UNITED STATES
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 April 30, 1999
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12988 Valley View Road 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)
10321 West 70th Street Eden Prairie, Minnesota 55344
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(Former name, former address and former fiscal year
if changed since last report)
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 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
June 14, 1999: 5,401,559
Total pages this report: 11
INDEX
PPT VISION, INC.
Part I. Financial Information Page
- ------- --------------------- ----
Item 1. Financial Statements
Balance Sheets as of April 30, 1999
October 31, 1998......................................... 3
Income Statements for the Three and Six Months Ended
April 30, 1999 and April 30, 1998........................ 4
Statements of Cash Flows for the Six Months Ended
April 30, 1999 and April 30, 1998........................ 5
Notes to Interim Financial Statements--April 30, 1999.... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Part II. Other Information........................................ 10
- -------- -----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
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............................................... 11
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PPT VISION, INC.
BALANCE SHEETS
April 30, 1999 October 31, 1998
Note A Note A
------------ ------------
(unaudited)
ASSETS
Cash and cash equivalents............. $ 4,464,000 $ 1,986,000
Investments........................... 8,611,000 15,009,000
Accounts receivable, net.............. 3,572,000 2,841,000
Inventories:
Manufactured and purchased parts.... 1,677,000 1,648,000
Work-in-process..................... 371,000 339,000
Finished goods...................... 58,000 20,000
------------ ------------
Inventories, net...................... 2,106,000 2,007,000
Other current assets.................. 329,000 254,000
------------ ------------
Total current assets............. 19,082,000 22,097,000
Fixed assets, net..................... 2,618,000 2,254,000
Other assets, net..................... 3,506,000 3,536,000
Deferred income taxes................. 2,274,000 1,688,000
------------ ------------
Total assets..................... $27,480,000 $29,575,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities................... $ 1,024,000 $ 1,602,000
Deferred rent......................... 83,000 102,000
Shareholders' equity:
Common stock.......................... 538,000 544,000
Capital in excess of par value........ 29,405,000 29,725,000
Accumulated (deficit)................. (3,524,000) (2,407,000)
Unrealized gain (loss), investments... (46,000) 9,000
------------ ------------
Total shareholders' equity....... 26,373,000 27,871,000
------------ ------------
Total liabilities and
shareholders' equity............. $27,480,000 $29,575,000
============ ============
PPT VISION, INC.
INCOME STATEMENTS
(UNAUDITED)
Three Months Ended Six Months Ended
April 30, April 30,
------------------------ --------------------------
1999 1998 1999 1998
----------- ----------- ------------ ------------
Net revenues............. $3,247,000 $3,177,000 $ 4,982,000 $ 7,182,000
Cost of sales............ 1,414,000 1,266,000 2,277,000 2,934,000
----------- ----------- ------------ ------------
Gross profit............. 1,833,000 1,911,000 2,705,000 4,248,000
Expenses:
Selling................ 1,310,000 1,222,000 2,392,000 2,328,000
General and
administrative........ 408,000 324,000 729,000 629,000
Research and
development........... 859,000 758,000 1,698,000 1,443,000
----------- ----------- ------------ ------------
Total expenses......... 2,577,000 2,304,000 4,819,000 4,400,000
----------- ----------- ------------ ------------
Income (loss) from
operations.............. (744,000) (393,000) (2,114,000) (152,000)
Interest income.......... 178,000 261,000 393,000 536,000
Other income............. 9,000 3,000 17,000 4,000
----------- ----------- ------------ ------------
Net income (loss)
before taxes........... (557,000) (129,000) (1,704,000) 388,000
Income tax benefit
(expense).............. 151,000 49,000 587,000 (147,000)
----------- ----------- ------------ ------------
Net income (loss)........ $ (406,000) $ (80,000) $ (1,117,000) $ 241,000
=========== =========== ============ ============
Per share data:
Common shares outstanding 5,397,000 5,408,000 5,406,000 5,398,000
Common and common
equivalent shares
outstanding............ 5,397,000 5,408,000 5,406,000 5,522,000
Basic earnings (loss)
per share.............. $ (0.08) $ (0.01) $ (0.21) $ 0.04
=========== =========== ============ ============
Diluted earnings (loss)
per share............... $ (0.08) $ (0.01) $ (0.21) $ 0.04
=========== =========== ============ ============
PPT VISION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
Ended Ended
April 30, 1999 April 30, 1998
---------------- ----------------
Net income(loss)............................... $(1,117,000) $ 241,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................. 487,000 306,000
Deferred rent.................................. (19,000) (17,000)
Deferred income tax (benefit).expense.......... (586,000) 79,000
Accrued interest income........................ (16,000) (204,000)
Realized gain on sale of investments........... (15,000) (2,000)
Change in assets and liabilities
Accounts receivable............................ (731,000) (28,000)
Inventories.................................... (99,000) (490,000)
Other assets................................... (75,000) (4,000)
Accounts payable and accrued expenses.......... (578,000) (581,000)
---------- ----------
Total adjustments............................. (1,632,000) (941,000)
---------- ----------
Net cash used in
operating activities......................... (2,749,000) (700,000)
Cash flows from investing activities:
Purchase of fixed assets....................... (783,000) (715,000)
Purchase of investments........................ (5,183,000) (12,519,000)
Sales and maturities of investments............ 11,557,000 11,383,000
Net investment in other long-term assets....... (38,000) (576,000)
---------- ----------
Net cash provided by (used in)
investing activities......................... 5,553,000 (2,427,000)
Cash flows from financing activities
Proceeds from issuance of common stock......... 73,000 129,000
Repurchases of common stock.................... (399,000) --
---------- ----------
Net cash provided by (used in)
financing activities......................... (326,000) 129,000
---------- ----------
Net increase (decrease) in cash and
cash equivalents............................... 2,478,000 (2,998,000)
Cash and cash equivalents at beginning of year.. 1,986,000 4,027,000
---------- ----------
Cash and cash equivalents at end of period...... $ 4,464,000 $ 1,029,000
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income tax.................................... $ -- $ 68
Interest...................................... -- --
PPT VISION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
April 30, 1999
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.
The Balance Sheet at October 31, 1998 has been derived from the Company's
audited financial statements for the fiscal year ended October 31, 1998 but does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
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, 1998.
Item 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net Revenues: Net revenues increased 2% to $3,247,000 for the three-month
period ended April 30, 1999, compared to net revenues of $3,177,000 for the same
period in fiscal 1998. For the six-month period ended April 30, 1999, net
revenues decreased 31% to $4,982,000 compared to net revenues of $7,182,000 for
the same period in fiscal 1998. Unit sales of the Company's machine vision
systems decreased to 97 for the second quarter of fiscal 1999 versus 126 for the
same period in fiscal 1998. However, the Company's average selling price per
machine vision system sold during the three-month period ended April 30, 1999
increased 35% compared to the same period in fiscal 1998. The increase in the
average selling price is attributed to shipments of the Company's new DSL
systems (Digital Serial Link) during the three-month period ended April 30,
1999. For the six-month period ended April 30, 1998, unit sales decreased to
161 compared to 275 for the same period in fiscal 1998. Gross revenues for the
first six months of fiscal 1999 decreased 22% in North America and 44% outside
North America. Sales to customers outside North America represented 29% of gross
revenues for the first six months of fiscal 1999, compared to 36% for the same
period in fiscal 1998. The decrease in net revenues for the first six months of
fiscal 1999 was primarily the result of declines in the electronics segment as
well as new product introduction delays experienced in the first quarter of
fiscal 1999.
Gross Profit: Gross profit decreased 4% to $1,833,000 for the three-month
period ended April 30, 1999, compared to $1,911,000 for the same period in
fiscal 1998. For the six-month period ended April 30, 1999, gross profit
decreased 36% to $2,705,000, compared to $4,248,000 for the same period in
fiscal 1998. As a percentage of net revenues, the gross profit for the second
quarter of fiscal 1999 decreased to 56%, compared to 60% for the same period in
fiscal 1998. For the six-month period ended April 30, 1999, gross profit as a
percentage of net revenues decreased to 54%, compared to 59% for the same period
in fiscal 1998. This decrease in gross profit in absolute dollars for the first
six months of fiscal 1999 is primarily due to the decrease in sales and costs
associated with the introduction of new products. The decrease in gross profit
as a percentage of net revenues is mainly a factor of unfavorable manufacturing
variances resulting from decreased production volumes. The Company anticipates
that the gross profit as a percentage of net revenues may fluctuate and may
decline temporarily at certain times in the remainder of fiscal 1999 due to
shifts in geographic and product mix as well as normal start-up costs associated
with new product introductions.
Selling Expenses: Selling expenses increased 7% to $1,310,000 for the three-
month period ended April 30, 1999, compared to $1,222,000 for the same period in
fiscal 1998. For the six-month period ended April 30, 1999, selling expenses
increased 3% to $2,392,000, compared to $2,328,000 for the same period in fiscal
1998. As a percentage of net revenues, selling expenses increased to 40% for
the second quarter of fiscal 1999, compared to 38% for the second quarter of
fiscal 1998. For the six-month period ended April 30, 1999, selling expenses as
a percentage of net revenues increased to 48%, compared to 32% for the same
period in fiscal 1998. The increase in expenses as a percentage of net revenues
is mainly related to the decline in net revenues. Although the Company will
limit the rate of growth in selling expenses, it is anticipated that selling
expenses may increase somewhat in fiscal 1999 as the Company makes the necessary
investments to support strategic initiatives.
General and Administrative Expenses: General and administrative expenses
increased 26% to $408,000 for the three-month period ended April 30, 1998,
compared to $324,000 for the same period in fiscal 1998. For the six-month
period ended April 30, 1999, general and administrative expenses increased 16%
to $729,000, compared to $629,000 for the same period in fiscal 1998. As a
percentage of net revenues, general and administrative expenses increased to 13%
for the second quarter of fiscal 1999, compared to 10% for the second quarter of
fiscal 1998. For the six-month period ended April 30, 1999, general and
administrative expenses as a percentage of net revenues increased to 15%,
compared to 9% for the same period in fiscal 1998. The increase in expenditures
is primarily attributable to increased expenses associated with operating the
Company as it prepares for continued growth. The increase in expenses as a
percentage of net revenues is primarily related to the decline in net revenues.
Research and Development Expenses: Research and development expenses increased
13% to $859,000 for the three-month period ended April 30, 1998, compared to
$758,000 for the same period in fiscal 1998. For the six-month period ended
April 30, 1999, research and development expenses increased 18% to $1,698,000,
compared to $1,443,000 for the same period in fiscal 1998. As a percentage of
net revenues, research and development expenses increased to 26% for the second
quarter of fiscal 1999, compared to 24% for the second quarter of fiscal 1998.
For the six-month period ended April 30, 1999, research and development expenses
as a percentage of net revenues increased to 34%, compared to 20% for the same
period in fiscal 1998. The increase in expenditures is mainly due to resource
commitments required to support new product development programs. The increase
in expenses as a percentage of net revenues is primarily due to the decline in
net revenues. The Company believes that during the remainder of fiscal 1999,
research and development expenses may increase as the Company commits the
resources necessary to support strategic initiatives.
Interest income decreased 32% to $178,000 for the three-month period ended
April 30, 1999, compared to $261,000 for the same period in fiscal 1998. For the
six-month period ended April 30, 1999, interest income decreased 27% to
$393,000, compared to $536,000 for the same period in fiscal 1998. The decrease
in interest income is primarily related to a reduction in the balances in cash
and cash equivalents and short-term investments.
Income Tax Benefit (Expense): Income tax benefit of $151,000 was recorded for
the three-month period ended April 30, 1999, compared to $49,000 for the same
period in fiscal 1998. For the six-month period ended April 30, 1999, income
tax benefit of $587,000 was recorded, compared to income tax expense of $147,000
for the same period in fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital decreased to $18,058,000 at April 30, 1999 from $20,495,000 at
October 31, 1998. The Company financed its operations during the first six
months of fiscal 1999 through internally generated cash flow and existing cash
and cash equivalents. Net cash used by operating activities during the first six
months of fiscal 1999 was $2,749,000. Accounts receivable increased $731,000
primarily due to shipments during April 1999. Inventories increased only
slightly by $99,000 during the first six months of fiscal 1999.
Net cash provided by investing activities was $5,553,000, primarily due to
sales and maturities of investments. The Company used $783,000 of cash for the
purchase of fixed assets, mainly consisting of computer, lab and manufacturing
equipment. Investments consist of short-term investment grade securities. In
September of 1999 the Board of Directors of PPT Vision, Inc. authorized the
Company to repurchase up to 750,000 shares of its Common Stock. The Company
used $399,000 of cash to repurchase 79,600 shares of its Common Stock in the
first six months of fiscal 1999.
Current assets decreased to $19,082,000 at April 30, 1999 from $22,097,000 at
October 31, 1998. Investments decreased to $8,611,000 at April 30, 1999 from
$15,009,000 at October 31, 1998. Cash and cash equivalents increased to
$4,464,000 at April 30, 1999 from $1,986,000 at October 31, 1998.
The Company's current liabilities decreased to $1,024,000 at April 30, 1999
from $1,602,000 at October 31, 1998. The current liabilities at October 31, 1998
included a $300,000 short-term liability related to the Company's 1998 purchase
of technology from Medar, Inc. During the first six months of fiscal 1999, the
entire balance of $300,000 was paid.
The Company expects that its capital expenditures for fiscal 1999 may increase
slightly from the $1.3 million in fiscal 1998, primarily for computer, lab and
manufacturing equipment. At June 14, 1999, the Company had commitments for
approximately $125,000 of capital equipment. The Company believes that its cash
flow from operations, existing cash and cash equivalents, and investments at
April 30, 1999 will be adequate for its working capital and capital resource
needs during fiscal 1999.
YEAR 2000 READINESS
- -------------------
The Company has analyzed the potential impact of the year 2000 issue on both
the Company's products and on critical business systems and development systems
used in the Company's internal operations. In response to the year 2000 issue,
the Company upgraded its current enterprise resource planning ("ERP") system to
the most recent revision level, which is year 2000 compliant. The cost of this
upgrade was included in the normal annual maintenance fee that the Company pays
to the provider of the software. Regarding its own product offerings, the
Company has tested the software and hardware included in its products and
believes that all products currently being shipped are year 2000 compliant. The
Company also has available low-cost alternatives to retrofit systems in the
field for year 2000 compliance. To date, the incremental costs to the Company
associated with the year 2000 issue have been minimal. The Company believes that
the costs of addressing any remaining year 2000 issues will not have a material
adverse impact on the Company's financial position. Based on the Company's
review of its own products and critical business systems and development
systems, the Company has not felt it necessary to put in place formal
contingency plans. However, the Company will take appropriate and timely action
to resolve any significant year 2000 issues that become apparent.
FORWARD LOOKING STATEMENT
- -------------------------
Certain of the statements contained in this Form 10-Q that relate to
expectations regarding future sales and profitability contain 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 (i) risks and
uncertainty in the market for machine vision, (ii) cyclicality of capital
spending by customers, (iii) quarterly fluctuations in operating results by the
Company due to the long selling cycle for machine vision products, (iv)
dependence on principal customers, including the Company's international
distributors, (v) competition in the Company's principal markets and (vi) the
Company's ability to obtain intellectual property protection for its proprietary
technology and protect itself against adverse intellectual property claims from
third parties, (vii) the Company's ability to continue to enhance its current
products and develop new products that keep pace with technological developments
and evolving industry standards. The Company wishes to caution readers not to
place undue reliance upon any such forward-looking statement, which speak only
as of the date made. A more detailed presentation of certain factors is
included in the Company's Annual Report on Form 10-K for the year ended October
31, 1998.
Item 3: Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
PART II. Other Information
Item 1: LEGAL PROCEEDINGS
-----------------
The Company is subject to legal proceedings and claims that arise in the
ordinary course of business. The Company currently believes that
resolving any pending matters will not have a material adverse impact on
the Company's financial position or its annual results of operations.
For further information see *Patents and Proprietary Rights" and
*Important Factors Regarding Forward-Looking Statements- Proprietary
Technology" in Part 1, Item 1 of the Company's Annual Report on Form
10-K for the year ended October 31, 1998.
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
None
Item 3: DEFAULTS UPON SENIOR SECURITIES
------------------------------
None
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On March 11, 1999, 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
---------- --------
Joseph C. Christenson.. 4,637,173 4,296
Larry G. Paulson....... 4,637,173 4,296
Bruce C. Huber......... 4,636,873 4,596
Peter R. Peterson...... 4,637,316 4,153
David Malmberg......... 4,636,873 4,596
Item 5: OTHER INFORMATION
-----------------
None
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits: Page
1. Exhibit 27 - Financial Data Schedule.................... 12
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended April 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PPT VISION, INC.
Date: June 14, 1999
/s/Richard R. Peterson
-----------------------------
Richard R. Peterson
(Principal Accounting Officer)
Chief Financial Officer
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