UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark One)
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 30, 2003 or | |
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o
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
| COGNEX CORPORATION |
| (Exact name of registrant as specified in its charter) |
| Massachusetts | 04-2713778 | |||
| (State or other jurisdiction of | (I.R.S. Employer | |||
| incorporation or organization) | Identification No.) |
| One Vision Drive |
| Natick, Massachusetts 01760-2059 |
| (508) 650-3000 |
| (Address, including zip code, and telephone number, |
| including area code, of principal executive offices) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes | þ | No | o |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes | þ | No | o |
As of April 27, 2003, there were 42,731,106 shares of Common Stock, $.002 par value, of the registrant outstanding.
INDEX
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements | |
| Consolidated Statements of Operations for the three months ended March 30, 2003 and March 31, 2002 | ||
| Consolidated Balance Sheets at March 30, 2003 and December 31, 2002 | ||
| Consolidated Statement of Stockholders’ Equity for the three months ended March 30, 2003 | ||
| Consolidated Condensed Statements of Cash Flows for the three months ended March 30, 2003 and March 31, 2002 | ||
| 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 and Use of Proceeds | |
| Item 3. | Defaults Upon Senior Securities | |
| Item 4. | Submission of Matters to a Vote of Security Holders | |
| Item 5. | Other Information | |
| Item 6. | Exhibits and Reports on Form 8-K | |
| Signatures | ||
| Certifications |
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended | ||||||||||
| March 30, | March 31, | |||||||||
| 2003 | 2002 | |||||||||
| (unaudited) | ||||||||||
Revenue |
||||||||||
Product |
$ | 28,248 | $ | 17,256 | ||||||
Service |
4,640 | 4,524 | ||||||||
| 32,888 | 21,780 | |||||||||
Cost of revenue |
||||||||||
Product |
8,870 | 5,829 | ||||||||
Service |
2,846 | 2,736 | ||||||||
| 11,716 | 8,565 | |||||||||
Gross margin |
||||||||||
Product |
19,378 | 11,427 | ||||||||
Service |
1,794 | 1,788 | ||||||||
| 21,172 | 13,215 | |||||||||
Research, development, and engineering expenses |
5,983 | 6,352 | ||||||||
Selling, general, and administrative expenses |
13,871 | 13,025 | ||||||||
Operating income (loss) |
1,318 | (6,162 | ) | |||||||
Investment and other income |
1,294 | 2,561 | ||||||||
Income (loss) before provision for income taxes |
2,612 | (3,601 | ) | |||||||
Income tax provision (benefit) |
819 | (1,081 | ) | |||||||
Net income (loss) |
$ | 1,793 | $ | (2,520 | ) | |||||
Net income (loss) per common and common-equivalent share: |
||||||||||
Basic |
$ | 0.04 | $ | (0.06 | ) | |||||
Diluted |
$ | 0.04 | $ | (0.06 | ) | |||||
Weighted-average common and common-equivalent shares outstanding: |
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Basic |
42,666 | 43,971 | ||||||||
Diluted |
43,557 | 43,971 | ||||||||
The accompanying notes are an integral part of these consolidated financial
statements.
1
COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETSTable of Contents
(In thousands)
| March 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| ASSETS | (unaudited) | |||||||||
Current assets: |
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Cash and cash equivalents |
$ | 50,969 | $ | 60,864 | ||||||
Short-term investments |
68,451 | 75,769 | ||||||||
Accounts receivable, less reserves of $2,010 and $2,207 in 2003
and 2002, respectively |
21,510 | 18,981 | ||||||||
Inventories |
17,517 | 18,952 | ||||||||
Deferred income taxes |
9,966 | 9,969 | ||||||||
Prepaid expenses and other current assets |
7,970 | 9,256 | ||||||||
Total current assets |
176,383 | 193,791 | ||||||||
Long-term investments |
161,090 | 139,352 | ||||||||
Property, plant, and equipment, net |
26,556 | 27,405 | ||||||||
Deferred income taxes |
16,699 | 16,608 | ||||||||
Intangible assets, net |
817 | 919 | ||||||||
Goodwill, net |
3,802 | 3,742 | ||||||||
Other assets |
3,414 | 3,686 | ||||||||
| $ | 388,761 | $ | 385,503 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ | 2,866 | $ | 3,496 | ||||||
Accrued expenses |
21,163 | 19,972 | ||||||||
Customer deposits |
3,733 | 3,659 | ||||||||
Deferred revenue |
4,659 | 3,856 | ||||||||
Total current liabilities |
32,421 | 30,983 | ||||||||
Commitments
(Notes 3, 7 and 8) |
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Stockholders’ equity: |
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Common stock, $.002 par value –
Authorized: 140,000 shares, issued: 46,969 and 46,877 shares
in 2003 and 2002, respectively |
94 | 94 | ||||||||
Additional paid-in capital |
186,051 | 184,595 | ||||||||
Treasury stock, at cost, 4,249 shares |
(72,311 | ) | (72,311 | ) | ||||||
Retained earnings |
249,803 | 248,010 | ||||||||
Accumulated other comprehensive loss |
(7,297 | ) | (5,868 | ) | ||||||
Total stockholders’ equity |
356,340 | 354,520 | ||||||||
| $ | 388,761 | $ | 385,503 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
COGNEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
| Accumulated | ||||||||||||||||||||||||||||||||||||||
| Common Stock |
Additional | Treasury Stock |
Other | Total | ||||||||||||||||||||||||||||||||||
| Paid-in | Retained | Comprehensive | Comprehensive | Stockholders' | ||||||||||||||||||||||||||||||||||
| Shares | Par Value | Capital | Shares | Cost | Earnings | Loss | Income | Equity | ||||||||||||||||||||||||||||||
Balance at December 31, 2002 |
46,877 | $ | 94 | $ | 184,595 | 4,249 | $ | (72,311 | ) | $ | 248,010 | $ | (5,868 | ) | $ | 354,520 | ||||||||||||||||||||||
Issuance of common stock under stock
option plans |
92 | — | 1,186 | 1,186 | ||||||||||||||||||||||||||||||||||
Tax benefit from exercise of stock options |
270 | 270 | ||||||||||||||||||||||||||||||||||||
Comprehensive income: |
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Net income |
1,793 | $ | 1,793 | 1,793 | ||||||||||||||||||||||||||||||||||
Losses on foreign intercompany loans,
net of gains on forward exchange
contracts, net of tax of $418 |
(713 | ) | (713 | ) | (713 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
(716 | ) | (716 | ) | (716 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income |
$ | 364 | ||||||||||||||||||||||||||||||||||||
Balance at March 30, 2003 (unaudited) |
46,969 | $ | 94 | $ | 186,051 | 4,249 | $ | (72,311 | ) | $ | 249,803 | $ | (7,297 | ) | $ | 356,340 | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
COGNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
| Three Months Ended | ||||||||||
| March 30, | March 31, | |||||||||
| 2003 | 2002 | |||||||||
| (unaudited) | ||||||||||
Cash flows from operating activities: |
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Net income (loss) |
$ | 1,793 | $ | (2,520 | ) | |||||
Adjustments to reconcile net income (loss) to net cash from
operating activities: |
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Depreciation and amortization |
2,420 | 2,228 | ||||||||
Tax benefit from exercise of stock options |
270 | 1,255 | ||||||||
Change in current assets and current liabilities |
(289 | ) | (1,897 | ) | ||||||
Other |
650 | (337 | ) | |||||||
Net cash provided by (used in) operating activities |
4,844 | (1,271 | ) | |||||||
Cash flows from investing activities: |
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Purchase of investments |
(53,194 | ) | (19,063 | ) | ||||||
Maturity and sale of investments |
37,554 | 18,714 | ||||||||
Purchase of property, plant, and equipment |
(561 | ) | (642 | ) | ||||||
Net cash used in investing activities |
(16,201 | ) | (991 | ) | ||||||
Cash flows from financing activities: |
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Issuance of common stock under stock option plans |
1,186 | 1,131 | ||||||||
Net cash provided by financing activities |
1,186 | 1,131 | ||||||||
Effect of exchange rate changes on cash |
276 | 590 | ||||||||
Net decrease in cash and cash equivalents |
(9,895 | ) | (541 | ) | ||||||
Cash and cash equivalents at beginning of period |
60,864 | 31,660 | ||||||||
Cash and cash equivalents at end of period |
$ | 50,969 | $ | 31,119 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: Summary of Significant Accounting Policies and Basis of Presentation
As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
In the opinion of the management of Cognex Corporation, the accompanying consolidated unaudited financial statements contain all adjustments necessary to present fairly the Company’s financial position at March 30, 2003, and the results of its operations for the three-month periods ended March 30, 2003 and March 31, 2002, and changes in stockholders’ equity and cash flows for the periods presented.
The results disclosed in the Consolidated Statements of Operations for the three-month period ended March 30, 2003 are not necessarily indicative of the results to be expected for the full year. Certain amounts reported in prior periods have been reclassified to be consistent with the current period presentation.
Stock-Based Compensation Plans
The Company recognizes compensation costs using the intrinsic value based method described in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Net income (loss) and net income (loss) per share as reported in these consolidated financial statements and on a pro forma basis, as if the fair value based method described in Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” had been adopted, are as follows:
| Three Months Ended | ||||||||
| March 30, 2003 | March 31, 2002 | |||||||
Net income (loss), as reported |
$ | 1,793 | $ | (2,520 | ) | |||
Less: Total stock-based compensation costs
determined under fair value based method, net of tax |
(3,171 | ) | (5,095 | ) | ||||
Net income (loss), pro forma |
$ | (1,378 | ) | $ | (7,615 | ) | ||
Basic net income (loss) per share, as reported |
$ | 0.04 | $ | (0.06 | ) | |||
Basic net income (loss) per share, pro forma |
$ | (0.03 | ) | $ | (0.17 | ) | ||
Diluted net income (loss) per share, as reported |
$ | 0.04 | $ | (0.06 | ) | |||
Diluted net income (loss) per share, pro forma |
$ | (0.03 | ) | $ | (0.17 | ) | ||
For the purpose of providing pro forma disclosures, the fair values of stock options granted were estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during the quarter ended March 30, 2003 and March 31, 2002, respectively: a risk-free interest rate of 2.0% and 3.5%; an expected life of 2.4 and 2.8 years; an expected volatility of 59% and 60%; and no expected dividends.
NOTE 2: New Pronouncements
In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” This issue addresses how revenue arrangements with multiple deliverables should be divided into separate units of accounting and how the arrangement consideration should be allocated to the identified separate accounting units. EITF Issue No. 00-21 is effective for fiscal periods beginning after June 15, 2003. The Company has not yet determined the impact of adopting EITF Issue No. 00-21 on its consolidated financial statements.
5
COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consist of the following:
| (In thousands) | March 30, 2003 | December 31, 2002 | ||||||||
| (unaudited) | ||||||||||
Cash |
$ | 43,529 | $ | 58,424 | ||||||
Municipal obligations |
7,440 | 2,440 | ||||||||
Total cash and cash equivalents |
50,969 | 60,864 | ||||||||
Municipal obligations |
68,451 | 75,769 | ||||||||
Total short-term investments |
68,451 | 75,769 | ||||||||
Municipal obligations |
152,317 | 131,425 | ||||||||
Investment in limited partnership |
8,773 | 7,927 | ||||||||