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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-8623
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ROBOTIC VISION SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-2400145
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Rabro Drive East, Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 273-9700
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
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None None
- --------------------------------------- ---------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of Class)
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(Title of Class)
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
..... .....
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes......... No.........
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The number of shares outstanding of the Registrant's common stock is
24,470,899 (as of 12/12/97).
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant is $309,590,749 (as of 12/12/97).
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement for its Annual Meeting of Stockholders scheduled to
be convened in April 1998.
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PART I
Item 1. Description of Business.
(a) General Development of Business
Robotic Vision Systems, Inc. ("RVSI" or the "Company"), directly and
through wholly owned subsidiaries grouped into three operating units, designs,
manufactures, markets and sells automated 1-dimensional ("1-D"), 2-dimensional
("2-D") and 3-dimensional ("3-D") machine vision-based products and systems for
inspection, measurement and identification, and is a leader in advanced electro-
optical sensor technology. RVSI's aircraft safety division has developed and is
marketing an ice detection product for the aviation industry.
On December 9, 1997, RVSI consummated a merger with Vanguard Automation,
Inc. ("Vanguard"), a privately owned company located in Tucson, Arizona,
pursuant to which Vanguard became a wholly owned subsidiary of RVSI ("Vanguard
Merger"). Vanguard is the leading supplier of ball grid array and chip scale
packaging equipment for the semiconductor and connector industries. The Vanguard
Merger was structured as a tax free reorganization and accounted for as a
pooling of interests. As a consequence of the Vanguard Merger, RVSI issued
3,390,780 shares of its Common Stock in exchange for all the outstanding capital
shares of Vanguard. Up to an additional 364,736 shares of RVSI's Common Stock
are issuable upon exercise of certain Vanguard options and warrants assumed by
RVSI upon consummation of the Vanguard Merger. The 1997 financial results
included herein do not include those of Vanguard, since that acquisition was
completed after the completion of the 1997 fiscal year.
RVSI was incorporated in New York in 1976 and reincorporated in Delaware in
1977. Its executive offices are located at 425 Rabro Drive East, Hauppauge, New
York 11788; telephone (516) 273-9700.
Unless otherwise noted, all subsequent references to RVSI or to the Company
in this Annual Report shall be deemed to refer to RVSI or the Company, as
applicable, and its consolidated subsidiaries as a single enterprise.
(b) Financial Information About Industry Segments
For the purpose of segment reporting, management considers the Company to
operate in one industry, the machine vision industry.
(c) Narrative Description of Business
(i) Principal Products and Product Development
A. The SEMICONDUCTOR EQUIPMENT GROUP is comprised of RVSI's Electronics
Division, as well as its wholly owned subsidiaries, Systemation Engineered
Products, Inc. ("Systemation") and Vanguard Automation, Inc. ("Vanguard").
RVSI's Electronics Division supplies inspection equipment to the
semiconductor industry. The electronics division's LS, GS and CS Series
lead scanning systems offer automated, high-speed, 3-D semiconductor
package lead inspection with the added feature of non-contact scanning of
the packages in their shipping trays ("in-tray scanning"). The systems use
a laser-based, non-contact, 3-D measurement technique to inspect and sort
quad flat packs, thin quad flat packs, chip scale packages ("CSP"), ball
grid arrays ("BGA") and thin small outline packs in their carrying trays.
The system measurements include coplanarity, total package height, true
position spread and span, as well as lead angle, width, pitch and gap.
Systemation offers tape-and-reel component processing systems designed to
handle CSP and BGA. RVSI also believes that Systemation's expertise in
designing and manufacturing systems that handle components in tubes
provides RVSI with the means to further expand the breadth of its product
offerings to the semiconductor market.
Vanguard is the leading supplier of BGA and CSP equipment for the
semiconductor and connection industries. Customers for Vanguard's
proprietary BGA and CSP equipment include over a dozen of the top
semiconductor manufacturers in the world.
B. The ACUITY IMAGING DIVISION is comprised of Acuity Imaging LLC
("Acuity") and Northeast Robotics LLC ("Northeast Robotics"), Acuity's wholly
owned subsidiary.
Acuity designs, manufactures and markets 2-D machine vision products and
systems and, through Northeast Robotics, lighting systems for use in
industrial automation. The Division's products, which utilize a combination
of software, an image processing computer and electronic cameras, perform
such functions as measurement, flaw detection, verification of the presence
and correctness of parts and subassemblies, and inspection of manufactured
products. Typically, they are utilized in hot, dusty, dirty or other harsh
industrial environments in applications where human inspection is not
practical or where the use of machine vision systems is faster, more
reliable and more economical than human inspection. Such applications
include assembly verification, date and lot code reading, flaw detection,
gauging and measurement, label verification and product identification.
2
C. The CIMATRIX DIVISION includes the respective operations of
International Data Matrix, Inc. and Computer Identics Corporation, each formerly
a wholly owned subsidiary of RVSI which, as of October 1, 1997, were combined
within CiMatrix LLC ("CiMatrix"), a wholly owned subsidiary of RVSI.
The CiMatrix Division manufactures data collection products, networks, and
linear and 2-D bar code reading systems. Its customers encompass a wide
cross-section of businesses and institutions, including postal services,
freight companies, and manufacturers of electronics, pharmaceuticals,
consumer goods, textiles and automobiles.
The Data Matrix code, a 2-D code which resembles a scrambled checkerboard,
was developed by one of the division's predecessors. The small size of the
Data Matrix code allows its use in industries and in applications that were
previously impossible to satisfy with machine readable codes because of its
ability to be printed or marked directly on parts and components, thereby
eliminating the need for paper labels and the high cost of labeling
equipment. Serialization and therefore traceability is now possible in
industries such as semiconductors, which have seen a surge in the theft of
memory chips and other high priced computer components.
D. The AIRCRAFT SAFETY DIVISION's sole current product is the ID-1
aircraft detection system, a full-wing electro-optical ice detection system
that is designed to provide a quick, clear and reliable indication of the
presence or absence of ice, snow or frost. This proprietary system can be
mounted on the bucket of a de-icing truck or other vehicle and is designed
to operate under conditions where visual inspection can be ineffective or
tactile inspection difficult. Its compact size and high degree of mobility
are also designed to allow the ID-1 to detect ice on aircraft surfaces at
any point between the gate and runway. Preliminary design and testing is
under way, funded in part by a Federal Aviation Administration ("FAA")
research grant in 1997, to adapt the technology to an on-aircraft product
which would provide both ground and airborne ice detection capability.
The commercial viability of the ID-1 has not as yet been proven nor
can it be assured. Consequently, there can be no assurance that the ID-1
can be commercially marketed at a profit at any time in the proximate
future, if ever.
(ii) Manufacturing
Each of the Company's production facilities are capable of fabricating and
assembling total electronic and electromechanical systems and subsystems.
Facilities include assembly and wiring
3
operations that have the ability to produce complex wiring harnesses, as well as
intricate electronic subassemblies. The Company maintains comprehensive test and
inspection programs to ensure that all systems meet exacting customer
requirements for performance and quality workmanship prior to delivery.
(iii) Marketing and Sales
The Semiconductor Equipment Group's marketing strategy focuses on
cultivating long-term relationships with the leading manufacturers of
electronic and semiconductor inspection and quality control equipment. Its
marketing efforts rely heavily on direct sales methods. The selling cycle for
its LS- and GS- Series products, generally, is between six to nine months from
initial customer contact to closure. A lengthier process is often the case in
the purchase of an initial unit. Subsequent purchases require less time and
often result in multiple orders. Typically, potential purchasers visit division
headquarters to receive a full demonstration of the product and to discuss the
merits of the product with the division's engineers before making a purchase
decision.
Sales activities in the domestic market are handled by direct sales
personnel. The Group presently employs 26 persons primarily engaged in sales.
Lending further support to the sales effort is a 182 person engineering and
technical staff, which provides assistance in areas requiring in-depth technical
analysis. Due to the depth of analysis involved in the customer's purchase
decision, division management emphasizes active interaction between the direct
sales staff and the buyer throughout the selling process.
The Group also maintains distribution capabilities in both Europe and the
Far East, providing access to all major markets for electronic and semiconductor
test equipment. A sales and technical support office is maintained in Singapore.
Certain products and systems developed and marketed by Acuity, Northeast
Robotics, and CiMatrix are often incorporated into the Semiconductor Equipment
Group's product offerings.
The Acuity Imaging Division markets its products worldwide through a direct
marketing, sales and sales application engineering force of 27 persons, as well
as through distributors and system integrators. It supports its distribution
channels with regional sales managers and sales application engineers who
support and interface directly with the distributors. In addition, the Division
provides sales and product training to its distributors as well as technical
product support.
The CiMatrix Division's product line is sold by its direct sales force in
the United States. European sales are conducted through RVSI Europe Limited
("RVSI Europe"), RVSI's wholly owned
4
subsidiary headquartered in the United Kingdom and with offices in France and
Germany. RVSI Europe also markets and sells the Acuity Division's products in
Europe. In addition, CiMatrix markets and sells its products on a worldwide
basis through distributors, value added resellers and systems integrators.
Products and components are also sold to OEMs, including materials handling
equipment manufacturers and system integration firms. These firms combine the
division's products with other hardware and software to create customized
information and control systems for sales to end users.
(iv) Sources of Supply
To support its internal operations and to extend its overall capacity, the
Company purchases a wide variety of components, assemblies and services from
proven outside manufacturers, distributors and service organizations. The
Company has not experienced any significant difficulty in obtaining adequate
supplies to perform under its contracts.
Several of the Company's components and sub-systems are purchased from
single sources. The Company believes that alternative sources of supply could be
obtained, if necessary, without major interruption in production.
(v) Proprietary Protection
At September 30, 1997 the Company owned 96 issued U.S. patents, with
expiration dates ranging from 1997 to 2014. The Company also has various U.S.
and foreign registered trademarks.
The Company does not believe that its present operations are materially
dependent upon the proprietary protection that may be available to the Company
by reason of any one or more of such patents. Moreover, as its patent position
has not been tested with the exception of the litigation referred to elsewhere
herein under "Legal Proceedings," no assurance can be given as to the
effectiveness of the protection afforded by its patent rights.
(vi) Customers
Intel accounted for approximately 16% and 13% of the Company's consolidated
sales during its fiscal years ended September 30, 1997 and 1996. No other
customers accounted for more than 10% of such sales during the fiscal years
ended September 30, 1997, 1996 and 1995, respectively.
5
(vii) Backlog
At September 30, 1997 the Company's backlog was approximately $30.0 million
as contrasted with approximately $14.9 million and $22.5 million at September
30, 1996 and 1995, respectively. The Company believes that most of its backlog
at September 30, 1997 will be completed prior to the close of fiscal year 1998.
The Company does not believe that its backlog at any particular time is
necessarily indicative of its future business.
(viii) Competition
The Company believes that machine vision has evolved into a new industry
over the past several years, in which a number of machine vision-based firms
have developed successful industrial applications for the technology. The
Company is aware that a large number of companies, estimated to be upward of 100
firms, entered the industry in the 1980's and that most of these were small
private concerns. Over the last several years the number of competitors has
narrowed to less than 25. The Company believes this is attributable, to a large
extent, to consolidation within the industry. Based upon the breadth of its
product lines, its customer base, and its level of revenues, the Company
believes that it is a significant factor in the machine vision industry.
(ix) Research and Development
Company-sponsored research and development efforts over recent years have
been largely devoted to continued development of advanced 2-D and 3-D vision
technology and applications software for use in various inspection and process
control automation systems. Research and development has also included activity
related to automatic identification technology development. Research and
development expenditures, net of capitalized software development costs,
aggregated approximately $23,410,000, $18,405,000 and $15,751,000 for the
Company's fiscal years ended September 30, 1997, 1996 and 1995, respectively. In
its fiscal years ended September 30, 1997, 1996 and 1995, the Company
capitalized $4,842,000, $2,630,000 and $535,000, respectively, of its software
development costs in accordance with the provisions of Statement of Financial
Accounting Standards No. 86.
(x) Environmental Regulation
The Company believes that compliance with Federal, state, local and, where
applicable, foreign environmental regulations does not have any material effect
on its capital expenditures, earnings or competitive position.
6
(xi) Employees
At December 12, 1997 the Company employed 800 persons, of whom 314 were
engineering and other technical personnel. None of the Company's employees is a
member of a labor union.
(d) Financial Information Relating to Foreign and Domestic Operations and
Export Sales
Revenues from unaffiliated customers generated by the Company's European
subsidiaries were $16,812,000, $16,226,000 and $16,762,000 for the years ended
September 30, 1997, 1996 and 1995, respectively.
Total revenues to customers outside the U.S. were $104,222,000, $92,957,000
and $79,334,000 for the years ended September 30, 1997, 1996 and 1995,
respectively.
Export sales from the Company's United States operations to unaffiliated
customers were as follows:
(In Thousands)
Year Ended September 30,
-------------------------
1997 1996 1995
------- ------- -------
Europe $16,413 $ 9,160 $ 8,665
Asia/Pacific Rim 69,082 66,398 53,609
Other 1,915 1,173 298
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Total $87,410 $76,731 $62,572
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Item 2. Properties.
The Company's executive offices and electronics division are located in
Hauppauge, New York. Systemation's operations are in New Berlin, Wisconsin and
Vanguard's operations are in Tucson, Arizona.
Acuity's operations are located in Nashua, New Hampshire while those of
CiMatrix are located in Canton, Massachusetts. The Company also maintains sales
and service facilities in four European countries and in Singapore. All of those
premises are leased at an aggregate annual cost of approximately $2.5 million.
Expiration dates of the respective leases range from 1998 to 2011.
7
Item 3. Legal Proceedings.
On or about October 22, 1992, the Company instituted an action in the
United States District Court for the Eastern District of New York against
defendant Cybo Systems, Inc., ("Cybo"), entitled Robotic Vision Systems, Inc. v.
Cybo Systems, Inc. a/k/a Cybot Systems, Inc., alleging that the defendant
breached certain agreements between the parties with respect to the sale by the
Company to the defendant of all of the assets of its welding and cutting systems
business.
On or about December 4, 1992, Cybo filed and served an answer denying the
substantive allegations of the Company's complaint. In addition, Cybo asserted
counterclaims against the Company alleging, among other things, breach of
contract and warranties, fraud, bad faith, trespass and conversion and is
seeking aggregate damages in excess of $10.0 million. Shortly thereafter, the
Company moved to dismiss certain of Cybo's counterclaims on the ground that Cybo
failed to plead fraud with the requisite particularity. By Order dated March 20,
1993, the Court (i) granted the Company's motion to dismiss without prejudice,
and (ii) granted Cybo leave to serve an amended answer with amended
counterclaims by April 19, 1993. Cybo has since served an amended answer and
counterclaims which purport to plead fraud with the requisite particularity. All
pre-trial discovery has been completed, and the Company has moved for partial
summary judgment to dismiss most of the damage claims. No decision has been
rendered as yet. The Company, upon the advice of its general counsel, believes
Cybo's counterclaims are without merit and that the ultimate outcome of this
matter will not have a material adverse effect on the Company's financial
position or results of operations. Except for certain matters relating to the
issue of damages, the parties have completed discovery.
RVSI is currently a party to two separate patent law suits (a third having
been dismissed), both commenced by RVSI, in the United States District Court for
the Central District of California with View Engineering, Inc. ("View"), a
wholly owned subsidiary of General Scanning, Inc., a company that competes with
RVSI in the assembly and distribution of 3-D machine vision-based products. The
law suits involve the question of whether View is infringing a number of RVSI
patents in the assembly and distribution of its own 3-D machine vision-based
products.
In the first action, the trial court dismissed the patent infringement
claims filed by RVSI and held that the relevant provisions of RVSI's patent at
issue in that case were invalid. In the second action, the trial court
determined that View's machines did not infringe three of RVSI's patents. Upon
RVSI's appeal, the Federal Circuit Court of Appeals overruled the trial court
and remanded the first action to the trial court for further discovery and,
ultimately, trial. RVSI's appeal of the trial court's ruling in the second
action was unsuccessful. The parties in the third action have completed
discovery and trial commenced on December 10,
8
1997. RVSI believes that the ultimate outcome of the two remaining proceedings
will not have a material adverse effect upon RVSI.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
9
PART II
Item 5. Market for the Company's Common Stock and Related Security Holder
Matters.
(a) Market Information.
The Company's Common Stock is quoted on The Nasdaq National Market under
the symbol ROBV. The following table sets forth the high and low closing prices
for the Company's Common Stock for the periods indicated:
Fiscal Quarter Ended High Low
- ------------------------- -------- ---------
September 30, 1997 $ 16-7/8 $ 11-3/4
June 30, 1997 11-7/8 8-3/8
March 31, 1997 18-1/4 10-3/4
December 31, 1996 15-3/8 10
September 30, 1996 $ 17-1/4 $12-13/16
June 30, 1996 20-5/16 14-1/2
March 31, 1996 24-1/2 12-7/8
December 31, 1995 27-1/8 19-3/8
On December 12, 1997 the closing price of the Company's Common Stock was
$13 per share.
(b) Holders
The number of holders of record of the Company's Common Stock as of
December 12, 1997 was approximately 5,900.
(c) Dividends
The Company has not paid any cash dividends since its inception and does
not contemplate doing so in the near future. Any decisions as to the future
payment of dividends will depend on the earnings and financial condition of the
Company and such other factors as the Board of Directors deems relevant at that
time.
In addition, the payment of cash dividends is restricted under the terms of
the Company's revolving credit arrangements with its bank.
10
Item 6. Selected Consolidated Financial Data
Statement of Operation Data:
(In Thousands, except per share amount)
Fiscal Year Ended September 30,
1997 1996 1995 1994 1993
-------- ------- ------- -------- ---------
Revenues $152,103 $143,540 $122,125 $90,994 $73,125
Income before (provision)
benefit from income taxes,
discontinued operations
and cumulative effect of
change in accounting
priciple $ 9,037 $ 8,594 $ 10,903 $ 4,638 $ 735
(Provision) benefit from
income taxes $ (792) $ 1,132 $ 92 $ (1) $ 45
Income before discontinued
operations and cumulative
effect of change in
accounting principle $ 8,245 $ 9,726 $ 10,995 $ 4,637 $ 780
Discontinued operations $ - $ - $ - $ - $ (37)
Cumulative effect of change
in accounting principle $ - $ - $ - $ - $ 327
Net income $ 8,245 $ 9,726 $ 10,995 $ 4,637 $ 1,070
Net income per common share
before discontinued
operations and cumulative
effect of change in
accounting principle $ .38 $ .45 $ .55 $ .25 $ .05
Net income per common share $ .38 $ .45 $ .55 $ .25 $ .06
Selected Balance Sheet Data:
(In Thousands)
At September 30,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total Assets $126,731 $96,985 $78,706 $43,092 $33,371
Current Liabilities $ 45,934 $34,108 $32,815 $20,154 $21,854
Total Liabilities $ 54,274 $34,587 $34,335 $22,734 $23,229
Stockholders' equity $ 72,457 $62,398 $44,371 $20,358 $10,142
Working capital $ 53,324 $45,976 $35,358 $15,246 $ 6,560
Reference is made to Item 7 hereof and the Notes to the Consolidated
Financial Statements for a discussion of the financial data presented above.
11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Years Ended September 30, 1997 and 1996
Revenues of $152,103,000 for the year ended September 30, 1997 represent an
increase of $8,563,000, or 6.0%, over revenues of $143,540,000 for the year
ended September 30, 1996. The increase in revenues was primarily attributable to
increased shipments of RVSI's LS-3000 Series and GS-5000 Series semiconductor
lead inspection systems.
The gross profit margin for the fiscal year ended September 30, 1997 was
50%, as compared to 48% for the fiscal year ended September 30, 1996.
Continued development of the LS-3000 and GS-5000 Series of lead scanning
systems, computerized visual inspection equipment, and barcode scanning and data
collection equipment, as well as the ID-1 aircraft wing ice detection system,
primarily accounted for $23,410,000 in research and development expense, net of
capitalized software development costs, during the year ended September 30,
1997, as compared to $18,405,000 during fiscal 1996. In its fiscal year
ended September 30, 1997, the Company capitalized $4,842,000 of its software
development costs as compared to $2,630,000 over the comparable 1996 period in
accordance with the provisions of Statement of Financial Accounting Standards
No. 86 ("SFAS No. 86"). Capitalized software development costs for the fiscal
year ended September 30, 1997 include $848,000 of costs related to certain
acquired subsidiaries. These subsidiaries had not capitalized any software
development costs in prior years because prior to their respective acquisitions
by the Company they had not utilized detailed program designs in the software
development process. In general, the software development costs incurred by
these subsidiaries between the time working models were available and the
related software projects were released to customers were not material.
Selling, general and administrative costs of $42,828,000 increased by
$3,225,000, or 8.0%, for the year ended September 30, 1997 as compared to
$39,603,000 in the prior fiscal year, primarily as a result of increased
marketing and distribution costs. For the year ended September 30, 1997, net
interest income was $2,000 as compared to $392,000 in the comparable period in
1996. The decrease is a result of using a significant portion of the Company's
cash to finance growing accounts receivable and inventory as the Company's
revenue growth pace increases.
Net income for the year ended September 30, 1997 was $8,245,000, or $.38
per share, as compared to net income of
12
$9,726,000, or $.45, for the year ended September 30, 1996.
During the fiscal year ended September 30, 1997, the Company recorded a net
provision for income taxes of $792,000. The current year provision primarily
relates to minimum federal and state income taxes which were partially offset by
a decrease in the valuation allowance relating to deferred tax assets which
emanated from a change in the legal structure of certain subsidiaries which
eliminated certain limitations on the Company's utilization of net operating
losses of acquired subsidiaries. During the fiscal year ended September 30,
1996, the Company recorded a net benefit from income taxes of $1,132,000. This
benefit primarily resulted from a decrease in the valuation allowance relating
to deferred tax assets which emanated from the Company's profitable operations
in fiscal 1996, and the extent to which the Company substantiated projected
future earnings.
The net deferred tax assets at September 30, 1997 and 1996 of $8,820,000
and $8,155,000, respectively, are equivalent to the benefit to be derived from
net operating loss carryforwards, and net deductible temporary differences that
were expected to be utilized to offset future taxable income projected as of the
respective balance sheet dates. The valuation allowance as of September 30, 1997
relates primarily to net operating loss carryforwards and tax credit
carryforwards of Acuity and CiMatrix which are subject to annual limitations.
Years Ended September 30, 1996 and 1995
Revenues of $143,540,000 for the year ended September 30, 1996 represent an
increase of $21,415,000, or 18%, in comparison to revenues of $122,125,000 for
the year ended September 30, 1995. The increase in revenues was primarily
attributable to substantially increased shipments of RVSI's LS-3000 Series and
GS-5000 Series semiconductor lead inspection systems.
Gross profit margins for the fiscal years ended September 30, 1996 and 1995
were 48% and 51%, respectively.
Continued development of the LS-3000 and GS-5000 Series of lead scanning
systems, computerized visual inspection equipment and barcode scanning and data
collection equipment, as well as the ID-1 aircraft wing ice detection system,
primarily accounted for $13,405,000 in research and development expense, net of
capitalized software development costs, during the year ended September 30,
1996, as contrasted with $15,751,000 during fiscal 1995. In its fiscal year
ended September 30, 1996, the Company capitalized $2,630,000 of its software
development costs as compared to $535,000 over the comparable 1995 period in
accordance with the provisions of SFAS No. 86. Capitalized software development
costs for the fiscal year ended September 30, 1996 include $1,534,000 of costs
related to certain acquired subsidiaries. These subsidiaries had not capitalized
any software development costs in prior years because prior to their respective
acquisitions by the Company they had not utilized detailed program designs in
the software development process. In general, the software development costs
incurred by these subsidiaries between the time working models were available
and the related software projects were released to customers were not material.
Selling, general and administrative costs increased by $5,346,000, or 15%
for the year ended September 30, 1996 as compared to the prior fiscal year,
primarily as a result of increased marketing and distribution costs. The
Company incurred $2,661,000 for merger expenses primarily relating to the
acquisition of Computer Identics by the Company on August 30, 1996. For the year
ended September 30, 1996, net interest income was $392,000 as compared to net
interest expense of $18,000 in the comparable period in 1995. The increase was a
result of investing additional available funds.
Liquidity and Capital Resources
13
The Company's operating, investing and financing activities for the year
ended September 30, 1997 utilized net cash and cash equivalents of $12,727,000
as follows:
o Operating activities utilized $12,492,000;
o $6,869,000 was used to purchase property and equipment, primarily
computer, engineering and demonstration equipment;
o $2,319,000 was received from the maturity of investments;
o $3,144,000 was used to pay for the purchase of a business;
o $8,000,000 was proceeds from long-term borrowings;
o $1,779,000 was used to repay short-term borrowings;
o Other financing activities provided $1,049,000 primarily through the
issuance of Common Stock upon the exercise of stock options and
warrants;
o The effect of exchange rate changes on cash and cash equivalents was
$189,000.
The Company's inventories at September 30, 1997 of $33,958,000 increased by
$10,368,000 from $23,590,000 as of September 30, 1996 primarily to support
higher production volumes and customer requirements for shorter lead times.
Accounts receivable at September 30, 1997 of $47,873,000 increased by
$20,535,000 from $27,338,000 as of September 30, 1996 primarily due to higher
operating levels and increased sales to larger customers with longer payment
terms.
On June 27, 1997, the Company entered into a credit agreement with a bank
which consisted of an $8,000,000 term loan and a $6,000,000 revolving credit
facility. The revolving credit facility was subsequently increased to
$11,000,000 on December 3, 1997. The term loan is payable in 60 monthly
installments of $133,333 and bears interest at 8.05 percent through June 27,
1999. Effective June 27, 1999, the interest rate will adjust, at the discretion
of the Company, to either LIBOR plus 1.75 percent or a fixed rate equal to the
average yield on a five-year U.S. Treasury security plus 2 percent. The
revolving credit facility expires on May 31, 2000 and borrowings bear interest
at LIBOR plus 1.5 percent. The Company is required to pay a commitment fee of
one quarter of one percent per annum on any unused portion of the credit
facility. Borrowings under the credit agreement are secured by substantially
all of the Company's assets and are guaranteed by all domestic subsidiaries.
The terms of the credit agreement,
14
among other matters, require the Company to maintain certain tangible net worth,
debt to equity, working capital, and debt service coverage ratios and place
restrictions on additional investments, indebtedness and the payment of cash
dividends. The amount outstanding under these credit facilities at September
30, 1997 was $12,524,000.
CiMatrix has an unsecured line of credit with a domestic bank which
provides for maximum borrowings of $2,500,000. Borrowings under this line of
credit may be made in German Deutschmarks, French Francs, or British Pounds and
bear interest at various rates dependent upon the currency borrowed and are
payable on demand. The interest rate on borrowings outstanding at September 30,
1997 range from 6.5 to 8.5 percent. The amount outstanding at September 30,
1997 was $1,665,000.
The Company anticipates that its working capital needs for fiscal 1998 will
be satisfied by operating revenues and, if necessary, through borrowings under
the existing line of credit or additional lines of credit.
Foreign Currency Transaction
The Company does not currently engage in international currency hedging
transactions to mitigate its foreign currency exposure. Included in the foreign
exchange gain (loss) are unrealized foreign exchange gains and losses resulting
from the currency remeasurement of the financial statements (primarily
inventories, accounts receivable and intercompany debt) of the foreign
subsidiaries of the Company into U.S. dollars. To the extent the Company is
unable to match revenue received in foreign currencies with expenses paid in the
same currency, it is exposed to possible losses on international currency
transactions.
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which was adopted by the
Company in fiscal 1997. The Company has chosen not to implement the fair value
based accounting method for employee stock options, but has elected to disclose
pro forma net income and earnings per share as if such method has been used to
account for stock-based compensation cost as described in SFAS No. 123.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS No. 128"), which will be adopted by the
Company on December 31, 1997. SFAS No. 128, which supersedes Accounting
Principles Board Opinion No. 15, "Earnings per Share", ("APB No. 15") replaces
primary and fully diluted earnings per share with basic and fully diluted
earnings per share, respectively. Had earnings per share been calculated in
accordance with SFAS No. 128, basic earnings per share for the years ended
September 30, 1997, 1996 and 1995 would have been $0.39, $0.48 and $0.62,
respectively. Diluted earnings per share for the years ended September 30, 1997,
1996 and 1995 would have been $0.38, $0.45, and $0.55, respectively.
Effect of Inflation
Management believes that the effect of inflation has not been material
during each of the years ended September 30, 1997, 1996 and 1995, respectively.
15
Forward-Looking Statements and Associated Risks
This Report contains forward-looking statements including statements
regarding, among other items, business strategy, growth strategy and anticipated
trends in RVSI's business, which are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The words
"believe," "expect" and "anticipate" and similar expressions identify forward-
looking statements, which speak only as of the date the statement is made.
These forward-looking statements are based largely on RVSI's expectations and
are subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond RVSI's control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this Report, including
those set forth in "Risk Factors," below, describe factors, among others, that
could contribute to or cause such differences. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this Report will in fact transpire or prove to be accurate.
Risk Factors
Fluctuations in the Semiconductor Market. Certain of RVSI's products,
----------------------------------------
particularly the products of its Semiconductor Equipment Group, are manufactured
for use by the semiconductor industry. Accordingly, the future financial results
of RVSI will depend significantly on the market demand for integrated circuit
devices. The semiconductor industry has been subject to significant market
fluctuations and periodic downturns. Such downturns have had a disproportion-
ately negative effect on manufacturers of semiconductor capital equipment.
Customer Concentration. RVSI's sales have been historically concentrated
----------------------
in a small number of customers at any time, although the specific customers
change over time. Sales to Intel accounted for approximately 16% and 15%,
respectively, of RVSI's revenues during the fiscal years ended September 30,
1997 and 1996. No other customers accounted for more than 10% of sales during
such fiscal years. The loss or any significant reduction in Intel's orders for
RVSI's products may be expected to materially adversely affect RVSI's operations
and prospects.
International Sales. A majority of RVSI's sales in recent years has been
-------------------
export sales to the Far East. For the fiscal year ended September 30, 1997,
export sales accounted for approximately 57% of RVSI's revenues. RVSI's
international business may be affected by changes in demand resulting from
fluctuations in currency exchange rates, trade restrictions, duties, general and
economic conditions, and other political and economic factors. Although RVSI
currently attempts to mitigate its direct exposure to
16
exchange rate fluctuations by transacting most international business in United
States dollars, there can be no assurance that their international operations
will escape the risk of fluctuating currency values, hard currency shortages, or
controls on currency exchange. To the extent foreign currencies weaken relating
to the U.S. dollar, RVSI's products could become more expensive in these
countries. This could adversely affect both RVSI's sales volumes and
profitability.
Product Protection and Intellectual Property. RVSI relies primarily on a
--------------------------------------------
combination of patent registrations, trade secrets, confidentiality procedures,
contractual provisions and copyright and trademark laws to protect its
proprietary rights. RVSI seeks to protect its software and other written
materials under trade secret and copyright laws, which afford only limited
protection. At September 30, 1997, RVSI owned 96 issued U.S. patents relating
to its 2-D and 3-D vision technology and other products, as well as the rights
to several U.S. patent applications relating to such technology. Nonetheless,
RVSI does not believe that its present operations are materially dependent upon
the proprietary protection that may be available to RVSI by reason of any one or
more of such patents. Moreover, as RVSI's patent position has not been tested
with the exception of the litigation discussed under "Legal Proceedings,"
elsewhere herein, there can be no assurance given as to the effectiveness of the
protection afforded by its patent rights.
Despite RVSI's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of its products or to obtain and use
information that RVSI regards as proprietary. The laws of some foreign
countries may not protect RVSI's proprietary rights to as great an extent as do
the laws of the United States, if at all. There can be no assurance that RVSI's
means of protecting its proprietary rights will be adequate or that RVSI's
competitors will not independently develop comparable or superior technologies.
Third parties may assert that RVSI's products infringe their proprietary rights.
Should litigation with respect to any such claims commence, such litigation
could be expensive and time consuming and could materially and adversely affect
RVSI's results of operations regardless of the outcome of the litigation.
Fluctuating Quarterly Results of Operations. RVSI has experienced, and in
-------------------------------------------
the future may be expected to continue to experience, substantial variations in
its periodic results of operations as a result of a number of factors, many of
which are outside of its control. In particular, RVSI's operating results may
vary because of downturns in the semiconductor industry, changes in economic
conditions, or technology changes affecting its principal products. Any of
these factors could cause RVSI's operating results to fluctuate significantly
from period to period, including on a quarterly basis.
17
Technological Risks. The future success of RVSI will depend, to a
-------------------
significant extent, on its ability to enhance, develop, manufacture profitably,
and deliver on a timely basis, technologically advanced, quality products and
its ability to achieve market acceptance for such products. There can be no
assurance that RVSI will be successful in introducing products or product
enhancements once developed, or that RVSI's products will not be rendered
obsolete by new industry standards or competitive products or technologies.
Competition. The markets for RVSI's products are extremely competitive.
-----------
Some of RVSI's competitors are more established and have greater financial,
technological, production, and marketing resources than RVSI. Competition could
intensify if new companies enter such markets or if existing competitors expand
their product lines. An increase in competition could have a material adverse
effect on RVSI's business and operating results. Maintaining competitive
position will require continued investment by RVSI in research and development
and sales and marketing.
Dependence on Key Personnel. RVSI's success depends in large part upon its
---------------------------
ability to hire and retain qualified technical and management personnel. In
recent periods, RVSI has encountered some difficulty in recruiting certain
qualified technical personnel. The inability to hire and retain such personnel
could have a material adverse effect on RVSI. There can be no assurance that
RVSI will be able to hire such qualified personnel.
Item 8. Financial Statements and Supplementary Data.
Reference is made to Item 14(a)1 herein.
Item 9. Disagreements on Accounting and Financial Disclosure.
There have been no changes in the Company's independent auditors due to
disagreements on accounting and financial disclosure during the 24 months prior
to September 30, 1997.
18
PART III
Item 10. Directors and Executive Officers of the Company.
Item 10 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1997.
Item 11. Executive Compensation.
Item 11 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1997.
Item 12. Security Ownership of Certain Beneficial Owners & Management.
Item 12 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1997.
Item 13. Certain Relationships and Related Transactions.
Item 13 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of September 30, 1997.
19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(i) Financial Statements.
Independent Auditors' Reports
Consolidated Balance Sheets at September 30, 1997 and
September 30, 1996
Consolidated Statements of Income for the Years Ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(ii) Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts
(iii) Exhibits.
10(a) Agreement and Plan of Merger and Reorganization,
dated as of October 30, 1997 by and among the
Company, Vanguard Automation, Inc. and RVSI
Southwest Acquisition Corp.(A)
11 Computation of per share amounts
21 Subsidiaries of Company
23(a) Independent Auditors' Consent -Deloitte & Touche
LLP
23(b) Consent of Independent Public Accountants - Arthur
Andersen LLP
20
23(c) Consent of Independent Public Accountants - Ernst
& Young LLP
27 Financial Data Schedule
- ------------------
(A) Denotes document filed as Exhibit to the Company's Current Report on Form
8-K dated December 18, 1997 and incorporated herein by reference.
(b) Reports on Form 8-K:
None.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Village of
Hauppauge, State of New York, on the 28th day of December, 1997.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ Pat V. Costa
----------------------------
Pat V. Costa, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
--------- -------- ----
Chairman of the
Board, President
and Director
(Principal Executive
Officer) December 28, 1997
/s/ Pat V. Costa
- -----------------------
Pat V. Costa
Executive Vice
President, Secretary/
Treasurer and
Director (Principal
Financial Officer) December 28, 1997
/s/ Robert H. Walker
- ----------------------
Robert H. Walker
Executive Vice President December 28, 1997
/s/Steven Bilodeau and Director
- ----------------------
Steven Bilodeau
Senior Vice President
and Director December 28, 1997
/s/ Howard Stern
- ----------------------
Howard Stern
22
Director December 28, 1997
/s/ Jay M. Haft
- ----------------------
Jay M. Haft
Director
- ----------------------
Donald J. Kramer
Director
- ----------------------
Mark J. Lerner
Director
- ----------------------
Frank A. DiPietro
Director
- ----------------------
Tomas Cohn
23
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
- --------------------------------------------------------------------------------
Independent Auditors' Report of Deloitte & Touche LLP F-1
Report of Arthur Andersen LLP, Independent Public Accountants F-2
Report of Ernst & Young LLP, Independent Auditors F-3
Consolidated Balance Sheets as of September 30, 1997 and 1996 F-4
Consolidated Statements of Income for the Years Ended
September 30, 1997, 1996 and 1995 F-5
Consolidated Statements of Stockholders' Equity
for the Years Ended September 30, 1997, 1996 and 1995 F-6
Consolidated Statements of Cash Flows
for the Years Ended September 30, 1997, 1996 and 1995 F-7 to F-8
Notes to Consolidated Financial Statements
for the Years Ended September 30, 1997, 1996 and 1995 F-9 to F-24
Schedule II: Valuation and Qualifying Accounts F-25
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Robotic Vision Systems, Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of Robotic Vision
Systems, Inc. and subsidiaries (the "Company") as of September 30, 1997 and
1996, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended September 30,
1997. Our audits included the financial statement schedule listed in the
index at item 14(a)(1) and (2). These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the
consolidated financial statements of Acuity Imaging, Inc. and subsidiaries
("Acuity"), a wholly-owned subsidiary, for the year ended September 30, 1995,
which statements reflect total revenues constituting 16% of consolidated total
revenues for the year ended September 30, 1995. We also did not audit the
consolidated financial statements of Computer Identics Corporation and
subsidiaries ("CI"), a wholly-owned subsidiary, for the year ended December
31, 1995, which statements reflect total revenues constituting 23% of
consolidated total revenues for the year ended September 30, 1995. Those
financial statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts
included for Acuity and CI for the year ended September 30, 1995, is based
solely on the reports of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
such consolidated financial statements present fairly, in all material
respects, the financial position of the Company at September 30, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Jericho, New York
December 9, 1997
F-1
ARTHUR ANDERSEN LLP
REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acuity Imaging, Inc.:
We have audited the consolidated balance sheet of Acuity Imaging, Inc. (a
Delaware corporation and a wholly owned subsidiary of Robotic Vision Systems,
Inc.) and subsidiaries as of September 30, 1995, and the related consolidated
statements of operations and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Acuity Imaging, Inc.
and subsidiaries at September 30, 1995, and the results of their operations and
their cash flows for the year ended in conformity with generally accepted
accounting principles.
On September 20, 1995, Robotic Vision Systems, Inc. acquired Acuity Imaging,
Inc.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 6, 1995
F-2
ERNST & YOUNG LLP
REPORT
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors
and Stockholders of Computer Identics Corporation:
We have audited the accompanying consolidated balance sheet of Computer
Identics Corporation and subsidiaries as of December 31, 1995 and the
related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended (not presented separately herein). Our
audits also included the related financial statement schedule - Valuation
and Qualifying Accounts, for the year ended December 31, 1995 (not presented
separately herein). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Computer
Identics Corporation and subsidiaries at December 31, 1995 and the
consolidated results of their operations, and their cash flows for year
ended, in conformity with generally accepted accounting principles. Also, in
our opinion the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 8, 1996
F-3
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
------------------------------------------------------------------------------
NOTES 1997 1996
----- --------- ---------
ASSETS (Note 9)
- --------
CURRENT ASSETS:
Cash and cash equivalents $ 5,465 $ 18,192
Investments - 1,500
Accounts receivable, net 3 47,873 27,338
Inventories 4 33,958 23,590
Deferred income taxes 5 10,643 8,116
Prepaid expenses and other 1,319 1,348
-------- --------
Total current assets 99,258 80,084
PLANT AND EQUIPMENT, net 6 12,672 9,266
INVESTMENTS - 665
GOODWILL, net of accumulated amortization of $290
and $61 in 1997 and 1996, respectively 2 6,207 2,627
OTHER ASSETS 5,7 8,594 4,343
-------- --------
$126,731 $ 96,985
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------
CURRENT LIABILITIES:
Note payable and current portion of long-term debt 9 $ 8,189 $ 8,225
Accounts payable 21,538 11,880
Accrued expenses and other current liabilities 8 15,079 12,332
Advance contract payments received 1,128 1,671
-------- --------
Total current liabilities 45,934 34,108
LONG-TERM DEBT 9 6,000 -
DEFERRED INCOME TAXES 5 1,823 -
OTHER LIABILITIES 517 479
-------- --------
TOTAL LIABILITIES 54,274 34,587
-------- --------
COMMITMENTS AND CONTINGENCIES 11
STOCKHOLDERS' EQUITY: 12
Common stock, $.01 par value; shares authorized,
30,000,000; shares issued and outstanding,
1997 - 21,063,000 and 1996 - 20,697,000 211 207
Additional paid-in capital 145,229 143,264
Accumulated deficit (73,150) (81,395)
Unrealized gain on investments available for sale - 147
Cumulative translation adjustment 167 175
-------- --------
Total stockholders' equity 72,457 62,398
-------- --------
$126,731 $ 96,985
======== ========
See notes to consolidated financial statements.
F-4
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------------------
NOTES 1997 1996 1995
----- ---- ---- ----
REVENUES 14, 15 $152,103 $143,540 $122,125
COST OF REVENUES 76,761 74,669 59,891
-------- -------- --------
GROSS PROFIT 75,342 68,871 62,234
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Research and development costs 23,410 18,405 15,751
Selling, general and administrative expenses 42,828 39,603 34,257
Merger expenses 2 69 2,661 1,305
Interest income (717) (1,125) (518)
Interest expense 715 733 536
-------- -------- --------
66,305 60,277 51,331
-------- -------- --------
INCOME BEFORE INCOME TAXES 9,037 8,594 10,903
INCOME TAX PROVISION (BENEFIT) 5 792 (1,132) (92)
-------- -------- --------
NET INCOME $ 8,245 $ 9,726 $ 10,995
-------- -------- --------
NET INCOME PER SHARE $0.38 $ 0.45 $ 0.55
--------- -------- --------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,721 21,386 19,872
--------- -------- --------
See notes to consolidated financial statements.
F-5
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL
NUMBER PAID-IN ACCUMULATED DEFERRED
NOTES OF SHARES AMOUNT CAPITAL DEFICIT COMPENSATION
-----------------------------------------------------------------------
Balance, October 1, 1994 17,023 $ 170 $121,521 $(101,397) $ (54)
Shares and warrants issued
in connection with
private equity
placement, net of
offering costs 12 1,110 11 9,375 - -
Shares issued in
connection with private
placement
of subsidiary, net of
offering costs 12 119 2 1,763 - -
Warrants issued for
professional services 12 - - 92 - -
Shares issued in
connection with the
exercise
of stock options and
warrants 12 746 7 1,476 - -
Other stock transactions 40 - 309 - (6)
Change in year end of
pooled companies 2 - - - (101) -
Translation adjustment - - - - -
Net income - - - 10,995 -
------ ------ -------- --------- ----------
Balance, September 30, 1995 19,038 190 134,536 (90,503) (60)
Shares issued in
connection with the
exercise of
stock options and
warrants 12 1,511 15 5,821 - -
Shares issued in
connection with the
acquisition
of Northeast Robotics,
Inc. accounted for as
a purchase 2 139 1 2,675 - -
Warrants issued for
professional services 12 - - 74 - -
Other stock transactions 9 1 158 - 60 -
Change in year end of
pooled companies 2 - - - (618) -
Change in net unrealized
holding gains 1 - - - - -
Translation adjustment - - - - -
Net income - - - 9,726 -
------ ------ -------- --------- ----------
Balance, September 30, 1996 20,697 207 143,264 (81,395) -
Shares issued in
connection with the
exercise of
stock options and
warrants 12 384 4 1,839 - -
Other stock transactions (18) - 126 - -
Change in net unrealized
holding gains 1 - - - - -
Translation adjustment - - - - -
Net income - - - 8,245 -
------ ------ -------- --------- ----------
Balance, September 30, 1997 21,063 $ 211 $145,229 $ (73,150) $-
======= ====== ======== ========= ==========
UNREALIZED CUMULATIVE TOTAL
GAIN ON TRANSLATION STOCKHOLDERS'
INVESTMENTS ADJUSTMENT EQUITY
------------ ------------ --------------
Balance, October 1, 1994 $ - $ 118 $ 20,358
Shares and warrants issued
in connection with
private equity
placement, net of
offering costs - - 9,386
Shares issued in
connection with private
placement
of subsidiary, net of
offering costs - - 1,765
Warrants issued for
professional services - - 92
Shares issued in
connection with the
exercise
of stock options and
warrants - - 1,483
Other stock transactions - - 303
Change in year end of
pooled companies - - (101)
Translation adjustment - 90 90
Net income - - 10,995
------------ ----- ----------
Balance, September 30, 1995 - 208 44,371
Shares issued in
connection with the
exercise of
stock options and
warrants - - 5,836
Shares issued in
connection with the
acquisition
of Northeast Robotics,
Inc. accounted for as
a purchase - - 2,676
Warrants issued for
professional services - - 74
Other stock transactions - - 219
Change in year end of
pooled companies - - (618)
Change in net unrealized
holding gains 147 - 147
Translation adjustment - (33) (33)
Net income - - 9,726
------------ ----- ----------
Balance, September 30, 1996 147 175 62,398
Shares issued in
connection with the
exercise of
stock options and
warrants - - 1,843
Other stock transactions - - 126
Change in net unrealized
holding gains (147) - (147)
Translation adjustment - (8) (8)
Net income - - 8,245
------------ ----- -----------
Balance, September 30, 1997 $ - $ 167 $ 72,457
============ ===== ===========
See notes to consolidated financial statements.
F-6
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(IN THOUSANDS)
- -------------------------------------------------------------------
1997 1996 1995
-------- ------- -------
OPERATING ACTIVITIES:
Net income $ 8,245 $ 9,726 $10,995
Adjustments to reconcile net income
to net cash (used in) provided by operating activities:
Deferred income taxes (93) (2,881) (1,729)
Depreciation and amortization 4,820 3,221 2,354
Other (693) 1,096 397
Changes in operating assets and liabilities (net of
effects of business acquired):
Accounts receivable (20,190) (6,039) (7,401)
Inventories (10,429) (4,065) (8,922)
Prepaid expenses and other current assets (481) (792) (102)
Other assets (4,803) (2,853) (854)
Accounts payable 8,815 (444) 5,346
Accrued expenses and other current liabilities 3,076 3,705 3,407
Advance contract payments received (698) (23) (350)
Other liabilities (61) (164) (136)
-------- ------- -------
Net cash (used in) provided by operating activities (12,492) 487 3,005
-------- ------- -------
INVESTING ACTIVITIES:
Proceeds from maturity of investments 2,319 1,000 1,500
Additions to plant and equipment, net (6,869) (5,534) (3,540)
Purchase of investments - - (1,484)
Payment for purchase of business (3,144) (77) -
-------- ------- -------
Net cash used in investing activities (7,694) (4,611) (3,524)
-------- ------- -------
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock and warrants - private
equity placement (less offering costs) - - 10,306
Proceeds from the exercise of stock options and warrants 1,271 2,428 1,357
Net proceeds from short-term borrowings (222) 7,752 6,400
Proceeds from long-term borrowings 8,000 - -
Repayment of long-term borrowings (1,779) (5,870) (1,940)
-------- ------- -------
Net cash provided by financing activities 7,270 4,310 16,123
-------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 189 71 44
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (12,727) 257 15,648
CASH AND CASH EQUIVALENTS:
Beginning of year 18,192 17,935 2,618
-------- ------- -------
End of year $ 5,465 $18,192 $18,266
======== ======= =======
See notes to consolidated financial statements.
F-7
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995 (CONTINUED)
- -----------------------------------------------------------------
1997 1996 1995
---- ---- ----
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $658 $699 $554
==== ==== ====
Taxes paid $218 $1,415 $1,056
==== ====== ======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Income tax benefit relating to the
exercise of stock options $572 $3,408 $126
==== ====== ====
Liabilities incurred in connection
with acquisition of business $902 $ - $ -
==== ====== ====
Property and equipment acquired under
capital leases $ 22 $ - $354
==== ====== ====
Issuance of common stock to acquire
Northeast Robotics, Inc. $ - $2,676 $ -
==== ====== ====
Liabilities satisfied by private
offering of common stock
of subsidiary $ - $ - $845
==== ====== ====
See notes to consolidated financial statements.
F-8
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
- ---------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
a. DESCRIPTION OF BUSINESS - Robotic Vision Systems, Inc. ("RVSI") and
-----------------------
subsidiaries (the "Company") designs, manufactures, markets and sells
automated two dimensional and three dimensional machine vision based
products and systems for inspection, measurement and identification, and
is a leader in advanced electro-optical sensor technology. The Company
is also developing an ice detection product for the aviation industry.
b. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
---------------------------
include the financial statements of Robotic Vision Systems, Inc. and its
subsidiaries, all of which are wholly-owned. All significant
intercompany transactions and balances have been eliminated in
consolidation.
c. REVENUES AND COST OF REVENUES - The Company recognizes revenue on its
-----------------------------
standard electronic inspection and measurement products upon shipment.
Revenue from the licensing of software is recognized when the software is
delivered if collectibility is probable and there are no significant
vendor obligations. Engineering service and support revenue is
recognized when such services are rendered. Warranty costs associated
with products sold with warranty protection, as well as other post-
contract support obligations, are estimated based on the Company's
historical experience and recorded in the period the product is sold.
d. CASH AND CASH EQUIVALENTS - Cash and cash equivalents includes money
-------------------------
market accounts and certain debt securities issued by the United States
government with an original maturity of three months or less.
e. INVESTMENTS - At September 30, 1996, investments consisted primarily of
-----------
certain debt securities issued by the United States government. The
Company's intention was to hold such investments until their maturity,
therefore, such investments were recorded at their amortized cost which
was $1,998,000. The carrying value of these investments approximated
market value. In addition, at September 30, 1996, the Company had
marketable equity securities classified as available-for-sale which were
recorded at their fair market value of $167,000, with unrealized gains of
$147,000 included as a separate component of stockholders' equity.
f. INVENTORIES - Inventories are stated at the lower of cost (using the
-----------
first-in, first-out cost flow assumption) or market.
g. PLANT AND EQUIPMENT - Plant and equipment is recorded at cost less
-------------------
accumulated depreciation and amortization and includes the costs
associated with demonstration equipment and other equipment internally
developed by the Company. The cost of internally developed assets
includes direct material and labor costs and applicable factory overhead.
Depreciation is computed by the straight-line method over estimated lives
ranging from two to eight years. Leasehold improvements are amortized
over the lesser of their respective estimated useful lives or lease
terms.
h. IMPAIRMENT OF LONG-LIVED ASSETS - In March 1995, the Financial Accounting
-------------------------------
Standards Board issued Statements of Financial Accounting Standards
("SFAS") No. 121, "Accounting For the Impairment of Long-Lived Assets and
For Long-Lived Assets To Be Disposed Of". SFAS No. 121
F-9
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of.
In accordance with SFAS No. 121, the Company reviews its long-lived
assets, including property and equipment, goodwill and other identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the
Company evaluates the probability that future undiscounted net cash
flows, without interest charges, will be less than the carrying amount of
the assets. Impairment is measured at fair value. The adoption of SFAS
No. 121 had no effect on the Company's consolidated financial statements.
i. SOFTWARE DEVELOPMENT COSTS - Software development costs are capitalized in
--------------------------
accordance with SFAS No. 86. Capitalized software development costs are
amortized primarily over a five-year period, which is the estimated
useful life of the software. Amortization begins in the period in which
the related product is available for general release to customers.
j. RESEARCH AND DEVELOPMENT COSTS - The Company charges research and
------------------------------
development costs for Company-funded projects to operations as incurred.
Research and development costs which are reimbursable under customer-
funded contracts are treated as contract costs.
k. INCOME TAXES - The Company accounts for income taxes under the provisions
------------
of SFAS No. 109, "Accounting for Income Taxes," which requires
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the
Company's consolidated financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
l. FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the Company's
----------------------------
European subsidiaries are translated at the exchange rate in effect at
the balance sheet date. Income statement accounts are translated at the
average exchange rate for the year. The resulting translation
adjustments are excluded from operations and accumulated as a separate
component of stockholders' equity. Transaction gains (losses) are
included in net income and totaled $(267,000), $(52,000) and $167,000 in
1997, 1996 and 1995, respectively.
m. NET INCOME PER SHARE - Net income per common share is computed by dividing
--------------------
each year's net income by the respective weighted average number of
shares of common stock outstanding during the period, after giving effect
to dilutive options and warrants.
n. FAIR VALUE OF FINANCIAL INSTRUMENTS - The following methods and
-----------------------------------
assumptions were used to estimate the fair value of each class of
financial instruments:
a) Cash and Cash Equivalents - The carrying amounts approximate fair value
-------------------------
because of the short maturity of these instruments.
b) Investments - The carrying amounts approximate fair value as determined
-----------
by quoted market prices.
c) Receivables - The carrying amount approximates fair value because of
-----------
the short maturity of these instruments.
F-10
d) Debt - The carrying amounts approximate fair value based on borrowing
----
rates currently available to the Company for loans with similar
terms.
e) Deferred Income Taxes - The carrying amounts approximate fair value
---------------------
because of the short maturity of these instruments.
o. USE OF ESTIMATES - The preparation of financial statements in
-----------------
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The Company's most significant estimates relate to the deferred income
tax valuation allowance, allowance for doubtful accounts receivable,
reserve for excess and obsolete inventory, and warranty reserve.
p. RECLASSIFICATIONS - Certain amounts in the 1995 and 1996 financial
-----------------
statements have been reclassified to conform with the 1997 presentation.
2. ACQUISITIONS
a. VANGUARD AUTOMATION, INC.
-------------------------
On December 9, 1997, the Company acquired the outstanding shares of
Vanguard Automation, Inc. ("Vanguard") for approximately 3,391,000 shares
of the Company's common stock, having a market value of $45,776,000 .
Outstanding Vanguard stock options were converted into stock options to
purchase approximately 152,000 shares of the Company's common stock.
Outstanding Vanguard warrants were converted into warrants to purchase
approximately 182,000 shares of the Company's common stock. Vanguard
produces and markets automated manufacturing equipment used in the
assembly of certain types of semiconductor packaging processes, commonly
referred to as Ball Grid Array. This acquisition will be accounted for as
a pooling of interests.
Unaudited pro forma consolidated statement of income data for the year
ended September 30, 1997, 1996 and 1995 is as follows:
RVSI VANGUARD ELIMINATIONS COMBINED
-------- --------- ------------- --------
1997
----
Revenues $152,103 $18,218 $(979) $169,342
Net income (loss) $ 8,245 $(7,511) $ (86) $ 648
Net income per share $ 0.38 $0.03
1996
----
Revenues $143,540 $10,977 $(542) $153,975
Net income (loss) $ 9,726 $(8,851) $ (40) $ 835
Net income per share $ 0.45 $0.04
1995
----
Revenues $122,125 $23,290 $ - $145,415
Net income $ 10,995 $ 1,153 $ - $ 12,148
Net income per share $ 0.55 $0.58
The unaudited pro forma consolidated statement of income data combines the
historical statement of income data of the Company for the years ended
September 30, 1997, 1996, and 1995 with the historical statement of income
data of Vanguard for the 12 months ended September 30, 1997 and the years
ended December 31, 1996 and 1995, respectively.
F-11
b. TRIGON
------
On June 30, 1997, the Company acquired Trigon Technologies, Inc.
("Trigon"), a privately owned company located in Farmington Hills,
Michigan. Trigon markets a line of 2-D machine vision products for the
semiconductor industry. The purchase price was $3,000,000 in cash plus
contingent consideration based upon the sales level of certain products
sold by Trigon, over a five-year period.
This acquisition has been accounted for as a purchase and, accordingly,
the results of Trigon are included in the consolidated statements of
income of the Company since the date of acquisition and the purchase
price (including acquisition costs) has been allocated to net assets
acquired based upon their fair values. Goodwill relating to the
acquisition of $2,997,000 is being amortized over 15 years. The
historical results of operations of Trigon were not material to the
operations of the Company.
c. SYSTEMATION ENGINEERED PRODUCTS, INC.
-------------------------------------
On October 1, 1996, the Company acquired the outstanding shares of SEP for
1,740,000 shares of the Company's common stock, having a market value at
the date of the merger of approximately $22,838,000. SEP designs
manufactures, markets and sells specialized high speed production
machinery for the electronics component industry. SEP's principle product
lines include tape and reel packaging equipment and automatic optical
inspection systems. This acquisition has been accounted for as a pooling
of interests and, accordingly, the consolidated financial statements have
been restated to include the accounts of SEP for all periods presented.
The accompanying September 30, 1995 consolidated financial statements
include SEP's amounts for the year ended March 31, 1996. The accompanying
consolidated financial statements for the years ended September 30, 1997
and 1996 include the operations of SEP on a common fiscal year. SEP's net
income for the period October 1, 1995 through March 31, 1996 of $558,000,
included twice in the accompanying consolidated statements of income for
the fiscal years ended September 1996 and 1995 as a result of conforming
fiscal years, has been included as an adjustment to consolidated
accumulated deficit. Expenses of $904,000 have been incurred related to
this merger.
d. COMPUTER IDENTICS CORPORATION
-----------------------------
On August 30, 1996, the Company acquired the outstanding shares of
Computer Identics Corporation ("CI") for approximately 2,127,000 shares
of the Company's common stock, having a market value at the date of the
merger of approximately $30,580,000. Outstanding CI stock options were
converted into options to purchase approximately 186,000 shares of the
Company's common stock. Outstanding CI warrants were converted into
warrants to purchase approximately 39,000 shares of the Company's common
stock. CI designs, manufactures, markets and sells standard barcode
products, data collection networks and systems for data collection and
material handling/industrial markets. This acquisition has been
accounted for as a pooling of interests and accordingly, the consolidated
financial statements have been restated to include the accounts of CI for
all periods presented. The accompanying September 30, 1995 consolidated
financial statement include CI's amounts for the year ended December 31,
1995. The accompanying consolidated financial statements for the years
ended September 30, 1997 and 1996 include the operations of CI on a
common fiscal year. CI's net income for the period October 1, 1995
through December 31, 1995 of $60,000 included twice in the accompanying
consolidated statements of income for the fiscal years ended September
1996 and 1995 as a result of conforming fiscal years, has been included
as an adjustment to consolidated accumulated deficit in fiscal 1996.
Included in the operating results of the Company for the year ended
September 30, 1996 are approximately
F-12
$24,661,000 of revenues and approximately $793,000 of net loss of CI
prior to the date of acquisition (August 30, 1996). Expenses of
$1,547,000 have been incurred related to this merger.
e. NORTHEAST ROBOTICS, INC.
------------------------
On May 30, 1996, the Company consummated a merger with Northeast Robotics,
Inc. ("NER"), a privately owned company located in New Boston, New
Hampshire, pursuant to which NER became a wholly owned subsidiary of the
Company (the "NER Merger"). NER markets a line of patented illumination
products to perform reliably in difficult imaging applications involving
highly reflective or uneven surfaces. As a consequence of the NER
Merger, the Company issued approximately 139,000 shares of its common
stock (which had a market value of approximately $2,676,000 on the date
the NER Merger was consummated) to the shareholders of NER in exchange
for all of the outstanding shares of NER common stock.
This acquisition has been accounted for as a purchase and, accordingly,
the results of NER are included in the consolidated statements of income
of the Company since the date of acquisition and the purchase price
(including acquisition costs) has been allocated to net assets acquired
based upon their fair values. Goodwill relating to the acquisition of
$2,688,000 is being amortized over 15 years. The historical results of
operations of NER were not material to the operations of the Company.
f. INTERNATIONAL DATA MATRIX, INC.
-------------------------------
On October 23, 1995, the Company acquired the outstanding shares of
International Data Matrix, Inc. ("IDM") for approximately 370,000 shares
of the Company's common stock, having a market value at the date of the
merger of approximately $8,183,000. IDM is a manufacturer and supplier
of two dimensional bar code reading systems. This acquisition has been
accounted for as a pooling of interests and accordingly, the consolidated
financial statements have been restated to include the accounts of IDM
for all periods presented. IDM's net loss for the period October 1, 1994
through December 31, 1994 of $154,000, included twice in the consolidated
statements of income for the fiscal years ended September 30, 1995 and
1994 as a result of conforming fiscal years, has been included as an
adjustment to the consolidated accumulated deficit in fiscal 1995.
Included in the operating results of the Company for the years ended
September 30, 1996 are approximately $77,000 of revenues and $135,000 of
net loss of IDM prior to the date of acquisition (October 23, 1995).
Expenses of $445,000 have been incurred related to this merger.
g. ACUITY IMAGING, INC. AND SUBSIDIARIES
-------------------------------------
On September 20, 1995, the Company acquired the outstanding shares of
Acuity Imaging, Inc. ("Acuity") for approximately 1,448,000 shares of the
Company's common stock, having a market value at the date of the merger
of approximately $31,141,000. Acuity designs, manufactures and markets
two dimensional machine vision systems for use in industrial automation.
Outstanding Acuity stock options were converted into options to purchase
approximately 114,000 shares of the Company's common stock. This
acquisition has been accounted for as a pooling of interests. Acuity's
net income for the period October 1, 1994 through December 31, 1994 of
$255,000, included twice in the consolidated statements of income for the
fiscal years ended September 30, 1995 and 1994 as a result of conforming
fiscal years, has been included as an adjustment to the consolidated
accumulated deficit in fiscal 1995. Included in the operating results of
the Company for the year ended September 30, 1995 are approximately
$19,153,000 of revenues and $1,188,000 of net loss of Acuity prior to the
date of acquisition (September 20, 1995). Expenses of $1,160,000 have
been incurred related to this merger.
F-13
3. ACCOUNTS RECEIVABLE
Accounts receivable at September 1997 and 1996 consisted of the following:
(IN THOUSANDS)
1997 1996
------- -------
Billed accounts receivable $43,895 $26,432
Unbilled accounts receivable 4,994 2,206
------- -------
Total 48,889 28,638
Less allowance for doubtful accounts receivable 1,016 1,300
------- -------
Accounts receivables, net $47,873 $27,338
======= =======
Unbilled receivables primarily relate to sales recorded on standard products
which have been shipped, but have not yet been finally accepted by the
customer. The Company has no significant remaining obligations relating to
these unbilled receivables and collectibility is probable. The Company
estimates that all of its unbilled receivables at September 30, 1997 will
become billable during the ensuing twelve months.
4. INVENTORIES
Inventories at September 1997 and 1996 consisted of the following:
(IN THOUSANDS)
1997 1996
------- -------
Raw materials $18,919 $ 9,995
Work-in-process 9,740 10,920
Finished goods 5,299 2,675
------- -------
Total $33,958 $23,590
======= =======
5. INCOME TAXES
The components of income before income tax provision (benefit) are as follows:
(IN THOUSANDS)
1997 1996 1995
------ ------ -------
Domestic $9,758 $8,795 $10,838
Foreign (721) (201) 65
------ ------ -------
Total $9,037 $8,594 $10,903
====== ====== =======
F-14
The income tax provision (benefit) for the fiscal years ended September 30,
1997, 1996 and 1995 consisted of the following:
(IN THOUSANDS)
1997 1996 1995
-------- -------- --------
Current:
Federal $ 776 $ 4,297 $ 4,957
State 118 1,028 747
Foreign (9) 38 42
Utilization of net operating loss carryforwards - (3,614) (4,109)
------- ------- -------
885 1,749 1,637
------- ------- -------
Deferred:
Federal 2,970 (734) 674
State 564 83 222
Adjustment of valuation allowance (3,627) (2,230) (2,625)
------- ------- -------
(93) (2,881) (1,729)
------- ------- -------
Total $ 792 $(1,132) $ (92)
======= ======= =======
The adjustment of the valuation allowance during fiscal 1997 emanated from a
change in the legal structure of certain subsidiaries which eliminated
certain limitations on the Company's utilization of net operating losses of
acquired subsidiaries. The adjustments of the valuation allowance during
fiscal 1996 and 1995 emanated from the Company's profitable operations during
those years and the extent to which the Company substantiated projected
future earnings. The valuation allowance as of September 30, 1997 relates
primarily to net operating loss carryforwards and tax credit carryforwards of
Acuity, IDM and CI which are subject to annual limitations as a result of the
changes in ownership.
The income tax benefits related to the exercise of stock options reduces
taxes currently payable or increases net deferred tax assets, and is credited
to additional paid-in capital. Such amounts approximate $572,000 and
$3,408,000 during the fiscal years ended September 1997 and 1996,
respectively.
A reconciliation between the statutory U.S. Federal income tax rate and the
Company's effective tax rate for the years ended September 30, 1997, 1996 and
1995 is as follows:
1997 1996 1995
------ ------- ------
U.S. Federal statutory rate 34.0% 34.0% 34.0%
Increases (reductions) due to:
State taxes - net of Federal tax benefit 2.1 8.3 4.7
Utilization of net operating loss carryforwards - (42.1) (35.2)
Anticipated future utilization of net operating
loss carryforwards (13.7) (17.0) (11.1)
Net operating loss not producing current tax benefits 2.6 1.3 7.1
Exempt income of foreign sales corporation (8.5) (0.3) (1.2)
Worthless stock deduction relating to liquidation
of foreign subsidiaries (8.5) - -
Other - net 0.8 2.6 0.9
----- ------ -----
Total 8.8% (13.2)% (0.8)%
===== ====== =====
F-15
The net deferred tax asset at September 30, 1997, 1996 and 1995 is comprised
of the following:
(IN THOUSANDS)
DEFERRED TAX ASSETS (LIABILITIES) 1997 1996 1995
- ------------------------------------- -------- --------- ---------
Net operating loss carryforwards $12,117 $ 12,436 $ 13,334
Tax credit carryforwards 2,655 2,853 2,651
Accrued liabilities 1,131 1,479 1,489
Inventories 2,134 2,492 1,206
Receivables 398 446 173
Property and equipment (79) (292) (44)
Merger expenses 271 706 288
Software development costs (2,043) (543) -
Other 31 - -
------- -------- --------
16,615 19,577 19,097
Less valuation allowance (7,795) (11,422) (15,874)
------- -------- --------
Total $ 8,820 $ 8,155 $ 3,223
======= ======== ========
At September 30, 1996, other assets included noncurrent net deferred tax
assets of $39,000.
As of September 30, 1997, the Company had Federal net operating loss
carryforwards of approximately $30,706,000 of which $19,988,000 are subject
to annual limitations because of the changes in ownership, as defined in the
Internal Revenue Code. Such loss carryforwards expire in the fiscal years
1998 through 2012. The utilization of the carryforwards to offset future tax
liabilities is dependent upon the Company's ability to generate sufficient
taxable income during the carryforward periods.
6. PLANT AND EQUIPMENT
Plant and equipment at September 1997 and 1996 consisted of the following:
(IN THOUSANDS)
1997 1996
------- -------
Machinery and equipment $ 6,924 $ 5,439
Furniture, fixtures and other equipment 8,251 5,645
Demonstration equipment 6,278 4,874
Leasehold improvements 1,571 1,185
------- -------
Total 23,024 17,143
Less accumulated depreciation and amortization 10,352 7,877
------- -------
Plant and equipment - net $12,672 $ 9,266
======= =======
7. OTHER ASSETS
Other assets at September 1997 and 1996 consisted of the following:
(IN THOUSANDS)
1997 1996
---- ----
Software development costs, net of accumulated
amortization of $2,251,000 and $1,289,000, respectively $7,233 $3,353
Other 1,361 990
------ ------
Total $8,594 $4,343
====== ======
F-16
Certain software development costs totaling $4,842,000 and $2,630,000 have
been capitalized during the fiscal years ended September 1997 and 1996,
respectively. Capitalized software development costs for the fiscal year
ended September 30, 1997 and 1996 include $848,000 and $1,534,000,
respectively, of costs related to certain acquired subsidiaries. These
subsidiaries had not capitalized any software development costs in prior
years because, prior to their respective acquisitions by the Company, they
had not utilized detailed program designs in the software development
process. In general, the software development costs incurred by these
subsidiaries between the time working models were available and the related
software projects were released to customers were not material.
Amortization expense relating to software development costs for 1997, 1996
and 1995 was $962,000, $551,000 and $325,000, respectively.
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at September 1997 and 1996
consisted of the following:
(IN THOUSANDS)
1997 1996
------- -------
Accrued wages and related employee benefits $ 4,636 $ 4,408
Accrued sales commissions 4,028 3,742
Accrued warranty and other product related costs 741 1,730
Other 5,674 2,452
------- -------
Total $15,079 $12,332
======= =======
9. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt at September 1997 and 1996 consisted of the following:
(IN THOUSANDS)
1997 1996
---- ----
RVSI line of credit (a) $ 4,924 $ -
RVSI term loan (a) 7,600 -
CI line of credit (b) 1,665 759
SEP line of credits, repaid in October 1996 - 6,400
SEP installment note payable, repaid in October 1996 - 845
Other borrowings - 221
------- ------
Total long-term debt 14,189 8,225
Less current portion of long-term debt 8,189 8,225
------- ------
Long-term debt, net of current portion $ 6,000 $ -
======= ======
a. On June 27, 1997, RVSI entered into a credit agreement with a bank which
consisted of an $8,000,000 term loan and a $6,000,000 revolving credit
facility. The revolving credit facility was subsequently increased to
$11,000,000 on December 3, 1997. The term loan is payable in 60 monthly
installments of $133,333 and bears interest at 8.05 percent through June
27, 1999. Effective June 27, 1999, the interest rate will adjust, at the
discretion of the Company, to either LIBOR plus 1.75 percent or a fixed
rate equal to the average yield on a five-year U.S. Treasury security
plus 2 percent. The revolving credit facility expires on May 31, 2000
and borrowings bear interest at LIBOR plus 1.5 percent. The Company is
required to pay a commitment fee of one quarter of one percent per annum
on any unused portion of the credit facility. Borrowings under the
credit agreement are secured by substantially all of the Company's assets
and are guaranteed by all
F-17
domestic subsidiaries. The terms of the credit agreement, among other
matters, require the Company to maintain certain tangible net worth, debt
to equity, working capital, and debt service coverage ratios and place
restrictions on additional investments, indebtedness and the payment of
cash dividends.
b. CI has an unsecured line of credit with a domestic bank which provides
for maximum borrowings of $2,500,000. Borrowings under this line of
credit may be made in German Deutschmarks, French Francs, or British
Pounds and bear interest at various rates dependent upon the currency
borrowed. Borrowings under this line of credit are payable on demand.
The interest rate on borrowings outstanding at September 30, 1997 range
from 6.5 percent to 8.5 percent.
Maturities of long-term debt as of September 30, 1997 are as follows:
YEAR ENDING
SEPTEMBER 30,
------------
1998 $ 8,189
1999 1,600
2000 1,600
2001 1,600
2002 1,200
-------
$14,189
=======
10. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLAN - The Company has a noncontributory pension plan for
employees who meet certain minimum eligibility requirements. The level of
retirement benefit is based on a formula which considers both employee
compensation and length of credited service.
Plan assets are invested in pooled bank investment accounts, and the fair
value of such assets is based on the quoted market prices of underlying
securities in such accounts. The Company funds pension plan costs based on
minimum and maximum funding criteria as determined by independent actuarial
consultants.
The components of net pension cost for the fiscal years ended September 30,
1997, 1996 and 1995 are summarized as follows:
(IN THOUSANDS)
1997 1996 1995
------ ------ ------
Service cost - benefits earned during the period $ 272 $ 219 $ 158
Interest on projected benefit obligations 135 97 83
Estimated return on plan assets (117) (81) (56)
Other - amortization of actuarial gains and
net transition asset (15) (23) (20)
----- ----- -----
Net pension cost $ 275 $ 212 $ 165
===== ===== =====
F-18
The funded status of the plan compared with the accrued expense included in
the Company's consolidated balance sheet at September 1997 and 1996 is as
follows:
(IN THOUSANDS)
1997 1996
------- -------
Fair value of plan assets $1,664 $1,211
------ ------
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits
of $318,000 and $965,000 in 1997 and 1996, respectively 1,647 1,246
Effect of projected compensation increases 554 350
------ ------
Projected benefit obligation for services rendered to date 2,201 1,596
------ ------
Projected benefit obligation in excess of plan assets (537) (385)
Unrecognized net loss 358 210
Remaining unrecognized net transition asset being
amortized over 11 years (14) (50)
Unrecognized prior service costs 23 28
------ ------
Accrued pension cost $ (170) $ (197)
====== ======
Significant assumptions used in determining net periodic pension cost and
related pension obligations are as follows:
1997 1996
----- -----
Discount rate 7.50% 7.50%
Rate of compensation increase 4.00% 4.00%
Expected long-term rate of return on assets 8.25% 8.25%
DEFINED CONTRIBUTION PLANS - The Company has three defined contribution plans
--------------------------
(the "Plans") for all eligible employees, as defined by the Plans. The
Company made matching employer contributions at various percentages in
accordance with the respective plan documents. The Company incurred
$520,000, $242,000 and $183,000 for matching employer contributions to the
Plans in 1997, 1996 and 1995, respectively. In 1997, 1996 and 1995, the
Company issued 9,000, 4,000 and 12,000 shares, respectively, of its common
stock to one of the Plans related to its prior year contribution.
11. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES - The Company has entered into operating lease agreements
----------------
for equipment, and manufacturing and office facilities. The minimum
noncancelable scheduled rentals under these agreements are as follows (in
thousands of dollars):
YEAR ENDING SEPTEMBER 30: FACILITIES EQUIPMENT TOTAL
- --------------------------- ---------- --------- -------
1998 $ 2,120 $157 $ 2,277
1999 1,752 282 2,034
2000 1,582 58 1,640
2001 1,190 14 1,204
2002 735 4 739
Thereafter 6,454 1 6,455
------- ---- -------
Total $13,833 $516 $14,349
======= ==== =======
Rent expense for 1997, 1996 and 1995 was $2,721,000, $1,910,000 and
$1,698,000, respectively.
On January 6, 1997, the lessor of SEP's manufacturing facility assigned the
lease to the former majority shareholder of SEP, in conjunction with the sale
of this facility to the former majority shareholder. In addition, the lease
was amended to include certain capital equipment owned by the former majority
F-19
shareholder. SEP began leasing this facility during fiscal 1996. The base
annual rental payable under the lease is $605,000. The lease expires in
October 2011.
LITIGATION - During fiscal 1992, the Company instituted an action against
----------
Cybo Systems, Inc. ("Cybo"), alleging that Cybo breached certain agreements
between the parties with respect to the sale by the Company to Cybo of all of
the assets of its welding and cutting systems business.
In response to the action brought by the Company, Cybo asserted claims
against the Company alleging, among other things, breach of contract and
warranties, fraud, bad faith, trespass and conversion. Cybo is seeking
aggregate damages in excess of $10,000,000. The Company believes that Cybo's
claims are without merit and plans to defend against them vigorously. The
Company's management, after discussion with legal counsel, believes that the
ultimate outcome of this matter will not have a material adverse impact on
the Company's consolidated financial statements.
The Company is also presently involved in other litigation matters in the
normal course of business. Based upon discussion with Company legal counsel,
management does not expect that these matters will have a material adverse
impact on the Company's consolidated financial statements.
12. STOCKHOLDERS' EQUITY
PRIVATE EQUITY PLACEMENTS - During fiscal 1995, the Company entered into an
-------------------------
agreement with a group of investors. Under the agreement, the Company
received approximately $9,386,000, after expenses, in exchange for the
issuance of 1,110,000 shares of the Company's common stock. The Company also
issued warrants exercisable through June 2000 to purchase approximately
68,000 shares of the Company's common stock at exercise prices ranging from
$8.75 to $9.00 per share.
During fiscal 1995, IDM entered into an agreement with a group of investors
and certain then existing stockholders. Under the agreement, IDM received
approximately $1,765,000 after expenses, in exchange for 46,447 shares of
IDM's common stock (approximately 119,000 equivalent shares of RVSI common
stock). IDM used approximately $785,000 of the net proceeds to satisfy
certain notes payable and related accrued interest and $60,000 of the net
proceeds to satisfy certain accounts payable.
WARRANTS ISSUED FOR SERVICES RENDERED - During fiscal 1996, the Company
-------------------------------------
issued warrants under certain agreements granting the holders thereof the
right through September 2000 to purchase up to approximately 50,000 shares of
the Company's common stock at exercise prices ranging from $12.88 to $25.00
per share as compensation for professional services rendered. The Company
recorded an expense of approximately $74,000 related to the issuance of such
warrants.
During fiscal 1995, the Company issued warrants under certain agreements
granting the holders thereof the right through July 1999 to purchase up to
approximately 82,000 shares of the Company's common stock at exercise prices
ranging from $5.81 to $23.38 per share as compensation for professional
services rendered. The Company recorded an expense of approximately $92,000
related to the issuance of such warrants.
WARRANTS EXERCISED - During fiscal 1997, the Company received approximately
------------------
$515,000 in connection with the issuance of approximately 91,000 shares of
its common stock upon the exercise of warrants to purchase such shares at
prices ranging between $1.00 and $7.67 per share.
During fiscal 1996, the Company received approximately $1,358,000 in
connection with the issuance of approximately 1,014,000 shares of its common
stock upon the exercise of warrants to purchase such shares at prices ranging
between $1.00 and $9.00 per share.
F-20
During fiscal 1995, the Company received approximately $492,000 in connection
with the issuance of approximately 324,000 shares of its common stock upon
the exercise of warrants to purchase such shares at prices ranging between
$1.00 and $4.38 per share.
WARRANTS OUTSTANDING - As of September 30, 1997, there were warrants
--------------------
outstanding to purchase approximately 183,000 shares of the Company's common
stock with exercise prices ranging between $3.75 and $25.00 per share.
STOCK OPTION PLANS - The Company has several stock option plans which provide
------------------
for the granting of options to employees or directors at prices and terms as
determined by the Board of Directors' Stock Option Committee. Such options
vest over a period of three to five years. All options issued by the Company
to date have exercise prices which were equal to market value of the
Company's common stock at the date of grant.
Shares granted and canceled during 1997 include a stock option repricing
offered by the Company to existing stock option holders of unexercised
options of each of the Company's stock option plans. All options that were
granted prior to July 9, 1997 were eligible for replacement. Under the terms
of the stock options repricing, at the election of the stock option holder,
stock option holders could surrender their unexercised stock options for a
proportionately less amount of stock options, based upon a formula, at an
exercise of $14.13, the fair value of the Company common stock on July 22,
1997. A total of approximately 1,196,000 options with exercise prices ranging
from $14.52 to $26.75 were canceled, and approximately 930,000 options were
reissued at an exercise price of $14.13 per share. Reissued options vest 20
percent on the six-month anniversary of the replacement date; 20 percent on
the one-year anniversary of the replacement date; and 20 percent annually
thereafter until fully vested. The options expire on July 22, 2002. For
directors and officers of the Company, the options will not become
exercisable until the earlier of seven years from the replacement date or
until the market value of the Company's common stock reaches the exercise
price of the originally replaced option.
The following table sets forth summarized information concerning the
Company's stock options:
NUMBER OF SHARES EXERCISE
(IN THOUSANDS) PRICE RANGE
------------ -------------
Options outstanding for shares of common stock at October 1, 1994 1,938 0.53 38.72
Granted 294 4.25 22.50
Canceled or expired (63) 0.53 17.43
Exercised (416) 0.53 17.43
------ ----- - -----
Options outstanding for shares of common stock at September 30, 1995 1,753 0.53 38.72
Granted 1,798 12.88 26.75
Canceled or expired (208) 1.00 22.50
Exercised (498) 0.53 17.43
------ ----- - -----
Options outstanding for shares of common stock at September 30, 1996 2,845 0.53 38.72
Granted 2,546 8.56 19.00
Canceled or expired (1,584) 0.81 38.72
Exercised (293) 0.53 15.34
------ ----- - -----
Options outstanding for shares of common stock at September 30, 1997 3,514 0.75 34.42
====== ===============
Shares reserved for issuance at September 30, 1997 371
======
F-21
Weighted average option exercise price information for the years 1997 and
1996 was as follows:
1997 1996
------ ------
Outstanding at beginning of year $12.40 $ 4.21
Granted during the year 13.09 18.20
Exercised during the year 4.14 2.09
Canceled, terminated and expired 16.84 16.94
Exercisable at year end 5.87 4.47
Significant option groups outstanding at September 30, 1997 and related
weighted average price and life information were as follows:
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- -------------- ----------- ---------------- -------- ----------- --------
$ 0.75 - $7.44 724 2.95 $ 3.23 565 $ 2.63
$ 7.56 - $12.75 931 5.48 10.93 69 9.26
$12.88 - $13.88 595 5.54 13.18 22 13.20
$14.13 946 6.47 14.13 66 14.13
$14.19 - $34.42 318 5.36 18.08 66 19.31
3,514 5.23 $11.23 788 $ 5.87
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
For Stock Issued To Employees", and selected interpretations in accounting
for its option plans. Accordingly, as all options have been granted at
exercise prices equal to fair market value on the date of grant, no
compensation expense has been recognized by the Company in connection with
its stock-based compensation plans. Had compensation cost for the Company's
stock option plans been determined based upon the fair value at the grant
date for awards under these plans consistent with the methodology prescribed
under Statement of Financial Accounting Standards No. 123, "Accounting For
Stock-Based Compensation", the Company's net income and earnings per share
would have been reduced by approximately $5,032,000 and $2,420,000 or $0.23
and $0.11 per share in 1997 and 1996, respectively. The weighted average
fair value of the options granted during 1997 and 1996 is estimated at $7.44
and $9.76 on the date of grant (using Black-Scholes option pricing model)
with the following weighted average assumptions for 1997 and 1996,
respectively: volatility of 64% and 56%, risk-free interest rate of 5.83%
and 5.81%, and an expected life of five years in 1997 and 1996.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
1997
----------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
Revenues $35,401 $32,388 $37,930 $46,384
Gross profit $17,898 $15,862 $19,390 $22,192
Net income $ 2,151 $ 918 $ 1,708 $ 3,468
Net income per share $ 0.10 $ 0.04 $ 0.08 $ 0.16
F-22
1996
-----------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
Revenues $36,279 $36,134 $36,083 $35,044
Gross profit $19,072 $18,255 $16,884 $14,660
Net income (loss) $ 4,727 $ 3,888 $ 2,857 $(1,746)
Net income (loss) per share $ 0.22 $ 0.18 $ 0.13 $ (0.08)
During the quarter ended September 30, 1996, the Company capitalized
approximately $590,000 of software development costs which should have been
capitalized during the first three quarters of the fiscal year ended
September 30, 1996.
During the quarter ended June 30, 1996, SEP became aware of a significant
problem with the performance of one of its products. The Company's management
believes it has resolved this problem and has implemented the necessary
design changes. As a result, SEP recorded inventory, warranty and accounts
receivable reserves of approximately $1.8 million and $1.1 million in the
third and fourth quarters of fiscal 1996, respectively, relating to the
correction of this problem.
The quarterly net income per share information is computed separately for
each period. Therefore, the sum of such quarterly per share amounts may
differ from the total for the year.
14. MAJOR CUSTOMERS AND CREDIT CONCENTRATIONS
The Company grants credit to customers who are primarily in the semiconductor
industry. During 1997 and 1996, revenues from a single customer represented
16 percent and 13 percent of total revenues, respectively. No other customer
accounted for more than 10 percent of total revenues for fiscal 1997, 1996
and 1995.
15. GEOGRAPHIC OPERATIONS
For the purposes of segment reporting, management considers the Company to
operate in one industry, the machine vision industry. Operations in this
business segment by geographic area are summarized as follows (in thousands
of dollars):
UNITED STATES EUROPE ELIMINATIONS CONSOLIDATED
------------- ------ ------------ ------------
YEAR ENDED SEPTEMBER 30, 1997:
------------------------------
Revenues from unaffiliated customers $135,291 $16,812 $ - $152,103
Transfers between geographic areas 4,611 - (4,611) -
-------- ------- ------- --------
Total revenues $139,902 $16,812 $(4,611) $152,103
-------- ------- ------- --------
Income (loss) before income tax benefit (provision) $ 9,764 $ (721) $ (6) $ 9,037
-------- ------- ------- --------
Identifiable assets $119,323 $ 8,451 $(4,976) $122,798
-------- ------- ------- --------
Corporate assets $ 3,933
--------
Total assets at September 30, 1997 $126,731
--------
YEAR ENDED SEPTEMBER 30, 1996:
------------------------------
Revenues from unaffiliated customers $127,314 $16,226 $ - $143,540
Transfers between geographic areas 4,128 240 (4,368) -
-------- ------- ------- --------
Total revenues $131,442 $16,466 $(4,368) $143,540
-------- ------- ------- --------
Income (loss) before income tax benefit (provision) $ 8,726 $ (201) $ 69 $ 8,594
-------- ------- ------- --------
Identifiable assets $ 83,121 $ 7,085 $(8,143) $ 82,063
-------- ------- ------- --------
Corporate assets 14,922
--------
Total assets at September 30, 1996 $ 96,985
========
F-23
YEAR ENDED SEPTEMBER 30, 1995:
------------------------------
Revenues from unaffiliated customers $105,363 $16,762 $ - $122,125
Transfers between geographic areas 5,050 110 (5,160) -
-------- ------- ------- --------
Total revenues $110,413 $16,872 $(5,160) $122,125
-------- ------- ------- --------
Income (loss) before income tax benefit (provision) $ 10,973 $ 65 $ (135) $ 10,903
-------- ------- ------- --------
Identifiable assets $ 61,930 $ 7,465 $(6,985) $ 62,410
-------- ------- ------- --------
Corporate assets 16,296
--------
Total assets at September 30, 1995 $ 78,706
========
Total revenues to customers outside the U.S. were $104,222,000, $92,957,000
and $79,334,000 for the years ended September 30, 1997, 1996 and 1995,
respectively.
Export sales from the Company's United States operations to unaffiliated
customers were as follows:
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30,
-----------------------
1997 1996 1995
---- ---- ----
Europe $16,413 $ 9,160 $ 8,665
Asia/Pacific Rim 69,082 66,398 53,609
Other 1,915 1,173 298
------- ------- -------
Total $87,410 $76,731 $62,572
======= ======= =======
* * * * * * *
F-24
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
---------------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------- ---------- ---------- ---------- ---------
ADDITION
----------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COST AND ACCOUNTS DEDUCTIONS AT END OF
DESCRIPTIONS OF PERIOD EXPENSES - DESCRIBE - DESCRIBE PERIOD
- -------------------- ---------- ---------- ---------- ---------- ---------
YEAR ENDED SEPTEMBER 30, 1997:
Allowance for doubtful accounts $1,300 $ 324 $ - (1) $ 608 (2) $1,016
------ ------ ------ ----- ------
Reserve for excess and
obsolete inventory $3,410 $1,089 $ 782 (2) $3,103
------ ------ ----- ------
YEAR ENDED SEPTEMBER 30, 1996:
Allowance for doubtful accounts $ 519 $ 882 $ 6 (1) $ 107 (2) $ 1,300
------ ------ ------ ------ -------
Reserve for excess and
obsolete inventory $ 957 $2,602 $ 149 (2) $ 3,410
------ ------ ------ --------
YEAR ENDED SEPTEMBER 30, 1995:
Allowance for doubtful accounts $ 605 $ 113 $ 8 (1) $ 207 (2) $ 519
------ ------ ------ ------ -------
Reserve for excess and
obsolete inventory $1,034 $ 280 $ 357 (2) $ 957
------ ------ ------ -------
(1) Recoveries of accounts written off.
(2) Amounts written off.
F-25