Cognex Corporation Announces Very Disappointing First 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 first quarter ended April 1, 2007. Revenue, net income and earnings per share are compared to the first and fourth quarters of 2006 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] "Our results for the first quarter of 2007 were very disappointing," said Dr. Robert J. Shillman, Cognex's Chairman and Chief Executive Officer. "Revenue was significantly below our expectations and, because of that, earnings fell far short as well. The major cause of the shortfall was in the Factory Automation market, where orders were significantly lower than planned in each primary region. Bookings were very slow leading up to our sales kick-off meetings in February, where everyone was fully informed about the change in sales strategy implemented by Eric Ceyrolle, our new Executive Vice President of Worldwide Sales and Marketing. Afterwards af·ter·ward also af·ter·wards adv. At a later time; subsequently. afterwards or afterward Adverb later [Old English æfterweard] Adv. 1. , business picked-up nicely but not enough to offset the earlier shortfall." Dr. Shillman continued, "In spite of the disappointing first quarter results that we announced today, I believe that 2007 will still be a good year for Cognex; both the direct sales channel and distributors now fully understand what is expected of them, and we are starting to see increased quotation levels coming from the direct sales force." Details of the Quarter Statement of Operations See Income statement. Highlights - First Quarter of 2007 * Revenue for the first quarter of 2007 decreased 14% from the first quarter of 2006 primarily due to lower sales in the Factory Automation market as well as in the Semiconductor and Electronics Capital Equipment market. On a sequential basis, revenue decreased 13% due to lower sales in all three of the company's primary markets; Factory Automation, Surface Inspection, and Semiconductor and Electronics Capital Equipment. * Gross margin was 72% in the first quarter of 2007, in the first quarter of 2006 and in the prior quarter. Excluding stock option expense, gross margin was 72% in the first quarter of 2007 compared to 72% in the comparable quarter of 2006 and 73% in the prior quarter. Gross margin excluding stock option expense was flat year-on-year despite lower revenue due to lower manufacturing costs. The decline in gross margin excluding stock option expense on a sequential basis is due to lower revenue offset by favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix. * Research, Development & Engineering (R, D & E) spending in the first quarter of 2007 was essentially flat with the first quarter of 2006 and decreased 2% from the prior quarter. Excluding stock option expense, R, D & E spending was essentially flat both year-on-year and sequentially. * Selling, General & Administrative (S, G & A) spending in the first quarter of 2007 increased 1% from the first quarter of 2006 and decreased 1% on a sequential basis. Excluding stock option expense, S, G & A increased 1% both year-on-year and sequentially. The increase in S, G & A spending excluding stock option expense year-on-year is due to 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. and costs associated with the company's sales kick-off meetings in the first quarter of 2007 offset by lower employee-related costs and the timing of marketing communication programs. On a sequential basis, S, G & A spending excluding stock option expense increased primarily due to costs for the sales kick-off meetings as well as higher employee-related costs and professional fees offset by lower travel and entertainment and marketing costs. * The company reported a foreign currency loss of $118,000 in the first quarter of 2007, a loss of $145,000 in the first quarter of 2006 and a gain of $374,000 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 $1,778,000 in the first quarter of 2007, $1,566,000 in the first quarter of 2006 and $1,581,000 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 due to higher yields. * The effective tax rate was 26% in the first quarter of 2007, 27% in the first quarter of 2006 and 19% in the prior quarter. Excluding the one-time discrete items described below, the tax rate would have been 25% in the fourth quarter of 2006. 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 first quarter of 2006. The increase on a sequential basis is due to the expectation that more of the company's profits will be earned and taxed in higher tax jurisdictions in 2007 than in 2006. In the fourth quarter of 2006, Cognex recorded favorable 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. Balance Sheet Highlights - April 1, 2007 * Cognex's financial position at April 1, 2007 was very strong, with over $265,000,000, or $6.01 per outstanding share, in cash and investments and no debt. In the first quarter of 2007, 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 $6,300,000, paid out over $3,700,000 in dividends to shareholders, and spent over $2,600,000 to repurchase nearly 125,000 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 first quarter of 2007 was 65 days, and remains within the company's targeted range. * Inventories at April 1, 2007, increased by approximately $2,100,000, or 7%, from the end of 2006, and inventory turns in the first quarter were equivalent to 1.8 times per year. Financial Outlook * For the second quarter of 2007, Cognex expects revenue to be between $50 million and $55 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 increase by approximately 5% on a sequential basis. The effective tax rate is expected to be 26%. As a result of the above, earnings for the second quarter of 2007 are expected to be between $0.07 and $0.12 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 (or between $0.11 and $0.16 per diluted share excluding an estimated $0.04 per diluted share for estimated stock option expense of $300,000 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 $2,700,000 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 first quarter of 2007, as well as its financial outlook, today at 5:00 p.m. eastern time. The telephone number for the live call is 866-256-9239 (or 703-639-1213 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 8:00 p.m. eastern time and will run continuously until 11:59 p.m. eastern time on Friday, April 20, 2007. The telephone number for the replay is 888-266-2081 (or 703-925-2533 if outside the United States) and the access code is 1066695. 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 Statements 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; (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; (8) the failure to effectively manage product transitions or accurately forecast customer demand; (9) the inability to attract and retain skilled employees; and (10) 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, 2006. 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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