SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 31, 1996
Commission File Number 0-11518
PPT VISION, INC.
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(Exact name of registrant as specified in its charter)
MINNESOTA 41-1413345
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10321 West 70th Street Eden Prairie, Minnesota 55344
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(Address of principal executive offices) (Zip Code)
(612) 996-9500
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 last 90 days. Yes X No
Shares of $.10 par value common stock outstanding at September 4, 1996:
5,357,972
Total pages this report: 14
Page 2
INDEX
PPT VISION, INC.
Part I. Financial Information Page
- ------- --------------------- ----
Item 1. Unaudited Financial Statements
Balance Sheets--as of July 31, 1996 and 3
October 31, 1995
Income Statements for the Three-Month and 4
Nine-Month Periods ended July 31, 1996 and
July 31, 1995
Statement of Cash Flows--Nine-Month Periods 5
ended July 31, 1996 and July 31, 1995
Notes to Financial Statements-- July 31, 1996 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Part II. Other Information 11
- -------- -----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 12
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Page 3
<TABLE>
PPT VISION, INC.
BALANCE SHEETS
07/31/96 10/31/95
Note A Note A
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $15,768,043 $1,234,890
Marketable securities 4,020,409 0
Accounts receivable, net 3,343,547 2,686,862
Inventories:
Manufactured and purchased parts 820,916 680,919
Work-in-process 92,036 214,410
Finished goods 102,872 47,532
Other current assets 132,332 47,832
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Total current assets 24,280,155 4,912,445
Restricted cash 212,792 212,792
Fixed assets, net 728,860 501,085
Other assets, net 81,298 64,348
Deferred income taxes 407,000 407,000
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Total assets $25,710,105 $6,097,670
=========== ===========
LIABILITIES AND EQUITY
Current liabilities $ 592,551 $ 780,873
Deferred rent 169,219 171,921
Shareholders' equity (Notes B and C):
Common stock 532,273 357,870
Capital in excess of par value 29,405,166 11,667,953
Accumulated (deficit) (4,989,104) (6,880,947)
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Total shareholders' equity 24,948,335 5,144,876
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Total liabilities and
shareholders' equity $25,710,105 $6,097,670
=========== ===========
</TABLE>
Page 4
<TABLE>
PPT VISION, INC.
INCOME STATEMENTS
(UNAUDITED)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------ ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $3,163,193 $2,750,601 $9,510,605 $6,746,037
Cost of sales 1,182,802 1,244,373 3,753,846 3,131,900
----------- ----------- ----------- -----------
Gross profit 1,980,391 1,506,228 5,756,759 3,614,137
Expenses:
Selling 738,026 643,081 1,969,056 1,717,674
General and administrative 230,696 255,598 761,299 614,762
Research and development 424,739 311,875 1,312,881 919,535
----------- ----------- ----------- -----------
Total expenses 1,393,461 1,210,554 4,043,236 3,251,971
----------- ----------- ----------- -----------
Income from operations 586,930 295,674 1,713,523 362,166
Interest income 123,483 17,862 167,589 41,950
Other income (expense) 3,187 1,213 10,731 64
----------- ----------- ----------- -----------
Net income $713,600 $314,749 $1,891,843 $404,180
=========== =========== =========== ===========
Per share data:
Weighted average common
shares outstanding 4,569,176 3,677,575 4,073,206 3,506,752
Net income per share $0.16 $0.09 $0.46 $0.12
=========== =========== =========== ===========
</TABLE>
Page 5
<TABLE>
PPT VISION, INC.
STATEMENT OF CASH FLOWS
Nine Months Nine Months
Ended Ended
July 31, 1996 July 31, 1995
------------- -------------
<S> <C> <C>
Net income $1,891,843 $404,180
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 200,930 105,318
Deferred rent (2,702) 37,998
Change in assets and liabilities
Accounts receivable (656,685) (331,358)
Inventories (63,433) 139,736
Other assets (84,500) 22,212
Accounts payable and accrued expenses (188,322) (7,833)
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Total adjustments (794,712) (33,927)
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Net cash provided by operating activities 1,097,131 370,253
Cash flows from investing activities:
Purchase of fixed assets (455,185) (307,152)
Purchase of marketable securities (4,020,409)
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Net cash used by investing activities (4,475,594) (307,152)
Cash flows from financing activities
Proceeds from issuance of common stock 17,911,616 66,576
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Net cash provided by financing activities 17,911,616 66,576
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Net increase in cash and cash equivalents 14,533,153 129,677
Cash and cash equivalents at beginning of year 1,234,890 1,092,186
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Cash and cash equivalents at end of period $15,768,043 $1,221,863
============ ============
</TABLE>
Page 6
PPT VISION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended October 31, 1995.
NOTE B - STOCK SPLIT
On March 14, 1996, the Board of Directors approved a three-for-two stock split
in the form of a fifty percent (50%) stock dividend. The distribution of shares
was made on April 5, 1996 to shareholders of record as of March 25, 1996. All
historical share and per share data included in the financial statements and
exhibits have been restated to reflect the stock split.
NOTE C - PUBLIC STOCK OFFERING
On June 19, 1996, the Company announced the sale of 1,600,000 shares of its
Common Stock through a public offering underwritten by Alex. Brown & Sons
Incorporated and Piper Jaffray Inc. The shares were sold to the public at the
offering price of $12.00 per share, with net proceeds of $17.7 million.
Page 7
Item 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net revenues increased 15% to $3,163,193 for the three-month period ended July
31, 1996 compared to net revenues of $2,750,601 for the same period in fiscal
1995. For the nine-month period ended July 31, 1996, net revenues increased 41%
to $9,510,605 compared to net revenues of $6,746,037 for the same period in
fiscal 1995. The increase in net revenues in fiscal 1996 was due to a 54%
growth in unit sales, with sales of the Company's machine vision systems
increasing to 356 in the first nine months of fiscal 1996 versus 231 for the
same period in fiscal 1995. Unit sales for the three-month period ended July
31, 1996 increased 43% to 127 versus 89 for the same period in fiscal 1995.
In the first nine months of fiscal 1996 net revenues increased 18% outside North
America and 55% in North America. Sales to customers outside North America
represented 29% of net revenues for the nine-month period ended July 31, 1996,
compared to 35% for the same period in fiscal 1995. The increase in North
America was primarily the result of the addition of nearly 50 new customers
since the third quarter of fiscal 1995 in a wide range of industry categories.
Sales to first-time customers in the third quarter of fiscal 1996 comprised 10%
of net revenues. This was partially offset by a slight decline in revenues in
the electronics segment. The decline in sales outside North America as a
percent of net revenues is primarily the result of weakness in sales in the Far
East, primarily in Japan. During the quarter, the Company's Japanese
distributor focused considerable resources on installing systems sold in prior
quarters, thus limiting current sales. The Company anticipates improvement in
sales in the Far East during the next few quarters.
During the third quarter of fiscal 1996, the Company also saw a significant
product-line shift toward the lower-priced Scout product. Sales of the Scout
comprised 39% of net revenues in the quarter, up from 10% during the same period
in fiscal 1995. While this led to lower revenue per system, it also had a
positive impact on gross profit margins, as the Scout carries a higher gross
profit margin than the Passport 240, from which much of its gain was taken.
Gross profit increased 31% to $1,980,391 for the three-month period ended July
31, 1996 compared with $1,506,228 for the same period in fiscal 1995. For the
nine-month period ended July 31, 1996, gross profit increased 59% to $5,756,759
compared with $3,614,137 for the same period in fiscal 1995. As a percentage of
net revenues, the gross profit increased to 63% for the three-month period ended
July 31, 1996 from 55% for the same period in fiscal 1995. For the nine-month
period ended July 31, 1996, the gross profit as a percentage of net revenues
increased to 61% from 54% for the same period in fiscal 1995. The increase in
gross profit in fiscal 1996 is primarily due to decreased material costs,
economies of scale related to increasing volume and to product mix shift toward
higher margin products. The Company anticipates that it can support increased
net revenues at its current manufacturing capacity. However, changing product
and geographic mix can impact gross profits as a percentage of net revenues.
Therefore, the Company expects that the level of gross profit as a percentage of
net revenues achieved in the third quarter of fiscal 1996 may be at the maximum
for the near term.
Page 8
Selling expenses increased 15% to $738,026 for the three-month period ended
July 31, 1996 compared with $643,081 for the same period in fiscal 1995. For
the nine-month period ended July 31, 1996, selling expenses increased 15% to
$1,969,056 compared with $1,717,674 for the same period in fiscal 1995. As a
percentage of net revenues, selling expenses remained relatively flat at 23% for
the three-month period ended July 31, 1996 compared to the same period in fiscal
1995. For the nine-month period ended July 31, 1996, selling expenses as a
percentage of net revenues decreased to 21% from 26% for the same period in
fiscal 1995. The increase in expenditures is related to expanded marketing and
promotion efforts and the addition of new employees in the sales and
applications engineering areas. The decline in selling expenses as a percentage
of net revenues over the nine-month period is primarily due to the Company's
ability to leverage its sales, applications engineering and international
distribution infrastructure. Selling expenses for international sales are
primarily incurred by the Company's distributors. Although the Company
anticipates selling expenses to increase during the next few quarters as the
Company invests additional amounts in sales and applications engineering, the
Company believes that these expenditures will not increase substantially as a
percentage of net revenues.
General and administrative expenses decreased 10% to $230,696 for the three
month period ended July 31, 1996 compared with $255,598 for the same period in
fiscal 1995. For the nine-month period ended July 31, 1996, general and
administrative expenses increased 24% to $761,299 compared with $614,762 for the
same period in fiscal 1995. As a percentage of net revenues, general and
administrative expenses declined to 7% for the three-month period ended
July 31, 1996 from 9% for the same period in fiscal 1995. For the nine-month
period ended July 31, 1996, general and administrative expenses as a percentage
of net revenues decreased to 8% from 9% for the same period in fiscal 1995. The
decrease in expenditures for the three-month period ended July 31, 1996 is
mainly due to reduced expenses related to uncollectable accounts receivable.
The increase in expenditures for the nine-month period ended July 31, 1996 is
primarily attributable to increased expenses associated with operating the
Company as it continues to grow and to investments in management infrastructure.
The decrease as a percentage of net revenues is mainly related to operating
leverage provided by the Company's growing revenue base. The Company believes
that general and administrative expenses will not increase substantially as a
percentage of net revenues during the next few quarters.
Research and development expenses increased 36% to $424,739 for the three-month
period ended July 31, 1996 compared with $311,875 for the same period in fiscal
1995. For the nine-month period ended July 31, 1996, research and development
expenses increased 43% to $1,312,881 compared with $919,535 for the same period
in fiscal 1995. As a percentage of net revenues, research and development
expenses increased to 13% for the three-month period ended July 31, 1996 from
11% for the same period in fiscal 1995. For the nine-month period ended July
31, 1996, research and development expenses as a percentage of net revenues
remained relatively flat at 14% compared to the same period in fiscal 1995. The
increase in expenses in fiscal 1996 is mainly due to new product development
programs and the necessary staffing to support these efforts. As the Company
continues to invest in next generation software and hardware development during
the next few quarters, it expects research and development expenses may remain
constant or increase slightly as a percentage of net revenues.
Page 9
Interest income increased 591% to $123,483 for the three-month period ended July
31, 1996 compared with $17,862 for the same period in fiscal 1995. For the
nine-month period ended July 31, 1996, interest income increased 299% to
$167,589 compared with $41,950 for the same period in fiscal 1995. The
increase in interest income is primarily due to interest on the proceeds of
the Company's recent public stock offering completed in June of 1996.
No income tax expense or benefit was recorded in the three-month and nine-month
periods ended July 31, 1996 or the same period in fiscal 1995. Depending on the
results of operations for the remainder of fiscal 1996, the Company may
determine that it is prudent and necessary to fully recognize the remaining
potential future tax benefits of loss carry forwards and net deductible
temporary differences available to offset taxable income in future periods.
Liquidity and Capital Resources
- -------------------------------
Working capital increased to $23,787,604 on July 31, 1996 from $4,131,572 on
October 31, 1995. The Company financed its increased sales in the first nine
months of fiscal 1996 through internally generated cash flow and existing cash
and cash equivalents. Net cash provided from operating activities was
$1,097,131. Due to a higher percentage of sales occurring in the last half of
the third quarter ended July 31, 1996, accounts receivable increased $656,685
during the first nine months of fiscal 1996. Inventories increased $72,963
during the first nine months of fiscal 1996. The Company used $455,185 in cash
flow in investing activities, primarily for the purchase of capital equipment.
In addition, the Company generated $17,911,616 from its financing activities as
a result of the completion of a public stock offering in June of 1996 and
issuances of its Common Stock upon exercise of stock options and warrants.
Current assets increased to $24,280,155 at July 31, 1996 from $4,912,445 at
October 31, 1995. This increase was primarily due to an increase in cash and
cash equivalents to $15,768,043 at July 31, 1996 from $1,234,890 at October 31,
1995. In addition, marketable securities increased to $4,020,409 at
July 31, 1996 from $0 at October 31, 1995. Accounts receivable also
increased to $3,343,547 at July 31, 1996 from $2,686,862 at October 31, 1995.
Current liabilities decreased to $592,551 at July 31, 1996 from $780,873 at
October 31, 1995. This was mainly due to lower trade accounts payable. The
Company believes that it cash flow from operations, existing cash and cash
equivalents at July 31, 1996 will be adequate for its foreseeable operating
needs.
Certain Factors Affecting Future Performance
- --------------------------------------------
Although the Company has experienced significant growth in net revenues over the
past five years, there can be no assurance that prior growth rates are
indicative of future operating results. In addition, while the Company has
directed, and intends to continue to direct, significant resources to building
its sales and applications engineering capabilities, corporate infrastructure
and research and product development activities, there can be no assurance that
such investments will result in increased net revenues or more favorable
operating margins. This Form 10-Q, as it relates to expectations regarding
future sales and profitability, contains forward-looking statements regarding
future performance of the Company. The Company's actual results could differ
materially from the estimates made in the forward-looking statements as a result
of a number of factors, including the factors set forth in this section. Future
operating results may fluctuate due to factors such as: demand for the Company's
machine vision systems, technological change, the introduction by the Company or
Page 10
its competitors of new products, product enhancements or services, the
acceptance by the Company's customers of such new products, product enhancements
or services, demand for the products of the Company's customers, the capital
spending patterns of the Company's customers, availability of components
integral to the functioning of the Company's products, changes in the level of
operating expenses and competitive conditions in the machine vision industry.
The machine vision industry is highly fragmented and the Company faces
competition from a number of companies in the machine vision market, some of
which have greater manufacturing and marketing capabilities and greater
financial, technological and personnel resources than the Company. The Company
may incur significant costs in connection with its engineering research,
development, marketing and customer service efforts in order to maintain or
enhance its competitive position. In addition, the Company and certain of its
competitors which are public companies have historically reported strong
operating margins. However, while to date the Company has not experienced
significant price competition, competitive pressures may in the future result in
price competition among the Company and its competitors which would negatively
affect operating margins in general for companies in the machine vision industry
and, specifically, could materially and adversely affect the Company's financial
condition and results of operations.
The Company anticipates that international sales will continue to account for a
significant portion of its net revenues. International sales are subject to a
number of risks, including various regulatory requirements, political and
economic changes and disruptions, transportation delays, and difficulties in
staffing and managing foreign sales operations and potentially adverse tax
consequences. In addition, fluctuations in exchange rates may render the
Company's products less price competitive relative to local product offerings.
These factors may, in the future, contribute to fluctuations in the Company's
financial condition and results of operations. Although the Company's results of
operations have not been materially adversely affected to date by these factors,
the long-term impact of these factors on the Company's financial condition or
results of operations, including any possible affect on the business outlook in
other developing countries, cannot be predicted.
Page 11
PART II. Other Information
Item 1: LEGAL PROCEEDINGS
-----------------
None
Item 2: CHANGES IN SECURITIES
---------------------
None
Item 3: DEFAULTS UPON SENIOR SECURITIES
------------------------------
None
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
Item 5: OTHER INFORMATION
-----------------
On June 19, 1996, the Company announced the sale of 1,600,000 shares
of its Common Stock through a public offering underwritten by Alex.
Brown & Sons Incorporated and Piper Jaffray Inc. The shares were sold
to the public at the offering price of $12.00 per share, with net
proceeds of $17.7 million.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits: Page
1. Exhibit 11 - Calculation of Earnings per Share 13
2. Exhibit 27 - Financial Data Schedule 14
(b) Reports on Form 8-K
None
Page 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the
undersigned duly authorized.
PPT VISION, INC.
Date: September 13, 1996
/s/Thomas R. Northenscold
-----------------------------
Thomas R. Northenscold
(Chief Financial Officer)
Page 13 Exhibit 11
<TABLE>
PPT VISION, INC.
Calculation of Earnings Per Share
Three Months Ended Nine Months Ended
July 31, July 31,
-------------------- ----------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Primary earnings per share
Net income $713,600 $314,749 $1,891,843 $404,180
Common and common equivalent
shares:
Weighted average number of
common shares outstanding 4,388,488 3,507,487 3,863,453 3,483,618
Dilutive effect of stock options
outstanding after application of
treasury stock method 180,688 170,088 209,753 23,134
--------- --------- --------- ---------
4,569,176 3,677,575 4,073,206 3,506,752
========= ========= ========= =========
Primary net income per common and
common equivalent share: $0.16 $0.09 $0.46 $0.12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 15,768,043
<SECURITIES> 4,020,409
<RECEIVABLES> 3,389,657
<ALLOWANCES> (46,110)
<INVENTORY> 1,015,824
<CURRENT-ASSETS> 24,280,155
<PP&E> 2,394,578
<DEPRECIATION> (1,665,718)
<TOTAL-ASSETS> 25,710,105
<CURRENT-LIABILITIES> 592,551
<BONDS> 0
0
0
<COMMON> 532,273
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,710,105
<SALES> 9,510,605
<TOTAL-REVENUES> 9,510,605
<CGS> 3,753,846
<TOTAL-COSTS> 4,043,236
<OTHER-EXPENSES> (178,320)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,891,843
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
