Exhibit 99.1
Cognex Corporation Announces Fourth Quarter Results
NATICK, Mass.--(BUSINESS WIRE)--Jan. 23, 2007--Cognex Corporation
(NASDAQ: 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 Corporation acquired on May 9,
2005) in the table below.
Earnings
per
Diluted
Revenue Net Income Share
- ---------------------------------- ============= ============ ========
Quarterly Comparisons
================================== ------------- ------------ --------
Current quarter: Q4-06 $58,796,000 $9,562,000 $0.21
- ---------------------------------- ------------- ------------ --------
Prior year's quarter: Q4-05 $60,818,000 $11,750,000 $0.24
- ---------------------------------- ------------- ------------ --------
Change from Q4-05 to Q4-06 (3%) (19%) (13%)
- ---------------------------------- ------------- ------------ --------
Prior quarter: Q3-06 $58,005,000 $10,116,000 $0.22
- ---------------------------------- ------------- ------------ --------
Change from Q3-06 to Q4-06 1% (5%) (5%)
- ---------------------------------- ------------- ------------ --------
- ---------------------------------- ------------- ------------ --------
Year to Date Comparisons
================================== ------------- ------------ --------
Year ended December 31, 2006 $238,915,000 $39,912,000 $0.86
- ---------------------------------- ------------- ------------ --------
Year ended December 31, 2005 $216,875,000 $35,702,000 $0.74
- ---------------------------------- ------------- ------------ --------
Change from 2005 to 2006 10% 12% 15%
- ---------------------------------- ------------- ------------ --------
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). For comparative
purposes, the company's results are shown in the table below excluding
stock option expense:
Earnings
per
Diluted
Revenue Net Income Share
- ---------------------------------- ============= ============ ========
Quarterly Comparisons
================================== ------------- ------------ --------
Current quarter: Q4-06 (Non-GAAP) $58,796,000 $11,828,000 $0.26
- ---------------------------------- ------------- ------------ --------
Prior year's quarter: Q4-05 (GAAP) $60,818,000 $11,750,000 $0.24
- ---------------------------------- ------------- ------------ --------
Change from Q4-05 to Q4-06 (3%) 1% 8%
- ---------------------------------- ------------- ------------ --------
Prior quarter: Q3-06 (Non-GAAP) $58,005,000 $12,369,000 $0.27
- ---------------------------------- ------------- ------------ --------
Change from Q3-06 to Q4-06 1% (4%) (4%)
- ---------------------------------- ------------- ------------ --------
- ---------------------------------- ------------- ------------ --------
Year to Date Comparisons
================================== ------------- ------------ --------
Year ended December 31, 2006 (Non-
GAAP) $238,915,000 $48,623,000 $1.05
- ---------------------------------- ------------- ------------ --------
Year ended December 31, 2005
(GAAP) $216,875,000 $35,702,000 $0.74
- ---------------------------------- ------------- ------------ --------
Change from 2005 to 2006 10% 36% 41%
- ---------------------------------- ------------- ------------ --------
"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 market as
the year progresses."
Details of the Quarter
Statement of Operations 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 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 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 $1,581,000 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 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
reinstatement 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 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 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 (DSO) 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 (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 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, 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, 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). 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 can listen to a real-time audio broadcast of the
conference call, as well as an archive replay of the call, on Cognex's
Web site 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,
Cognex also has regional offices and distributors located throughout
North America, Japan, Europe, Asia, and Latin America. Visit Cognex
on-line at http://www.cognex.com/.
Forward-Looking Statement
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 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
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 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.
COGNEX CORPORATION
Statements of Operations
(Unaudited)
In thousands, except per share amounts
Three Months Ended Twelve Months Ended
December October December December December
31, 1, 31, 31, 31,
2006 2006 2005 2006 2005
----------------------------------------------
Revenue $58,796 $58,005 $60,818 $238,915 $216,875
Cost of revenue (1) 16,000 15,447 17,289 64,750 62,899
-------- -------- -------- --------- ---------
Gross margin 42,796 42,558 43,529 174,165 153,976
Percentage of
revenue 73% 73% 72% 73% 71%
Research, development,
and engineering
expenses (1) 8,111 7,997 6,916 32,607 27,640
Percentage of
revenue 14% 14% 11% 14% 13%
Selling, general, and
administrative expenses
(1) 24,816 23,414 21,979 97,286 82,332
Percentage of
revenue 42% 40% 36% 41% 38%
-------- -------- -------- --------- ---------
Operating income 9,869 11,147 14,634 44,272 44,004
Percentage of
revenue 17% 19% 24% 19% 20%
Foreign currency gain
(loss) 374 (282) (286) (333) (888)
Investment and other
income 1,581 1,518 1,531 6,437 5,130
-------- -------- -------- --------- ---------
Income before taxes 11,824 12,383 15,879 50,376 48,246
Income tax provision 2,262 2,267 4,129 10,464 12,544
-------- -------- -------- --------- ---------
Net income $9,562 $10,116 $11,750 $39,912 $35,702
Percentage of
revenue 16% 17% 19% 17% 16%
======== ======== ======== ========= =========
Net income per diluted common
and common
equivalent share
(2) $0.21 $0.22 $0.24 $0.86 $0.74
======== ======== ======== ========= =========
Diluted weighted-average common
and common
equivalent shares
outstanding 45,346 45,682 48,320 46,648 47,935
======== ======== ======== ========= =========
Cash dividends per
common share $0.085 $0.085 $0.080 $0.330 $0.320
======== ======== ======== ========= =========
Amounts include stock
option expense, as
(1) follows:
Cost of revenue $402 $413 - 1,596 -
Research,
development,
and
engineering 956 941 - 3,627 -
Selling,
general, and
administrative 2,138 2,121 - 8,209 -
-------- -------- -------- --------- ---------
Total stock
option expense $3,496 $3,475 - $13,432 -
======== ======== ======== ========= =========
(2)Net income per
diluted common
and common
equivalent
share excluding
stock option
expense. $0.26 $0.27 $0.24 $1.05 $0.74
======== ======== ======== ========= =========
COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
In thousands, except per share amounts
Twelve
Three Months Months
Ended Ended
December October December
31, 1, 31,
2006 2006 2006
-------- ------------------
Revenue (GAAP) $58,796 $58,005 $238,915
======== ======== =========
Gross margin (GAAP) $42,796 $42,558 $174,165
Stock option expense 402 413 1,596
-------- -------- ---------
Gross margin (Non-GAAP) $43,198 $42,971 $175,761
======== ======== =========
Percentage of revenue 73% 74% 74%
R, D & E expenses (GAAP) $8,111 $7,997 $32,607
Stock option expense (956) (941) (3,627)
-------- -------- ---------
R, D & E expenses (Non-GAAP) $7,155 $7,056 $28,980
======== ======== =========
S, G & A expenses (GAAP) $24,816 $23,414 $97,286
Stock option expense (2,138) (2,121) (8,209)
-------- -------- ---------
S, G & A expenses (Non-GAAP) $22,678 $21,293 $89,077
======== ======== =========
Operating income (GAAP) $9,869 $11,147 $44,272
Stock option expense 3,496 3,475 13,432
-------- -------- ---------
Operating income (Non-GAAP) $13,365 $14,622 $57,704
======== ======== =========
Percentage of revenue 23% 25% 24%
Net income (GAAP) $9,562 $10,116 $39,912
Stock option expense, net of tax 2,266 2,253 8,711
Net income excluding stock option
-------- -------- ---------
expense (Non-GAAP) $11,828 $12,369 $48,623
======== ======== =========
Percentage of revenue 20% 21% 20%
Net income per diluted share (GAAP) $0.21 $0.22 $0.86
Stock option expense, net of tax 0.05 0.05 0.19
-------- -------- ---------
Net income per diluted share excluding
stock option expense (Non-GAAP) $0.26 $0.27 $1.05
======== ======== =========
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
December December
31, 31,
2006 2005
-------------------
Assets
Cash and investments $266,220 $312,258
Accounts receivable 39,249 42,051
Inventories 30,889 18,819
Property, plant, and equipment 26,028 24,175
Other assets 165,518 167,259
--------- ---------
Total assets $527,904 $564,562
========= =========
Liabilities and Shareholders' Equity
Current liabilities $54,189 $58,041
Shareholders' equity 473,715 506,521
--------- ---------
Total liabilities and shareholders' equity $527,904 $564,562
========= =========
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
Three Months Ended Twelve Months Ended
December October December December December
31, 1, 31, 31, 31,
2006 2006 2005 2006 2005
-------------------------- -------------------
Revenue $58,796 $58,005 $60,818 $238,915 $216,875
======== ======== ======== ========= =========
Revenue by division:
Modular Vision
Systems Division 86% 88% 86% 87% 84%
Surface Inspection
Systems Division 14% 12% 14% 13% 16%
-------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= =========
Revenue by geography:
Americas 36% 37% 37% 35% 37%
Japan 28% 28% 28% 28% 28%
Europe 28% 26% 28% 28% 29%
Asia 8% 9% 7% 9% 6%
-------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= =========
Revenue by market:
Discrete factory
automation 56% 56% 56% 55% 57%
Semiconductor and
electronics
capital equipment 30% 32% 30% 32% 27%
Surface inspection 14% 12% 14% 13% 16%
-------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= =========
Revenue by product:
Vision sensors 55% 53% 48% 52% 46%
PC-based vision
systems 25% 30% 31% 30% 32%
Surface inspection
vision systems 9% 7% 10% 8% 11%
Service 11% 10% 11% 10% 11%
-------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= =========
CONTACT: Cognex Corporation
Susan Conway, 508-650-3353
Director of Investor Relations
susan.conway@cognex.com