<PAGE>
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, 1998 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
5 SHAWMUT ROAD, CANTON, MASSACHUSETTS 02021
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
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.
Yes X No
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Number of shares of Common Stock outstanding
as of February 5, 1999 24,887,195
No of Pages 10
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
PART 1. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
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(In thousands, except per share data)
<S> <C> <C>
Assets: (Unaudited)
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
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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
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Total assets $ 113,910 $ 121,571
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--------- ---------
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 19,186 21,073
Advance payments received 1,284 1,216
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Total current liabilities 75,906 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 (133,784) (131,962)
Cumulative translation adjustment 17 17
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Total stockholders' equity 34,975 36,797
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Total liabilities and stockholders' equity $ 113,910 $ 121,571
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</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
December 31, December 31,
1998 1997
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(Unaudited)
(in thousands, except per share amounts)
<S> <C> <C>
Revenues $ 29,405 $53,788
Cost of revenues 16,834 27,745
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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
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Income (loss) from operations (4,235) 3,897
Gain on sale of product line (3,248) -
Interest expense, net 835 246
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Income (loss) before provision for income taxes (1,822) 3,651
Provision for income taxes - 108
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Net income (loss) $ (1,822) $ 3,543
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Net income (loss) per share:
Basic $ (0.07) $ 0.14
Diluted $ (0.07) $ 0.14
Weighted average shares:
Basic 24,876 24,476
Diluted 24,876 25,444
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
December 31, December 31,
1998 1997
------------ ------------
(Unaudited)
OPERATING ACTIVITIES: (in thousands, except per share amounts)
<S> <C> <C>
Net income (loss) $(1,822) $ 3,543
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Gain on sale of product line (3,248) -
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 (2,044) 2,323
Advance contract payments 68 (314)
Other long-term liabilities - (503)
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Net cash used in operating activities (2,093) (8,213)
------------ ------------
INVESTING ACTIVITIES:
Additions to plant and equipment (107) (1,734)
Proceeds from sale of product line 4,500 -
------------ ------------
Net cash provided by (used in) investing activities 4,393 (1,734)
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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)
Proceeds from long-term borrowings 61 -
------------ ------------
Net cash provided by (used in) financing activities (2,068) 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
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Cash and cash equivalents - end of period $ 2,653 $ 3,619
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 835 $ 283
Income taxes paid $ - $ -
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Balance Sheet of Robotic Vision Systems, Inc. and Subsidiaries
(The "Company") as of December 31, 1998, the Consolidated Statements of
Operations for the three month periods ended December 31, 1998 and 1997 and the
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, 1998 SEPTEMBER 30, 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
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Total $31,333 $36,213
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</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
one 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 January 1999, the Company's banks
have agreed to forebear their right to exercise any remedies under this
agreement through March 19, 1999. However, absent continuation of waivers, the
Company will be in noncompliance at the expiration of the waiver period.
Accordingly, the borrowings under the agreement at December 31, 1998 and
September 30, 1998 have been classified as current. The Company is currently
working with its banks to modify the revolving credit agreement and establish
new financial covenants.
5
<PAGE>
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
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
6
<PAGE>
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. 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 a gain of $3.2
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 $3.2 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 $3.2 million gain, the total net loss for the three months
ended December 31, 1998 was $1.8 million, or $0.07 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 $2.1 million of net cash
used in operating activities, $0.1 million of net cash used for additions to
plant and equipment, $4.4 million of net cash provided by the sale of a
product line and $2.1 million of net cash used in financing activities.
The $2.0 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 and a
shorter acceptance cycle on new product installations. 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.
7
<PAGE>
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 $4.0
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 January 1999, the Company's banks have agreed to
forebear their right to exercise any remedies under this agreement until March
19, 1999. The Company is currently working with its banks to modify the
revolving credit agreement and establish new financial covenants.
In January 1999, the Company signed a term sheet with an institutional
investor for an equity financing which includes a beneficial conversion
feature and also provides for warrants. The anticipated net proceeds from the
initial round of financing is expected to be between $9.0 million and $10.0
million. The Company believes it will complete this transaction in the near
future.
Management believes that through a combination of proceeds from the expected
equity financing, obtaining additional external capital, its domestic banks
continuing to waive non-compliance of financial covenants 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.
8
<PAGE>
ROBOTIC VISION SYSTEMS, INC., AND SUBSIDIARIES
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.
BANK AGREEMENT
In March 1998, the Company entered into a bank financing agreement that contains
certain restrictive financial covenants with which the Company has not been in
compliance. All instances of noncompliance have been waived by the Company's
lending banks through March 19, 1999; however, absent continuation of
forebearance, or modification of the bank agreement, the Company will continue
to be in noncompliance at the end of the forebearance period.
PART II. OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
9
<PAGE>
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 12, 1999 /s/ PAT V. COSTA
----------------------------
PAT V. COSTA
President and CEO
(Principal Executive Officer)
Dated: February 12, 1999 /s/ JOHN J. ARCARI
-----------------------------
JOHN J. ARCARI
Chief Financial Officer
(Principal Financial and
Accounting Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000225868
<NAME> ROBOTIC VISION SYSTEMS, INC
<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
<ALLOWANCES> (1,000)
<INVENTORY> 31,333
<CURRENT-ASSETS> 65,990
<PP&E> 34,258
<DEPRECIATION> (18,993)
<TOTAL-ASSETS> 113,910
<CURRENT-LIABILITIES> 75,906
<BONDS> 3,029
0
0
<COMMON> 249
<OTHER-SE> 168,493
<TOTAL-LIABILITY-AND-EQUITY> 113,910
<SALES> 29,405
<TOTAL-REVENUES> 29,405
<CGS> 16,834
<TOTAL-COSTS> 16,834
<OTHER-EXPENSES> 16,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 875
<INCOME-PRETAX> (5,070)
<INCOME-TAX> 0
<INCOME-CONTINUING> 702
<DISCONTINUED> 0
<EXTRAORDINARY> 3,248
<CHANGES> 0
<NET-INCOME> (1,822)
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
