the Years Ended December 31,
1995, 1994 and 1993 (Page F-32);
(G) Notes to the Consolidated Financial Statements of
CI and Subsidiaries (Pages F-33 through F-39);
(H) Consolidated Balance Sheets of CI and Subsidiaries
as of March 31, 1996 (unaudited) and December 31,
1995 (Page F-40);
(I) Consolidated Statements of Operations of CI and
Subsidiaries for the three months ended March 31,
1996 and 1995 (unaudited) (Page F-41);
31
<PAGE>
(J) Consolidated Statements of Cash Flows of CI and
Subsidiaries for the three months ended March 31,
1996 and 1995 (unaudited) (Page F-42); and
(K) Notes to Consolidated Financial Statements of CI
and Subsidiaries (unaudited) (Page F-43).
(iv) Pro Forma Financial Information.*
(A) Summary of Unaudited Pro Forma Combined Statements
of Operations for the six months ended March 31,
1996 and 1995 and for the years ended September
30, 1995, 1994 and 1993 (Page 41);
(B) Unaudited Pro Forma Condensed Combined Balance
Sheets as of March 31, 1996 (Page 42);
(C) Unaudited Pro Forma Condensed Combined Statements
of Operations for the Fiscal Year Ended September
30, 1995 (Page 43);
(D) Unaudited Pro Forma Condensed Combined Statements
of Operations for the Fiscal Year Ended September
30, 1994 (Page 44);
(E) Unaudited Pro Forma Condensed Combined Statements
of Operations for the Fiscal Year Ended September
30, 1993 (Page 45);
(F) Unaudited Pro Forma Condensed Combined Statements
of Operations for the Six Months Ended March 31,
1996 (Page 46);
(G) Unaudited Pro Forma Condensed Combined Statements
of Operations for the Six Months Ended March 31,
1995 (Page 47); and
32
<PAGE>
(H) Notes to Unaudited Pro Forma Financial Information
(Page 48).
- ----------
* Incorporated by reference to the Company's definitive Prospectus, dated
August 1, 1996, comprising a portion of its Registration Statement on Form
S-4 (File No. 333-08663), relating to the CI Merger (the "Prospectus").
The parenthetical references to page numbers herein relate to the
applicable pages of the Prospectus at which the relevant financial
statements and notes thereto, as well as the pro forma financial
statements and notes thereto, may be located.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Village of
Hauppauge, State of New York, on the 30th day of December, 1996.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ Pat V. Costa
----------------------------
Pat V. Costa, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Capacity Date
Chairman of the
Board, President
and Director
(Principal Executive
/s/ Pat V. Costa Officer) December 30, 1996
- --------------------------
Pat V. Costa
Executive Vice
President, Secretary/
Treasurer and
Director (Principal
/s/ Robert H. Walker Financial Officer) December 30, 1996
- --------------------------
Robert H. Walker
Senior Vice President
/s/ Howard Stern and Director December 30, 1996
- --------------------------
Howard Stern
34
<PAGE>
/s/ Jay M. Haft Director December 30, 1996
- --------------------------
Jay M. Haft
__________________________ Director December , 1996
Donald J. Kramer
__________________________ Director December , 1996
Donald F. Domnick
35
<PAGE>
__________________________ Director December 30, 1996
Mark J. Lerner
__________________________ Director December , 1996
Frank A. DiPietro
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Robotic Vision Systems, Inc. and
subsidiaries:
We have audited the accompanying consolidated balance sheets of Robotic Vision
Systems, Inc. and subsidiaries (the "Company") as of September 30, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended September 30,
1996. Our audits included the financial statement schedule listed in the index
at Item 14(a) (1) and (2). These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We did not audit the consolidated financial
statements of Acuity Imaging, Inc. and subsidiaries ("Acuity"), a wholly-owned
subsidiary, for the years ended September 30, 1995 and December 31, 1994,
respectively, which statements reflect total assets constituting 10% of
consolidated total assets as of September 30, 1995 and total revenues
constituting 21% and 30% of consolidated total revenues for the years ended
September 30, 1995 and 1994, respectively. We also did not audit the
consolidated financial statements of Computer Identics Corporation and
subsidiaries ("CI"), a wholly-owned subsidiary, for the years ended December 31,
1995 and 1994, respectively which statements reflect total assets constituting
21% of consolidated total assets as of September 30, 1995 and total revenues
constituting 30% and 35% of consolidated total revenues for the years ended
September 30, 1995 and 1994, respectively. Those financial statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for Acuity and CI as of
September 30, 1995 and for the years ended September 30, 1995 and 1994, is based
solely on the reports of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of the Company at September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
Jericho, New York
December 9, 1996
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acuity Imaging, Inc.:
We have audited the consolidated balance sheet of Acuity Imaging, Inc. (a
Delaware corporation and a wholly owned subsidiary of Robotic Vision Systems,
Inc.) and subsidiaries as of September 30, 1995, and the related consolidated
statements of operations and cash flows for the years ended September 30, 1995
and December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Acuity Imaging, Inc.
and subsidiaries at September 30, 1995, and the results of their operations and
their cash flows for the years ended September 30, 1995 and December 31, 1994 in
conformity with generally accepted accounting principles.
On September 20, 1995, Robotic Vision Systems, Inc. acquired Acuity Imaging,
Inc.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 6, 1995
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
and Stockholders of Computer Identics Corporation:
We have audited the accompanying consolidated balance sheet of Computer Identics
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended December 31, 1995 (not presented
separately herein). Our audits also included the related financial statements
schedule - Valuation and Qualifying Accounts, for each of the two years in the
period ended December 31, 1995 (not presented separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Computer Identics
Corporation and subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations, and their cash flows for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 8, 1996
F-3
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
(in thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES 1996 1995
----- ---- ----
Restated
<S> <C> <C> <C>
ASSETS (Note 2)
CURRENT ASSETS:
Cash and cash equivalents $ 17,975 $ 18,176
Investments 1,500 1,000
Accounts receivable, net 3, 9 20,711 18,144
Inventories 4 17,453 12,086
Deferred income taxes 5 6,205 2,375
Prepaid expenses and other 685 534
--------- ---------
Total current assets 64,529 52,315
PLANT AND EQUIPMENT, net 6 7,981 5,074
INVESTMENTS 665 1,989
GOODWILL, net of accumulated amortization of
$61 in 1996 2 2,627 --
OTHER ASSETS 5,7 4,242 1,748
--------- ---------
$ 80,044 $ 61,126
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable 9 $ 844 $ 270
Loan payable -- 2,387
Accounts payable 9,995 10,390
Accrued expenses and other current liabilities 8 7,941 7,264
Advance contract payments received 865 1,367
--------- ---------
Total current liabilities 19,645 21,678
OTHER LIABILITIES 229 135
--------- ---------
TOTAL LIABILITIES 19,874 21,813
--------- ---------
COMMITMENTS AND CONTINGENCIES 11
STOCKHOLDERS' EQUITY: 12
Common stock, $.01 par value; shares
authorized, 30,000,000; shares issued and
outstanding, 1996 - 18,957,000 and 1995 - 17,298,000 190 173
Additional paid-in capital 143,632 134,904
Accumulated deficit (83,974) (95,912)
Deferred compensation -- (60)
Unrealized gain on investments available for sale 147 --
Cumulative translation adjustment 175 208
--------- ---------
Total stockholders' equity 60,170 39,313
--------- ---------
$ 80,044 $ 61,126
========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(in thousands, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES 1996 1995 1994
----- ---- ---- ----
Restated Restated
(Note 2) (Note 2)
<S> <C> <C> <C> <C>
REVENUES 16 $ 111,022 $ 93,005 $ 73,865
COST OF REVENUES 51,214 42,791 35,876
--------- -------- --------
GROSS PROFIT 59,808 50,214 37,989
--------- -------- --------
OPERATING COSTS AND EXPENSES:
Research and development costs 14,679 12,980 10,255
Selling, general and administrative expenses 32,018 27,321 24,231
Merger expenses 2 2,036 1,305 --
Separation costs 13 -- -- 469
Interest income (1,076) (469) (149)
Interest expense 208 196 239
--------- -------- --------
47,865 41,333 35,045
--------- -------- --------
INCOME BEFORE BENEFIT FROM
INCOME TAXES 11,943 8,881 2,944
BENEFIT FROM INCOME TAXES 5 55 635 227
--------- -------- --------
NET INCOME $ 11,998 $ 9,516 $ 3,171
========= ======== ========
NET INCOME PER SHARE $ 0.60 $ 0.52 $ 0.19
========= ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,888 18,133 16,618
========= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
---------------- Additional Unrealized
Number Paid-in Accumulated Deferred Gain on
Notes of Shares Amount Capital Deficit Compensation Investments
----- --------- ------ ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 1, 1993
(as previously reported) 11,217 $113 $ 92,294 $ (90,436) $ -- $ --
Changes resulting from acquisition
accounted for as pooling of interests 2 1,972 20 24,177 (18,062) (113) --
------ ---- -------- --------- ------- ----
Balance, October 1, 1993 (Restated) 13,189 133 116,471 (108,498) (113) --
Shares and warrants issued in
connection with private equity
placement, net of offering costs 12 1,360 14 3,790 -- -- --
Shares issued in connection with
private placement of subsidiary,
net of offering costs 12 59 -- 491 -- -- --
Warrants issued for professional
services 12 -- -- 38 -- -- --
Shares issued in connection with
the exercise of stock options
and warrants 12 597 5 728 -- -- --
Other stock transactions 78 1 371 -- 59 --
Translation adjustment -- -- -- -- -- --
Net income -- -- -- 3,171 -- --
------ ---- -------- --------- ------- ----
Balance, September 30, 1994 (Restated) 15,283 153 121,889 (105,327) (54) --
Shares and warrants issued in
connection with private equity
placement, net of offering costs 12 1,110 11 9,375 -- -- --
Shares issued in connection with
private placement of subsidiary,
net of offering costs 12 119 2 1,763 -- -- --
Warrants issued for professional
services 12 -- -- 92 -- -- --
Shares issued in connection with
the exercise of stock options
and warrants 12 746 7 1,476 -- -- --
Other stock transactions 40 -- 309 -- (6) --
Change in year end of pooled companies 2 -- -- -- (101) -- --
Translation adjustment -- -- -- -- -- --
Net income -- -- -- 9,516 -- --
------ ---- -------- --------- ------- ----
Balance, September 30, 1995 (Restated) 17,298 173 134,904 (95,912) (60) --
Shares issued in connection with
the exercise of stock options
and warrants 12 1,511 15 5,821 -- -- --
Shares issued in connection with
the acquisition of Northeast Robotics,
Inc. accounted for as a purchase 2 139 1 2,675 -- -- --
Warrants issued for professional services 12 -- -- 74 -- -- --
Other stock transactions 9 1 158 -- 60 --
Change in year end of pooled company 2 -- -- -- (60) -- --
Change in net unrealized holding gains 1 -- -- -- -- -- 147
Translation adjustment -- -- -- -- -- --
Net income -- -- -- 11,998 -- --
------ ---- -------- --------- ------- ----
Balance, September 30, 1996 18,957 $190 $143,632 $ (83,974) $ -- $ 147
====== ==== ======== ========= ======= ====
</TABLE>
Cumulative Total
Translation Stockholders'
Adjustment Equity
---------- ------
Balance October 1, 1993
(as previously reported) $ 137 $ 2,108
Changes resulting from acquisition
accounted for as pooling of interests (58) 5,964
----- --------
Balance, October 1, 1993 (Restated) 79 8,072
Shares and warrants issued in
connection with private equity
placement, net of offering costs -- 3,804
Shares issued in connection with
private placement of subsidiary,
net of offering costs -- 491
Warrants issued for professional
services -- 38
Shares issued in connection with
the exercise of stock options
and warrants -- 733
Other stock transactions -- 431
Translation adjustment 39 39
Net income -- 3,171
----- --------
Balance, September 30, 1994 (Restated) 118 16,779
Shares and warrants issued in
connection with private equity
placement, net of offering costs -- 9,386
Shares issued in connection with
private placement of subsidiary,
net of offering costs -- 1,765
Warrants issued for professional
services -- 92
Shares issued in connection with
the exercise of stock options
and warrants -- 1,483
Other stock transactions -- 303
Change in year end of pooled companies -- (101)
Translation adjustment 90 90
Net income -- 9,516
----- --------
Balance, September 30, 1995 (Restated) 208 39,313
Shares issued in connection with
the exercise of stock options
and warrants -- 5,836
Shares issued in connection with
the acquisition of Northeast Robotics,
Inc. accounted for as a purchase -- 2,676
Warrants issued for professional services -- 74
Other stock transactions -- 219
Change in year end of pooled company -- (60)
Change in net unrealized holding gains -- 147
Translation adjustment (33) (33)
Net income -- 11,998
----- --------
Balance, September 30, 1996 $ 175 $ 60,170
===== ========
See notes to consolidated financial statements.
F-6
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Restated Restated
(Note 2) (Note 2)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 11,998 $ 9,516 $ 3,171
Adjustments to reconcile net income
to net cash provided by operating activities:
Deferred income taxes (1,704) (1,212) (579)
Depreciation and amortization 2,833 2,029 1,505
Other 296 395 364
Changes in operating assets and liabilities (net of
effects of business acquired):
Accounts receivable (3,500) (4,919) (3,490)
Inventories (4,789) (4,678) (1,048)
Prepaid expenses and other current assets (290) (132) (34)
Other assets (2,743) (636) (369)
Accounts payable (919) 3,772 1,727
Accrued expenses and other current liabilities 2,915 1,244 (440)
Advance contract payments received (609) (438) (329)
Other liabilities (39) (136) (35)
-------- -------- -------
Net cash provided by operating activities 3,449 4,805 443
-------- -------- -------
INVESTING ACTIVITIES:
Proceeds from maturity of investments 1,000 1,500 --
Additions to plant and equipment (5,218) (3,140) (1,982)
Purchase of investments -- (1,484) (2,984)
Payment for purchase of business (77) -- --
-------- -------- -------
Net cash used in investing activities (4,295) (3,124) (4,966)
-------- -------- -------
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock and warrants - private
equity placements (less offering costs) -- 10,306 4,068
Proceeds from the exercise of stock options and warrants 2,428 1,357 733
Proceeds from short-term borrowings -- 3,809 1,578
Payment of short-term borrowings (1,950) (1,566) (3,525)
-------- -------- -------
Net cash provided by financing activities 478 13,906 2,854
-------- -------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 71 44 20
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (297) 15,631 (1,649)
CASH AND CASH EQUIVALENTS:
Beginning of year 18,272 2,545 4,508
-------- -------- -------
End of year $ 17,975 $ 18,176 $ 2,859
======== ======== =======
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Restated Restated
(Note 2) (Note 2)
<S> <C> <C> <C>
SUPPLEMENTAL INFORMATION:
Interest paid $ 196 $ 201 $1,397
========== ========== ======
Taxes paid $ 467 $ 617 $ 430
========== ========== ======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Liabilities satisfied by private offering
of common stock of subsidiary $ -- $ 845 $ 227
========== ========== ======
Issuance of common stock to acquire
Northeast Robotics, Inc. $ 2,676 $ -- $ --
========== ========== ======
Income tax benefit relating to the
exercise of stock options $ 3,408 $ 126 $ --
========== ========== ======
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
a. Description of Business - Robotic Vision Systems, Inc. and
subsidiaries (the "Company") designs, manufactures, markets and sells
automated two dimensional and three dimensional machine vision based
products and systems for inspection, measurement and identification,
and is a leader in advanced electro-optical sensor technology. The
Company is also developing an ice detection product for the aviation
industry.
b. Principles of Consolidation - The consolidated financial statements
include the financial statements of Robotic Vision Systems, Inc. and
its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions and balances have been eliminated in
consolidation.
The consolidated financial statements of the Company have been
prepared to give retroactive effect to the business combination with
Computer Identics Corporation ("CI") (Note 2) which occurred on August
30, 1996 and has been accounted for as a pooling of interests.
c. Revenues and Cost of Revenues - The Company recognizes revenue on its
standard electronic inspection and measurement products upon shipment.
Revenue from the licensing of software is recognized when the software
is delivered if collectibility is probable and there are no
significant vendor obligations. Engineering service and support
revenue is recognized when such services are rendered. Warranty costs
associated with products sold with warranty protection, as well as
other post-contract support obligations, are estimated based on the
Company's historical experience and recorded in the period the product
is sold.
d. Cash and Cash Equivalents - Cash and cash equivalents includes money
market accounts and certain debt securities issued by the United
States government with an original maturity of three months or less.
e. Investments - Investments consist primarily of certain debt securities
issued by the United States government with maturities through
November 1997. The Company's intention is to hold such investments
until their maturity, therefore, such investments are recorded at
their amortized cost which was $1,998,000 and $2,989,000 at September
30, 1996 and 1995, respectively. The carrying value of these
investments approximated market value. In addition, at September 30,
1996, the Company had marketable equity securities classified as
available-for-sale which were recorded at their fair market value of
$167,000, with unrealized gains of $147,000 included as a separate
component of stockholders' equity.
f. Inventories - Inventories are stated at the lower of cost (using the
first-in, first-out cost flow assumption) or market.
F-9
<PAGE>
g. Plant and Equipment - Plant and equipment is recorded at cost less
accumulated depreciation and amortization and includes the costs
associated with demonstration equipment and other equipment internally
developed by the Company. The cost of internally developed assets
includes direct material and labor costs and applicable factory
overhead. Depreciation is computed by the straight-line method over
estimated lives ranging from two to eight years. Leasehold
improvements are amortized over the lesser of their respective
estimated useful lives or lease terms.
h. Impairment of Long-Lived Assets - In March 1995, the Financial
Accounting Standards Board issued Statements of Financial Accounting
Standards ("SFAS") No. 121, "Accounting For the Impairment of
Long-Lived Assets and For Long-Lived Assets To Be Disposed Of". SFAS
No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of.
In accordance with SFAS No. 121, the Company reviews its long-lived
assets, including property and equipment, goodwill and other
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not
be fully recoverable. To determine recoverability of its long-lived
assets, the Company evaluates the probability that future undiscounted
net cash flows, without interest charges, will be less than the
carrying amount of the assets. Impairment is measured at fair value.
The adoption of SFAS No. 121 had no effect on the Company's
consolidated financial statements.
i. Software Development Costs - Software development costs are
capitalized in accordance with SFAS No. 86. Capitalized software
development costs are amortized primarily over a five-year period,
which is the estimated useful life of the software. Amortization
begins in the period in which the related product is available for
general release to customers.
j. Research and Development Costs - The Company charges research and
development costs for Company-funded projects to operations as
incurred. Research and development costs which are reimbursable under
customer-funded contracts are treated as contract costs.
k. Income Taxes - The Company accounts for income taxes under the
provisions of SFAS No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in
the Company's consolidated financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based
on the differences between the financial accounting and tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
The cumulative amount of undistributed earnings of foreign
subsidiaries at September 30, 1996 was approximately $359,000. The
Company does not provide deferred taxes on undistributed earnings of
foreign subsidiaries since the Company anticipates no significant
incremental U.S. income taxes on the repatriation of these earnings as
tax rates in foreign jurisdictions generally approximate or exceed the
U.S. Federal rate.
F-10
<PAGE>
l. Foreign Currency Translation - Assets and liabilities of the Company's
European subsidiaries are translated at the exchange rate in effect at
the balance sheet date. Income statement accounts are translated at
the average exchange rate for the year. The resulting translation
adjustments are excluded from operations and accumulated as a separate
component of stockholders' equity. Transaction gains (losses) are
included in net income and totaled $(52,000), $167,000 and $(72,000)
in 1996, 1995 and 1994, respectively.
m. Accounting for Stock-Based Compensation - In October 1995, the
Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation," which must be adopted by the Company in
fiscal 1997. The Company has chosen not to implement the fair value
based accounting method for employee stock options, but has elected to
disclose, commencing with its fiscal 1997 consolidated financial
statements, pro forma net income and earnings per share as if such
method had been used to account for stock-based compensation cost as
described in SFAS No. 123.
n. Income Per Share - Net income per common share is computed by dividing
each year's net income by the respective weighted average number of
shares of common stock outstanding during the period, after giving
effect to dilutive options and warrants. The effect of options and
warrants was calculated using the modified treasury stock method for
the year ended September 30, 1994.
o. Fair Value of Financial Instruments - The following methods and
assumptions were used to estimate the fair value of each class of
financial instruments:
a) Cash and Cash Equivalents - The carrying amounts approximate fair
value because of the short maturity of these instruments.
b) Investments - The carrying amounts approximate fair value as
determined by quoted market prices.
c) Receivables - The carrying amount approximates fair value because
of the short maturity of these instruments.
d) Debt - The carrying amounts approximate fair value based on
borrowing rates currently available to the Company for loans with
similar terms.
p. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
q. Reclassifications - Certain amounts in the 1994 and 1995 financial
statements have been reclassified to conform with the 1996
presentation.
F-11
<PAGE>
2. ACQUISITIONS
a. Sytemation Engineered Products, Inc.
On October 1, 1996, the Company acquired the outstanding shares of
Systemation Engineered Products, Inc. ("SEP") for 1,740,000 shares of
the Company's common stock, having a market value at the date of the
merger of approximately $22,838,000. SEP designs manufactures, markets
and sells specialized high speed production machinery for the
electronics component industry. SEP's principal product lines include
tape and reel packaging equipment and automatic optical inspection
systems. This acquisition will be accounted for as a pooling of
interests. For the year ended September 30, 1996, the Company has
incurred expenses of approximately $190,000 and SEP incurred expenses
of approximately $670,000 related to this merger. The pro forma
adjustments relates to the elimination of intercompany transactions
between RVSI and SEP and the elimination of non-recurring merger
expenses (net of tax) which are directly attributable to this merger.
Unaudited pro forma consolidated statement of income data for the
years ended September 30, 1996, 1995 and 1994 is as follows:
RVSI SEP ADJUSTMENTS COMBINED
---- --- ------------ --------
1996
----
Revenues $111,022 $ 32,532 $ (14) $143,540
Net income (loss) $ 11,998 $ (2,272) $ 533 $ 10,259
Net income per share $ 0.60 $ 0.47
1995
----
Revenues $ 93,005 $ 29,328 $(208) $122,125
Net income $ 9,516 $ 1,479 $-- $ 10,995
Net income per share $ 0.52 $ 0.55
1994
----
Revenues $ 73,865 $ 17,530 $(401) $ 90,994
Net income $ 3,171 $ 1,466 $-- $ 4,637
Net income per share $ 0.19 $ 0.25
The unaudited pro forma consolidated statement of income data combines
the historical statement of income data of the Company for the years
ended September 30, 1996, 1995 and 1994 with the historical statement
of income data of SEP for the twelve months ended September 30, 1996
and the fiscal years ended March 31, 1996 and 1995, respectively.
b. Computer Identics Corporation
On August 30, 1996, the Company acquired the outstanding shares of CI
for approximately 2,127,000 shares of the Company's common stock,
having a market value at the date of the merger of approximately
$30,580,000. Outstanding CI stock options were converted into options
to purchase approximately 186,000 shares of the Company's common
stock. Outstanding CI warrants were converted into warrants to
purchase approximately 39,000 shares of the Company's common stock. CI
designs, manufactures, markets and sells standard barcode products,
data collection networks and systems for data collection and material
handling/industrial markets. This acquisition has been accounted for
as a pooling of interests and accordingly, the consolidated financial
statements have been restated to include the accounts of CI for all
periods presented. The accompanying September 30, 1995 and 1994
consolidated financial statements include CI's amounts for the years
ended December 31, 1995 and 1994. The accompanying consolidated
financial statements for the year ended September 30, 1996 include the
operations of CI on a common fiscal year. CI's
F-12
<PAGE>
net income for the period October 1, 1995 through December 31, 1995 of
$60,000, included twice in the accompanying consolidated statements of
income for the fiscal years ended September 30, 1996 and 1995 as a
result of conforming fiscal years, has been included as an adjustment
to consolidated accumulated deficit. Included in the operating results
of the Company for the year ended September 30, 1996 are approximately
$24,661,000 of revenues and approximately $793,000 of net loss of CI
prior to the date of acquisition (August 30, 1996). Expenses of
$1,547,000 have been incurred related to this merger.
The following is a reconciliation of certain restated amounts with
amounts previously reported:
(in thousands)
1995 1994
---------- ----------
Revenues:
As previously reported $ 65,260 $ 47,839
Effect of CI pooling of interests 27,745 26,026
---------- ----------
As restated $ 93,005 $ 73,865
========== ==========
Net income (loss):
As previously reported $ 8,833 $ 3,681
Effect of CI pooling of interests 683 (510)
---------- ----------
As restated $ 9,516 $ 3,171
========== ==========
1995 1994
-------- --------
Net income (loss) per share:
Primary:
As previously reported $ 0.55 $ 0.25
Effect of CI pooling of interests (0.03) (0.06)
-------- --------
As restated $ 0.52 $ 0.19
======== ========
Fully diluted:
As previously dated $ 0.53 $ 0.25
Effect of CI pooling of interests (0.01) (0.06)
-------- --------
As restated $ 0.52 $ 0.19
======== ========
c. Northeast Robotics, Inc.
On May 30, 1996, the Company consummated a merger with Northeast
Robotics, Inc. ("NER"), a privately owned company located in New
Boston, New Hampshire, pursuant to which NER became a wholly owned
subsidiary of the Company (the "NER Merger"). NER markets a line of
patented illumination products to perform reliably in difficult
imaging applications involving highly reflective or uneven surfaces.
As a consequent of the NER Merger, the Company issued approximately
139,000 shares of its common stock (which had a market value of
approximately $2,676,000 on the date the NER Merger was consummated)
to the shareholders of NER in exchange for all of the outstanding
shares of NER common stock.
This acquisition has been accounted for as a purchase and,
accordingly, the results of NER are included in the consolidated
statements of income of the Company since the date of
F-13
<PAGE>
acquisition and the purchase price (including acquisition costs) has
been allocated to net assets acquired based upon their fair values.
Goodwill relating to the acquisition of $2,688,000 is being amortized
over 15 years. Pro forma results of operations assuming NER was
acquired as of the beginning of each of the fiscal years ended
September 30, 1996 and 1995 would not differ materiality from the
reported results.
d. International Data Matrix, Inc.
On October 23, 1995, the Company acquired the outstanding shares of
International Data Matrix, Inc. ("IDM") for approximately 370,000
shares of the Company's common stock, having a market value at the
date of the merger of approximately $8,183,000. IDM is a manufacturer
and supplier of two dimensional bar code reading systems. This
acquisition has been accounted for as a pooling of interests and
accordingly, the consolidated financial statements have been restated
to include the accounts of IDM for all periods presented. The
accompanying September 30, 1994 consolidated financial statements
include IDM's amounts for the year ended December 31, 1994. The
accompanying consolidated financial statements for the years ended
September 30, 1995 and 1996 include the operations of IDM on a common
fiscal year. IDM's net loss for the period October 1, 1994 through
December 31, 1994 of $154,000, included twice in the accompanying
consolidated statements of income for the fiscal years ended September
30, 1995 and 1994 as a result of conforming fiscal years, has been
included as an adjustment to the consolidated accumulated deficit.
Included in the operating results of the Company for the years ended
September 30, 1996 are approximately $77,000 of revenues and $135,000
of net loss of IDM prior to the date of acquisition (October 23,
1995). Expenses of $445,000 have been incurred related to this merger.
e. Acuity Imaging, Inc. and Subsidiaries
On September 20, 1995, the Company acquired the outstanding shares of
Acuity Imaging, Inc. ("Acuity") for approximately 1,448,000 shares of
the Company's common stock, having a market value at the date of the
merger of approximately $31,141,000. Acuity designs, manufactures and
markets two dimensional machine vision systems for use in industrial
automation. Outstanding Acuity stock options were converted into
options to purchase approximately 114,000 shares of the Company's
common stock. This acquisition has been accounted for as a pooling of
interests. The accompanying September 30, 1994 consolidated financial
statements include Acuity's amounts for the years ended December 31,
1994. The accompanying consolidated financial statements for the years
ended September 30, 1995 and 1996 include the operations of Acuity on
a common fiscal year. Acuity's net income for the period October 1,
1994 through December 31, 1994 of $255,000, included twice in the
accompanying consolidated statements of income for the fiscal years
ended September 30, 1995 and 1994 as a result of conforming fiscal
years, has been included as an adjustment to the consolidated
accumulated deficit. Included in the operating results of the Company
for the year ended September 30, 1995 are approximately $19,153,000 of
revenues and $1,188,000 of net loss of Acuity prior to the date of
acquisition (September 20, 1995). Expenses of $1,160,000 have been
incurred related to this merger.
F-14
<PAGE>
f. Merger of Acuity (formerly Automatix Incorporated) with Itran Corp.
On January 26, 1994, Acuity (formerly Automatix Incorporated
["Automatix"]) merged with Itran Corp. ("Itran") in a tax-free
exchange of approximately 1,483,000 registered shares of Automatix
common stock for substantially all of Itran's outstanding common and
preferred stock. Itran was a developer and seller of computerized
visual inspection equipment. Automatix was the surviving corporation
and, simultaneously with the merger, changed its name to Acuity
Imaging, Inc. Outstanding Itran stock options were converted into
options to purchase approximately 162,000 shares of Acuity's common
stock. The merger has been accounted for as a pooling of interests.
Expenses of approximately $1,091,000 were incurred related to this
merger.
3. RECEIVABLES
Receivables at September 30, 1996 and 1995 consisted of the following:
(in thousands)
1996 1995
------- -------
Billed accounts receivable $19,045 $17,365
Unbilled accounts receivable 2,206 1,298
------- -------
Total 21,251 18,663
Less allowance for doubtful
accounts receivable 540 519
------- -------
Receivables - net $20,711 $18,144
======= =======
Unbilled receivables primarily relate to sales recorded on standard
products which have been shipped, but have not yet been finally accepted by
the customer. The Company has no significant remaining obligations relating
to these unbilled receivables and collectibility is probable. The Company
estimates that all of its unbilled receivables at September 30, 1996 will
become billable during the ensuing twelve months.
4. INVENTORIES
Inventories at September 30, 1996 and 1995 consisted of the following:
(in thousands)
1996 1995
------- -------
Raw materials $ 7,628 $ 4,234
Work-in-process 7,150 5,851
Finished goods 2,675 2,001
------- -------
Total $17,453 $12,086
======= =======
F-15
<PAGE>
5. INCOME TAXES
The components of income before benefit from income taxes are as follows:
(in thousands)
1996 1995 1994
-------- ------ -------
Domestic $ 12,035 $8,816 $ 3,045
Foreign (92) 65 (101)
-------- ------ -------
Total $ 11,943 $8,881 $ 2,944
======== ====== =======
The benefit from income taxes for the fiscal years ended September 30,
1996, 1995 and 1994 consisted of the following:
(in thousands)
1996 1995 1994
------- ------- -------
Current:
Federal $ 4,191 $ 4,012 $ 1,377
State 1,034 632 290
Foreign 38 42 38
Utilization of net operating
loss carryforwards (3,614) (4,109) (1,353)
------- ------- -------
1,649 577 352
------- ------- -------
Deferred:
Federal 443 1,191 353
State 83 222 66
Adjustment of valuation allowance (2,230) (2,625) (998)
------- ------- -------
(1,704) (1,212) (579)
------- ------- -------
Total $ (55) $ (635) $ (227)
======= ======= =======
The adjustments of the valuation allowance during fiscal 1996, 1995 and
1994 emanate from the Company's profitable operations during those years
and the extent to which the Company can substantiate projected future
earnings. The valuation allowance as of September 30, 1996 relates
primarily to net operating loss carryforwards and tax credit carryforwards
of Acuity, IDM and CI which are subject to annual limitations as a result
of the changes in ownership.
The income tax benefits related to the exercise of stock options reduces
taxes currently payable or increases net deferred tax assets, and is
credited to additional paid-in capital. Such amounts approximate $3,408,000
and $126,000 during the fiscal years ended September 30, 1996 and 1995,
respectively.
A reconciliation between the statutory U.S. Federal income tax rate and the
Company's effective tax rate for the years ended September 30, 1996, 1995
and 1994 is as follows:
F-16
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U.S. Federal statutory rate 34.0% 34.0% 34.0%
Increases (reductions) due to:
State taxes - net of Federal tax benefit 6.2 4.9 7.5
Utilization of net operating loss carryforwards (30.3) (43.2) (44.8)
Anticipated future utilization of net operating
loss carryforwards (12.2) (13.7) (19.7)
Net operating loss not producing current tax benefits 0.9 8.8 9.8
Net foreign losses for which no benefit was provided 0.6 1.2 5.1
Other - net 0.3 0.8 0.4
------ ------ ------
Total (0.5)% (7.2)% (7.7)%
====== ====== ======
</TABLE>
The net deferred tax asset at September 30, 1996, 1995 and 1994 is
comprised of the following:
(in thousands)
Deferred Tax Assets (Liabilities) 1996 1995 1994
-------------------------------- -------- -------- --------
Net operating loss carryforwards $ 12,436 $ 13,334 $ 15,855
Tax credit carryforwards 2,853 2,651 1,729
Accrued liabilities 852 997 1,038
Inventories 1,466 801 652
Receivables 188 173 184
Property and equipment (235) 5 204
Merger expenses 706 288 --
Software development costs (543) -- --
-------- -------- --------
17,723 18,249 19,662
Less valuation allowance (11,422) (15,874) (18,499)
-------- -------- --------
Total $ 6,301 $ 2,375 $ 1,163
======== ======== ========
At September 30, 1996, other assets include noncurrent net deferred tax
assets of $96,000.
As of September 30, 1996, Robotic Vision Systems, Inc. ("RVSI") had Federal
net operating loss carryforwards of approximately $5,700,000. Such loss
carryforwards expire in the fiscal years 2005 through 2007. Additionally,
RVSI had Federal income tax credits of approximately $1,085,000 and state
income tax credits of approximately $774,000. The utilization of the
carryforwards to offset future tax liabilities is dependent upon the
Company's ability to generate sufficient taxable income during the
carryforward periods.
As of September 30, 1996, CI had Federal net operating loss carryforwards
of approximately $5,223,000 which expire in the fiscal year 2001 through
2011, and approximately $4,663,000 of net operating loss carryforwards
attributable to its foreign operations which can be carried forward
indefinitely. Additionally, CI had Federal income tax credits of
approximately $665,000 and state income credits of approximately $229,000.
Because of the changes in ownership, as defined in the Internal Revenue
Code, which occurred in August 1996 (Note 2), certain of the net operating
loss carryforwards and credits are subject to annual limitations.
F-17
<PAGE>
As of September 30, 1996, IDM had Federal net operating loss carryforwards
of approximately $5,470,000. Such loss carryforwards expire in the fiscal
years 2006 through 2011. In addition, IDM had available approximately
$37,000 of unused general business tax credits. Because of the changes in
ownership, as defined in the Internal Revenue Code, which occurred in
October 1995 (Note 2), certain of the net operating loss carryforwards and
credits are subject to annual limitations.
As of September 30, 1996, Acuity had Federal net operating loss
carryforwards of approximately $11,355,000. Such loss carryforwards expire
in the fiscal years 1997 through 2010. In addition, Acuity had available
approximately $325,000 of unused investment tax credits. Because of the
changes in ownership, as defined in the Internal Revenue Code, which
occurred in January 1994 and September 1995 (Note 2), certain of the net
operating loss carryforwards and credits are subject to annual limitations.
6. PLANT AND EQUIPMENT
Plant and equipment at September 30, 1996 and 1995 consisted of the
following:
(in thousands)
1996 1995
------- -------
Machinery and equipment $ 4,676 $ 5,259
Furniture, fixtures and other equipment 3,795 2,539
Demonstration equipment 4,874 3,256
Leasehold improvements 1,185 521
------- -------
Total 14,530 11,575
Less accumulated depreciation and amortization 6,549 6,501
------- -------
Plant and equipment - net $ 7,981 $ 5,074
======= =======
7. OTHER ASSETS
Other assets at September 30, 1996 and 1995 consisted of the following:
(in thousands)
1996 1995
------ ------
Software development costs, net
of accumulated amortization of
$1,289,000 and $738,000, respectively $3,353 $1,274
Other 889 474
------ ------
Total $4,242 $1,748
====== ======
Certain software development costs totaling $2,630,000 and $535,000 have
been capitalized during the fiscal years ended September 30, 1996 and 1995,
respectively. Capitalized software development costs for the fiscal year
ended September 30, 1996 include $1,534,000 of costs related to certain
acquired subsidiaries. These subsidiaries had not capitalized any software
development costs in prior years because, prior to their respective
acquisitions by the Company, they had not utilized detailed program designs
in the software development process. In general,
F-18
<PAGE>
the software development costs incurred by these subsidiaries between the
time working models were available and the related software projects were
released to customers were not material.
Amortization expense relating to software development costs for 1996, 1995
and 1994 was $551,000, $325,000 and $239,000, respectively.
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at September 30, 1996
and 1995 consisted of the following:
(in thousands)
1996 1995
------ ------
Accrued wages and related employee benefits $3,402 $2,530
Accrued sales commissions 2,634 1,982
Other 1,905 2,752
------ ------
Total $7,941 $7,264
====== ======
9. NOTES PAYABLE
The Company has a revolving line of credit from a bank that provides for
maximum borrowings of $6,000,000. The agreement expires on January 31,
1999. Borrowings under the agreement are secured by all accounts receivable
of the Company and bear interest at the adjusted LIBOR rate, as defined,
plus two percent. The Company is required to pay a commitment fee of one
quarter of one percent per annum on any unused portion of the credit
facility. The terms of the agreement, among other matters, require the
Company to maintain certain tangible net worth, debt to equity, working
capital, and earnings before depreciation and amortization to long-term
debt ratios and restrict the payment of cash dividends. There were no
borrowings outstanding under this agreement at September 30, 1996.
CI has an unsecured line of credit arrangement with a domestic bank which
provides for borrowings up to $1,000,000. Borrowings under the line of
credit bear interest at the prime rate (the prime rate was 8 1/4 percent at
September 30, 1996) plus one half of one percent and are payable on demand.
At September 30, 1996, CI was in default of one of the loan covenants which
was subsequently waived by the bank. There were no borrowings outstanding
as of September 30, 1996. In addition, CI has an uncommitted line of credit
in the amount of DM 1,500,000 with the same bank. Borrowings under this
line of credit bear interest at the prevailing Lombard Rate plus 2 percent
and are payable on demand. Borrowings outstanding under this line of credit
totaled DM 1,139,000 as of September 30, 1996 (approximately $759,000).
During 1995, three institutional investors, as well as a former stockholder
of IDM common stock, loaned IDM a total of $270,000 for working capital
purposes. Such loans bore interest at the rate of 10 percent and were
secured by certain accounts receivable, inventory, and equipment. Such
amounts were repaid in October 1995.
F-19
<PAGE>
10. EMPLOYEE BENEFIT PLANS
Defined Benefit Plan - The Company has a noncontributory pension plan for
employees who meet certain minimum eligibility requirements. The level of
retirement benefit is based on a formula which considers both employee
compensation and length of credited service.
Plan assets are invested in pooled bank investment accounts, and the fair
value of such assets is based on the quoted market prices of underlying
securities in such accounts. The Company funds pension plan costs based on
minimum and maximum funding criteria as determined by independent actuarial
consultants.
The components of net pension cost for the fiscal years ended September 30,
1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 219 $ 158 $ 143
Interest on projected benefit obligations 97 83 62
Estimated return on plan assets (81) (56) (52)
Other - amortization of actuarial gains and
net transition asset (23) (20) (30)
----- ----- -----
Net pension cost $ 212 $ 165 $ 123
===== ===== =====
</TABLE>
The funded status of the plan compared with the accrued expense included in
the Company's consolidated balance sheet at September 30, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
(in thousands)
1996 1995
------- -------
<S> <C> <C>
Fair value of plan assets $ 1,211 $ 810
------- -------
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including
vested benefits of $965,000 and $754,000 in
1996 and 1995, respectively 1,246 933
Effect of projected compensation increases 350 340
------- -------
Projected benefit obligation for services rendered to date 1,596 1,273
------- -------
Projected benefit obligation in excess of plan assets (385) (463)
Unrecognized net loss 210 217
Remaining unrecognized net transition asset being
amortized over 11 years (50) (86)
Unrecognized prior service costs 28 34
------- -------
Accrued pension cost $ (197) $ (298)
======= =======
</TABLE>
F-20
<PAGE>
Significant assumptions used in determining net periodic pension cost and
related pension obligations are as follows:
1996 1995
---- ----
Discount rate 7.50% 8.00%
Rate of compensation increase 4.00% 4.00%
Expected long-term rate of return on assets 8.25% 8.25%
Defined Contribution Plans - The Company has three defined contribution
plans (the "Plans") for all eligible employees, as defined by the Plans.
The Company made matching employer contributions at various percentages in
accordance with the respective plan documents. The Company incurred
$242,000, $183,000 and $163,000 for matching employer contributions to the
Plans in 1996, 1995 and 1994, respectively. In 1996, 1995 and 1994, the
Company issued 4,000, 12,000 and 9,000 shares, respectively, of its common
stock to one of the Plans related to its prior year contribution.
11. COMMITMENTS AND CONTINGENCIES
Operating Leases - The Company has entered into operating lease agreements
for equipment, and manufacturing and office facilities. The minimum
noncancelable scheduled rentals under these agreements are as follows (in
thousands of dollars):
Year Ending September 30:
-------------------------
Facilities Equipment Total
---------- --------- -----
1997 $1,530 $267 $1,797
1998 1,371 146 1,517
1999 974 63 1,037
2000 809 18 827
2001 434 3 437
Thereafter -- 1 1
------ ---- ------
Total $5,118 $498 $5,616
====== ==== ======
Rent expense for 1996, 1995 and 1994 was $1,703,000, $1,470,000 and
$1,395,000, respectively.
Litigation - During fiscal 1992, the Company instituted an action against
Cybo Systems, Inc. ("Cybo"), alleging that Cybo breached certain agreements
between the parties with respect to the sale by the Company to Cybo of all
of the assets of its welding and cutting systems business.
In response to the action brought by the Company, Cybo asserted claims
against the Company alleging, among other things, breach of contract and
warranties, fraud, bad faith, trespass and conversion. Cybo is seeking
aggregate damages in excess of $10,000,000. The Company believes that
Cybo's claims are without merit and plans to defend against them
vigorously. The Company's management, after discussion with legal counsel,
believes that the ultimate outcome of this matter will not have a material
adverse impact on the Company's consolidated financial statements.
F-21
<PAGE>
The Company is also presently involved in other litigation matters in the
normal course of business. Based upon discussion with Company legal
counsel, management does not expect that these matters will have a material
adverse impact on the Company's consolidated financial statements.
12. STOCKHOLDERS' EQUITY
Private Equity Placements - During fiscal 1995, the Company entered into an
agreement with a group of investors. Under the agreement, the Company
received approximately $9,386,000, after expenses, in exchange for the
issuance of 1,110,000 shares of the Company's common stock. The Company
also issued warrants exercisable through June 2000 to purchase
approximately 68,000 shares of the Company's common stock at exercise
prices ranging from $8.75 to $9.00 per share.
During fiscal 1995, IDM entered into an agreement with a group of investors
and certain then existing stockholders. Under the agreement, IDM received
approximately $1,765,000 after expenses, in exchange for 46,447 shares of
IDM's common stock (approximately 119,000 equivalent shares of RVSI common
stock). IDM used approximately $785,000 of the net proceeds to satisfy
certain notes payable and related accrued interest and $60,000 of the net
proceeds to satisfy certain accounts payable.
During fiscal 1994, the Company entered into an agreement with a group of
investors. Under the agreement the Company received approximately
$3,804,000, after expenses, in exchange for the issuance of 1,360,000
shares of the Company's common stock. The Company also issued warrants
exercisable through December 1999 to purchase 51,000 shares of the
Company's common stock at an exercise price of $3.75 per share.
During fiscal 1994, IDM entered into an agreement with an investor and
certain existing stockholders. Under the agreement, IDM received
approximately $491,000, after expenses, in exchange for 22,796 shares of
IDM's common stock (approximately 59,000 equivalent shares of RVSI common
stock). IDM used approximately $227,000 of the net proceeds to satisfy
certain notes payable and related accrued interest.
Warrants Issued for Services Rendered - During fiscal 1996, the Company
issued warrants under certain agreements granting the holders thereof the
right through September 2000 to purchase up to approximately 47,000 shares
of the Company's common stock at exercise prices ranging from $12.88 to
$25.00 per share as compensation for professional services rendered. The
Company recorded an expense of approximately $74,000 related to the
issuance of such warrants.
During fiscal 1995, the Company issued warrants under certain agreements
granting the holders thereof the right through July 1999 to purchase up to
approximately 82,000 shares of the Company's common stock at exercise
prices ranging from $5.81 to $23.38 per share as compensation for
professional services rendered. The Company recorded an expense of
approximately $92,000 related to the issuance of such warrants.
F-22
<PAGE>
During fiscal 1994, the Company issued warrants for the purchase of 30,000
shares of the Company's common stock at an exercise price of $4.69 per
share as compensation for professional services rendered. The Company
recorded an expense of approximately $38,000 related to the issuance of
such warrants.
Warrants Exercised - During fiscal 1996, the Company received approximately
$1,358,000 in connection with the issuance of approximately 1,014,000
shares of its common stock upon the exercise of warrants to purchase such
shares at prices ranging between $1.00 and $9.00 per share.
During fiscal 1995, the Company received approximately $492,000 in
connection with the issuance of approximately 324,000 shares of its common
stock upon the exercise of warrants to purchase such shares at prices
ranging between $1.00 and $4.38 per share.
During fiscal 1994, the Company received approximately $270,000 in
connection with the issuance of approximately 243,000 shares of its common
stock upon the exercise of warrants to purchase such shares at prices
between $0.88 and $4.38 per share.
Warrants Outstanding - As of September 30, 1996, there were warrants
outstanding to purchase approximately 271,000 shares of the Company's
common stock with exercise prices ranging between $1.00 and $25.00 per
share.
Stock Option Plans - The Company has several stock option plans which
provide for the granting of options to employees or directors at prices and
terms as determined by the Board of Directors' Stock Option Committee. Such
options vest over a period of three to five years. All options issued by
the Company to date have exercise prices which were equal to market value
of the Company's common stock at the date of grant.
The following table sets forth summarized information concerning the
Company's stock options:
<TABLE>
<CAPTION>
Number of Shares Exercise
(In Thousands) Price Range
-------------- -----------
<S> <C> <C>
Options outstanding for shares of common stock at October 1, 1993 1,991 $0.53 - $38.72
Granted 366 3.63 - 15.06
Canceled or expired (67) 0.53 - 21.51
Exercised (352) 0.53 - 17.43
------ -------------
Options outstanding for shares of common stock at September 30, 1994 1,938 0.53 - 38.72
Granted 294 4.25 - 22.50
Canceled or expired (63) 0.53 - 17.43
Exercised (416) 0.53 - 17.43
------ -------------
Options outstanding for shares of common stock at September 30, 1995 1,753 0.53 - 38.72
Granted 1,798 12.88 - 26.75
Canceled or expired (208) 1.00 - 22.50
Exercised (498) 0.53 - 17.43
------ -------------
Options outstanding for shares of common stock at September 30, 1996 2,845 $0.53 - $38.72
====== =============
Options exercisable at September 30, 1996 867
=====
Shares reserved for issuance at September 30, 1996 3,181
=====
</TABLE>
F-23
<PAGE>
13. SEPARATION COSTS
In June 1994, CI implemented a cost savings program which resulted in a
reduction in its work force. As part of this program, a charge of $469,000
was recorded consisting principally of employee severance and related
benefits.
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following consolidated quarterly information for 1996 and 1995 have
been restated to account for the merger with CI (See Note 2) which has been
accounted for as a pooling of interests (in thousands of dollars, except
per share amounts):
1996
-------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $27,826 $28,264 $27,940 $26,992
Gross profit $15,123 $15,816 $15,415 $13,454
Net income $ 3,946 $ 4,110 $ 3,753 $ 189
Net income per share $ 0.20 $ 0.21 $ 0.19 $ 0.01
1995
-------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $20,465 $21,243 $24,202 $27,095
Gross profit $11,159 $11,765 $12,800 $14,490
Net income $ 1,177 $ 4,390 $ 1,069 $ 2,880
Net income per share $ 0.07 $ 0.25 $ 0.06 $ 0.15
During the quarter ended September 30, 1996, the Company capitalized
approximately $590,000 of software development costs which should have been
capitalized during the first three quarters of the fiscal year ended
September 30, 1996.
The quarterly net income per share information is computed separately for
each period. Therefore, the sum of such quarterly per share amounts may
differ from the total for the year.
F-24
<PAGE>
15. MAJOR CUSTOMERS AND CREDIT CONCENTRATIONS
The Company grants credit to customers who are primarily in the
semiconductor industry. During 1996 and 1995, revenues from a single
customer represented 15 percent and 11 percent, respectively, of total
revenues. No other customer accounted for more than 10 percent of total
revenues for fiscal 1996, 1995 and 1994.
16. GEOGRAPHIC OPERATIONS
For the purposes of segment reporting, management considers the Company to
operate in one industry, the machine vision industry. Operations in this
business segment by geographic area are summarized as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
United
States Europe Eliminations Consolidated
------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Year ended September 30, 1996:
Revenues from unaffiliated customers $94,796 $ 16,226 $ -- $111,022
Transfers between geographic areas 4,128 240 (4,368) --
------- -------- ------- --------
Total revenues $98,924 $ 16,466 $(4,368) $111,022
======= ======== ======= ========
Income (loss) before benefit from income taxes $12,075 $ (201) $ 69 $ 11,943
------- -------- ------- --------
Identifiable assets $66,180 $ 7,085 $(8,143) $ 65,122
======= ======== =======
Corporate assets 14,922
--------
Total assets at September 30, 1996 $ 80,044
========
Year ended September 30, 1995:
Revenues from unaffiliated customers $76,243 $ 16,762 $ -- $ 93,005
Transfers between geographic areas 5,050 110 (5,160) --
------- -------- ------- --------
Total revenues $81,293 $ 16,872 $(5,160) $ 93,005
======= ======== ======= ========
Income (loss) before benefit from income taxes $ 8,818 $ 198 $ (135) $ 8,881
------- -------- ------- --------
Identifiable assets $44,350 $ 7,465 $(6,985) $ 44,830
======= ======== =======
Corporate assets 16,296
--------
Total assets at September 30, 1995 $ 61,126
========
Year ended September 30, 1994:
Revenues from unaffiliated customers $60,163 $ 13,702 $ -- $ 73,865
Transfers between geographic areas 3,287 97 (3,384) --
------- -------- ------- --------
Total revenues $63,450 $ 13,799 $(3,384) $ 73,865
======= ======== ======= ========
Income (loss) before benefit from income taxes $ 3,010 $ 154 $ (220) $ 2,944
------- -------- ------- --------
Identifiable assets $30,693 $ 6,544 $(6,884) $ 30,353
======= ======== =======
Corporate assets 3,041
--------
Total assets at September 30, 1994 $ 33,394
========
</TABLE>
Total revenues to customers outside the U.S. were $70,975,000, $58,138,000
and $32,973,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
F-25
<PAGE>
Export sales from the Company's United States operations to unaffiliated
customers were as follows:
(in thousands)
Year Ended September 30,
-------------------------------------
1996 1995 1994
------- ------- -------
Europe $ 4,675 $ 6,122 $ 576
Asia/Pacific Rim 49,458 35,011 18,413
Other 1,173 298 282
------- ------- -------
Total $55,306 $41,431 $19,271
======= ======= =======
* * * * * * *
F-26
<PAGE>
SCHEDULE II
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Addition
----------------------
Charged to
Balance at Charged to Other Balance
beginning Cost and Accounts Deductions at end of
Descriptions of Period Expenses - describe - describe Period
------------ --------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1996:
Allowance for doubtful accounts $ 519 $ 122 $ 6(1) $ 107(2) $ 540
====== ====== ===== ====== ======
Reserve for excess and
obsolete inventory $ 957 $1,177 $ -- $ 149(2) $1,985
====== ====== ===== ====== ======
Year ended September 30, 1995:
Allowance for doubtful accounts $ 605 $ 113 $ 8(1) $ 207(2) $ 519
====== ====== ===== ====== ======
Reserve for excess and
obsolete inventory $1,034 $ 280 $ -- $ 357(2) $ 957
====== ====== ===== ====== ======
Year ended September 30, 1994:
Allowance for doubtful accounts $ 561 $ 117 $ -- $ 73(2) $ 605
====== ====== ===== ====== ======
Reserve for excess and
obsolete inventory $1,070 $ 206 $ -- $ 242(2) $1,034
====== ====== ===== ====== ======
</TABLE>
(l) Recoveries of accounts written off.
(2) Amounts written off.
S-1
EXHIBIT 11
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
COMPUTATION OF PER SHARE AMOUNTS
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
Restated Restated
(Note 2) (Note 1)
PRIMARY:
Net Income $11,998 $ 9,516 $ 3,171
======= ======= =======
Weighted average number of common shares 18,426 15,878 14,598
Assumed number of shares issued
from common share equivalents 1,462 2,255 2,020
------- ------- -------
Weighted average number of common
and common equivalent shares 19,888 18,133 16,618
======= ======= =======
Net Income per share:
Primary $ 0.60 $ 0.52 $ 0.19
======= ======= =======
FULLY DILUTED:
Net Income $11,998 $ 9,516 $ 3,171
======= ======= =======
Weighted average number of common shares 18,426 15,878 14,598
Assumed number of shares issued
from common share equivalents 1,469 2,377 2,222
======= ======= =======
Weighted average number of
common equivalent shares 19,895 18,255 16,820
======= ======= =======
Net income per share:
Fully diluted $ 0.60 $ 0.52 $ 0.19
======= ======= =======
NOTE: The effect of options and warrants was calculated using the modified
treasury stock method for the year ended September 30, 1994.
EXHIBIT 21
SUBSIDIARIES OF COMPANY
STATE OR
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
- ------------------------------------- ---------------
Acuity Imaging, Inc. Delaware
Acuity Imaging Limited United Kingdom
Computer Identics Corporation Massachusetts
Computer Identics N.V./S.A. Belgium
Computer Identics S.A. France
Computer Identics GmbH Germany
Computer Identics Limited United Kingdom
International Data Matrix, Inc. Florida
Systemation Engineered Products, Inc. Wisconsin
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
Robotic Vision Systems, Inc. and Subsidiaries:
We consent to the incorporation by reference in Registration Statement Nos.
2-82662, 2-85336, 2-94926, 33-12280, 33-16088, 33-28764, 33-45474, 33-63289,
33-64039, 33-70960, 333-14529, and 333-03139 each on Form S-8 and Registration
Statement Nos. 33-62715 and 333-05971 each on Form S-3 of our report dated
December 9, 1996, appearing in this Annual Report on Form 10-K of Robotic Vision
Systems, Inc., for the year ended September 30, 1996.
We also consent to the incorporation by reference in the Annual Report on Form
10-K under the Securities Exchange Act of 1934 of Robotic Vision Systems, Inc.
for the year ended September 30, 1996 of our report dated January 28, 1994 and
contained in Registration Statement No. 333-05971 of Robotic Vision Systems,
Inc. on Form S-4 under the Securites Act of 1933 insofar as such report relates
to the financial statements of Computer Identics Corporation for the year ended
December 31, 1993.
/s/ Deloitte & Touche LLP
Jericho, New York
December 27, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated November 6, 1995 covering the audited financial statements of
Acuity Imaging, Inc. as of September 30, 1995 and for the years ended September
30, 1995 and December 31, 1994, included in this form 10-K into Robotic Vision
Systems, Inc.'s previously filed Registration Statements on Form S-8 (File Nos.
2-82662, 2-85336, 2-94926, 33-12280, 33-16088, 33-28764, 33-45474, 33-63289,
33-64039, 33-70960, 333-14529, 333-03139) and Form S-3 (File Nos. 33-62715,
333-05971).
/s/ Arthur Andersen LLP
Boston, Massachusetts
December 27, 1996
EXHIBIT 23(c)
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
2-82662, 2-85336, 2-94926, 33-12280, 33-16088, 33-28764, 33-45474, 33-63289,
33-64039, 33-70960, 33-14529, and 333-03139 each on Form S-8 and Registration
Statement Nos. 33-62715 and 333-05971 each on Form S-8 of our report dated
February 8, 1996, with respect to the 1995 and 1994 consolidated financial
statements and schedule of Computer Identics Corporation and subsidiaries
included in the Annual Report (Form 10-K) of Robotic Vision Systems, Inc., for
the year ended September 30, 1996.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 27, 1996
