<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended July 2, 1995 or
------------
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________to ____________
COMMISSION FILE NUMBER 0-17869
-------
COGNEX CORPORATION
------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2713778
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
----------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
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 past 90 days.
Yes X No
----- -----
As of July 30, 1995, there were 19,209,169 shares of Common Stock, $.002
par value, of the registrant outstanding.
Total number of pages: 11
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<PAGE> 2
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income for the three and six months ended
July 2, 1995 and July 3, 1994
Consolidated Balance Sheets as of July 2, 1995 and December 31, 1994
Consolidated Statement of Stockholders' Equity for the six months
ended July 2, 1995
Consolidated Statements of Cash Flows for the six months ended
July 2, 1995 and July 3, 1994
Notes to Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II OTHER INFORMATION
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
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 2, JULY 3, JULY 2, JULY 3,
1995 1994 1995 1994
------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue................................................. $23,722 $14,950 $43,159 $27,788
Cost of revenue......................................... 5,236 3,334 9,188 6,144
------- ------- ------- -------
Gross margin............................................ 18,486 11,616 33,971 21,644
Research, development and engineering expenses.......... 3,073 2,471 5,789 4,952
Selling, general and administrative expenses............ 5,810 4,150 10,881 7,457
------- ------- ------- -------
Income from operations.................................. 9,603 4,995 17,301 9,235
Interest income......................................... 668 338 1,300 731
------- ------- ------- -------
Income before provision for income taxes................ 10,271 5,333 18,601 9,966
Provision for income taxes.............................. 3,030 1,653 5,487 3,089
------- ------- ------- -------
Net income.............................................. $ 7,241 $ 3,680 $13,114 $ 6,877
======= ======= ======= =======
Net income per share.................................... $ .35 $ .20 $ .64 $ .37
======= ======= ======= =======
Weighted average common shares outstanding.............. 20,630 18,318 20,545 18,386
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE> 4
<TABLE>
COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
JULY 2, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 23,317 $ 56,326
Investments ....................................................... 59,569 25,169
Accounts receivable, less reserves of approximately $689 and $684 in
1995 and 1994, respectively ..................................... 16,148 9,151
Inventories ....................................................... 5,403 4,439
Deferred income taxes ............................................. 1,652 1,463
Prepaid expenses and other ......................................... 4,491 1,195
-------- --------
Total current assets ........................................... 110,580 97,743
-------- --------
Property, plant and equipment, net ..................................... 20,513 14,503
Other assets ........................................................... 542 593
-------- --------
$131,635 $112,839
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 1,060 $ 1,284
Accrued expenses ................................................... 6,258 5,135
Accrued income taxes ............................................... 1,649 1,674
Customer deposits ................................................. 744 744
Deferred revenue ................................................... 302 394
-------- --------
Total current liabilities ..................................... 10,013 9,231
-------- --------
Stockholders' equity:
Common stock, $.002 par value -
Authorized: 60,000,000 shares, issued: 19,073,897 and 18,751,935
shares in 1995 and 1994, respectively ........................... 38 38
Additional paid-in capital ......................................... 58,551 53,633
Cumulative translation adjustment ................................. 143 (53)
Retained earnings ................................................. 63,596 50,482
Treasury stock, at cost, 37,488 and 30,878 shares in 1995 and 1994,
respectively ................................................... (706) (492)
-------- --------
Total stockholders' equity ..................................... 121,622 103,608
-------- --------
$131,635 $112,839
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 5
<TABLE>
COGNEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
COMMON STOCK TREASURY STOCK
------------------ --------------------
NUMBER $.002 ADDITIONAL CUMULATIVE NUMBER TOTAL
OF PAR PAID-IN TRANSLATION RETAINED OF STOCKHOLDERS'
SHARES VALUE CAPITAL ADJUSTMENT EARNINGS SHARES COST EQUITY
---------- ------- ------- ----------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994..... 18,751,935 $ 38 $53,633 $ (53) $50,482 30,878 $ (492) $103,608
Issuance of stock under
stock option and stock
purchase plans............... 321,962 2,128 2,128
Tax benefit from the exercise
of stock options............. 2,790 2,790
Common stock received for
payment of stock option
exercises.................... 6,610 (214) (214)
Translation adjustment......... 196 196
Net income..................... 13,114 13,114
Balance at July 2, 1995 ---------- ------- ------- -------- ------- ------- ------- --------
(unaudited).................... 19,073,897 $ 38 $58,551 $ 143 $63,596 37,488 $ (706) $121,622
========== ======= ======= ======== ======= ======= ======= ========
The accompanying notes are an integral part of these consolidated financial statements.
3
</TABLE>
<PAGE> 6
<TABLE>
COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
SIX MONTHS ENDED
JULY 2, JULY 3,
1995 1994
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 13,114 $ 6,877
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ................................... 1,290 750
Tax benefit from the exercise of stock options ................... 2,790 946
Change in current assets and current liabilities ................. (10,716) (3,370)
-------- --------
Net cash provided by operating activities ......................... 6,478 5,203
-------- --------
Cash flows from investing activities:
Purchase of investments ........................................... (45,705) (12,547)
Maturities of investments ......................................... 11,305 10,368
Purchase of property, plant and equipment ......................... (7,202) (7,925)
(Increase)/decrease in other assets ............................... 153 (51)
-------- --------
Net cash used in investing activities ............................. (41,449) (10,155)
-------- --------
Cash flows from financing activities:
Issuance of stock under stock option and stock purchase plans ..... 1,914 1,090
-------- --------
Net cash provided by financing activities ......................... 1,914 1,090
-------- --------
Effect of exchange rate changes on cash ................................. 48 (32)
-------- --------
Net decrease in cash and cash equivalents ............................... (33,009) (3,894)
Cash and cash equivalents at beginning of period ....................... 56,326 21,833
-------- --------
Cash and cash equivalents at end of period ............................. $ 23,317 $ 17,939
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 7
COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ------------------------------------------
Basis of Presentation
---------------------
As permitted by the rules of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by generally
accepted accounting principles. Reference should be made to the
financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, as
filed with the Securities and Exchange Commission on March 27, 1995.
In the opinion of the management of Cognex Corporation, the
accompanying financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
Company's financial position at July 2, 1995 and December 31, 1994,
and the results of its operations and changes in stockholders' equity
and cash flows for the six months ended July 2, 1995 and July 3, 1994.
The results disclosed in the Consolidated Statement of Income for the
six months ended July 2, 1995 are not necessarily indicative of the
results to be expected for the full year.
<TABLE>
INVENTORIES
-----------
<CAPTION>
Inventories consist of the following:
(In thousands) JULY 2, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials $2,968 $2,476
Work-in-process 2,043 1,604
Finished goods 392 359
------ ------
$5,403 $4,439
====== ======
</TABLE>
<TABLE>
PROPERTY, PLANT AND EQUIPMENT
-----------------------------
<CAPTION>
Property, plant and equipment consist of the following:
(In thousands) JULY 2, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
Land $ 1,500 $ 800
Building 12,613 7,836
Building improvements 1,340 1,107
Computer hardware and software 10,296 8,772
Furniture and fixtures 1,401 1,298
Leasehold improvements 300 250
------- -------
27,450 20,063
Less: accumulated depreciation and amortization (6,937) (5,560)
------- -------
$20,513 $14,503
======= =======
</TABLE>
5
<PAGE> 8
COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NET INCOME PER SHARE
--------------------
Net income per share is calculated based on the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Primary and fully diluted net income per share are not materially different
for each of the periods presented. Dilutive common equivalent shares consist
of stock options, calculated using the treasury stock method.
SUBSEQUENT EVENT - ACQUISITION OF ACUMEN, INC.
----------------------------------------------
On July 21, 1995, the Company acquired all of the outstanding shares of
Acumen, Inc., a developer of machine vision systems for semiconductor wafer
identification, for approximately $14 million. The purchase price includes
$8.5 million in cash, 96,140 shares of Cognex stock valued at $4.2 million,
and stock options valued at $1.3 million. The acquistion will be accounted
for under the purchase method of accounting. A significant portion of the
purchase price is expected to be charged to third quarter earnings for
in-process technology.
6
<PAGE> 9
ITEM 2: MANAGEMENTGS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the three-month and six-month periods ended July 2, 1995
increased 59% and 55% to $23,722,000 and $43,159,000, respectively, over the
comparable periods in 1994. Contributing to the revenue increase, each of
the Company's major geographic areas, the United States, Japan, and Europe,
grew in excess of 45% over the three-month period in 1994 and in excess of
50% over the six-month period in 1994.
International revenue amounted to $14,108,000 and $25,240,000 for the
three-month and six-month periods ended July 2, 1995 compared to $9,070,000
and $16,147,000 for the same periods in 1994, an increase of 56% in both
periods. Domestic revenue increased 64% and 54% for the three-month and
six-month periods in 1995 over the comparable periods in 1994. The increase
in worldwide revenue is due primarily to the growth in sales to existing
customers, that is, those customers that have been with the Company for three
or more years. Sales to existing customers represented 81% and 83% of
revenue for the three-month and six-month periods in 1995 and increased 56%
over the comparable periods in 1994.
The combined sales of the Cognex 2000 and 3000 Series vision systems
increased $1,317,000 and $2,096,000, yet decreased as a percentage of revenue
to 22% and 23% for the three-month and six-month periods ended July 2, 1995
from 25% and 27% for the comparable periods in 1994. Sales of the Cognex
4000 Series vision system increased $2,325,000 and $5,268,000, yet declined
as a percentage of revenue to 38% and 40% for the three-month and six-month
periods in 1995 from 46% and 43% for the comparable periods in 1994. Sales
of the Cognex 5000 Series vision system increased $3,244,000 and $4,912,000,
and grew to 29% and 27% of revenue for the three-month and six-month periods
in 1995 from 24% and 25% for the comparable periods in 1994. The decline in
sales as a percentage of revenue of the Cognex 2000, 3000, and 4000 products
and the increase in sales as a percentage of revenue of the Cognex 5000
products is a result of the higher revenue growth associated with newer
products.
Gross margin represented 78% and 79% of revenue for the three-month and
six-month periods ended July 2, 1995 compared to 78% of revenue for the same
periods in 1994. The one-point increase in the gross margin percentage for
the six-month period in 1995 compared to the same period in 1994 is primarily
due to higher margins from the Company's Customer Satisfaction services.
Research, development and engineering expenses increased to $3,073,000
and $5,789,000 for the three-month and six-month periods ended July 2, 1995
from $2,471,000 and $4,952,000 for the comparable periods in 1994. Expenses
as a percentage of revenue were 13% for both periods in 1995 compared to 17%
and 18% for the same periods in 1994. The increase in aggregate costs is due
primarily to higher personnel-related costs to support the Company's
investment in the research and development of new and existing products. The
decrease in expenses as a percentage of revenue is due to higher than
anticipated revenue growth outpacing the investment in research and
development.
Selling, general and administrative expenses increased to $5,810,000 and
$10,881,000 for the three-month and six-month periods ended July 2, 1995 from
$4,150,000 and $7,457,000 for the comparable periods in 1994. Expenses as a
percentage of revenue were 25% for both periods in 1995 compared to 28% and
27% for the same periods in 1994. The increase in aggregate costs is
primarily due to higher personnel-related costs, both domestically and
internationally, to support the Company's increased revenue and customer
base. In addition, the Company incurred costs in the second quarter of 1995
associated with the purchase of an office building adjacent to the Company's
corporate headquarters.
Interest income increased to $668,000 and $1,300,000 for the three-month
and six-month periods ended July 2, 1995 from $338,000 and $731,000 for the
comparable periods in 1994. The increase in interest income is due primarily
to a larger investment base.
7
<PAGE> 10
The Company's effective tax rate for the three-month and six-month
periods ended July 2, 1995 was 29.5% compared to 31.0% for comparable periods
in 1994. The decrease in the effective tax rate is primarily due to a
reduction in state income taxes and an increased benefit from tax-exempt
interest income resulting from a larger investment base.
OTHER
On July 21, 1995, the Company acquired all of the outstanding shares of
Acumen, Inc. for approximately $14,000,000, which includes $8,500,000 in cash
in addition to Cognex stock and options valued at $5,500,000. A significant
portion of the purchase price is expected to be charged to third quarter
earnings for in-process technology. Acumen's technology complements and
strengthens Cognex's semiconductor wafer identification capabilities.
Acumen's historical financial position and results of operations were not
significant compared to the Company's financial position and results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital and other cash requirements during the
six-month period ended July 2, 1995 were substantially met through cash flow
generated from operations. Working capital at July 2, 1995 was $100,567,000,
an increase of $12,055,000 from the working capital balance at December 31,
1994. Cash and investments increased $1,391,000 from December 31, 1994 as a
result of cash generated from operations and the proceeds from the issuance
of stock under stock option and stock purchase plans offset by the purchase
for cash of an office building adjacent to the Company's corporate
headquarters.
At July 2, 1995, the Company had no outstanding short-term or long-term
debt. The Company has a $1,000,000 unsecured demand line of credit with a
bank, which is available through August 15, 1995. There have been no
borrowings under the line of credit. The Company intends to extend the bank
line of credit through August 15, 1996.
Capital requirements consist primarily of expenditures for computer
hardware and software equipment, along with expenditures related to the
expansion of the Company's office space to accomodate anticipated future
growth. Capital expenditures in the six-month period ended July 2, 1995
were $7,202,000, substantially all of which were funded out of current
operations. Included in these capital expenditures was the purchase in June
1995 of an 83,000 square-foot office building adjacent to the Company's
corporate headquarters for $5,300,000 in cash. The building is occupied
with tenants who have lease commitments that extend over the next several
years. The Company will oversee these lease commitments until it is ready
to take occupancy. Also in June 1995, the Company began work on a planned
50,000 square-foot addition to its headquarters building. Future cash
requirements related to the addition are anticipated to approximate between
$5,000,000 and $6,000,000 and are expected be paid out through the first
quarter of 1997.
On July 21, 1995, the Company acquired all of the outstanding shares of
Acumen, Inc. for approximately $14,000,000. The purchase price includes
$8,500,000 in cash, $6,300,000 of which was paid out on the closing date,
with the remaining balance to be paid out through the year 2000.
The Company believes that the existing cash and investment balances,
together with cash generated from operations, will be sufficient to meet the
Company's working capital and capital expenditure requirements through 1995.
8
<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
At the Special Meeting of Stockholders in lieu of the 1995
Annual Meeting held on April 25, 1995, William Krivsky and
Robert Shillman were elected directors to hold office for
three years. Patrick Sansonetti, Anthony Sun, and Rueben
Wasserman continued as directors after the meeting. In
addition, the Stockholders approved a proposal to amend the
Articles of Organization of the Company to increase the number
of shares of common stock which the Company has authority to
issue from 25,000,000 shares to 60,000,000 shares. Of the
16,712,178 shares represented at the meeting, 16,650,445 votes
were cast in favor of the election of William Krivsky as
director and 61,733 withheld; 16,627,088 votes were cast in
favor of the election of Robert Shillman as director and
85,090 withheld; 13,514,984 votes were cast in favor of the
proposal to amend the Articles of Organization, 3,141,589
votes were cast against, and 55,605 abstained.
ITEM 5. OTHER INFORMATION
Acquisition of Acumen, Inc.
On July 21, 1995, the Company acquired all of the outstanding
shares of Acumen, Inc., a developer of machine vision systems
for semiconductor wafer identification, for approximately $14
million. The purchase price includes $8.5 million in cash
paid from existing cash balances, 96,140 shares of Cognex
stock valued at $4.2 million, and stock options valued at $1.3
million. The acquistion will be accounted for under the
purchase method of accounting. A significant portion of the
purchase price is expected to be charged to third quarter
earnings for in-process technology. Acumen's technology
complements and strengthens Cognex's semiconductor wafer
identification capabilities.
It is impracticable for the Company to provide the historical
and pro forma financial information required by Item 7 of Form
8-K at this time. This information will be filed under cover
of Form 8 as soon as practicable, but no later than 60 days
from the date of this filing.
9
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
10
<PAGE> 13
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.
DATE: August 4, 1995 COGNEX CORPORATION
/s/ Robert J. Shillman
----------------------------------
Robert J. Shillman
President, Chief Executive Officer, and Chairman
(principal executive officer)
/s/ John J. Rogers, Jr.
----------------------------------
John J. Rogers, Jr.
Vice President, Chief Financial Officer, and Treasurer
(principal financial and accounting officer)
11
<PAGE> 1
<TABLE>
EXHIBIT 11
COGNEX CORPORATION
COMPUTATION OF PER SHARE EARNINGS
Weighted average common and common share equivalents were computed as follows:
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 2, JULY 3, JULY 2, JULY 3,
1995 1994 1995 1994
---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Weighted average common shares outstanding................ 18,892,390 17,180,931 18,854,832 17,126,091
Weighted average options outstanding...................... 3,830,982 3,738,398 3,869,397 3,792,530
Shares assumed to be purchased............................ (2,093,146) (2,601,562) (2,178,780) (2,532,387)
---------- ---------- ---------- ----------
Primary weighted average common and common share
equivalents outstanding................................. 20,630,226 18,317,767 20,545,449 18,386,234
Dilutive effect of weighted average shares................ 186,807 55 287,317 945
---------- ---------- ---------- ----------
Fully diluted weighted average common and common share
equivalents outstanding................................. 20,817,033 18,317,822 20,832,766 18,387,179
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q OF COGNEX CORPORATION FOR THE QUARTER ENDED JULY 2, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-03-1995
<PERIOD-END> JUL-02-1995
<CASH> 23,317,000
<SECURITIES> 59,569,000
<RECEIVABLES> 16,837,000
<ALLOWANCES> 689,000
<INVENTORY> 5,403,000
<CURRENT-ASSETS> 110,580,000
<PP&E> 27,450,000
<DEPRECIATION> 6,937,000
<TOTAL-ASSETS> 131,635,000
<CURRENT-LIABILITIES> 10,013,000
<BONDS> 0
<COMMON> 38,000
0
0
<OTHER-SE> 121,584,000
<TOTAL-LIABILITY-AND-EQUITY> 131,635,000
<SALES> 23,722,000
<TOTAL-REVENUES> 23,722,000
<CGS> 5,236,000
<TOTAL-COSTS> 5,236,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,271,000
<INCOME-TAX> 3,030,000
<INCOME-CONTINUING> 7,241,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,241,000
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
