Cognex Corporation Announces Second Quarter Results; Machine Vision Company Reports Significant Increases in Both Revenue and Net Income.NATICK Natick (nā`tĭk), town (1990 pop. 30,510), Middlesex co., E Mass., a residential and industrial suburb of Boston, on Lake Cochituate; founded as a Native American village by John Eliot 1651, settled by colonial Americans 1718, inc. 1781. , 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 second quarter ended July July: see month. 2, 2006. Revenue, net income and earnings per share for the quarter and six months ended July 2, 2006 are compared to the second quarter of 2005, the first quarter of 2006, and the first six months of 2005 in the table below.
Earnings per
Diluted
Revenue Net Income Share
----------------------------- ------------- ------------ -------------
Quarterly Comparisons
----------------------------- ------------- ------------ -------------
Current quarter: Q2-06 $63,074,000 $11,434,000 $0.24
----------------------------- ------------- ------------ -------------
Prior year's quarter: Q2-05 $54,603,000 $7,800,000 $0.17
----------------------------- ------------- ------------ -------------
Change from Q2-05 to Q2-06 16% 47% 45%
----------------------------- ------------- ------------ -------------
Prior quarter: Q1-06 $59,040,000 $8,800,000 $0.18
----------------------------- ------------- ------------ -------------
Change from Q1-06 to Q2-06 7% 30% 32%
----------------------------- ------------- ------------ -------------
Year to Date Comparisons
----------------------------- ------------- ------------ -------------
Six months ended July 2, 2006 $122,114,000 $20,234,000 $0.42
----------------------------- ------------- ------------ -------------
Six months ended July 3, 2005 $97,801,000 $13,094,000 $0.28
----------------------------- ------------- ------------ -------------
Change from first six months
of 2005 to first six months
of 2006 25% 55% 53%
----------------------------- ------------- ------------ -------------
Beginning in the first quarter of 2006, Cognex Cog·nex A trademark for the drug tacrine hydrochloride. tacrine hydrochloride Cognex Pharmacologic class: Cholinergic (cholinesterase inhibitor) Therapeutic class: included the expenses associated with stock options in its results; those expenses reduced earnings by $0.04 per share in the first quarter, $0.05 per share in the second quarter and $0.09 per share in the first six months of the year (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). ). Reported results for 2006 and for the second quarter of 2005 include the operating results of DVT See deep vein thrombosis. Corporation (acquired on May 9, 2005), and they also include pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta amortization costs related to that acquisition of $1,143,000 in both the first and second quarters of 2006 (or $2,286,000 in the first six months of 2006), and $762,000 in the second quarter and in the first six months of 2005. "I am very pleased with our results for the second quarter of 2006," said Dr. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. J. Shillman, Cognex's Chairman and Chief Executive Officer. "We reported significant increases both year-on-year and sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen at both the top and bottom lines. We were highly profitable with net income equal to 18% of revenue (or 22% excluding stock option expense). And, we reported earnings of $0.24 per share (or $0.27 per share excluding both the benefit of a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax settlement described herein and excluding stock option expense), which was better than Wall Street's consensus expectations." Dr. Shillman continued, "Our outlook for Q3 is cautious; the Factory Automation market is typically soft during the summer months, and demand from the Semiconductor and Electronics Capital Equipment market seems to have reached a peak. As a result, we now expect that third quarter revenue will be between $61 million and $64 million, and earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share will be between $0.19 and $0.23." Details of the Quarter Statement of Operations See Income statement. Highlights - Second Quarter of 2006 --Revenue for the second quarter of 2006 increased 16% over the second quarter of 2005 due primarily to higher revenues from the Semiconductor and Electronics Capital Equipment market, and, to a lesser extent, the Factory Automation market. On a sequential One after the other in some consecutive order such as by name or number. basis, revenue increased 7% due to higher revenue from both the Surface Inspection and Factory Automation markets. --Gross margin was 74% in the second quarter of 2006, 71% in the second quarter of 2005 and 72% in the prior quarter. Gross margin increased year-on-year due to higher sales of modular vision systems. On a sequential basis, gross margin increased due to lower costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc higher production throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. . --Research, Development & Engineering (R, D & E) spending in the second quarter of 2006 increased 19% from the second quarter of 2005 and 8% from the prior quarter (or 6% and 7%, respectively, excluding stock option expense). Spending increased year-on-year due to higher outside service costs related to patent activities and new product initiatives. The increase on a sequential basis is due to higher employee-related costs and higher outside service costs related to new product initiatives. --Selling, General & Administrative (S, G & A) spending in the second quarter of 2006 increased 18% from the second quarter of 2005 and 6% on a sequential basis (or 8% and 5%, respectively, excluding stock option expense). The increase year-on-year is primarily due to one month of incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. DVT costs and the company's investment in sales and marketing. On a sequential basis, S, G & A increased due to higher sales and marketing expenses, including travel and entertainment and marketing communications Marketing communications (or marcom) are messages and related media used to communicate with a market. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales , and the impact of foreign exchange rates on the company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . --The company reported a foreign currency loss of $280,000 in the second quarter of 2006, a loss of $291,000 in the second quarter of 2005 and a loss of $145,000 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 $1,772,000 in the second quarter of 2006 compared to $973,000 in the second quarter of 2005 and $1,566,000 in the prior quarter. The increase in investment and other income, both year-on-year and sequentially, is due to higher yields. --The effective tax rate was 19% in the second quarter of 2006 compared to 26% in the second quarter of 2005 and 27% in the prior quarter. The second quarter of 2006 includes a benefit of $869,000 from the settlement of a multi-year state tax audit during the quarter. Excluding this benefit, the tax rate would have been 25%. The decrease in the effective tax rate on a sequential basis is due to more of the Company's profits being earned in lower tax jurisdictions than had been anticipated. Balance Sheet Highlights - July 2, 2006 --Cognex's financial position at July 2, 2006, was very strong, with $274,000,000 in cash and investments, and no debt. For the first six months of 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 ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $25,000,000, paid out approximately $7,500,000 in dividends to shareholders, and spent nearly $62,000,000 to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. approximately 2.3 million shares of its common stock on the open market. --Days sales outstanding (DSO See CSO. ) for the second quarter of 2006 was 63 days, and remains within the company's targeted range. --Inventories at July 2, 2006, increased by approximately $7,200,000, or 38%, from the end of 2005, and inventory turns were equivalent to 2.7 times per year. Cognex increased its inventory in 2006 to better support its distributors, to obtain an adequate supply of end-of-life end-of-life Cardiac pacing noun The point at which a pacemaker signals need for replacement, as its battery is nearing depletion Medtalk adjective components, and to support new product introductions while shifting a portion of its manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. from Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. to
Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. .
Financial Outlook --For the third quarter of 2006, Cognex expects revenue to be between $61 million and $64 million. Gross margin is expected to be in the low-to-mid-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 increase by no more than 3% on a sequential basis. The effective tax rate is expected to be 26%. As a result of the above, earnings for the third quarter of 2006 are expected to be between $0.19 and $0.23 per diluted share (or between $0.24 and $0.28 per diluted share excluding an estimated $0.05 per diluted share for 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). Management 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 the continuing operational performance of Cognex 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. In addition, Cognex has excluded the benefit from the settlement of a multi-year state tax audit from the non-GAAP adjusted earnings per share because it is a one-time favorable item. 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. However, these non-GAAP financial measures are not meant to be considered in isolation, nor as a substitute for financial information provided in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. Analyst Conference Call and Simultaneous Webcast Cognex will host a conference call to discuss its results for the second 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 7515154. Internet users Internet user n → internauta m/f Internet user Internet n → internaute m/f can listen to a real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. audio broadcast of the conference call, as well as an archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. 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
 r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , 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," "shall" and similar words. These forward-looking statements, which include statements regarding business trends 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; (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 December: see month. 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.
COGNEX CORPORATION
Statements of Operations
(Unaudited)
In thousands, except per share amounts
Three Months Ended Six Months Ended
July 2, April 2, July 3, July 2, July 3,
2006 2006 2005 2006 2005
-------- -------- -------- --------- -------
Revenue $63,074 $59,040 $54,603 $122,114 $97,801
Cost of revenue (1) 16,593 16,710 16,065 33,303 29,855
------- ------- ------- -------- -------
Gross margin 46,481 42,330 38,538 88,811 67,946
Percentage of
revenue 74% 72% 71% 73% 69%
Research, development,
and engineering
expenses (1) 8,582 7,917 7,185 16,499 13,500
Percentage of
revenue 14% 13% 13% 14% 14%
Selling, general, and
administrative
expenses (1) 25,277 23,779 21,494 49,056 39,002
Percentage of
revenue 40% 40% 39% 40% 40%
------- ------- ------- -------- -------
Operating income 12,622 10,634 9,859 23,256 15,444
Percentage of
revenue 20% 18% 18% 19% 16%
Foreign currency loss (280) (145) (291) (425) (192)
Investment and
other income 1,772 1,566 973 3,338 2,443
------- ------- ------- -------- -------
Income before taxes 14,114 12,055 10,541 26,169 17,695
Income tax provision 2,680 3,255 2,741 5,935 4,601
------- ------- ------- -------- -------
Net income $11,434 $ 8,800 $ 7,800 $ 20,234 $13,094
Percentage of
revenue 18% 15% 14% 17% 13%
======= ======= ======= ======== =======
Net income per diluted
common and common
equivalent share (2) $ 0.24 $ 0.18 $ 0.17 $ 0.42 $ 0.28
Diluted weighted-average
common and common
equivalent shares
outstanding 47,517 48,419 47,141 47,756 47,269
Cash dividends per
common share $ 0.08 $ 0.08 $ 0.08 $ 0.16 $ 0.16
======= ======= ======= ======== =======
(1) Amounts include
stock option
expense, as
follows:
Cost of revenue $ 426 $ 355 - 781 -
Research,
development,
and
engineering 948 782 - 1,730 -
Selling,
general, and
administrative 2,131 1,819 - 3,950 -
------- ------- ------- -------- -------
Total stock
option expense $ 3,505 $ 2,956 - $ 6,461 -
======= ======= ======= ======== =======
(2) Net income per
diluted common and
common equivalent
share excluding
stock option
expense $ 0.29 $ 0.22 $ 0.17 $ 0.51 $ 0.28
======= ======= ======= ======== =======
COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
In thousands, except per share amounts
Six Months
Three Months Ended Ended
July 2, April 2, July 2,
2006 2006 2006
-------- ----------- -------------
Gross margin (GAAP) $ 46,481 $ 42,330 $ 88,811
Stock option expense 426 355 781
-------- ---------- -------------
Gross margin (Non-GAAP) $ 46,907 $ 42,685 $ 89,592
======== ========== =============
Percentage of revenue (1) 74% 72% 73%
R, D & E expenses (GAAP) $ 8,582 $ 7,917 $ 16,499
Stock option expense (948) (782) (1,730)
-------- ---------- -------------
R, D & E expenses (Non-GAAP) $ 7,634 $ 7,135 $ 14,769
======== ========== =============
S, G & A expenses (GAAP) $ 25,277 $ 23,779 $ 49,056
Stock option expense (2,131) (1,819) (3,950)
-------- ---------- -------------
S, G & A expenses (Non-GAAP) $ 23,146 $ 21,960 $ 45,106
======== ========== =============
Operating income (GAAP) $ 12,622 $ 10,634 $ 23,256
Stock option expense 3,505 2,956 6,461
-------- ---------- -------------
Operating income (Non-GAAP) $ 16,127 $ 13,590 $ 29,717
======== ========== =============
Percentage of revenue (1) 26% 23% 24%
Net income (GAAP) $ 11,434 $ 8,800 $ 20,234
Stock option expense, net of
tax 2,274 1,918 4,192
-------- ---------- -------------
Net income (Non-GAAP) $ 13,708 $ 10,718 $ 24,426
======== ========== =============
Percentage of revenue (1) 22% 18% 20%
Net income per diluted
share (GAAP) $ 0.24 $ 0.18 $ 0.42
Stock option expense,
net of tax 0.05 0.04 0.09
-------- ---------- -------------
Net income per diluted share
excluding stock option
expense (Non-GAAP) 0.29 0.22 0.51
Tax benefit (0.02) - (0.02)
-------- ---------- -------------
Net income per diluted share excluding
stock option expense and tax
benefit (Non-GAAP) $ 0.27 $ 0.22 $ 0.49
======== ========== =============
(1) Calculated based upon revenue of $63,074,000 in the second quarter
of 2006, $59,040,000 in the first quarter of 2006, and
$122,114,000 for the first six months of 2006.
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
July 2, December 31,
2006 2005
-------------- -----------
Assets
Cash and investments $ 274,107 $ 312,258
Accounts receivable 44,639 42,051
Inventories 26,039 18,819
Property, plant, and equipment 24,220 24,175
Other assets 169,344 167,259
------------- -----------
Total assets $ 538,349 $ 564,562
============= ===========
Liabilities and Shareholders' Equity
Current liabilities $ 64,455 $ 58,041
Shareholders' equity 473,894 506,521
------------- -----------
Total liabilities and shareholders' equity $ 538,349 $ 564,562
============= ===========
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
Three Months Ended Six Months Ended
July 2, April 2, July 3, July 2, July 3,
2006 2006 2005 2006 2005
-------- -------- ------- --------- -------
Revenue $63,074 $59,040 $54,603 $122,114 $97,801
======= ======= ======= ======== =======
Revenue by division:
Modular Vision Systems
Division 86% 89% 83% 87% 83%
Surface Inspection
Systems Division 14% 11% 17% 13% 17%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
Revenue by geography:
United States 35% 33% 37% 34% 37%
Europe 30% 27% 31% 29% 30%
Japan 26% 30% 26% 28% 27%
Other 9% 10% 6% 9% 6%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
Revenue by market:
Discrete factory
automation 55% 56% 60% 55% 57%
Semiconductor and
electronics capital
equipment 31% 33% 23% 32% 26%
Surface inspection 14% 11% 17% 13% 17%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
Revenue by product:
Vision sensors 46% 48% 44% 37% 42%
PC-based vision
systems 35% 36% 32% 45% 34%
Surface inspection
vision systems 10% 7% 13% 9% 12%
Service 9% 9% 11% 9% 12%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
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