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 April 30, 1996
Commission File Number 0-11518
PPT VISION, INC.
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1413345
----------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10321 West 70th Street Eden Prairie, Minnesota 55344
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 996-9500
----------------------------------------------------------------------
(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 $0.10 par value common stock outstanding at April 30, 1996: 3,679,717
Total pages this report: 14
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INDEX
PPT VISION, INC.
Page
Part I. Financial Information
- ------- ---------------------
Item 1. Financial Statements
Balance Sheets--as of April 30, 1996 and 3
October 31, 1995
Income Statements for the Three-Month and 4
Six-Month Periods ended April 30, 1996 and
April 30, 1995
Statement of Cash Flows--Six-Month Periods 5
ended April 30, 1996 and April 30, 1995
Notes to Financial Statements--April 30, 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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<TABLE>
PPT VISION, INC.
BALANCE SHEETS
04/30/96 10/31/95
(Unaudited) (Note A)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,651,001 $ 1,234,890
Accounts receivable, net 3,060,258 2,686,862
Inventories:
Manufactured and purchased parts 1,044,263 680,919
Work-in-process 114,389 214,410
Finished goods 72,104 47,532
Other current assets 111,674 47,832
----------- -----------
Total current assets 6,053,689 4,912,445
Restricted cash 212,792 212,792
Fixed assets, net 653,096 501,085
Other assets, net 77,567 64,348
Deferred income taxes 407,000 407,000
----------- -----------
Total assets $ 7,404,144 $ 6,097,670
=========== ===========
LIABILITIES AND EQUITY
Current liabilities $ 702,214 $ 780,873
Commitments and contingencies:
Deferred rent 172,427 171,921
Shareholders' equity (Note B):
Common stock 367,972 357,870
Capital in excess of par value 11,864,235 11,667,953
Accumulated (deficit) (5,702,704) (6,880,947)
----------- -----------
Total shareholders' equity 6,529,503 5,144,876
----------- -----------
Total liabilities and
shareholders' equity $ 7,404,144 $ 6,097,670
=========== ===========
</TABLE>
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<TABLE>
PPT VISION, INC.
INCOME STATEMENTS
(UNAUDITED)
Three Months Ended Six Months Ended
April 30, April 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $3,212,409 $1,966,006 $6,347,412 $3,995,436
Cost of sales 1,268,478 924,249 2,571,044 1,887,527
---------- ---------- ---------- ----------
Gross profit 1,943,931 1,041,757 3,776,368 2,107,909
Operating expenses:
Selling 659,598 534,185 1,231,029 1,074,593
General and administrative 250,221 190,445 530,603 359,164
Research and development 441,570 298,167 888,143 607,660
---------- ---------- ---------- ----------
Total expenses 1,351,389 1,022,797 2,649,775 2,041,417
---------- ---------- ---------- ----------
Income from operations 592,542 18,960 1,126,593 66,492
Interest income 28,675 14,925 44,106 24,088
Other income (expense) 146 (635) 7,544 (1,149)
---------- ---------- ---------- ----------
Net income $ 621,363 $ 33,250 $1,178,243 $ 89,431
========== ========== ========== ==========
Per share data (Note B):
Net income per share $0.16 $0.01 $0.31 $0.03
Weighted average common
shares outstanding 3,834,643 3,586,645 3,825,454 3,497,488
</TABLE>
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<TABLE>
PPT VISION, INC.
STATEMENT OF CASH FLOWS
Increase/(Decrease) in Cash and Cash Equivalents
Six Months Ended Six Months Ended
April 30, 1996 April 30, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,178,243 $ 89,431
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 114,167 66,044
Deferred rent 506 32,424
Change in assets and liabilities
Accounts receivable (373,396) (62,720)
Inventories (287,895) (96,645)
Other assets (63,842) 4,107
Accounts payable and accrued expenses (78,659) 21,615
---------- ----------
Total adjustments (689,119) (35,175)
---------- ----------
Net cash provided by operating activities 489,124 54,256
Cash flows from investing activities:
Purchase of fixed assets (279,397) (121,554)
---------- ----------
Net cash used in investing activities (279,397) (121,554)
Cash flows from financing activities
Proceeds from issuance of common stock 206,384 23,611
---------- ----------
Net cash provided by financing activities 206,384 23,611
---------- ----------
Net increase (decrease) in cash and
cash equivalents 416,111 (43,687)
Cash and cash equivalents at beginning of year 1,234,890 1,092,186
--------- ----------
Cash and cash equivalents at end of period $1,651,001 $1,048,499
========== ==========
</TABLE>
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PPT VISION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
APRIL 30, 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.
Page 7
Item 2
- ------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net revenues increased 63% to $3,212,409 for the three-month period ended April
30, 1996 compared to net revenues of $1,966,006 for the same period in fiscal
1995. For the six-month period ended April 30, 1996, net revenues increased 59%
to $6,347,412 compared to net revenues of $3,995,436 for the same period in
fiscal 1995. The increase in net revenues in fiscal 1996 was due to a 61%
growth in unit sales, with sales of the Company's machine vision systems
increasing to 229 in the first six months of fiscal 1996 versus 142 for the same
period in fiscal 1995. Unit sales for the three-month period ended April 30,
1996 increased 60% to 117 versus 73 for the same period in fiscal 1995. The
Company attributes its sales growth to increased demand in all markets, with
particularly strong results shown internationally. In the first six months of
fiscal 1996 net revenues increased 89% outside North America and 49% in North
America. Sales to customers outside North America represented 34% of net
revenues for the six-month period ended April 30, 1996, compared to 29% for the
same period in fiscal 1995. The increase internationally is primarily the
result of increased sales to electronic component manufacturers in the Far East
through international distributors. The increase in North America is primarily
the result of increased sales to the electronics and automobile manufacturers.
Gross profit increased 87% to $1,943,931 for the three-month period ended April
30, 1996 compared with $1,041,757 for the same period in fiscal 1995. For the
six-month period ended April 30, 1996, gross profit increased 79% to $3,776,368
compared with $2,107,909 for the same period in fiscal 1995. As a percentage of
net revenues, the gross profit increased to 61% for the three-month period ended
April 30, 1996 from 53% for the same period in fiscal 1995. For the six-month
period ended April 30, 1996, the gross profit as a percentage of net revenues
increased to 59% from 53% for the same period in fiscal 1995. The increase in
gross profit in fiscal 1996 is primarily due to economies of scale related to
increasing volume and to decreased material costs. The Company anticipates that
it can support increased net revenues at its current manufacturing capacity.
Selling expenses increased 23% to $659,598 for the three-month period ended
April 30, 1996 compared with $534,185 for the same period in fiscal 1995. For
the six-month period ended April 30, 1996, selling expenses increased 15% to
$1,231,029 compared with $1,074,593 for the same period in fiscal 1995. As a
percentage of net revenues, selling expenses declined to 21% for the three-month
period ended April 30, 1996 from 27% for the same period in fiscal 1995. For
the six-month period ended April 30, 1996, selling expenses as a percentage of
net revenues decreased to 19% from 27% for the same period in fiscal 1995. The
decline in selling expenses as a percentage of net revenues 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 in the remainder of fiscal 1996
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 for the remainder of this fiscal year.
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General and administrative expenses increased 31% to $250,221 for the three-
month period ended April 30, 1996 compared with $190,445 for the same period in
fiscal 1995. For the six-month period ended April 30, 1996, general and
administrative expenses increased 48% to $530,603 compared with $359,164 for the
same period in fiscal 1995. As a percentage of net revenues, general and
administrative expenses declined to 8% for the three-month period ended April
30, 1996 from 10% for the same period in fiscal 1995. For the six-month period
ended April 30, 1996, general and administrative expenses as a percentage of net
revenues decreased to 8% from 9% for the same period in fiscal 1995. The
increase in expenditures in 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 may decline
slightly as a percentage of net revenues during the remainder of fiscal 1996.
Research and development expenses increased 48% to $441,570 for the three-month
period ended April 30, 1996 compared with $298,167 for the same period in fiscal
1995. For the six-month period ended April 30, 1996, research and development
expenses increased 46% to $888,143 compared with $607,660 for the same period in
fiscal 1995. As a percentage of net revenues, research and development expenses
declined to 14% for the three-month period ended April 30, 1996 from 15% for the
same period in fiscal 1995. For the six-month period ended April 30, 1996,
research and development expenses as a percentage of net revenues decreased to
14% from 15% for 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. The decline as a percentage of net revenues
in fiscal 1996 is the result of the Company's growing revenue base. As the
Company continues to invest in next generation software and hardware
development, it expects research and development expenses may remain constant or
increase slightly as a percentage of net revenues during the remainder of fiscal
1996.
No income tax expense or benefit was recorded in the three-month and six-month
periods ended April 30, 1996 or the same period in fiscal 1995. Depending on
the results of operations for the last six months 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 $5,351,475 on April 30, 1996 from $4,131,572 on
October 31, 1995. The Company financed its increased sales in the first six
months of fiscal 1996 through internally generated cash flow and existing cash
and cash equivalents. Net cash provided from operating activities was $489,124
for the six-month period ended April 30, 1996. Due to the increased level of
sales activity and a higher percentage of sales occurring in the last half of
the second quarter ended April 30, 1996, accounts receivable increased $373,396
during the first six months of fiscal 1996. Inventories increased $287,895
during the first six months of fiscal 1996 due to raw material purchases to
support increased sales and new product introductions. The Company used
$279,397 in cash flow in investing activities, primarily for
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the purchase of capital equipment. In addition, The Company generated $206,384
from its financing activities as a result of issuances of its Common Stock upon
exercise of stock options and warrants.
Current assets increased to $6,053,689 at April 30, 1996 from $4,912,445 at
October 31, 1995. This increase was primarily due to an increase in cash and
cash equivalents to $1,651,001 at April 30, 1996 from $1,234,890 at October 31,
1995. Accounts receivable also increased to $3,060,258 at April 30, 1996 from
$2,686,862 at October 31, 1995.
Current liabilities decreased to $702,214 at April 30, 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 April 30, 1996 and the net proceeds of a planned offering of the
Company's Common Stock will be adequate for its foreseeable operating needs.
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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
---------------------------------------------------
On March 6, 1996, the Company held its Annual Meeting of Shareholders.
At the meeting, the following action was taken:
(a)The following persons were re-elected to the Company's Board of
Directors receiving the votes set forth opposite their names:
For Withheld Abstain
--------- -------- -------
Joseph C. Christenson 2,173,213 1,456 909
Larry G. Paulson 2,173,401 1,268 909
Bruce C. Huber 2,173,213 1,456 909
Peter R. Peterson 2,173,363 1,306 909
David Malmberg 2,173,401 1,268 909
Item 5: OTHER INFORMATION
-----------------
Certain Factors Affecting Future Performance
--------------------------------------------
In response to the "safe harbor" provisions contained in the Private
Securities Litigation Reform Act of 1995 the Company is including in
this Quarterly Report on Form 10-Q the following cautionary statements
which are intended to identify certain important factors that could
cause the Company's actual results to differ materially from those
projected in forward-looking statements of the Company made by or on
behalf of the Company.
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. 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 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
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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 distributor relationships. 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.
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.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits: Page
1. Exhibit 11 - Calculation of Earnings/(Loss) per Share 13
2. Exhibit 27 - Financial Data Schedule 14
(b) Reports on Form 8-K
None
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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: May 15, 1996
/s/Thomas R. Northenscold
-------------------------
Thomas R. Northenscold
(Chief Financial Officer)
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<TABLE>
Exhibit 11
PPT VISION, INC.
Calculation of Earnings Per Share (Note B)
Three Months Ended Six Months Ended
April 30, April 30,
1996 1995 1996 1995
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Primary earnings per share
Net income $621,363 $33,250 $1,178,243 $89,431
Common and common
equivalent shares:
Weighted average number
of common shares outstanding 3,618,732 3,482,722 3,600,935 3,471,340
Dilutive effect of stock
options outstanding after
application of treasury
stock method 215,911 103,923 224,519 26,150
--------- --------- --------- ---------
3,834,643 3,586,645 3,825,454 3,497,490
========= ========= ========= =========
Primary net income
per common and common
equivalent share $0.16 $0.01 $0.31 $0.03
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 1,651,001
<SECURITIES> 0
<RECEIVABLES> 3,100,258
<ALLOWANCES> (40,000)
<INVENTORY> 1,230,756
<CURRENT-ASSETS> 6,053,689
<PP&E> 2,241,114
<DEPRECIATION> (1,588,018)
<TOTAL-ASSETS> 7,404,144
<CURRENT-LIABILITIES> 702,214
<BONDS> 0
0
0
<COMMON> 12,232,207
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,404,144
<SALES> 3,212,409
<TOTAL-REVENUES> 3,212,409
<CGS> 1,268,478
<TOTAL-COSTS> 2,619,867
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 652
<INCOME-PRETAX> 621,363
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 621,363
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
