<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1997 Commission File Number 0-8623
----------------- ------
ROBOTIC VISION SYSTEMS, INC.
----------------------------
(Exact name of Registrant as specified in charter)
DELAWARE 11-2400145
- ------------------------------- ---------------------
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification Number
425 RABRO DRIVE EAST, HAUPPAUGE, NEW YORK 11788
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (516) 273-9700
--------------
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 twelve 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
----- -----
Number of shares of Common Stock outstanding
as of February 6, 1998 24,515,406
----------
No of Pages 10
--
<PAGE> 2
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial statements
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
---- ----
(Unaudited) Restated
(Note 2)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .................... $ 3,619,000 $ 8,811,000
Accounts receivables, net .................... 53,679,000 50,563,000
Inventories (Note 3) ......................... 48,555,000 39,095,000
Deferred income taxes ........................ 10,643,000 10,643,000
Other current assets ......................... 1,674,000 1,429,000
------------ ------------
Total Current Assets ...................... 118,170,000 110,541,000
Plant and equipment, net ....................... 14,968,000 14,507,000
Goodwill, net .................................. 6,176,000 6,207,000
Other assets ................................... 11,489,000 8,668,000
------------ ------------
TOTAL ..................................... $150,803,000 $139,923,000
------------ ------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-
term debt (Note 4) ........................ $ 15,711,000 $ 10,623,000
Accounts payable ............................. 24,420,000 23,320,000
Accrued expenses and other current liabilities 21,946,000 19,623,000
Advance contract payments received ........... 1,502,000 1,816,000
------------ ------------
Total Current Liabilities ................. 63,579,000 55,382,000
Deferred income taxes .......................... 1,823,000 1,823,000
Other long-term liabilities .................... 6,217,000 7,141,000
------------ ------------
Total Liabilities ......................... 71,619,000 64,346,000
------------ ------------
Common stock, authorized 30,000,000
shares, $0.01 par value; issued and outstanding
24,487,000 shares at December 31, 1997 and
24,438,000 shares at September 30, 1997 ... 245,000 244,000
Additional paid-in capital ..................... 166,706,000 166,623,000
Accumulated deficit ............................ (87,914,000) (91,457,000)
Cumulative translation adjustment .............. 147,000 167,000
------------ ------------
Total Stockholders' Equity ................ 79,184,000 75,577,000
------------ ------------
TOTAL ..................................... $150,803,000 $139,923,000
============ ============
</TABLE>
1
<PAGE> 3
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
---------------------------
1997 1996
Restated
(Note 2)
Revenues ................................... $53,788,000 $38,734,000
Cost of revenues ........................... 27,745,000 21,377,000
----------- -----------
Gross profit ............................... 26,043,000 17,357,000
Research and development costs ............. 6,629,000 5,686,000
Selling, general and administrative expenses 14,894,000 10,854,000
Merger expenses ............................ 623,000 44,000
Interest expense, net ...................... 246,000 18,000
----------- -----------
Income before provision for income taxes ... 3,651,000 755,000
Provision for income taxes ................. 108,000 1,049,000
----------- -----------
Net income (loss) .......................... $ 3,543,000 $ (294,000)
=========== ===========
Net income (loss) per share:
Basic and Diluted ...................... $ 0.14 $ (0.01)
=========== ===========
2
<PAGE> 4
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) .......................................... $ 3,543,000 $ (294,000)
Adjustments to reconcile net income to net cash
from operating activities:
Deferred income taxes ...................................... - 995,000
Depreciation and amortization .............................. 1,660,000 1,327,000
Other ...................................................... (20,000) (339,000)
Changes in assets & liabilities:
Accounts Receivables .............................. (3,120,000) (4,550,000)
Inventories ....................................... (9,460,000) (496,000)
Other current assets .............................. (245,000) (200,000)
Other assets ...................................... (3,177,000) (473,000)
Accounts payable .................................. 1,100,000 1,621,000
Accrued expenses and other current liabilities .... 2,323,000 191,000
Advanced contract payments received ............... (314,000) (393,000)
Other long-term liabilities ....................... (503,000) (6,000)
----------- -----------
Net cash used in operating activities ...................... (8,213,000) (2,617,000)
----------- -----------
INVESTING ACTIVITIES:
Additions to plant & equipment ............................. (1,734,000) (1,214,000)
Proceeds from investments .................................. - 821,000
----------- -----------
Net cash provided by (used in) investing activities ........ (1,734,000) (393,000)
----------- -----------
FINANCING ACTIVITIES:
Issuance of Common Stock in connection with
the exercise of stock options and warrants ................. 84,000 476,000
Net proceeds (repayments) from short-term borrowings ....... 5,317,000 (2,640,000)
Repayments of long-term borrowings ......................... (650,000) (1,072,000)
Proceeds from long-term borrowings ......................... - 172,000
----------- -----------
Net cash provided by (used in) financing activities ........ 4,751,000 (3,064,000)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents 4,000 (82,000)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ....... (5,192,000) (6,156,000)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR .............. 8,811,000 23,546,000
----------- -----------
CASH AND CASH EQUIVALENTS- END OF YEAR ..................... $ 3,619,000 $17,390,000
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid .............................................. $ 283,000 $ 252,000
Taxes paid ................................................. - 1,285,000
</TABLE>
3
<PAGE> 5
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet of Robotic Vision Systems, Inc. and Subsidiaries
(The "Company") as of December 31, 1997, the consolidated results of operations
for the three month periods ended December 31, 1997 and 1996 and the
consolidated statements of cash flows for the three month periods ended December
31, 1997 and 1996 have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial condition, results of
operations and cash flows at December 31, 1997 and for all periods presented
have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Form 10-K for the year ended September 30,
1997. The results of operations for the period ended December 31, 1997 are not
necessarily indicative of the operating results for the full year.
2. ACQUISITIONS
Vanguard Automation, Inc. ("Vanguard")
On December 9, 1997, the Company acquired the outstanding shares of Vanguard for
approximately 3,391,000 shares of the Company's common stock, having a market
value of $45,776,000. Outstanding Vanguard stock options were converted into
stock options to purchase approximately 152,000 shares of the Company's common
stock. Outstanding Vanguard warrants were converted into warrants to purchase
approximately 182,000 shares of the Company's common stock. Vanguard produces
and markets automated manufacturing equipment used in the assembly of certain
types of semiconductor packaging processes, commonly referred to as Ball Grid
Array. 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 Vanguard for all periods presented.
The following is a reconciliation of certain restated amounts with amounts
previously reported.
Three Months
Ended
December 31, 1996
-----------------
REVENUES:
As previously reported ........................... $35,401,000
Effect of Vanguard pooling of
interests .................................... 3,333,000
-----------
As restated ...................................... $38,734,000
===========
NET INCOME (LOSS):
As previously reported ........................... $ 2,151,000
Effect of Vanguard pooling of
interests .................................... (2,445,000)
-----------
As restated ...................................... $ (294,000)
===========
NET INCOME (LOSS) PER COMMON SHARE:
Diluted:
As previously reported ........................... $ 0.10
Effect of Vanguard pooling of
interests .................................... (0.11)
-----------
As restated ...................................... $ (0.01)
===========
4
<PAGE> 6
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
3. INVENTORIES
Inventories at December 31, 1997 and September 30, 1997 consisted of the
following;
December 31, 1997 September 30, 1997
----------------- ------------------
Raw Materials $25,948,000 $20,638,000
Work-in-Process 17,211,000 13,158,000
Finished Goods 5,396,000 5,299,000
----------- -----------
Total $48,555,000 $39,095,000
=========== ===========
4. NOTES PAYABLE AND LONG-TERM DEBT
The Company currently has a credit agreement with a domestic bank consisting of
a $17,000,000 revolving credit agreement and an $8,000,000 term loan. The
revolving credit agreement was increased from $6,000,000 to $11,000,000 in
December 1997 and subsequently increased to $17,000,000 in January 1998. At
December 31, 1997, $9,424,000 was outstanding under the revolving credit
agreement and $7,200,000 was outstanding under the term loan. At September 30,
1997, $4,924,000 was outstanding under the revolving credit agreement and
$7,600,000 was outstanding under the term loan.
In addition, the Company has an unsecured line of credit with a domestic bank
which provides borrowings in various European currencies to a maximum amount of
$2,500,000. At December 31, 1997, $2,482,000 was outstanding under this line of
credit. At September 30, 1997, $1,665,000 was outstanding under this line of
credit.
5. EARNINGS PER SHARE
In the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings Per Share". Basic earnings per
share is determined by using the weighted average number of shares outstanding
during each period. Diluted earnings per share further assumes the issuance of
common shares for all dilutive potential common shares outstanding. The
calculation for earnings per share for the three months ended December 31, 1997
and 1996 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
------------------ ------------------
December 31, 1997 December 31, 1996
----------------- -----------------
BASIC DILUTED BASIC DILUTED
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
Net income (loss) .......................... $ 3,543,000 $ 3,543,000 $ (294,000) $ (294,000)
=========== =========== =========== ===========
Weighted average number of common shares ... 24,476,000 24,476,000 23,373,000 23,373,000
Assumed number of shares issued from common
share equivalents ................. - 968,000 - -
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares ................. 24,476,000 25,444,000 23,373,000 23,373,000
=========== =========== =========== ===========
Net income (loss) per share ................ $ 0.14 $ 0.14 $ (0.01) $ (0.01)
=========== =========== =========== ===========
</TABLE>
5
<PAGE> 7
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended December 31, 1997 Compared to
Three Months Ended December 31, 1996
RESULTS OF OPERATIONS
Revenues were $53,788,000 for the three months ended December 31, 1997, compared
to $38,734,000 in the three months ended December 31, 1996, an increase of 39%.
The increase in revenues largely reflected volume shipments of new products,
which included the LS-3950DB lead scanner introduced in the current quarter and
the 7000 Series end-of-line inspection system introduced in the fourth quarter
of last fiscal year. In addition, Vanguard Automation, Inc., which was acquired
by the Company in December 1997, contributed to the year-to-year improvement in
revenues.
The gross profit margin was 48.4% of revenues in the three months ended December
31, 1997, compared to 44.8% of revenues in the three months ended December 31,
1996.
Research and development expenses were $6,629,000, or 12.3% of revenues, in the
three months ended December 31, 1997, compared to $5,686,000, or 14.7% of
revenues, in the three months ended December 31, 1996. The increase in research
and development expenses reflected the Company's focus on new product
development, including the development of the LS-3950DB lead scanner, the 7000
Series inspection system, as well as new visual inspection and data collection
equipment. In the three months ended December 31, 1997, the Company capitalized
$1,696,000 of its software development costs, in accordance with Statement of
Financial Accounting Standards No. 86, compared to $588,000 capitalized in the
three months ended December 31, 1996.
Selling, general and administrative expenses were $14,894,000, or 27.7% of
revenues, in the three months ended December 31, 1997, compared to $10,854,000,
or 28.0% of revenues, in the three months ended December 31, 1996. The increase
in selling, general and administrative expenses largely reflected higher
marketing and distribution costs associated with the higher level of revenues
year-to-year.
The Company incurred merger costs of $623,000 in the three months ended December
31, 1997 related to its acquisition of Vanguard Automation, Inc.
Net interest expense was $246,000 in the three months ended December 31, 1997,
compared to net interest expense of $18,000 in the three months ended December
31, 1996. The increase in interest expense reflected the higher level of bank
borrowings in the three months ended December 31, 1997.
The tax provision of $108,000 in the three months ended December 31, 1997
reflected minimum federal and certain state taxes. Projected taxable income from
the consolidated group has accelerated the opportunity to use net operating loss
and credit carry forwards in 1998, thus only a minimal federal and state tax
provision is anticipated for fiscal 1998. The tax provision of $1,049,000 in the
three months ended December 31, 1996 reflected normal federal and state taxes.
Vanguard experienced a loss before income taxes of $2,455,000 in the three
months ended December 31, 1996, and accordingly, no provision for income taxes
was recorded on the unprofitable operations of Vanguard prior to the merger.
Net income for the three months ended December 31, 1997 was $3,543,000, or $0.14
per share, compared to a net loss of $294,000, or (0.01) per share.
6
<PAGE> 8
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Continued
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $5,192,000 in the three months ended
December 31, 1997 as a result of $8,213,000 of net cash used in operating
activities, $1,734,000 of net cash used in investing activities, $4,751,000 of
net cash provided by financing activities and the effect of exchange rate
changes on cash of $4,000.
Accounts receivable increased $3,120,000 in the three months ended December 31,
1997 largely as a result of the combination of higher sequential quarterly
revenues and an increase in shipments to customers with a longer payment cycle.
Inventories increased $9,460,000 in the three months ended December 31, 1997 as
a result of materials required to support new product deliveries and anticipated
higher future shipment levels.
The Company had net additions to plant and equipment of $1,734,000 in the three
months ended December 31, 1997, which exceeded depreciation charges of
$1,273,000.
The Company expanded its revolving credit agreement from $6,000,000 to
$11,000,000 in December 1997 and subsequently increased the line to $17,000,000
in January 1998. The increase in borrowing capacity relates to financing the
Company's working capital requirements needed to support higher revenue levels
and the acquisition of Vanguard Automation, Inc. At December 31, 1997,
$9,424,000 was outstanding under this revolving credit agreement. At September
30, 1997, $4,924,000 was outstanding under this revolving credit agreement. The
Company also had borrowings outstanding of $2,482,000 and $1,665,000, at
December 31, 1997 and September 30, 1997, respectively, under an additional
unsecured line of credit.
The Company expects to meet its remaining fiscal 1998 cash requirements through
a combination of existing cash balances, borrowing availability under existing
bank lines and cash flows from operations.
FOREIGN CURRENCY TRANSACTIONS
The Company does not currently engage in international currency hedging
transactions to mitigate its foreign currency exposure. To the extent the
Company is unable to match revenues received in foreign currencies with expenses
paid in the same currency, it is exposed to possible losses on international
currency transactions.
7
<PAGE> 9
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Continued
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". This Statement requires that changes in
comprehensive income be shown in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 130 is effective for
periods beginning after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information". SFAS No.
131 specifies new guidelines for determining a company's operating segments and
related requirements for disclosure. The Company is in the process of evaluating
the impact of the new standard on the presentation of its financial statements
and the disclosures therein. SFAS No. 131 is effective for periods beginning
after December 15, 1997.
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 97-2, "Software Reserve Recognition". This
Statement specifies certain changes for determining the recognition of software
revenue. The Company is in the process of evaluating the impact of the SOP on
its revenue recognition policies. SOP No. 97-2 is effective for periods
beginning after December 15, 1997.
FLUCTUATIONS IN THE SEMICONDUCTOR MARKET
The semiconductor industry has been subject to significant market fluctuations
and periodic downturns, which often have a disproportionately negative effect on
both revenues and earnings of semiconductor capital equipment companies. The
future financial results of RVSI may, therefore, depend significantly on the
market demand for integrated circuit devices.
INTERNATIONAL SALES
A majority of RVSI's sales in recent years has been export sales to the Far
East. For the fiscal year ended September 30, 1997, export sales accounted for
approximately 57% of RVSI's revenues. RVSI's international business may be
affected by changes in demand resulting from fluctuations in currency exchange
rates, trade restrictions, duties, general and economic conditions, and other
political and economic factors. Although RVSI currently attempts to mitigate its
direct exposure to exchange rate fluctuations by transacting most international
business in United States dollars, there can be no assurance that their
international operations will escape the risk of fluctuating currency values,
hard currency shortages, or controls on currency exchange. To the extent foreign
currencies weaken relating to the U.S. dollar, RVSI's products could become more
expensive in these countries. This could adversely affect both RVSI's sales
volumes and profitability.
CUSTOMER CONCENTRATION
RVSI's sales have been historically concentrated in a small number of customers
at any time, although the specific customers change over time. Sale to Intel
accounted for approximately 16% and 13%, respectively, of RVSI's revenues during
the fiscal years ended September 30, 1997 and 1996. No other customers accounted
for more than 10% of sales during such fiscal years. The loss or any significant
reduction in Intel's orders for RVSI's products may be expected to materially
adversely affect RVSI's operations and prospects.
8
<PAGE> 10
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Current Report on Form 8-K dated December 18, 1997, as amended on
Form 8-K/A on January 16, 1998; Items 2 and 7; Audited Financial
Statements and Related Notes of Vanguard Automation, Inc. at
December 31, 1996 and at September 30, 1997 and for the years
ended December 31, 1996 and September 30, 1997, respectively;
Unaudited summary of Pro Forma Condensed Combined Statements of
Operations for the years ended September 30, 1997, 1996 and 1995;
Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1997; Unaudited Pro Forma Condensed Combined
Statements of Operations for the years ended September 30, 1997,
1996 and 1995, respectively; and Notes to Unaudited Pro Forma
Condensed Financial Information.
9
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBOTIC VISION SYSTEMS, INC.
----------------------------
Registrant
Dated: February 13, 1998 /s/ PAT V. COSTA
--------------------------------------
PAT V. COSTA
President and CEO
(Principal Executive Officer)
Dated: February 13, 1998 /s/ ROBERT H. WALKER
--------------------------------------
ROBERT H. WALKER
Executive Vice President and Treasurer
(Principal Financial Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1997 OCT-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 3,619,000 3,619,000
<SECURITIES> 0 0
<RECEIVABLES> 54,695,000 54,695,000
<ALLOWANCES> (1,016,000) (1,016,000)
<INVENTORY> 48,555,000 48,555,000
<CURRENT-ASSETS> 118,170,000 118,170,000
<PP&E> 29,277,000 29,277,000
<DEPRECIATION> (14,309,000) (14,309,000)
<TOTAL-ASSETS> 150,803,000 150,803,000
<CURRENT-LIABILITIES> 63,579,000 63,579,000
<BONDS> 0 0
0 0
0 0
<COMMON> 245,000 245,000
<OTHER-SE> 166,855,000 166,855,000
<TOTAL-LIABILITY-AND-EQUITY> 150,803,000 150,803,000
<SALES> 53,788,000 53,788,000
<TOTAL-REVENUES> 53,788,000 53,788,000
<CGS> 27,745,000 27,745,000
<TOTAL-COSTS> 27,745,000 27,745,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 299,000 299,000
<INCOME-PRETAX> 3,651,000 3,651,000
<INCOME-TAX> 108,000 108,000
<INCOME-CONTINUING> 3,543,000 3,543,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,543,000 3,543,000
<EPS-PRIMARY> 0.14 0.14
<EPS-DILUTED> 0.14 0.14
</TABLE>
