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, 2000
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)
(952) 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 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 9, 2000: 5,272,050
Total pages this report: 13
INDEX
PPT VISION, INC.
Part I. Financial Information Page
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Item 1. Financial Statements
Balance Sheets as of April 30, 2000 and
October 31, 1999......................................... 3
Income Statements for the Three and Six Months Ended
April 30, 2000 and April 30, 1999........................ 4
Statements of Cash Flows for the Six Months Ended
April 30, 2000 and April 30, 1999........................ 5
Notes to Interim Financial Statements--April 30, 2000.... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 7
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ............................................. 10
Part II. Other Information........................................ 11
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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............................................... 13
PPT VISION, INC.
BALANCE SHEETS
April 30, 2000 October 31, 1999
Note A Note A
------------ ------------
(unaudited)
ASSETS
Cash and cash equivalents............. $ 1,356,000 $ 2,135,000
Investments........................... 6,252,000 8,262,000
Accounts receivable, net.............. 4,071,000 3,325,000
Inventories:
Manufactured and purchased parts.... 2,003,000 1,649,000
Work-in-process..................... 338,000 512,000
Finished goods...................... 62,000 30,000
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Inventories, net...................... 2,403,000 2,191,000
Other current assets.................. 295,000 205,000
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Total current assets............. 14,377,000 16,118,000
Fixed assets, net..................... 2,419,000 2,400,000
Other assets, net..................... 3,338,000 3,327,000
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Total assets..................... $20,134,000 $21,845,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses. $ 1,792,000 $ 2,674,000
Deferred revenue...................... 363,000 --
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Total current liabilities........ 2,155,000 2,674,000
Shareholders' equity:
Common stock.......................... 527,000 526,000
Capital in excess of par value........ 28,916,000 28,862,000
Accumulated (deficit)................. (11,386,000) (10,141,000)
Unrealized loss, investments.......... (78,000) (76,000)
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Total shareholders' equity....... 17,979,000 19,171,000
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Total liabilities and
shareholders' equity............. $20,134,000 $21,845,000
============ ============
See accompanying notes to condensed financial statements
PPT VISION, INC.
INCOME STATEMENTS
(UNAUDITED)
Three Months Ended Six Months Ended
April 30, April 30,
------------------------ --------------------------
2000 1999 2000 1999
----------- ----------- ------------ ------------
Net revenues............. $4,125,000 $3,246,000 $ 8,232,000 $4,982,000
Cost of sales............ 1,819,000 1,414,000 3,595,000 2,276,000
----------- ----------- ------------ ------------
Gross profit............. 2,306,000 1,832,000 4,637,000 2,706,000
Expenses:
Sales and marketing.... 1,137,000 1,146,000 2,226,000 2,110,000
General and
administrative........ 754,000 407,000 1,420,000 729,000
Research and
development........... 1,284,000 1,023,000 2,539,000 1,980,000
----------- ----------- ------------ ------------
Total expenses......... 3,175,000 2,576,000 6,185,000 4,819,000
----------- ----------- ------------ ------------
Loss from
operations.............. (869,000) (744,000) (1,548,000) (2,113,000)
Interest income.......... 115,000 178,000 251,000 393,000
Other income............. 49,000 9,000 52,000 17,000
----------- ----------- ------------ ------------
Net loss before taxes.... (705,000) (557,000) (1,245,000) (1,703,000)
Income tax benefit....... - 151,000 - 586,000
----------- ----------- ------------ ------------
Net loss........ $ (705,000) $ (406,000) $ (1,245,000) $(1,117,000)
=========== =========== ============ ============
Per share data:
Common shares outstanding 5,267,000 5,397,000 5,262,000 5,406,000
Common and common
equivalent shares
outstanding............ 5,267,000 5,397,000 5,262,000 5,406,000
Basic loss per share..... $ (0.13) $ (0.08) $ (0.24) $ (0.20)
=========== =========== ============ ============
Diluted loss per share... $ (0.13) $ (0.08) $ (0.24) $ (0.20)
=========== =========== ============ ============
See accompanying notes to condensed financial statements
PPT VISION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
Ended Ended
April 30, 2000 April 30, 1999
---------------- ---------------
Net loss....................................... $(1,245,000) $ (1,117,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization.................. 505,000 487,000
Deferred rent.................................. -- (19,000)
Deferred income tax (benefit) expense.......... -- (586,000)
Accrued interest income (loss)................. 30,000 (16,000)
Realized gain on sale of investments........... -- (15,000)
Change in assets and liabilities
Accounts receivable............................ (746,000) (731,000)
Inventories.................................... (212,000) (99,000)
Other assets................................... (90,000) (75,000)
Accounts payable and accrued expenses.......... (882,000) (578,000)
Deferred revenue............................... 363,000 --
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Total adjustments............................. (1,032,000) (1,632,000)
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Net cash used in operating activities......... (2,277,000) (2,749,000)
Cash flows from investing activities:
Purchase of fixed assets....................... (494,000) (783,000)
Purchase of investments........................ (2,643,000) (5,183,000)
Sales and maturities of investments............ 4,622,000 11,557,000
Net investment in other long-term assets....... (42,000) (38,000)
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Net cash provided by investing activities..... 1,443,000 5,553,000
Cash flows from financing activities
Proceeds from issuance of common stock......... 55,000 73,000
Repurchases of common stock.................... -- (399,000)
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Net cash provided by
(used in) financing activities............. 55,000 (326,000)
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Net (decrease) increase
in cash and cash equivalents.................. (779,000) 2,478,000
Cash and cash equivalents at beginning of year.. 2,135,000 1,986,000
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Cash and cash equivalents at end of period...... $ 1,356,000 $ 4,464,000
========== ==========
See accompanying notes to condensed financial statements
PPT VISION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
April 30, 2000
NOTE A - ORGANIZATION
We design, manufacture, market and integrate machine vision-based automated
inspection systems for manufacturing applications such as electronic and
mechanical assembly verification, verification of printed characters, packaging
integrity, surface flaw detection, and gauging and measurement tasks. A machine
vision system is a combination of cameras, lighting, and computer hardware and
software working together to capture and analyze images of moving parts to
determine if the parts match a defined standard. Machine vision-based
inspection systems enable manufacturers to realize significant economic paybacks
by increasing the quality of manufactured parts and improving the productivity
of manufacturing processes. The Company's vision systems are sold throughout
the Americas, Europe and Asia to a broad range of industry categories, including
automotive, electronic and semiconductor components, consumer goods, medical
devices, pharmaceuticals and plastics.
NOTE B - 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, 1999 has been derived from the Company's
audited financial statements for the fiscal year ended October 31, 1999 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, 1999.
NOTE C - COMPREHENSIVE LOSS
Three Months Ended Six Months Ended
April 30, April 30,
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2000 1999 2000 1999
----------- ----------- ------------ ------------
Net loss $ (705,000) $ (406,000) $(1,245,000) $(1,117,000)
Other comprehensive loss:
Unrealized income
(Loss) on investments 8,000 (24,000) (2,000) (54,000)
----------- ----------- ------------ ------------
Total comprehensive loss $ (697,000) $ (430,000) $(1,247,000) $(1,171,000)
=========== =========== ============ ============
NOTE D - RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 financial statements to
conform to the April 30, 2000 presentation.
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 27% to $4,125,000 for the three-month
period ended April 30, 2000, compared to net revenues of $3,246,000 for the same
period in fiscal 1999 and increased to $8,232,000 for the six-months ended April
30, 2000, up from $4,982,000 for the same period of 1999. Unit sales of the
Company's machine vision systems increased to 174 for the second quarter of
fiscal 2000 versus 97 for the same period in fiscal 1999. Unit sales for the
six-month period ended April 30, 2000 increased to 364 compared to 161 for the
same period in fiscal 1999. The increase in the number of units sold is
attributed to strong performance both domestically and internationally in the
Company's core markets, including electronics and automotive. Gross revenues for
the first six-months of fiscal 2000 increased 28% in North America and 152%
outside North America. Sales to customers outside North America represented 45%
of gross revenues for the first six-months of fiscal 2000, compared to 29% for
the same period in fiscal 1999.
Gross Profit: Gross profit increased 26% to $2,306,000 for the three-month
period ended April 30, 2000, compared to $1,832,000 for the same period in
fiscal 1999. For the six-month period ended April 30, 2000, gross profit
increased 71% to $4,637,000, compared to $2,706,000 for the same period in
fiscal 1999. As a percentage of net revenues, the gross profit for the second
quarter of fiscal 2000 remained constant at 56%, compared to the same period in
fiscal 1999. For the six-month period ended April 30, 2000, gross profit as a
percentage of net revenues increased to 56%, compared to 54% for the same period
in fiscal 1999. This increase in gross profit in absolute dollars for the three
and six month period ended April 30, 2000 is primarily attributed to the
increase in net revenues. 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 2000 due to shifts in geographic and product
mix as well as normal start-up costs associated with new product introductions.
Sales and Marketing: Sales and marketing expenses decreased slightly to
$1,137,000 for the three-month period ended April 30, 2000, compared to
$1,146,000 for the same period in fiscal 1999. For the six-month period ended
April 30, 2000, selling expenses increased 5% to $2,226,000, compared to
$2,110,000 for the same period in fiscal 1999. As a percentage of net revenues,
sales and marketing expenses decreased to 28% for the second quarter of fiscal
2000, compared to 35% for the second quarter of fiscal 1999. For the six-month
period ended April 30, 2000, selling expenses as a percentage of net revenues
decreased to 27%, compared to 42% for the same period in fiscal 1999. The
decrease in expenses as a percentage of net revenues is attributed to the
increase in net revenues. Although the Company will limit the rate of growth in
sales and marketing expenses, it is anticipated that sales and marketing
expenses may increase somewhat in the remainder of fiscal 2000 as the Company
makes the necessary investments to support strategic initiatives.
General and Administrative Expenses: General and administrative expenses for
the six-month period ended April 30, 2000 includes $200,000 in costs incurred in
connection with the Company's lawsuit with National Instruments Corporation
("NIC")and $180,000 (incurred during the Company's first quarter ended January
31, 2000) in costs accrued in connection with the settlement of the Company's
lawsuit with Integrated Electronic Technologies, Inc. ("IET"). Refer to Part
II, Item 1 "Legal Proceedings" of this Form 10-Q for more detailed information
regarding the NIC and IET lawsuits.
General and administrative expenses increased 85% to $754,000 for the three-
month period ended April 30, 2000, compared to $407,000 for the same period in
fiscal 1999. For the six-month period ended April 30, 2000, general and
administrative expenses increased 95% to $1,420,000, compared to $729,000 for
the same period in fiscal 1999. As a percentage of net revenues, general and
administrative expenses increased to 18% for the second quarter of fiscal 2000,
compared to 13% for the second quarter of fiscal 1999. For the six-month period
ended April 30, 2000, general and administrative expenses as a percentage of net
revenues increased to 17%, compared to 15% for the same period in fiscal 1999.
The increase in expenditures in absolute dollars is primarily attributable to
the costs associated with the NIC and IET lawsuits as noted above, and increased
expenses associated with operating the Company as it prepares for continued
growth.
Research and Development Expenses: Research and development expenses increased
26% to $1,284,000 for the three-month period ended April 30, 2000, compared to
$1,023,000 for the same period in fiscal 1999. For the six-month period ended
April 30, 2000, research and development expenses increased 28% to $2,539,000,
compared to $1,980,000 for the same period in fiscal 1999. As a percentage of
net revenues, research and development expenses decreased to 31% for the second
quarter of fiscal 2000, compared to 32% for the second quarter of fiscal 1999.
For the six-month period ended April 30, 2000, research and development expenses
as a percentage of net revenues decreased to 31%, compared to 40% 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 Company
believes that during the remainder of fiscal 2000, research and development
expenses may increase slightly as the Company commits the resources necessary to
support strategic initiatives.
Interest income decreased 35% to $115,000 for the three-month period ended
April 30, 2000, compared to $178,000 for the same period in fiscal 1999. For the
six-month period ended April 30, 2000, interest income decreased 36% to
$251,000, compared to $393,000 for the same period in fiscal 1999. The decrease
in interest income is related to a reduction in the balances in cash and cash
equivalents and short-term investments.
Income Tax Benefit (Expense): The Company did not record an income tax benefit
or expense for either the three-month or six-month period ended April 30, 2000,
compared to an income tax benefit of $151,000 and $586,000 for the same periods
in fiscal 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital decreased to $12,222,000 at April 30, 2000 from $13,444,000 at
October 31, 1999. The Company financed its operations during the first six
months of fiscal 2000 through internally generated cash flow and existing cash
and cash equivalents. Net cash used by operating activities during the first six
months of fiscal 2000 was $2,278,000. Accounts receivable increased $746,000
primarily due to increased revenues and product shipments in second half of the
second quarter. Inventories increased $212,000 during the first six months of
fiscal 2000 due to the purchase of inventory items with extended delivery lead
times to fulfill future orders.
Net cash provided by investing activities was $1,444,000, primarily due to
sales and maturities of investments. The Company used $493,000 of cash for the
purchase of fixed assets, mainly consisting of computer, lab equipment and
manufacturing equipment. The Company anticipates that it will expend
approximately $500,000 on capital expenditures over the second half of fiscal
2000. Investments consist of short-term investment grade securities.
The Company believes that its cash flow from operations, existing cash and
cash equivalents, and investments at April 30, 2000 will provide adequate
liquidity to meet the Company's normal working capital and capital resource
needs for at least the next twelve months.
FORWARD LOOKING STATEMENTS
--------------------------
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's expectations,
beliefs, intentions or strategies regarding the future. Forward-looking
statements include, without limitation, statements regarding the extent and
timing of future revenues and expenses and customer demand. These statements
include, but are not limited to, changes in worldwide general economic
conditions, cyclicality of capital spending by customers, PPT VISION's ability
to keep pace with technological developments and evolving industry standards,
worldwide competition, and PPT VISION's ability to protect its existing
intellectual property from challenges from third parties and other factors.
All forward-looking statements included in this document are based on
information available to the Company as of the date hereof, and the Company
assumes no obligation to update any such forward-looking statements. It is
important to note that the Company's actual results could differ materially from
those in such forward-looking statements. The forward-looking statements of the
Company are subject to risks and uncertainties. Some of the factors that could
cause future results to materially differ from the Company's recent results or
those projected in the forward-looking statements are detailed in our Annual
Report on Form 10-K for the year ended October 31, 1999, filed with the SEC.
Item 3: Quantitative and Qualitative Disclosures about Market Risk.
The Company believes it does not have material exposure to quantitative and
qualitative market risks. The carrying amounts reflected in the balance sheets
of cash and cash equivalents, investments, trade receivables and trade payables
approximate fair value at April 30, 2000 due to the short maturities of these
instruments.
Interest Rate Risk
The Company maintains investment portfolio holdings of various issuers, types
and maturities, primarily U.S. government and agency securities and other short
terms, interest-bearing investment grade securities. The Company's cash and
investments include cash equivalents, which the Company considers to be
investments purchased with original maturities of three months or less.
Investments having original maturities in excess of three months are stated at
amortized cost, which approximates fair value, and are classified as available
for-sale. Given the short maturities and investment grade quality of the
portfolio holdings at April 30, 2000, as well as the Company's policy of holding
rate sensitive instruments to maturity, a 100 basis point rise in interest rates
would not be expected to have a material adverse impact on the fair value of the
Company's investment portfolio. As a result, the Company does not currently
hedge these interest rate exposures
Foreign Currency Exchange Rate Risk.
The Company's international sales, which are primarily in Europe, South
America, Japan and Southeast Asia, are transacted in U.S. Dollars. As a
result, the Company believes it is not is not subject to adverse movements in
foreign currency exchange rates.
PART II. Other Information
Item 1: LEGAL PROCEEDINGS
-----------------
In July 1999, the Company was served by National Instruments Corporation ("NIC")
of Austin, Texas, in a patent infringement lawsuit filed in United States
District Court for the Western District of Texas. NIC has alleged that the
Company's Vision Program Manager software ("VPM") infringes certain United
States patents held by NIC that it claims relate to certain aspects of graphical
user interfaces. The Company has filed a counterclaim and requested that the
Court declare the NIC patents invalid or determine that the Company does not
infringe the NIC patents. The Company believes that it has meritorious defenses
to the lawsuit and is defending itself vigorously. The suit is scheduled to go
to trial on or about July 10, 2000. The parties are currently engaged in
settlement discussions.
On July 9, 1999 Integrated Electronic Technologies, Inc. ("IET") of Cicero,
New York, filed a complaint against the Company in the United States District
Court for the Northern District of New York. IET asserted breach of contract and
related claims in connection with the proposed purchase by the Company of
certain handling systems to be manufactured by IET. The Company filed an answer
denying all liability and asserted counterclaims seeking damages from IET. The
parties entered into a settlement agreement under which the parties agreed to
dismiss the lawsuit with prejudice and the Company agreed to pay a total of
$160,000, $140,000 of which has been paid, with the remaining $20,000 due to IET
upon the satisfaction of certain obligations contained in the settlement
agreement. The Company expects the District Court to issue an Order dismissing
the case with prejudice in June 2000.
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.
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
None
Item 3: DEFAULTS UPON SENIOR SECURITIES
------------------------------
Not Applicable
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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On March 16, 2000, the Company held its Annual Meeting of
Shareholders. At the meeting the following actions were 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.. 4,732,599 71,999
Larry G. Paulson....... 4,735,047 69,551
Bruce C. Huber......... 4,735,047 69,551
Peter R. Peterson...... 4,735,047 69,551
David Malmberg......... 4,735,047 69,551
(b) The second matter related to the approval to adopt the PPT VISION, Inc.
2000 Stock Option Plan. 2,767,971 votes were cast for approval and
154,786 were cast against approval. There were 8,931 abstentions and
1,872,910 broker non-votes.
(c) The third matter related to the approval to adopt the PPT VISION,Inc.
2000 Employee Stock Purchase Plan. 2,828,614 votes were cast for
approval and 95,809 were cast against approval. There were 7,296
abstentions and 1,872,879 broker
non-votes.
Based on these voting results, each of the directors nominated was
elected and the second and third matters were approved.
Item 5: OTHER INFORMATION
-----------------
None.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits: Page
The following exhibits are filed as part of this Quarterly
Report on Form 10-Q for the quarterly period
ended April 30, 2000: ..................................... 12
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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 15, 2000
/s/Richard R. Peterson
-----------------------------
Richard R. Peterson
(Principal Accounting Officer)
Chief Financial Officer
