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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)  
 
  (X Box)   Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 29, 2002 or
 
  (Box)   Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to ______

Commission File Number 0-17869

COGNEX CORPORATION

(Exact name of registrant as specified in its charter)
     
Massachusetts   04-2713778
 
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer Identification No.)

One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000

(Address, including zip code, and telephone number,
including area code, of principal executive offices)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes (X Box)                      No (Box)

     As of October 27, 2002, there were 42,555,541 shares of Common Stock, $.002 par value, of the registrant outstanding.

 

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4:  CONTROLS AND PROCEDURES
PART II:  OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS
ITEM 2.  CHANGES IN SECURITIES
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5.  OTHER INFORMATION
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
CERTIFICATIONS

Table of Contents

INDEX

     
         
PART I   FINANCIAL INFORMATION
 
Item 1.   Financial Statements
    Consolidated Statements of Operations for the three and nine months ended September 29, 2002
      and September 30, 2001
    Consolidated Balance Sheets at September 29, 2002 and December 31, 2001
    Consolidated Statement of Stockholders’ Equity for the nine months ended September 29, 2002
    Consolidated Condensed Statements of Cash Flows for the nine months ended September 29, 2002
      and September 30, 2001
    Notes to Consolidated Financial Statements
 
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.   Quantitative and Qualitative Disclosures About Market Risk
 
Item 4.   Controls and Procedures
 
PART II   OTHER INFORMATION
 
Item 1.   Legal Proceedings
 
Item 2.   Changes in Securities
 
Item 3.   Defaults Upon Senior Securities
 
Item 4.   Submission of Matters to a Vote of Security Holders
 
Item 5.   Other Information
 
Item 6.   Exhibits and Reports on Form 8-K
 
    Signatures
 
    Certifications

 

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

                                     
        Three Months Ended   Nine Months Ended
       
 
        September 29,   September 30,   September 29,   September 30,
        2002   2001   2002   2001
       
 
 
 
        (unaudited)   (unaudited)
Revenue
                                
 
Product
   $ 27,268     $ 28,657     $ 66,930     $ 98,739  
 
Service
     4,559       5,317       13,348       16,820  
 
    
     
     
     
 
 
     31,827       33,974       80,278       115,559  
Cost of revenue
                                
 
Product
     8,219       8,355       20,330       26,738  
 
Service
     2,846       2,715       8,528       9,375  
 
    
     
     
     
 
 
     11,065       11,070       28,858       36,113  
Gross margin
                                
 
Product
     19,049       20,302       46,600       72,001  
 
Service
     1,713       2,602       4,820       7,445  
 
    
     
     
     
 
 
     20,762       22,904       51,420       79,446  
Research, development, and engineering expenses
     6,714       7,583       19,564       23,420  
Selling, general, and administrative expenses
     15,442       14,168       42,700       49,047  
Amortization of goodwill
     —       773       —       2,328  
 
    
     
     
     
 
Operating income (loss)
     (1,394 )     380       (10,844 )     4,651  
Investment income
     2,507       2,834       878       8,318  
Other income
     119       155       346       571  
 
    
     
     
     
 
Income (loss) before provision (benefit) for income taxes
     1,232       3,369       (9,620 )     13,540  
Income tax provision (benefit)
     451       1,077       (3,169 )     4,332  
 
    
     
     
     
 
Net income (loss)
   $ 781     $ 2,292     $ (6,451 )   $ 9,208  
 
    
     
     
     
 
Net income (loss) per common and common-equivalent share:
                                
   
Basic
   $ .02     $ .05     $ (.15 )   $ .21  
 
    
     
     
     
 
   
Diluted
   $ .02     $ .05     $ (.15 )   $ .20  
 
    
     
     
     
 
Weighted-average common and common-equivalent shares outstanding:
                                
   
Basic
     43,309       43,710       43,817       43,573  
 
    
     
     
     
 
   
Diluted
     43,571       45,463       43,817       45,266  
 
    
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

1

Table of Contents

COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

                     
        September 29,   December 31,
        2002   2001
       
 
        (unaudited)        
ASSETS
                
Current assets:
                
 
Cash and cash equivalents
   $ 47,108     $ 31,660  
 
Short-term investments
     83,075       78,513  
 
Accounts receivable, less reserves of $2,407 and $2,080 in 2002 and 2001, respectively
     21,645       17,064  
 
Inventories
     19,146       23,078  
 
Deferred income taxes
     12,076       12,175  
 
Prepaid expenses and other current assets
     11,243       10,082  
 
    
     
 
   
Total current assets
     194,293       172,572  
             
Long-term investments
     140,963       182,542  
Property, plant, and equipment, net
     28,279       31,213  
Deferred income taxes
     12,517       12,001  
Intangible assets, net
     1,047       1,654  
Goodwill, net
     3,593       3,268  
Other assets
     3,623       3,654  
 
    
     
 
 
   $ 384,315     $ 406,904  
 
    
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
 
Accounts payable
   $ 6,517     $ 4,356  
 
Accrued expenses
     14,333       16,387  
 
Accrued income taxes
     2,003       2,099  
 
Customer deposits
     3,519       2,943  
 
Deferred revenue
     3,353       3,075  
 
    
     
 
   
Total current liabilities
     29,725       28,860  
             
Stockholders’ equity:
                
 
Common stock, $.002 par value – Authorized: 140,000 shares, issued: 46,799 and 46,289 shares in 2002 and 2001, respectively
     94       93  
 
Additional paid-in capital
     183,365       173,675  
 
Treasury stock, at cost, 4,249 and 2,390 shares in 2002 and 2001, respectively
     (72,311 )     (43,419 )
 
Retained earnings
     247,586       254,037  
 
Accumulated other comprehensive loss
     (4,144 )     (6,342 )
 
    
     
 
   
Total stockholders’ equity
     354,590       378,044  
 
    
     
 
 
   $ 384,315     $ 406,904  
 
    
     
 

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

COGNEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 (In thousands)

                                             
        Common Stock   Additional   Treasury Stock
       
  Paid-in  
        Shares   Par Value   Capital   Shares   Cost
       
 
 
 
 
Balance at December 31, 2001
     46,289     $ 93     $ 173,675       2,390     $ (43,419 )
 
Issuance of common stock under stock option and stock purchase plans
     510       1       8,004                  
 
Tax benefit from exercise of stock options
                     1,686                  
 
Repurchase of common stock
                             1,768       (26,425 )
 
Common stock received for payment of stock option exercises
                             91       (2,467 )
 
Comprehensive loss:
                                        
   
Net loss
                                        
   
Recognition of accumulated losses on equity securities, net of tax of $2,506, in current operations
                                        
   
Foreign currency translation adjustment
                                        
 
                                        
   
Comprehensive loss
                                        
 
    
     
     
     
     
 
Balance at September 29, 2002 (unaudited)
     46,799     $ 94     $ 183,365       4,249     $ (72,311 )
 
    
     
     
     
     
 

[Additional columns below]

[Continued from above table, first column(s) repeated]
                                     
                Accumulated                
                Other           Total
        Retained   Comprehensive   Comprehensive   Stockholders'
        Earnings   Loss   Loss   Equity
       
 
 
 
Balance at December 31, 2001
   $ 254,037     $ (6,342 )           $ 378,044  
 
Issuance of common stock under stock option and stock purchase plans
                             8,005  
 
Tax benefit from exercise of stock options
                             1,686  
 
Repurchase of common stock
                             (26,425 )
 
Common stock received for payment of stock option exercises
                             (2,467 )
 
Comprehensive loss:
                                
   
Net loss
     (6,451 )           $ (6,451 )     (6,451 )
   
Recognition of accumulated losses on equity securities, net of tax of $2,506, in current operations
             4,269       4,269       4,269  
   
Foreign currency translation adjustment
             (2,071 )     (2,071 )     (2,071 )
 
                    
         
   
Comprehensive loss
                   $ (4,253 )        
 
    
     
     
     
 
Balance at September 29, 2002 (unaudited)
   $ 247,586     $ (4,144 )           $ 354,590  
 
    
     
             
 

The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

COGNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

                     
        Nine Months Ended
       
        September 29,   September 30,
        2002   2001
       
 
        (unaudited)  
Cash flows from operating activities:
                
 
Net income (loss)
   $ (6,451 )   $ 9,208  
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
   
Depreciation and amortization
     7,153       10,279  
   
Tax benefit from exercise of stock options
     1,686       1,304  
   
Loss on sale of equity securities
     6,184       —  
   
Deferred income tax benefit
     (611 )     (766 )
   
Change in current assets and current liabilities
     (1,431 )     630  
   
Other
     618       (128 )
 
    
     
 
 
Net cash provided by operating activities