Cognex Corporation Announces Fourth Quarter Results.NATICK, Mass. -- Cognex Corporation Cognex Corporation is an American corporation that manufactures commercial machine vision systems. Cognex is the world leader in its field, holding an array of patents and employing academic experts. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CGNX) today announced its financial results for the fourth quarter and year ended December 31, 2006. Revenue, net income and earnings per share are compared to the fourth quarter of 2005, to the third quarter of 2006, and to the year ended December 31, 2005 (which includes 8 months of results for DVT See deep vein thrombosis. Corporation acquired on May 9, 2005) in the table below. [TABLE OMITTED] Beginning in 2006, Cognex has included stock option expense in its results (Exhibit 2 shows the effect of stock option expensing on certain line items in the P&L as reported under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). For comparative purposes, the company's results are shown in the table below excluding stock option expense: [TABLE OMITTED] "Although I am disappointed by the level of business in the fourth quarter, there was some good news to report," said Dr. Robert J. Shillman, Cognex's Chairman and Chief Executive Officer. "First, revenue and earnings per share for the quarter were within our guidance, which was reassuring. And second, net income, excluding stock option expense, was equal to 20% of revenue (or 16% including stock option expense), which is a long-standing target for Cognex." Dr. Shillman continued, "For Q1 of 2007, we believe that revenue from the Factory Automation market will increase year-on-year but, unfortunately, that increase will not be enough to offset the expected decline in the semiconductor and electronic industries, which are among the largest users of Cognex products. Going forward, we intend to kick-off a number of new sales and marketing initiatives in early 2007 that should help grow revenue outside of that cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. market as the year progresses." Details of the Quarter Statement of Operations See Income statement. Highlights - Fourth Quarter of 2006 * Revenue for the fourth quarter of 2006 decreased 3% from the fourth quarter of 2005 due to lower sales in all three of the company's primary markets; Factory Automation, Surface Inspection, and Semiconductor and Electronics Capital Equipment. On a sequential basis, revenue increased 1% due to higher sales in the Surface Inspection market and, to a lesser extent, the Factory Automation market. * Gross margin was 73% in the fourth quarter of 2006, 72% in the fourth quarter of 2005 and 73% in the prior quarter. Excluding stock option expense, gross margin increased to 73% in the fourth quarter of 2006 from 72% in the comparable quarter of 2005, and was down from 74% in the prior quarter. The increase year-on-year in gross margin excluding stock option expense is due to lower costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc higher production throughput. Gross margin excluding stock option expense decreased on a sequential basis due to product mix: a greater percentage of revenue came from the sale of surface inspection systems in the fourth quarter of 2006 than from modular vision systems. * Research, Development & Engineering (R, D & E) spending in the fourth quarter of 2006 increased 17% from the fourth quarter of 2005 and 1% from the prior quarter (or 3% and 1%, respectively, excluding stock option expense). R, D & E spending excluding stock option expense increased year-on-year and sequentially due to higher employee-related costs, primarily new employees, and higher outside services related to new product initiatives. * Selling, General & Administrative (S, G & A) spending in the fourth quarter of 2006 increased 13% from the fourth quarter of 2005 and 6% on a sequential basis (or 3% and 7%, respectively, excluding stock option expense). The increase in S, G & A spending excluding stock option expense year-on-year was primarily due to the fact that 2005 included the reversal of a $1,000,000 reserve related to the Lemelson case. On a sequential basis, S, G & A spending excluding stock option expense increased due to higher employee-related costs, travel and entertainment, and marketing programs. * The company reported a foreign currency gain of $374,000 in the fourth quarter of 2006, a loss of $286,000 in the fourth quarter of 2005 and a loss of $282,000 in the prior quarter. The company recognizes foreign currency gains and losses on the revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. and settlement of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and payable balances that are reported in one currency and collected or paid in another. * Investment and other income was $1,581,000 in the fourth quarter of 2006, $1,531,000 in the fourth quarter of 2005 and $1,518,000 in the prior quarter. The increase in investment and other income year-on-year is due to higher yields offset by a lower average invested balance as Cognex used cash to repurchase its common stock. Investment and other income increased on a sequential basis despite a consistent average invested balance and comparable investment yields due to higher other income. * The effective tax rate was 19% in the fourth quarter of 2006, 26% in the fourth quarter of 2005 and 18% in the prior quarter. Excluding the one-time discrete items described in the following two paragraphs, the tax rates would have been 25% in the fourth quarter of 2006, and 23% in the prior quarter. The decrease in the effective tax rate year-on-year is due to more of the company's profits being earned in lower tax jurisdictions than in the fourth quarter of 2005. The increase on a sequential basis is due to the fact that the third quarter of 2006 includes a year-to-date adjustment reducing the effective tax rate for more of the company's profits being earned in lower tax jurisdictions than had been anticipated. In the fourth quarter of 2006, Cognex recorded favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax adjustments of nearly $700,000 due to adjusting the estimate of the Japanese tax audit settlement upon filing of the actual tax return in Japan, and the favorable impact in the U.S. of the retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a reinstatement Reinstatement The restoration of an insurance policy after it has lapsed for nonpayment of premiums. of the Research & Development tax credit. In the third quarter of 2006, Cognex recorded a net tax benefit of approximately $570,000 which included the unfavorable settlement of the multi-year Japanese tax audit, the benefit from the statute of limitations A type of federal or state law that restricts the time within which legal proceedings may be brought. Statutes of limitations, which date back to early Roman Law, are a fundamental part of European and U.S. law. expiring for a particular tax year and the favorable adjustment of estimates made as a result of filing the actual tax returns for 2005. Balance Sheet Highlights - December 31, 2006 * Cognex's financial position at December 31, 2006 was very strong, with over $266,000,000, or $6.00 per share, in cash and investments and no debt. In 2006, Cognex generated positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of approximately $50,000,000, paid out over $15,000,000 in dividends to shareholders, and spent over $86,000,000 to repurchase nearly 3,300,000 shares of its common stock on the open market. * Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSO See CSO. ) for the fourth quarter of 2006 was 60 days, and remains within the company's targeted range. * Inventories at December 31, 2006, increased by approximately $2,700,000, or 10%, from the end of the third quarter of 2006, and inventory turns in the fourth quarter were equivalent to 2.1 times per year. Business Trends and Financial Outlook Financial Outlook * For the first quarter of 2007, Cognex expects revenue to be between $55 million and $58 million. Gross margin is expected to be in the low-70% range. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. (R, D & E and S, G & A) are expected to be essentially flat on a sequential basis. The effective tax rate is expected to be 26%. As a result of the above, earnings for the first quarter of 2007 are expected to be between $0.12 and $0.16 per diluted share (or between $0.17 and $0.21 per diluted share excluding an estimated $0.05 per diluted share for estimated stock option expense of $400,000 in Cost of Goods Sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold and $3,100,000 in Operating Expenses). Non-GAAP Financial Measures This press release and its attachments contain non-GAAP financial measures. In particular, Cognex incurs expense related to stock options included in its GAAP presentation of cost of revenue, research, development, and engineering expenses (R,D&E), and selling, general and administrative expenses (S,G&A). Cognex excludes these expenses for the purpose of calculating non-GAAP adjusted gross margin, non-GAAP adjusted operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , non-GAAP adjusted net income and non-GAAP adjusted earnings per share when it evaluates its continuing operational performance and in connection with its budgeting process and the allocation of resources allocation of resources Apportionment of productive assets among different uses. The issue of resource allocation arises as societies seek to balance limited resources (capital, labour, land) against the various and often unlimited wants of their members. , because these expenses have no current effect on cash or the future uses of cash and they fluctuate as a result of changes in Cognex's stock price. Cognex also excludes certain items affecting the tax provision because they are one-time discrete events. Cognex believes that these non-GAAP financial measures are useful to investors because they allow investors to more accurately assess and compare Cognex's results over multiple periods and to evaluate the effectiveness of the methodology used by management to review the operating results of the company. However, these non-GAAP financial measures are not meant to be considered in isolation, nor as a substitute for financial information provided in accordance with GAAP. Exhibit 2 shows a reconciliation of these financial measures from GAAP to non-GAAP. Analyst Conference Call and Simultaneous Webcast Cognex will host a conference call to discuss its results for the fourth quarter of 2006, as well as its financial outlook, today at 5:00 p.m. eastern time. The telephone number for the live call is 800-770-5589 (or 973-935-2039 if outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ). A replay will begin tonight at approximately 7:00 p.m. eastern time and will run continuously for 72 hours. The telephone number for the replay is 877-519-4471 (or 973-341-3080 if outside the United States) and the access code is 8254041. Internet users Internet user n → internauta m/f Internet user Internet n → internaute m/f can listen to a real-time audio broadcast of the conference call, as well as an archive replay of the call, on Cognex's website at http://www.cognex.com/investor/default.asp. About Cognex Corporation Cognex Corporation designs, develops, manufactures, and markets machine vision sensors and systems, or devices that can "see." Cognex vision sensors are used in factories around the world to automate the manufacture of a wide range of items and to assure their quality. Cognex is the world's leader in the machine vision industry, having shipped more than 350,000 machine vision systems, representing over $2 billion in cumulative revenue, since the company's founding in 1981. In addition to its corporate headquarters in Natick, Massachusetts Natick (Pronunciation IPA: /ˈneɪtɪk/) is a town in Middlesex County, Massachusetts, United States. Natick is located near the center of the MetroWest region of Massachusetts, with a population of 32,170 at the , Cognex also has regional offices and distributors located throughout North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Japan, Europe, Asia, and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . Visit Cognex on-line at http://www.cognex.com/. Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements made in this press release, which do not relate solely to historical matters, are forward-looking statements. You can identify these forward-looking statements by use of the words "expects," "anticipates," "estimates," "believes," "projects," "intends," "plans," "will," "may," "should," "shall" and similar words. These forward-looking statements, which include statements regarding business trends, revenue growth and the company's financial outlook, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) global economic conditions that impact the capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. trends of manufacturers in a variety of industries, including, but not limited to, the semiconductor, electronics, automotive and steel industries; (2) the cyclicality of the semiconductor and electronics industries; (3) the reliance upon certain sole-source suppliers to manufacture and deliver critical components for the company's products; (4) the inability to design and manufacture high-quality products; (5) the technological obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. of current products and the inability to develop new products; (6) the inability to protect the company's proprietary technology and intellectual property; (7) the challenges in integrating acquisitions and achieving anticipated benefits; and (8) the other risks detailed in the company's reports filed with the SEC, including the company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2005. You should not place undue reliance upon any such forward-looking statements, which speak only as of the date made. The company disclaims any obligation to update forward-looking statements after the date of such statements. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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