Exhibit 99.1
Cognex Corporation Announces Fourth Quarter Results
NATICK, Mass.--(BUSINESS WIRE)--Jan. 25, 2006--Cognex Corporation
(NASDAQ: CGNX) today announced revenue for the fourth quarter ended
December 31, 2005 of $60,818,000, and net income of $11,750,000, or
$0.24 per diluted share. These most recent quarterly results are
compared to the company's historical results for the fourth quarter of
2004 and for the third quarter of 2005 in the table below. Also
provided in the table below are revenue, net income and earnings per
share for the year ended December 31, 2005, as compared to the
company's historical results for the year ended December 31, 2004.
Revenue Net Income Earnings per
Diluted
Share
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Quarterly Comparisons
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Current quarter: Q4-05 $60,818,000 $11,750,000 $0.24
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Prior year's quarter: Q4-04 $43,909,000 $6,644,000 $0.14
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Change from Q4-04 to Q4-05 39% 77% 69%
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Prior quarter: Q3-05 $58,256,000 $10,858,000 $0.22
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Change from Q3-05 to Q4-05 4% 8% 9%
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Yearly Comparisons
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Year ended December 31, 2005 $216,875,000 $35,702,000 $0.74
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Year ended December 31, 2004 $201,957,000 $37,744,000 $0.80
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Change from 2004 to 2005 7% (5%) (7%)
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The company's reported results for 2005 include the results of DVT
Corporation (since May 9, 2005), and also include the amortization
costs related to that acquisition ($1,143,000 in the fourth quarter
and $3,048,000 for the year).
"I am rather pleased with our results for 2005; despite a dramatic
year-on-year decline of more than 30% in revenue from our customers
who manufacture capital equipment for the semiconductor and
electronics industries, our revenue kept pace with 2004 because of
significant growth in our other businesses that focus on the factory
floor," said Dr. Robert J. Shillman, Cognex's Chairman and Chief
Executive Officer. "Our 2005 revenue from the Surface Inspection
market grew by 22% vs. 2004, as did our business in the Factory
Automation market...and that's without including the revenue from DVT
which we acquired in May of 2005. We expect that those businesses,
together with new initiatives, will make Cognex far less dependent on
the vagaries of the semiconductor and electronics capital equipment
industries."
Dr. Shillman continued, "And, although our net income is not yet
at our target level of 20% (or more) of revenue, given the downturn in
the Semi/Electronics business, we did pretty well in 2005, with net
income at 16% of revenue and operating income at 20% of revenue (or
18% and 22%, respectively, excluding $3 million of amortization for
DVT acquisition-related costs)."
"Finally, we had a positive surprise at the end of 2005 when the
Lemelson Partnership, whose machine vision patents were declared
invalid, unenforceable, and not infringed by Cognex, said that they
would not seek further review by the U.S. Supreme Court of that
decision (even though they have until late February of 2006 to do so),
and they advised the U.S. District Court of Arizona that they intend
to file a motion to dismiss their machine vision patent claims against
hundreds of companies, many of whom are Cognex customers. As a result,
in the fourth quarter we reversed a $1 million reserve that we had
established for possible indemnification of our customers around the
world. Now everyone can benefit from the use of Cognex products
without fear of Lemelson," concluded Dr. Shillman.
Details of the Quarter
----------------------
Statement of Operations Highlights - Fourth Quarter of 2005
-- Revenue for the fourth quarter of 2005 increased a dramatic
39% over the fourth quarter of 2004 due to the following
factors:
-- Record revenue from the Factory Automation market
(including incremental revenue of approximately $6,200,000
from the DVT acquisition),
-- Increased revenue from customers in the Semiconductor and
Electronics Capital Equipment business, and
-- Higher sales of SmartView(R), the company's surface
inspection product.
On a sequential basis, revenue increased 4% over the prior quarter
due to higher revenue from the Factory Automation and Semi/Electronics
Capital Equipment markets.
-- Gross margin was 72% in the fourth quarter of 2005 compared to
73% in both the fourth quarter of 2004 and in the prior
quarter. Cost of revenue for the fourth quarter of 2005, the
fourth quarter of 2004, and the third quarter of 2005 includes
a benefit of $287,000, $317,000, and $185,000, respectively,
relating to the sale of inventory previously reserved.
Excluding this benefit, gross margin would have been 71% in
the fourth quarter of 2005, 72% in the fourth quarter of 2004,
and 73% in the prior quarter. Gross margin declined
year-on-year despite higher sales volume due to revenue mix as
well as favorable variances in the fourth quarter of 2004 that
didn't repeat in the current quarter. On a sequential basis,
the gross margin declined due to revenue mix and higher
manufacturing costs. During the fourth quarter of 2005, Cognex
began moving a portion of its manufacturing operation from
Massachusetts to Ireland to be closer to its contract
manufacturer.
-- Research, Development & Engineering (R, D & E) spending in the
fourth quarter of 2005 decreased 1% from the fourth quarter of
2004 and 4% from the prior quarter. Spending decreased
year-on-year (despite incremental costs associated with the
new employees added from the DVT acquisition) due to lower
outside service costs. The decline on a sequential basis is
due to lower employee-related costs, including relocation
expenses, as compared to the prior quarter.
-- Selling, General & Administrative (S, G & A) spending in the
fourth quarter of 2005 increased 18% from the fourth quarter
of 2004 and 3% on a sequential basis (or 23% and 8%,
respectively, excluding the $1,000,000 Lemelson reserve
reversal). The increase year-on-year is due to incremental DVT
costs, the company's investment in sales and marketing, and
higher professional fees. On a sequential basis, the increase
is due to higher employee-related expenses and sales costs,
including commissions and travel and entertainment.
-- The company reported a foreign currency loss of $286,000 in
the fourth quarter of 2005, a gain of $1,568,000 in the fourth
quarter of 2004 and a loss of $410,000 in the prior quarter.
The company recognizes foreign currency gains and losses on
the revaluation and settlement of accounts receivable and
payable balances that are reported in one currency and
collected or paid in another.
-- Investment and other income was $1,531,000 in the fourth
quarter of 2005 compared to $1,322,000 in the fourth quarter
of 2004 and $1,156,000 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 26% in the third and fourth
quarters of 2005 as compared to 29% in the fourth quarter of
2004. The effective tax rate decreased year-on-year due to
more of the company's profits being earned and taxed in lower
tax jurisdictions in 2005 than in 2004.
Balance Sheet Highlights - December 31, 2005
-- Cognex's financial position at December 31, 2005 was very
strong, with over $312,000,000 in cash and investments, and no
debt. Cash and investments decreased by nearly $79,000,000
from the end of 2004, primarily due to the following uses:
-- $115 million to purchase DVT,
-- $15 million paid out to shareholders as dividends, and
-- $11.7 million to repurchase approximately 384,000 shares
of common stock on the open market.
Notwithstanding those non-operating uses, Cognex generated
positive cash flow from operations in 2005 of over $41,000,000.
-- Days sales outstanding (DSO) for the fourth quarter of 2005
was 62 days, and remains within the company's targeted range.
-- Inventories at December 31, 2005 decreased by approximately
$1,300,000, or 6%, from the end of 2004 despite incremental
inventory from the DVT acquisition, and inventory turns in the
fourth quarter were equivalent to 3.7 times per year.
Business Trends and Financial Outlook
Bookings and Backlog:
-- For the fourth quarter of 2005, bookings increased slightly
over the prior quarter due to higher orders from the Semiconductor and
Electronics Capital Equipment market and the Factory Automation
market, which set a new record. The increase in orders from those
markets offset the expected decline in surface inspection orders given
the unsustainably high order rate in the first nine months of the
year. Consolidated backlog at year end was approximately $33,000,000,
which is an increase of 14% over the 2004 year-end backlog of
approximately $29,000,000.
Financial Outlook:
-- For the first quarter of 2006, Cognex expects revenue to be
between $60 million and $63 million. At that revenue level,
gross margin is expected to be in the low-70% range, including
estimated pre-tax stock-based compensation expense of
$300,000. For the first quarter, operating expenses (R, D & E
and S, G & A), including estimated pre-tax stock-based
compensation expense of $2,600,000, are expected to increase
by 15% to 20% on a sequential basis. The effective tax rate is
expected to be 26%. As a result of the above, earnings are
expected to be between $0.16 and $0.20 per diluted share (or
between $0.20 and $0.24 per diluted share excluding estimated
stock-based compensation expenses of $2,900,000).
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures which
Cognex believes are helpful in allowing individuals to more accurately
assess its operations and more readily compare its results over
multiple periods. However, the non-GAAP financial measures are not
meant to be considered in isolation, nor as a substitute for financial
information provided in accordance with GAAP.
Analyst Conference Call and Simultaneous Webcast
Cognex will host a conference call to discuss its results for the
fourth quarter of 2005, 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). 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 6871747.
Internet users 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 systems, or computers that can "see." Cognex is the
world's leader in the machine vision industry, having shipped more
than 300,000 machine vision systems, representing over $1.9 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 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, 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 has regional offices and distributors located
throughout North America, Japan, Europe, Southeast Asia, and Latin
America. Visit Cognex on-line at http://www.cognex.com.
Forward-Looking Statement
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," "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
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 trends
of manufacturers in a variety of industries; (2) the cyclicality of
the semiconductor and electronics industries; (3) the inability to
achieve significant international revenue; (4) fluctuations in foreign
exchange rates; (5) the loss of, or significant curtailment of
purchases by, any one or more principal customers; (6) the reliance
upon certain sole source suppliers to manufacture and deliver critical
components for the company's products; (7) 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 for the fiscal year ended December 31, 2004.
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 Twelve Months Ended
Dec. 31, Oct. 2, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Revenue $ 60,818 $ 58,256 $ 43,909 $216,875 $201,957
Cost of revenue 17,289 15,755 11,791 62,899 57,371
-------- -------- -------- -------- --------
Gross margin 43,529 42,501 32,118 153,976 144,586
Percentage of
revenue 72% 73% 73% 71% 72%
Research, development,
and engineering expenses 6,916 7,224 6,958 27,640 27,063
Percentage of
revenue 11% 12% 16% 13% 13%
Selling, general, and
administrative expenses 21,979 21,351 18,693 82,332 70,674
Percentage of
revenue 36% 37% 43% 38% 35%
-------- -------- -------- -------- --------
Operating income 14,634 13,926 6,467 44,004 46,849
Percentage of
revenue 24% 24% 15% 20% 23%
Foreign currency gain
(loss) (286) (410) 1,568 (888) 1,641
Investment and other
income 1,531 1,156 1,322 5,130 4,670
-------- -------- -------- -------- --------
Income before taxes 15,879 14,672 9,357 48,246 53,160
Income tax provision 4,129 3,814 2,713 12,544 15,416
-------- -------- -------- -------- --------
Net income $ 11,750 $ 10,858 $ 6,644 $ 35,702 $ 37,744
Percentage of
revenue 19% 19% 15% 16% 19%
======== ======== ======== ======== ========
Net income per diluted common
and common
equivalent share $ 0.24 $ 0.22 $ 0.14 $ 0.74 $ 0.80
======== ======== ======== ======== ========
Diluted weighted-average
common and common
equivalent shares
outstanding 48,320 48,469 46,157 47,935 47,358
======== ======== ======== ======== ========
Cash dividends per common
share $ 0.08 $ 0.08 $ 0.08 $ 0.32 $ 0.28
======== ======== ======== ======== ========
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
December 31, December 31,
2005 2004
------------ ------------
Assets
Cash and investments $ 312,258 $ 391,076
Accounts receivable 42,051 33,816
Inventories 18,819 20,091
Property, plant, and equipment 24,175 23,995
Other assets 167,259 64,330
------------ ------------
Total assets $ 564,562 $ 533,308
============ ============
Liabilities and Stockholders' Equity
Current liabilities $ 58,041 $ 70,501
Stockholders' equity 506,521 462,807
------------ ------------
Total liabilities and stockholders' equity $ 564,562 $ 533,308
============ ============
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
Three Months Ended Twelve Months Ended
Dec. 31, Oct. 2, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Revenue $ 60,818 $ 58,256 $ 43,909 $216,875 $201,957
======== ======== ======== ======== ========
Revenue by division:
Modular Vision Systems
Division 86% 84% 83% 84% 86%
Surface Inspection
Systems Division 14% 16% 17% 16% 14%
-------- -------- -------- -------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ======== ========
Revenue by geography:
United States 37% 37% 36% 37% 31%
Japan 28% 30% 29% 28% 38%
Europe 28% 27% 29% 29% 25%
Other 7% 6% 6% 6% 6%
-------- -------- -------- -------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ======== ========
Revenue by market:
Discrete factory
automation 56% 57% 56% 57% 44%
Semiconductor and
electronics capital
equipment 30% 27% 27% 27% 42%
Surface inspection 14% 16% 17% 16% 14%
-------- -------- -------- -------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ======== ========
Revenue by product:
Vision sensors 45% 44% 38% 43% 30%
PC-based vision systems 34% 34% 35% 35% 47%
Surface inspection
vision systems 10% 12% 13% 11% 10%
Service 11% 10% 14% 11% 13%
-------- -------- -------- -------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ======== ========
CONTACT: Cognex Corporation
Susan Conway, 508-650-3353
Director of Investor Relations