Cognex Corporation Reports Fourth Quarter Results; Machine Vision Company Announces Significant Increases in Bookings, Revenues and Profits.Business Editors/High-Tech Writers 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.--(BUSINESS WIRE)--Jan. 26, 2004 Overview of the Quarter 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 revenue for the fourth quarter ended December December: see month. 31, 2003 of $41,878,000, and net income of $5,714,000, or $0.13 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. These results compare favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. with both the comparable quarter in 2002 and with the prior quarter in 2003, as shown in the table below:
Earnings per
Time Period Revenue Net Income Diluted Share
Current quarter: Q4-03 $41,878,000 $5,714,000 $0.13
Prior year's quarter: Q4-02 $33,829,000 $424,000 $0.01
Increase from Q4-02 to Q4-03 24% 1,248% 1,200%
Prior quarter: Q3-03 $38,704,000 $5,138,000 $0.11
Increase from Q3-03 to Q4-03 8% 11% 18%
For the year ended December 31, 2003, Cognex Cog·nex A trademark for the drug tacrine hydrochloride. tacrine hydrochloride Cognex Pharmacologic class: Cholinergic (cholinesterase inhibitor) Therapeutic class: reported revenue of $150,092,000, a 32% increase over 2002's revenue of $114,107,000. And, Cognex reported net income for the year ended December 31, 2003 of $15,951,000, or $0.36 per diluted share, compared to a loss of $6,027,000, or $0.14 per diluted share, in 2002. "2003 was a good year for Cognex," 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 Chief Executive Officer and Chairman. "Annual revenue increased for the first time in three years as our business rebounded from a deep downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in 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. by our customers, and profits increased at a significantly higher rate. We had record bookings and revenue both for In-Sight(R), Cognex's family of low-cost vision sensors
The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of nearly $26 million at year end." Dr. Shillman continued, "We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about 2004, and are planning for an up year in revenue, operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. , and net income. The order rate has increased significantly in recent weeks, particularly from our OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and customers in the semiconductor and electronics industries, which gives us a great start to the year. And, we expect profits to increase at a significantly higher rate than revenue as we keep a tight rein on spending and invest only in strategic areas that help drive revenue, such as sales and marketing." Details of the Quarter Statement of Operations See Income statement. Highlights - Fourth Quarter of 2003 -- Revenue for the fourth quarter of 2003 increased 24% over the comparable quarter in 2002 and 8% on a sequential basis. The year-on-year increase is due to higher sales to Original Equipment Manufacturer (OEM) customers in the electronics industry as well as to end-user (job) end-user - The person who uses a computer application, as opposed to those who developed or support it. The end-user may or may not know anything about computers, how they work, or what to do if something goes wrong. customers across a variety of industries. The sequential increase is primarily due to higher sales to end-user customers across a variety of industries, with the largest increase in the paper industry. -- Gross margin was 68% in the fourth quarter of 2003 compared to 67% in the comparable quarter in 2002 and 66% in the prior quarter. Cost of revenue for the third and fourth quarters of 2003 as well as the fourth quarter of 2002 includes a benefit of $296,000, $116,000 and $528,000, respectively, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc an inventory reserve recorded in the fourth quarter of 2001. Excluding this benefit, gross margin would have been 68% in the fourth quarter of 2003, 66% in the fourth quarter in 2002, and 65% in the prior quarter. The increase in gross margin, both year-on-year and sequentially, is primarily due to the higher sales volume. -- Research, Development & Engineering (R, D & E) spending in the fourth quarter of 2003 increased 3% from the comparable quarter in 2002 and was essentially flat on a sequential basis. R, D & E spending increased year-on-year primarily due to employee and other expenses from the acquisition of Gavitec's machine vision business on December 1, 2003, as well as 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. . -- Selling, General & Administrative (S, G & A) spending in the fourth quarter of 2003 decreased 4% from the comparable quarter in 2002 primarily due to lower legal expenses relating to the company's patent lawsuit lawsuit: see procedure; tort. against the Lemelson Partnership, which were somewhat offset by the impact of foreign exchange rates on the company's international operations. S, G & A spending increased 7% from the prior quarter due to higher sales and marketing expenses as well as the impact of foreign exchange rates. -- Investment and other income was $1,396,000 in the fourth quarter of 2003 compared to a loss of $20,000 in the comparable quarter of 2002 and income of $1,145,000 in the prior quarter. Investment and other income in the fourth quarter of 2002 included a charge of $1,768,000 for the write down of an investment to its estimated fair value. Excluding this charge, investment and other income decreased year-on-year primarily due to lower yields on investments. The increase in investment and other income on a sequential basis is due to gains realized in the fourth quarter as compared to losses in the third quarter. -- The foreign currency loss was $749,000 in the fourth quarter of 2003 as compared to a gain of $77,000 in the comparable quarter of 2002 and a gain of $828,000 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 balances that are reported in one currency and collected in another. Balance Sheet Highlights - December 31, 2003 -- Cognex's financial position remains very strong at December 31, 2003, with over $300,000,000 in cash and investments and no debt. Cash and investments increased nearly $27,000,000 from the end of 2002. This increase is the net result of 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 and cash received from the exercise of employee stock options, less the payment of approximately $12,000,000 to acquire Siemens Dematic AG's wafer (1) A small, thin continuous-loop magnetic tape cartridge that has been used from time to time for data storage and specialized applications. (2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. identification business and Gavitec AG's machine vision business, as well as dividend payments of approximately $5,200,000 (Cognex declared it's first-ever cash dividend in the third quarter of 2003). -- 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 2003 was 56 days, compared to 66 days in the prior quarter. The decline in DSO is primarily due to the fact that certain OEM customers pay on the thirtieth day of each month, which does not always coincide with the end of the fiscal quarter. -- Inventories at December 31, 2003 decreased 18% from the end of 2002, as inventory turns improved in the fourth quarter to a rate equivalent to 3.4 times per year from 2.4 times per year in the fourth quarter of 2002. Business Trends and Financial Outlook -- In the fourth quarter of 2003, bookings increased 12% on a sequential basis and the company's book-to-bill ratio Book-to-Bill Ratio The technology industry's demand-to-supply ratio for orders on a "firm's book" to number of orders filled. Notes: This ratio tells whether the company has more orders than it can deliver (if greater than 1), has the same amount of orders that it can was above 1.0. This increase was primarily due to higher orders from customers in the semiconductor industry. Cognex expects revenue for the first quarter of 2004 to be between $45 million and $48 million. At that revenue level, gross margin is expected to be in the high 60% range. For the first quarter, 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 on a sequential basis in the range of 5% to 10% as the company absorbs a full quarter of expenses related to the Gavitec acquisition and increases its investment in sales and marketing to help drive revenue. The effective tax rate for the first quarter of 2004 is expected to be 31%. And, as a result of the above, earnings for the first quarter are expected to be between $0.14 and $0.17 per diluted share, excluding any benefit from the sale of previously reserved inventory. Analyst Conference Call and Simultaneous Webcast Cognex Corporation will host a conference call to discuss its results for the fourth quarter of 2003, as well as its financial outlook, today at 5:30 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 7:30 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 4382439. 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 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 systems, or computers that can "see." Cognex is the world's leader in the machine vision industry, having shipped more than 200,000 vision systems, representing over $1.5 billion in cumulative revenue, since the company's founding in 1981. Cognex's Modular Vision Systems Division, headquartered 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 , specializes in machine vision systems that 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 Alameda is a city in Alameda County, California, United States. It is located on a small island of the same name next to Oakland, California in the San Francisco Bay. An additional part of the city is Bay Farm Island, which is adjacent to the Oakland International Airport. , specializes in machine vision systems that are used for inspecting the surfaces of products manufactured in a continuous fashion, such as metals, papers and plastics. In addition to its corporate headquarters in Natick, Massachusetts, Cognex also has regional offices 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, and Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. . 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 and its attachments, 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," "believes," "projects," "anticipates," "will" and similar words. These forward-looking statements, which include statements regarding business trends and the company's financial outlook, involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the effect of the general economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , including the worldwide slowdown in capital spending, and the uncertainty of the timing and rate of recovery; (2) the cyclicality of the semiconductor and electronics industry; (3) the company's continued ability to achieve significant international revenue; (4) the loss of, or significant curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. of purchases by, any one or more principal customers; (5) the inability to achieve expected results from acquisitions; (6) the inability to respond to competitive technology and pricing pressures; (7) the reliance upon certain sole source suppliers to manufacture or deliver critical components for the company's products; (8) changes in foreign exchange rates; and (9) 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, 2002. 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
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
Dec. 31, Sept. 28, Dec. 31, Dec. 31, Dec. 31,
2003 2003 2002 2003 2002
(unaudited)
Revenue $41,878 $38,704 $33,829 $150,092 $114,107
Cost of revenue 13,234 13,190 11,001 50,139 39,859
Gross margin 28,644 25,514 22,828 99,953 74,248
Percentage of revenue 68% 66% 67% 67% 65%
Research, development,
and engineering
expenses 6,227 6,246 6,066 24,719 25,630
Percentage of revenue 15% 16% 18% 16% 22%
Selling, general, and
administrative
expenses 14,770 13,761 15,403 55,724 58,376
Percentage of revenue 35% 36% 46% 37% 51%
Operating income (loss) 7,647 5,507 1,359 19,510 (9,758)
Percentage of revenue 18% 14% 4% 13% (9%)
Foreign currency gain
(loss) (749) 828 77 (1,712) 350
Investment and other
income (loss) 1,396 1,145 (20) 5,450 1,204
Income (loss) before
taxes 8,294 7,480 1,416 23,248 (8,204)
Income tax provision
(benefit) 2,580 2,342 992 7,297 (2,177)
Net income (loss) $5,714 $5,138 $424 $15,951 $(6,027)
Percentage of revenue 14% 13% 1% 11% (5%)
Net income (loss) per
diluted common and
common equivalent
share $0.13 $0.11 $0.01 $0.36 $(0.14)
Diluted weighted-average
common and common
equivalent shares
outstanding 44,931 44,890 43,162 44,466 43,503
COGNEX CORPORATION
Balance Sheets
(In thousands)
December 31, December 31,
2003 2002
Assets
Cash and investments $303,502 $275,985
Accounts receivable 26,697 18,981
Inventories 15,519 18,952
Property, plant, and equipment 24,980 27,405
Other assets 61,835 44,611
Total assets $432,533 $385,934
Liabilities and Stockholders' Equity
Current liabilities $47,287 $31,414
Other liabilities 252 -
Stockholders' equity 384,994 354,520
Total liabilities and stockholders' equity $432,533 $385,934
COGNEX CORPORATION
Additional Information Schedule
(Dollars in thousands)
Three Months Ended Twelve Months Ended
Dec. 31, Sept. 28, Dec. 31, Dec. 31, Dec. 31,
2003 2003 2002 2003 2002
(unaudited)
Revenue $41,878 $38,704 $33,829 $150,092 $114,107
Revenue by division:
Modular Vision
Systems Division 80% 82% 82% 81% 79%
Surface Inspection
Systems Division 20% 18% 18% 19% 21%
Total 100% 100% 100% 100% 100%
Revenue by customer type:
End user 62% 60% 62% 62% 67%
Original equipment
manufacturer 38% 40% 38% 38% 33%
Total 100% 100% 100% 100% 100%
Revenue by geography:
United States 36% 35% 36% 34% 41%
Japan 30% 35% 34% 34% 29%
Europe 27% 24% 21% 25% 24%
Other 7% 6% 9% 7% 6%
Total 100% 100% 100% 100% 100%
Revenue by industry:
Semiconductor 26% 26% 32% 24% 25%
Electronics 22% 23% 18% 23% 18%
Surface inspection 20% 18% 18% 19% 21%
Automotive 10% 11% 12% 11% 11%
Consumer products 2% 2% 2% 2% 4%
Packaging 1% 1% 3% 2% 3%
Other 19% 19% 15% 19% 18%
Total 100% 100% 100% 100% 100%
Revenue by product:
PC-based vision
systems 41% 46% 47% 44% 42%
Vision sensors 32% 29% 27% 28% 26%
Surface inspection
vision systems 16% 13% 13% 15% 16%
Service 11% 12% 13% 13% 16%
Total 100% 100% 100% 100% 100%
Number of new customer
accounts:
End user 212 226 233 867 960
Original equipment
manufacturer 15 30 23 104 107
Total 227 256 256 971 1067
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