<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 March 30, 1997 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 April 27, 1997, there were 41,095,466 shares of Common Stock, $.002
par value, of the registrant outstanding.
Total number of pages: 11
Exhibit index is located on page 9
================================================================================
<PAGE> 2
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three months ended
March 30, 1997 and March 31, 1996
Consolidated Balance Sheets at March 30, 1997 and December 31, 1996
Consolidated Statement of Stockholders' Equity for the three months
ended March 30, 1997
Consolidated Statements of Cash Flows for the three months ended
March 30, 1997 and March 31, 1996
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
COGNEX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<CAPTION>
THREE MONTHS ENDED
MARCH 30, MARCH 31,
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
Revenue .................................................. $28,143 $34,887
Cost of revenue .......................................... 7,695 9,206
------- -------
Gross margin ............................................. 20,448 25,681
Research, development and engineering expenses ........... 5,179 4,766
Selling, general and administrative expenses ............. 7,419 6,345
------- -------
Income from operations ................................... 7,850 14,570
Investment income ........................................ 1,333 792
Other income ............................................. 157 219
------- -------
Income before provision for income taxes ................. 9,340 15,581
Provision for income taxes ............................... 2,849 4,752
------- -------
Net income ............................................... $ 6,491 $10,829
======= =======
Net income per share ..................................... $ .15 $ .25
======= =======
Weighted-average common and common equivalent shares
outstanding .......................................... 43,945 44,057
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE> 4
COGNEX CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
MARCH 30, DECEMBER 31,
1997 1996
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and investments ...................................................... $ 141,834 $ 134,000
Accounts receivable, less reserves of $989 and $968 in 1997 and 1996,
respectively ........................................................... 17,903 18,809
Revenue in excess of billings ............................................. 4,802 3,379
Inventories ............................................................... 7,968 7,013
Deferred income taxes ..................................................... 2,520 2,642
Prepaid expenses and other ................................................ 4,034 3,545
--------- ---------
Total current assets .................................................. 179,061 169,388
--------- ---------
Property, plant and equipment, net ............................................. 28,924 28,331
Other assets ................................................................... 3,308 3,534
--------- ---------
$ 211,293 $ 201,253
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 3,849 $ 3,652
Accrued expenses .......................................................... 7,785 7,007
Accrued income taxes ...................................................... 2,650 2,029
Customer deposits ......................................................... 3,525 2,596
Deferred revenue .......................................................... 844 1,287
--------- ---------
Total current liabilities ............................................. 18,653 16,571
--------- ---------
Deferred income taxes .......................................................... 338 393
Other liabilities .............................................................. 1,601 1,600
Stockholders' equity:
Common stock, $.002 par value -
Authorized: 120,000,000 shares, issued: 41,126,959 and
40,914,166 shares in 1997 and 1996, respectively ....................... 82 82
Additional paid-in capital ................................................ 79,139 77,569
Cumulative translation adjustment ......................................... 121 95
Retained earnings ......................................................... 112,323 105,832
Treasury stock, at cost, 85,113 and 80,918 shares in 1997 and
1996, respectively ..................................................... (964) (889)
--------- ---------
Total stockholders' equity ............................................ 190,701 182,689
--------- ---------
$ 211,293 $ 201,253
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 5
COGNEX CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TREASURY STOCK TOTAL
------------------- PAID-IN TRANSLATION RETAINED -------------- STOCKHOLDERS'
SHARES PAR VALUE CAPITAL ADJUSTMENT EARNINGS SHARES COST EQUITY
------ --------- ---------- ----------- -------- ------ ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.............. 40,914,166 $82 $77,569 $ 95 $105,832 80,918 $(889) $182,689
Issuance of stock under stock option
plans................................. 212,793 724 724
Tax benefit from exercise of stock
options............................... 846 846
Common stock received for payment of
stock option exercises................ 4,195 (75) (75)
Translation adjustment.................. 26 26
Net income.............................. 6,491 6,491
---------- --- ------- ---- -------- ------ ----- --------
Balance at March 30, 1997 (unaudited)..... 41,126,959 $82 $79,139 $121 $112,323 85,113 $(964) $190,701
========== === ======= ==== ======== ====== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
COGNEX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
THREE MONTHS ENDED
MARCH 30, MARCH 31,
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................ $ 6,491 $ 10,829
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................... 1,357 1,153
Tax benefit from exercise of stock options .............................. 846 626
Change in deferred income tax provision ................................. 67 (42)
Change in other current assets and current liabilities .................. 586 6,716
--------- ---------
Net cash provided by operating activities ................................. 9,347 19,282
--------- ---------
Cash flows from investing activities:
Investments ............................................................... (443) (1,535)
Purchase of property, plant and equipment ................................. (2,551) (2,010)
Cash assumed in acquisition of Isys Controls, Inc. ........................ 918
Other ..................................................................... 3 29
--------- ---------
Net cash used in investing activities
(2,991) (2,598)
--------- ---------
Cash flows from financing activities:
Issuance of stock under stock option plans ................................ 649 283
--------- ---------
Net cash provided by financing activities ................................. 649 283
--------- ---------
Effect of exchange rate changes on cash ........................................ 386 111
--------- ---------
Net increase in cash and cash equivalents ...................................... 7,391 17,078
Cash and cash equivalents at beginning of period ............................... 48,423 23,911
--------- ---------
Cash and cash equivalents at end of period ..................................... 55,814 40,989
Investments .................................................................... 86,020 68,264
--------- ---------
Cash and investments ........................................................... $ 141,834 $ 109,253
========= =========
</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
consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996, as filed with the Securities and Exchange Commission on March
24, 1997.
In the opinion of the management of Cognex Corporation, the
accompanying consolidated financial statements contain all adjustments
(consisting of only normal, recurring adjustments) necessary to
present fairly the Company's financial position at March 30, 1997, and
the results of operations and changes in stockholders' equity and cash
flows for the three months ended March 30, 1997.
The results disclosed in the Consolidated Statements of Income for the
three months ended March 30, 1997 are not necessarily indicative of
the results to be expected for the full year.
Certain amounts reported in prior periods have been reclassified to be
consistent with the current period's presentation.
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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings
per Share," which is effective for fiscal years ending after December
15, 1997, including restatement of all prior period earnings per share
(EPS) data presented. SFAS No. 128 requires the presentation of basic
and diluted EPS. Basic EPS, which replaces primary EPS, excludes
dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of
the entity. Diluted EPS is computed similarly to fully diluted EPS
under existing rules. The Company will adopt SFAS No. 128 for the
fiscal year ending December 31, 1997 and has not yet determined the
impact of adoption.
5
<PAGE> 8
COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(In thousands) MARCH 30, DECEMBER 31,
1997 1996
-------- -----------
(UNAUDITED)
<S> <C> <C>
Raw materials............................... $3,662 $3,861
Work-in-process............................. 2,649 1,710
Finished goods.............................. 1,657 1,442
------ ------
$7,968 $7,013
====== ======
</TABLE>
6
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the quarter ended March 30, 1997 totaled $28,143,000,
representing a 19% decrease from the quarter ended March 31, 1996, and a 6%
increase from the quarter ended December 31, 1996. Sales to customers based
in the United States, which represented 45% of revenue in the first quarter
of 1997, decreased $2,676,000, or 17%, from the first quarter of 1996, yet
increased $658,000, or 6%, from the fourth quarter of 1996. Following a
similar trend, sales to customers based in Japan decreased $4,374,000, or
28%, from the first quarter of 1996, yet increased $1,243,000, or 13%, from
the fourth quarter of 1996.
The decrease in worldwide revenue from the first quarter of 1996 is due
primarily to decreased volume from Original Equipment Manufacturer (OEM)
customers. Sales to OEM customers decreased $5,871,000, or 25%, from the
first quarter of 1996. However, sales to OEM customers increased $2,185,000,
or 14%, from the fourth quarter of 1996 due primarily to increased volume
from certain key OEM customers in the semiconductor and electronics
industries. The growth in revenue experienced in the first quarter of 1997
over the fourth quarter of 1996 is anticipated to continue for the next
several quarters, as OEM customers begin to replenish their depleted
inventories and prepare to meet higher anticipated demand for their products.
Gross margin as a percentage of revenue for the quarter ended March 30, 1997
was 73% compared to 74% for the quarter ended March 31, 1996 and 71% for the
quarter ended December 31, 1996. The decrease in gross margin as a percentage
of revenue from the first quarter of 1996 is due primarily to a shift in
product mix to lower margin products, as well as price discounts given to
some of the Company's larger customers for attaining certain volume
thresholds. The increase in gross margin as a percentage of revenue from the
fourth quarter of 1996 resulted primarily from manufacturing efficiencies,
due to increased production plans resulting from higher sales, as well as an
increase in business with certain key OEM customers, who purchase higher
margin products from the Company. Gross margins as a percentage of revenue
for 1997 are expected to remain consistent with the results experienced in
the current quarter.
Research, development and engineering expenses for the quarter ended March
30, 1997 increased 9% to $5,179,000 from $4,766,000 for the quarter ended
March 31, 1996. The increase in aggregate expenses is due primarily to higher
personnel-related costs to support the Company's investment in the research
and development of new and existing products. Expenses as a percentage of
revenue were 18% for the first quarter of 1997 compared to 14% for the first
quarter of 1996. The increase in expenses as a percentage of revenue is due
primarily to a lower revenue base in the first quarter of 1997.
Selling, general and administrative expenses for the quarter ended March 30,
1997 increased 17% to $7,419,000 from $6,345,000 for the quarter ended March
31, 1996. The increase in aggregate expenses is due primarily to a 49%
increase in sales and marketing personnel, both domestically and
internationally, to support the Company's expanding worldwide operations.
Expenses as a percentage of revenue were 26% for the first quarter of 1997
compared to 18% for the first quarter of 1996. The increased level of
expenses as a percentage of revenue is expected to continue for the remainder
of 1997, as additional resources are committed to further penetrate the
factory floor market.
7
<PAGE> 10
Investment income for the quarter ended March 30, 1997 increased 68% to
$1,333,000 from $792,000 for the comparable period in 1996. This increase in
investment income is due primarily to an increased investment base.
The Company's effective tax rate was 30.5% for the quarters ended March 30,
1997 and March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the quarter ended March 30, 1997 were
met through cash generated from operations. Cash and investments increased
$7,834,000 from December 31, 1996 primarily as a result of $9,347,000 of cash
generated from operations, partially offset by $2,551,000 of capital
expenditures. Cash generated from operations consists of net income, adjusted
primarily for the effects of depreciation and amortization, the tax benefit
from the exercise of stock options, and changes in current assets and current
liabilities.
Capital expenditures for the quarter ended March 30, 1997 totaled $2,551,000
and consisted primarily of expenditures for computer hardware, expenditures
related to a 50,000 square-foot expansion of the Company's corporate
headquarters, and expenditures related to the implementation of a new
business system. Future cash requirements related to the new business system
approximate $1,500,000, the majority of which is expected to be paid out
through 1997 with anticipated funding from cash generated from operations.
The Company believes that the existing cash and investments balance, together
with cash generated from operations, will be sufficient to meet the Company's
planned working capital and capital expenditure requirements through 1997,
including potential business acquisitions.
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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Calculation of Weighted-Average Common
and Common Equivalent Shares Outstanding
Exhibit 27 - Financial Data Schedule (electronic
filing only)
(b) Reports on Form 8-K
None
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: May 9, 1997 COGNEX CORPORATION
/s/ John J. Rogers, Jr.
------------------------------------
John J. Rogers, Jr.
Executive Vice President, Chief
Financial Officer, and Treasurer
(duly authorized officer, principal
financial and accounting officer)
10
<PAGE> 1
EXHIBIT 11
COGNEX CORPORATION
<TABLE>
CALCULATION OF WEIGHTED-AVERAGE COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING
<CAPTION>
THREE MONTHS ENDED
MARCH 30, MARCH 31,
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Weighted-average common shares outstanding................................ 40,920,611 40,326,678
Weighted-average options outstanding...................................... 7,723,545 7,167,555
Shares assumed to be purchased............................................ (4,698,760) (3,437,712)
---------- ----------
Primary weighted-average common and common equivalent shares outstanding..
43,945,396 44,056,521
Dilutive effect of weighted-average shares................................ 181,054
---------- ----------
Fully diluted weighted-average common and common equivalent shares
outstanding............................................................. 44,126,450 44,056,521
========== ==========
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF COGNEX CORPORATION FOR THE QUARTER
ENDED MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000851205
<NAME> COGNEX CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 55,814,000
<SECURITIES> 86,020,000
<RECEIVABLES> 18,892,000
<ALLOWANCES> 989,000
<INVENTORY> 7,968,000
<CURRENT-ASSETS> 179,061,000
<PP&E> 39,715,000
<DEPRECIATION> 10,791,000
<TOTAL-ASSETS> 211,293,000
<CURRENT-LIABILITIES> 18,653,000
<BONDS> 0
0
0
<COMMON> 82,000
<OTHER-SE> 190,619,000
<TOTAL-LIABILITY-AND-EQUITY> 211,293,000
<SALES> 28,143,000
<TOTAL-REVENUES> 28,143,000
<CGS> 7,695,000
<TOTAL-COSTS> 7,695,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,340,000
<INCOME-TAX> 2,849,000
<INCOME-CONTINUING> 6,491,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,491,000
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
