<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
FOR QUARTER ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER 0-8623
</TABLE>
ROBOTIC VISION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
DELAWARE 11-2400145
(STATE OR OTHER JURISDICTION OF IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER
5 SHAWMUT ROAD, CANTON, MASSACHUSETTS 02021
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (781) 821-0830
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.
[X] Yes [ ] No
Number of shares of Common Stock outstanding as of February 5, 1999 24,887,195
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<PAGE> 2
INTRODUCTORY NOTE
This Amendment on Form 10-Q/A amends the Registrant's Quarterly Report on
Form 10-Q for the three months ended December 31, 1998, as filed by the
Registrant on February 12, 1999, and is being filed to reflect the restatement
of the Registrant's consolidated financial statements (the "Restatement").
The Restatement reflects the deferral of a gain recorded in connection with the
sale of Aircraft Safety, pending resolution of contingencies. See Note 8 of
Notes to Condensed Consolidated Financial Statements.
<PAGE> 3
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
(As restated,
See Note 8)
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents......................... $ 2,653 $ 2,421
Accounts receivable, net.......................... 30,537 32,367
Inventories....................................... 31,333 36,213
Other current assets.............................. 1,467 1,226
--------- ---------
Total current assets...................... 65,990 72,227
Plant and equipment, net.......................... 15,265 17,591
Deferred income taxes............................. 8,820 8,820
Goodwill.......................................... 5,745 5,847
Other assets...................................... 18,090 17,086
--------- ---------
Total assets.............................. $ 113,910 $ 121,571
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term
debt........................................... $ 36,000 $ 38,038
Accounts payable.................................. 19,436 21,388
Accrued expenses.................................. 19,636 21,073
Advance payments received......................... 1,284 1,216
--------- ---------
Total current liabilities......................... 76,356 81,715
Long-term debt.................................... 3,029 3,059
STOCKHOLDERS' EQUITY:
Common stock, authorized 50,000 shares, $0.01 par
value; issued and outstanding 24,876 at
December 31, 1998 and 24,870 at September 30,
1998........................................... 249 249
Additional paid-in capital........................ 168,493 168,493
Accumulated deficit............................... (134,234) (131,962)
Cumulative translation adjustment................. 17 17
--------- ---------
Total stockholders' equity................ 34,525 36,797
--------- ---------
Total liabilities and stockholders'
equity................................. $ 113,910 $ 121,571
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
2
<PAGE> 4
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
(As restated,
See Note 8)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Revenues............................................ $29,405 $53,788
Cost of revenues.................................... 16,834 27,745
------- -------
Gross profit...................................... 12,571 26,043
Research and development expenses................... 5,590 6,629
Selling, general and administrative expenses........ 11,216 14,894
Merger expenses..................................... -- 623
------- -------
Income (loss) from operations..................... (4,235) 3,897
Gain on sale of product line........................ (2,798) --
Interest expense, net............................... 835 246
------- -------
Income (loss) before provision for income taxes... (2,272) 3,651
Provision for income taxes.......................... -- 108
------- -------
Net income (loss)................................. $(2,272) $ 3,543
======= =======
Net income (loss) per share:
Basic............................................. $ (0.09) $ 0.14
Diluted........................................... $ (0.09) $ 0.14
Weighted average shares:
Basic............................................. 24,876 24,476
Diluted........................................... 24,876 25,444
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE> 5
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
(As restated,
See Note 8)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................... $(2,272) $ 3,543
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Gain on sale of product line...................... (2,798) --
Depreciation and amortization..................... 2,632 1,660
Other............................................. -- (20)
Changes in assets and liabilities:
Accounts receivable............................ 1,830 (3,120)
Inventories.................................... 4,432 (9,460)
Other current assets........................... (241) (245)
Other assets................................... (1,748) (3,177)
Accounts payable............................... (1,952) 1,100
Accrued expenses............................... (1,594) 2,323
Advance contract payments...................... 68 (314)
Other long-term liabilities.................... -- (503)
------- -------
Net cash used in operating activities............... (1,643) (8,213)
------- -------
INVESTING ACTIVITIES:
Additions to plant and equipment.................... (46) (1,734)
Proceeds from sale of product line.................. 4,050 --
------- -------
Net cash provided by (used in) investing
activities........................................ 4,004 (1,734)
------- -------
FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and
warrants.......................................... -- 84
Borrowings (repayments) of bank debt................ (2,025) 5,317
Repayments of long-term debt........................ (104) (650)
------- -------
Net cash provided by (used in) financing
activities........................................ (2,129) 4,751
------- -------
Effect of exchange rate changes on cash and cash
equivalents....................................... -- 4
Net increase (decrease) in cash and cash
equivalents....................................... 232 (5,192)
Cash and cash equivalents -- beginning of period.... 2,421 8,811
------- -------
Cash and cash equivalents -- end of period.......... $ 2,653 $ 3,619
------- -------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid....................................... $ 835 $ 283
Income taxes paid................................... $ -- $ --
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE> 6
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Condensed Consolidated Balance Sheet of Robotic Vision Systems, Inc.
and Subsidiaries (The "Company") as of December 31, 1998, the Condensed
Consolidated Statements of Operations for the three month periods ended December
31, 1998 and 1997 and the Condensed Consolidated Statements of Cash Flows for
the three month periods ended December 31, 1998 and 1997 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, 1998
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. It is suggested that these condensed
consolidated financial statements 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, 1998. The results of operations for the period
ended December 31, 1998 are not necessarily indicative of the operating results
for the full year.
2. INVENTORIES
Inventories at December 31, 1998 and September 30, 1998 consisted of the
following;
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Raw Materials............................... $15,498 $17,124
Work-in-Process............................. 7,532 10,429
Finished Goods.............................. 8,303 8,660
------- -------
Total............................. $31,333 $36,213
======= =======
</TABLE>
3. NOTES PAYABLE
The Company has a revolving credit agreement with three domestic banks
which is collateralized by substantially all of the domestic tangible and
intangible assets of the Company. The agreement has a term which expires in
March 2000 and borrowings under the agreement currently bear interest at the
prime rate plus two percent. At December 31, 1998, the Company had borrowings
of $35,475,000 outstanding which reflect the maximum commitment under the
agreement. The agreement contains certain financial covenants, including
minimum levels of profitability, liquidity and net worth, with which the
Company has not been in compliance. Under an amendment executed in March 1999,
the Company's banks had agreed to forebear their right to exercise any remedies
under this agreement through April 23, 1999. Accordingly, the borrowings under
the agreement at December 31, 1998 and September 30, 1998 have been classified
as current. On April 22, 1999, the Company renegotiated the terms of its credit
agreement with its three banks. The new agreement sets the facility at $35.4
million and establishes new covenants for the balance of the term of the
agreement, March 18, 2000.
5
<PAGE> 7
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. SALE OF PRODUCT LINE
In December 1998, the Company sold its Aircraft Safety product line
("Aircraft Safety") to a subsidiary of B.F. Goodrich ("Goodrich") for
$4,500,000, consisting of $4,050,000 in cash paid on closing and $450,000
payable upon the resolution of two items as noted in the next paragraph. The
Company no longer considered this technology a key component of its product
portfolio or future strategic direction. The Company sold certain inventory,
equipment and intellectual property in the transaction. The transaction resulted
in an initial gain of $2,798,000.
During the second quarter of fiscal 1999, the contingency relating to a
portion of the employee retention ($250,000) was resolved and in the third
quarter of fiscal 1999, the remaining contingency relating to employee
retention was resolved ($125,000). These amounts will be recorded as additional
gain in those quarters. At April 20, 1999, the contract novation had not been
completed.
5. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted average
number of shares outstanding during each period. Diluted net income per share
reflects the effect of the Company's outstanding stock options and warrants
(using the treasury stock method), except where such options would be
anti-dilutive. For the three months ended December 31, 1997, the assumed number
of potential common shares was 968,000. For the three months ended December 31,
1998, any such potential common shares were anti-dilutive due to the loss for
the period.
6. COMPREHENSIVE INCOME (LOSS)
Effective October 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income".
Currently, in addition to net income or loss, the only item that the Company
currently records as other comprehensive income or loss is the change in the
cumulative translation adjustment resulting from the changes in exchange rates
and the effect of those changes upon translation of the financial statements of
the Company's foreign operations. For the periods ended December 31, 1998 and
1997, the components of comprehensive income (loss) included net income (loss)
of $(2,272,000) and $3,543,000, respectively, foreign currency translation
adjustment of $0 and $(20,000), respectively, for total comprehensive income
(loss) of $(2,272,000) and $3,790,000, respectively.
7. EQUITY FINANCING
In February 1999, the Company completed an equity-based financing with a
group of institutional investors. Net proceeds from the financing were $10.0
million. The financing was in the form of prepaid and incentive common stock
purchase warrants. Proceeds from the financing are to be used for working
capital requirements.
8. RESTATEMENT
Subsequent to the issuance of the Company's unaudited condensed consolidated
financial statements for the three months ended December 31, 1998, the Company's
Management determined that $450,000 of the gain recorded in connection with the
sale of Aircraft Safety should have been deferred pending receipt of the
proceeds upon resolution of contingencies relating to the retention of certain
employees by Goodrich ($375,000) and the novation of a certain government
contract held by Aircraft Safety to Goodrich ($75,000). As a result, the
unaudited condensed consolidated financial statements for the three months ended
December 31, 1998 have been restated for amounts previously reported. This
change had no effect on the loss from operations of $4,235,000 for the three
months ended December 31, 1998.
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
1998
------------
As
Previously As
Reported Restated
---------- ----------
<S> <S> <S>
AT DECEMBER 31,
Accrued expenses $ 19,186 $ 19,636
Accumulated deficit (133,784) (134,234)
FOR THE THREE MONTHS ENDED DECEMBER 31,
Gain on sale of product line (3,248) (2,798)
Net income (loss) (1,822) (2,272)
Net loss per share -- Basic ($0.07) ($0.09)
Net loss per share -- Diluted ($0.07) ($0.09)
</TABLE>
6
<PAGE> 8
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, 1998 COMPARED TO
THREE MONTHS ENDED DECEMBER 31, 1997
Results of Operations
The Company's unaudited condensed consolidated financial statements for the
three months ended December 31, 1998 are restated. Subsequent to the issuance of
the Company's unaudited condensed consolidated financial statements for the
three months ended December 31, 1998, the Company's Management determined that
$450,000 of the gain recorded in connection with the sale of Aircraft Safety
should have been deferred pending receipt of the proceeds upon resolution of
contingencies relating to the retention of certain employees by Goodrich
($375,000) and the novation of a certain government contract held by Aircraft
Safety to Goodrich ($75,000). As a result, the unaudited condensed consolidated
financial statements for the three months ended December 31, 1998 have been
restated from amounts previously reported. This change had no effect on the loss
from operations of $4,235,000 for the three months ended December 31, 1998.
Revenues were $29.4 million in the three months ended December 31, 1998
compared to $53.8 million in the three months ended December 31, 1997, a decline
of 45%. The significantly lower revenues year-to-year reflect the effect of the
severe semiconductor industry downturn which began in early calender 1998. In
the three months ended December 31, 1998, revenues for the Company's
Semiconductor Equipment Group were less than half the level of the year earlier
period. Revenues for the Company's Acuity CiMatrix division for 1-D and 2-D
barcode reading and machine vision products were also down 10% from the year
earlier period. In the three months ended December 31, 1998, revenues for the
Company's Semiconductor Equipment Group represented 60% of total revenues,
compared to 76% of total revenues in the three months ended December 31, 1997.
Revenues of $29.4 million in the three months ended December 31, 1998 were
3.5% higher than the fourth quarter of fiscal 1998 revenues of $28.4 million.
Although revenues for Semiconductor Equipment Group were down slightly from the
fourth quarter of fiscal 1998, the Company had a 40% increase in orders for
these products over the preceding quarter. Revenues for the Company's Acuity
CiMatrix division were up approximately 15% sequentially, primarily as a result
of demand for its 1-D tunnel applications for postal service and material
handling applications. In addition, the Company began delivering its new machine
vision platform, Visionscape, during the three months ended December 31, 1998.
Overall, the Company's orders were 30% higher than the fourth quarter of fiscal
1998 and were approximately 110% of revenues in the three months ended December
31, 1998.
The gross profit margin was 42.8% of revenues in the three months ended
December 31, 1998 compared to 48.4% of revenues in the three months ended
December 31, 1997. The lower gross profit margin year-to-year primarily reflects
the impact of proportionately high level of fixed manufacturing costs on the
significantly lower level of revenues. However, the gross profit margin in the
three months ended December 31, 1998 improved 7.4% from the gross profit margin
of 35.4% of revenues, excluding inventory provisions, in the fourth quarter of
fiscal 1998. The sequential improvement was largely a result of a more favorable
product mix, particularly for its Semiconductor Equipment Group, largely as a
result of new products introduced during fiscal 1998.
Research and development expenses were $5.6 million, or 19.0% of revenues,
in the three months ended December 31, 1998, compared to $6.6 million, or 12.3%
of revenues, in the three months ended December 31, 1997. The Company has
continued to invest in new product development, including new semiconductor
inspection and component handling systems, as well as enhancing its 1-D barcode
reading products and expanding its new machine vision platform, Visionscape. In
December 1998, the Company's Acuity Cimatrix Division introduced the MXi, the
first hand-held imager for reading digital direct part marks, 1-D barcodes and
new, digital 2-D symbologies, such as the Data Matrix code. This product is a
result of a joint venture with Polaroid Corporation which began in 1997. The MXi
was co-designed and will be manufactured by Polaroid for RVSI's exclusive
distribution. Initial deliveries of the MXi are expected to commence in the
second half of fiscal 1999. In the three months ended December 31, 1998, the
Company capitalized $1.4 million in software
7
<PAGE> 9
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
development costs under Statement of Financial Accounting Standards No. 86.,
compared to $1.7 million in the three months ended December 31, 1997.
Selling, general and administrative expenses were $11.2 million, or 38.1%
of revenues, in the three months ended December 31, 1998, compared to $14.9
million, or 27.7% of revenues, in the three months ended December 31, 1997. The
lower level of expenses reflects a combination of the expense reduction steps
taken by the Company in fiscal 1998, together with lower variable selling costs
on the lower level of revenues.
Primarily as a result of the expense reduction steps taken by the Company
since April 1998, total operating expenses have been lowered from $23.0 million
in the second quarter of fiscal 1998 to $16.8 million in the first quarter of
fiscal 1999. Compared to the fourth quarter of fiscal 1998, operating expenses
in the first quarter of fiscal 1999 were down $2.5 million.
In December 1998, the Company sold its Aircraft Safety product line to a
subsidiary of B.F. Goodrich for $4.5 million in cash, consisting of $4.05
million in cash paid at closing and $0.45 million paid upon resolution of two
items. The Company no longer considered this technology a key component of its
product portfolio or future strategic direction. The Company sold certain
inventory, equipment and intellectual property in the transaction, resulting in
an initial gain of $2.8 million. Proceeds from the sale were used for working
capital requirements and to repay $2.0 million of outstanding bank debt.
Net interest expense was $0.8 million in the three months ended December
31, 1998, compared to $0.2 million in the three months ended December 31, 1997.
The increase in interest expense primarily reflects the significantly higher
level of bank borrowings in the three months ended December 31, 1998.
There was no tax provision in the three months ended December 31, 1998 due
to the loss for the current fiscal quarter. The tax provision for the three
months ended December 31, 1997 reflected minimum federal and state income taxes.
Excluding the $2.8 million gain from the sale of the Company's Aircraft
Safety product line, the net loss for the three months ended December 31, 1998
was $5.1 million, or $0.20 per share, compared to net income of $3.5 million, or
$0.14 per share, for the three months ended December 31, 1997. Including the
$2.8 million gain, the total net loss for the three months ended December 31,
1998 was $2.3 million, or $0.09 per share.
Liquidity and Capital Resources
The Company's cash balance increased $0.2 million, to $2.7 million, in the
three months ended December 31, 1998, as a result of $1.6 million of net cash
used in operating activities, $0.1 million of net cash used for additions to
plant and equipment, $4.0 million of net cash provided by the sale of a product
line and $2.1 million of net cash used in financing activities.
The $1.6 million of net cash used in operating activities was primarily a
result of the operating loss for the quarter, after non-cash depreciation and
amortization charges. Although revenues were up sequentially, accounts
receivable declined $1.8 million in the three months ended December 31, 1998 as
a result of the Company's continued focus on asset management. Inventories were
reduced a further $4.4 million in the three months ended December 31, 1998 as
the Company continued to consume short-term excess levels, particularly in its
Semiconductor Equipment Group.
8
<PAGE> 10
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
Additions to plant and equipment were $0.2 million in the three months
ended December 31, 1998, which were substantially below depreciation charges of
$1.5 million in the period. The increase in other long-term assets of $1.7
million primarily represents capitalized software development costs in the three
months ended December 31, 1998.
The reductions in accounts payable and accrued expenses, combined, of $3.5
million largely reflects the continued low level of inventory purchases in the
current fiscal period, as well as cash payments of $1.1 million for severance
charges recorded in fiscal 1998.
At December 31, 1998, the Company had borrowings of $35.5 million
outstanding under its revolving credit agreement with its domestic banks,
compared to $37.5 million in borrowings outstanding at September 30, 1998. The
Company is currently not in compliance with the financial covenants under the
agreement. Under an amendment executed in March 1999, the Company's banks have
agreed to forebear their right to exercise any remedies under this agreement
until April 23, 1999. The Company is currently working with its banks to modify
the revolving credit agreement and establish new financial covenants.
In February 1999, the Company completed an equity-based financing with a
group of institutional investors. Net proceeds from the financing were $10.0
million. The financing was in the form of prepaid and incentive common stock
purchase warrants. Proceeds from the financing are to be used for working
capital requirements.
Management believes that through a combination of proceeds from this equity
financing, obtaining additional external capital and cash flow from operations,
the Company will have sufficient liquidity through at least September 30, 1999
to fund its cash requirements.
Effect of Inflation
Management believes that during the three months ended December 31, 1998
the effect of inflation was not material.
9
<PAGE> 11
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This report contains forward-looking statements including statements
regarding, among other items, financing activities and anticipated trends in the
Company's business, which are made pursuant to the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. These statements are based
largely on the Company's expectations and are subject to a number of risks and
uncertainties, some of which cannot be predicted or quantified and are beyond
the Company's control. Future events and actual results could differ materially
from those set forth in, contemplated by, or underlying the forward-looking
statements. Statements in this report, including those set forth in "Risk
Factors" below, describe factors, among others, that could contribute to or
cause such differences. The following "Risk Factors" should be read in
conjunction with other risk factors detailed in the Company's most recent
registration statement, annual report on Form 10-K and 10-K/A, and other filings
with the Securities and Exchange Commission.
RISK FACTORS
Fluctuations in the Semiconductor Market
The semiconductor industry, which has been subject to significant market
fluctuations and periodic downturns in the past, is currently still experiencing
weak industry conditions. These weak industry conditions have had an adverse
affect on the revenues and earnings of the Company, as well as other
semiconductor capital equipment companies. Until semiconductor industry
conditions further improve, the Company's revenues and earnings will continue to
be adversely affected.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash equivalents and trade receivables.
The Company places its cash equivalents with high quality financial
institutions, limits the amount of credit exposure to any one institution and
has established investment guidelines relative to diversification and maturities
designed to maintain safety and liquidity. The Company's trade receivables
result primarily from sales to semiconductor manufacturers located in North
America, Japan, the Pacific Rim and Europe. Receivables are mostly from major
corporations, distributors or are supported by letters of credit. The Company
maintains reserves for potential credit losses and such losses have been
immaterial.
The fair value of the Company's notes payable and long-term liabilities is
estimated based on quoted market prices for the same or similar issues or on
current rates offered to the Company for debt of the same remaining maturities.
For all other balance sheet financial instruments, the carrying amount
approximates fair value.
We are exposed to the impact of fluctuation in interest rates, primarily
through our borrowing activities. Our policy has been to use U.S. dollar
denominated borrowings to fund our working capital requirements. The interest
rate on our current borrowings fluctuate with current market rates. The extent
of risk associated with an increase in the interest rate on our borrowings is
not quantifiable or predictable because of the variability of future interest
rates and our future financing requirements. At December 31, 1998, we had bank
borrowings outstanding of $35.3 million and a long-term note payable of $2.25
million which have a variable interest rate. Using a yield to maturity analysis
and assuming an increase in the interest rate on these borrowings of 78 basis
points (10% fluctuation in the rate), interest rate variability on these
borrowings would not have a material effect on our financial results.
We are also exposed to the impact of foreign currency fluctuations. During
fiscal 1998, most local currencies of our international subsidiaries weakened
against the U.S. dollar. Since we translate foreign currencies into U.S. dollars
for reporting purposes, these weakened currencies had a negative, though
immaterial, impact on our results. We also believe that our exposure to currency
exchange fluctuation risk is insignificant because our international
subsidiaries sell to customers, and satisfy their financial obligations, almost
exclusively in their local currencies. During fiscal 1998, we did not engage in
foreign currency hedging activities. Based on a hypothetical ten percent adverse
movement in foreign currency exchange rates, the potential losses in future
earnings, fair value of risk-sensitive instruments, and cash flows are
immaterial, although the actual effects may differ materially from the
hypothetical analysis.
PART II. OTHER INFORMATION
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 -- Financial Data Schedule
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report or amendment thereto to be signed on its
behalf by the undersigned thereunto duly authorized.
ROBOTIC VISION SYSTEMS, INC.
--------------------------------------
Registrant
/s/ PAT V. COSTA
--------------------------------------
Pat V. Costa
President and CEO
Dated: April 22, 1999 (Principal Executive Officer)
/s/ FRANK D. EDWARDS
--------------------------------------
Frank D. Edwards
Chief Financial Officer
(Principal Financial and
Dated: April 22, 1999 Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,653
<SECURITIES> 0
<RECEIVABLES> 31,537
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0
0
<COMMON> 249
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<INCOME-TAX> 0
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<CHANGES> 0
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<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
