Cognex Corporation Announces Fourth Quarter Results

„Excluding unusual items, which are described in detail on the accompanying supplemental schedule, \“Reconciliation of Net Income (Loss) as Reported vs. Net Income (Loss) Excluding Unusual Items,\“ net income for the fourth quarter of 2002 would have been $1,859,000, or $0.04 per diluted share, compared to a loss of $941,000, or $0.02 per diluted share, for the same period in 2001. In addition, the loss for 2002 would have been $2,054,000, or $0.05 per diluted share, compared to net income of $8,267,000, or $0.18 per diluted share, for 2001.\r\n
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\r\n\“2002 was a very challenging year for Cognex,\“ said Dr. Robert J. Shillman, Cognex’s President, Chief Executive Officer, and Chairman. \“The worldwide slowdown in capital equipment spending by manufacturers, particularly those in the semiconductor and electronics industries, has severely impacted our results. The best thing I can say about 2002 is that it is behind us.\“\r\n
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\r\nDr. Shillman continued, \“However, there were some positive developments that lead us to be a bit more optimistic going into 2003 than we were entering into 2002. We ended the year with $26 million of orders in backlog, which is an increase of 63% over the 2001 year-end backlog. We reduced our cost structure to be in line with the lower level of business, and we returned to profitability…at both the operating income line and the bottom line…in the fourth quarter. SmartView®, our surface inspection product, exceeded our expectations in 2002 as we set new records for both orders and revenue at our Surface Inspection Systems Division. We also had record bookings and revenue from In-Sight(TM), Cognex’s family of low-cost vision sensors, with orders increasing 40% over the prior year. SmartView and In-Sight each grew faster than their respective markets as we continued to gain market share over the competition.\“\r\n
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\r\nStatement of Operations Highlights – Fourth Quarter of 2002\r\n
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\r\n * Revenue for the fourth quarter of 2002 increased 34% from the comparable quarter in 2001 and 6% from the prior quarter primarily due to higher shipments to Original Equipment Manufacturers (OEMs).\r\n
\r\n * Gross margin, excluding the unusual items described in detail in the accompanying supplemental schedule, \“Reconciliation of Net Income (Loss) as Reported vs. Net Income (Loss) Excluding Unusual Items,\“ was 66% in the fourth quarter of 2002 compared to 62% in both the comparable quarter in 2001 and the prior quarter. The increase in gross margin, both year-on-year and sequentially, is primarily due to the higher sales volume as well as sales of modular vision systems representing a greater percentage of total revenue.\r\n
\r\n * R, D & E spending in the fourth quarter of 2002 decreased 9% from the comparable quarter in 2001 and 10% from the prior quarter. The decrease in R, D & E spending, both year-on-year and sequentially, is primarily due to cost-containment measures implemented by the company, including the workforce reduction announced by Cognex on August 1, 2002.\r\n
\r\n * S, G & A spending in the fourth quarter of 2002 increased 22% from the comparable quarter in 2001 and was essentially flat with the prior quarter. The year-on-year increase in spending is primarily due to higher sales and marketing costs, such as advertising, commissions, and travel, and higher professional fees as well as the impact of foreign exchange rates on the company’s international operations, somewhat offset by savings from the workforce reduction in August of 2002.\r\n
\r\n * Investment and other income for the fourth quarter of 2002 includes a charge of $1,768,000 for the write down of an investment in a venture capital limited partnership to its estimated fair value. Excluding this charge, investment and other income decreased 37% from the fourth quarter of 2001 and 33% from the prior quarter primarily due to lower yields on investments as well as a lower average invested balance after using approximately $26,400,000 in cash to repurchase Cognex stock during the third quarter of 2002. \r\n
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\r\nBalance Sheet Highlights – December 31, 2002\r\n
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\r\n * Cognex’s financial position remains very strong at the end of 2002, with $276,000,000 in cash and investments and no debt. Cash and investments at the end of 2002 decreased approximately $17,000,000 from December 31, 2001, primarily as a net result of two positive events. In 2002, Cognex paid out approximately $26,400,000 to repurchase nearly 1.8 million shares of its common stock and generated in excess of $15,000,000 in cash from operations.\r\n
\r\n * Days sales outstanding for the fourth quarter of 2002 was 50 days, compared to 63 days for the comparable quarter in 2001. The decline in DSO is primarily due to the company’s collection efforts in 2002 as well as to the timing of receipts from certain customers at the end of 2001.\r\n
\r\n * Inventory at the end of 2002 decreased 18% from the end of 2001 as Cognex used inventory to meet customer requirements. \r\n
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\r\nBusiness Trends and Financial Outlook\r\n
\r\n# In the fourth quarter of 2002, bookings decreased on a sequential basis and the company’s book-to-bill ratio slipped below 1.0 for the first time since the beginning of 2002. This decline was due to lower orders from OEM customers. As a result, Cognex expects revenue for the first quarter of 2003 to also decline on a sequential basis to between $31 million and $33 million. At that revenue level, gross margin is expected to be in the low to mid-60% range. Operating expenses (R, D & E and S, G & A) for the first quarter are expected to decrease on a sequential basis in the range of 5% to 10%. The effective tax rate for the first quarter of 2003 is expected to be 28%. And, earnings for the first quarter are expected to be between $0.02 and $0.05 per diluted share. Cognex has no visibility for customer demand beyond the first quarter of 2003.\r\n
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\r\nAnalyst Conference Call and Simultaneous Webcast\r\n
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\r\nCognex Corporation will host a conference call to discuss its results for the fourth quarter and full year of 2002, as well as the financial outlook, today at 6:00 p.m. eastern. The telephone number to listen to the live conference call is 800-481-7713 (or 719-457-2730 if outside the United States). A replay of the conference call will begin at 9:00 p.m. eastern today and will be available until midnight on February 3, 2003. To listen to the conference call replay, the telephone number is 888-203-1112 (or 719-457-0820 if outside the United States) and the access code is 617503.\r\n
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\r\nInternet users can listen to a real-time audio broadcast of the conference call on Cognex’s website at http://www.cognex.com. An archive of the webcast will be available for one week.\r\n
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\r\nAbout Cognex Corporation\r\n
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\r\nCognex Corporation designs, develops, manufacturers, and markets machine vision systems, or computers that can \“see\“. Cognex is the world’s leader in the machine vision industry, having shipped to date more than 175,000 machine vision systems, representing over $1.3 billion in cumulative revenue, since the company’s founding in 1981. Cognex’s Modular Vision Systems Division, headquartered in Natick, Massachusetts, specializes in machine vision systems which are used for automating the manufacture of a wide range of discrete items and for assuring their quality. Cognex’s Surface Inspection Systems Division, headquartered in Alameda, California, specializes in machine vision systems which are used for inspecting the surfaces of products that are manufactured in a continuous fashion, such as metals, paper, nonwovens and plastics. In addition to its corporate headquarters in Natick, Massachusetts, Cognex also has regional offices located throughout North America, Japan, Europe, and Southeast Asia. Visit Cognex on-line at http://www.cognex.com.\r\n
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\r\nForward-Looking Statement\r\n
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\r\nCertain statements made in this press release are forward-looking statements. These statements are based on the company’s current expectations and estimates as to prospective events and circumstances, which may or may not be in the company’s control and as to which there can be no firm assurances given. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. The company wishes to caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The company disclaims any obligation subsequently to revise forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Further discussions of risk factors are also available in the company’s filings with the Securities and Exchange Commission.\r\n
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\r\n COGNEX CORPORATION\r\n
\r\n Statements of Operations\r\n
\r\n (In thousands, except per share amounts)\r\n
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\r\n Three Months Ended Twelve Months Ended\r\n
\r\n Dec. 31, Sept. 29, Dec. 31, Dec. 31, Dec. 31,\r\n
\r\n 2002 2002 2001 2002 2001\r\n
\r\n ————————— ——————-\r\n
\r\n (unaudited)\r\n
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\r\nRevenue $33,829 $31,827 $25,170 $114,107 $140,729\r\n
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\r\nCost of revenue 11,001 11,065 26,232 39,859 62,345\r\n
\r\n ——– ——– ——— ——— ———\r\n
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\r\nGross margin 22,828 20,762 (1,062) 74,248 78,384\r\n
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\r\nResearch, development,\r\n
\r\n and engineering\r\n
\r\n expenses 6,066 6,714 6,674 25,630 30,094\r\n
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\r\nSelling, general, and\r\n
\r\n administrative\r\n
\r\n expenses 15,326 15,442 12,543 58,026 61,590\r\n
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\r\nAmortization of\r\n
\r\n goodwill – – 780 – 3,108\r\n
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\r\nCharge for intangible\r\n
\r\n asset impairment – – 10,932 – 10,932\r\n
\r\n ——– ——– ——— ——— ———\r\n
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\r\nOperating income (loss) 1,436 (1,394) (31,991) (9,408) (27,340)\r\n
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\r\nInvestment and other\r\n
\r\n income (loss) (20) 2,626 2,780 1,204 11,669\r\n
\r\n ——– ——– ——— ——— ———\r\n
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\r\nIncome (loss) before\r\n
\r\n taxes 1,416 1,232 (29,211) (8,204) (15,671)\r\n
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\r\nIncome tax provision\r\n
\r\n (benefit) 992 451 (8,876) (2,177) (4,544)\r\n
\r\n ——– ——– ——— ——— ———\r\n
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\r\nNet income (loss) $424 $781 $(20,335) $(6,027) $(11,127)\r\n
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\r\nNet income (loss) per\r\n
\r\n diluted common and\r\n
\r\n common equivalent\r\n
\r\n share $0.01 $0.02 $(0.46) $(0.14) $(0.25)\r\n
\r\n ======== ======== ========= ========= =========\r\n
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\r\nDiluted weighted-average\r\n
\r\n common and common\r\n
\r\n equivalent shares\r\n
\r\n outstanding 43,162 43,751 43,835 43,503 43,639\r\n
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\r\n COGNEX CORPORATION\r\n
\r\n Balance Sheets\r\n
\r\n (In thousands)\r\n
\r\n Dec. 31, Dec. 31,\r\n
\r\n 2002 2001\r\n
\r\n ——————-\r\n
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\r\nAssets\r\n
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\r\nCash and investments $275,985 $292,715\r\n
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\r\nAccounts receivable 18,981 17,064\r\n
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\r\nInventories 18,952 23,078\r\n
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\r\nProperty, plant, and equipment, net 27,405 31,213\r\n
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\r\nOther assets 45,806 42,834\r\n
\r\n ——— ———\r\n
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\r\nTotal assets $387,129 $406,904\r\n
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\r\nLiabilities and Stockholders‘ Equity\r\n
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\r\nCurrent liabilities $32,609 $28,860\r\n
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\r\nStockholders‘ equity 354,520 378,044\r\n
\r\n ——— ———\r\n
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\r\nTotal liabilities and stockholders‘ equity $387,129 $406,904\r\n
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\r\n COGNEX CORPORATION\r\n
\r\n Reconciliation of Net Income (Loss) as Reported\r\n
\r\n vs. Net Income (Loss) Excluding Unusual Items\r\n
\r\n (In thousands, except per share amounts)\r\n
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\r\n Three Months Ended Twelve Months Ended\r\n
\r\n Dec. 31, Sept. 29, Dec. 31, Dec. 31, Dec. 31,\r\n
\r\n 2002 2002 2001 2002 2001\r\n
\r\n ——————————————–\r\n
\r\n (unaudited)\r\n
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\r\nNet income (loss), as\r\n
\r\n reported $424 $781 $(20,335) $(6,027)$(11,127)\r\n
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\r\nUnusual items in cost of\r\n
\r\n revenue:\r\n
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\r\n Charge for excess\r\n
\r\n inventory and\r\n
\r\n impairment of\r\n
\r\n complete technology – – 16,615 – 16,615\r\n
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\r\n Realized benefit\r\n
\r\n relating to 2001\r\n
\r\n charge for excess\r\n
\r\n inventory (528) (1,156) – (2,684) -\r\n
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\r\nUnusual items in operating\r\n
\r\n expenses:\r\n
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\r\n Charge for impairment\r\n
\r\n of goodwill – – 10,932 – 10,932\r\n
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\r\nUnusual items in investment\r\n
\r\n and other income (loss):\r\n
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\r\n Investment losses 1,768 – – 7,952 -\r\n
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\r\nUnusual items in income\r\n
\r\n tax provision (benefit):\r\n
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\r\n Tax effect of unusual\r\n
\r\n items 195 428 (8,153) (1,295) (8,153)\r\n
\r\n ——————————————–\r\n
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\r\nNet income (loss),\r\n
\r\n excluding unusual items $1,859 $53 $(941) $(2,054) $8,267\r\n
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\r\nNet income (loss) per\r\n
\r\n diluted common and\r\n
\r\n common equivalent share,\r\n
\r\n excluding unusual items $0.04 $0.00 $(0.02) $(0.05) $0.18\r\n
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\r\nDiluted weighted-average\r\n
\r\n common and common\r\n
\r\n equivalent shares\r\n
\r\n outstanding 43,162 43,751 43,835 43,503 45,187\r\n
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\r\n COGNEX CORPORATION\r\n
\r\n Additional Revenue Information\r\n
\r\n (Dollars in thousands)\r\n
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\r\n Three Months Ended Twelve Months Ended\r\n
\r\n Dec. 31, Sept. 29, Dec. 31, Dec. 31, Dec. 31,\r\n
\r\n 2002 2002 2001 2002 2001\r\n
\r\n ———————————————-\r\n
\r\n (unaudited)\r\n
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\r\nRevenue $33,829 $31,827 $25,170 $114,107 $140,729\r\n
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\r\nRevenue by customer type:\r\n
\r\n End user 62% 67% 73% 67% 56%\r\n
\r\n Original equipment\r\n
\r\n manufacturer 38% 33% 27% 33% 44%\r\n
\r\n ———————————————-\r\n
\r\n Total 100% 100% 100% 100% 100%\r\n
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\r\nRevenue by geography:\r\n
\r\n United States 36% 38% 44% 41% 37%\r\n
\r\n Japan 34% 32% 24% 29% 37%\r\n
\r\n Europe 21% 24% 26% 24% 22%\r\n
\r\n Other 9% 6% 6% 6% 4%\r\n
\r\n ———————————————-\r\n
\r\n Total 100% 100% 100% 100% 100%\r\n
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\r\nRevenue by industry:\r\n
\r\n Semiconductor 32% 25% 16% 25% 29%\r\n
\r\n Electronics 18% 19% 19% 18% 26%\r\n
\r\n Surface inspection 18% 21% 26% 21% 17%\r\n
\r\n Automotive 12% 12% 12% 11% 8%\r\n
\r\n Packaging 3% 4% 5% 3% 3%\r\n
\r\n Consumer products 2% 4% 3% 4% 3%\r\n
\r\n Other 15% 15% 19% 18% 14%\r\n
\r\n ———————————————-\r\n
\r\n Total 100% 100% 100% 100% 100%\r\n
\r\n ==============================================\r\n
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\r\nRevenue by division:\r\n
\r\n Modular Vision Systems\r\n
\r\n Division 82% 79% 74% 79% 83%\r\n
\r\n Surface Inspection\r\n
\r\n Systems Division 18% 21% 26% 21% 17%\r\n
\r\n ———————————————-\r\n
\r\n Total 100% 100% 100% 100% 100%\r\n
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\r\nContact:\r\n
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\r\n Cognex Corporation\r\n
\r\n Susan Conway, 508/650-3353\r\n
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\r\nSource: Cognex Corporation“;0;143;3;“admin“;““;0;““;0;0;0;0;0