News Details

NATICK, Mass.--(BUSINESS WIRE)-- Cognex Corporation (NASDAQ: CGNX) today announced its financial results for the third quarter of 2012. Selected financial data for the quarter and nine months ended September 30, 2012, are compared to the second quarter of 2012, the third quarter of 2011 and the first nine months of 2011 in Table 1 below.

Table 1
		Revenue			Net Income		Net Income per Diluted Share
Quarterly Comparisons
Current quarter: Q3-12		$80,076,000			$17,805,000		$0.41
Prior year's quarter: Q3-11		$80,085,000			$18,037,000		$0.42
Change from Q3-11 to Q3-12		0%			(1%)		(3%)
Prior quarter: Q2-12		$84,326,000			$19,767,000		$0.45
Change from Q2-12 to Q3-12		(5%)			(10%)		(10%)
Year to Date Comparisons
Nine months ended Sept. 30, 2012		$242,111,000			$51,854,000		$1.19
Nine months ended Oct. 2, 2011		$237,872,000			$50,770,000		$1.19
Change from first nine months of 2011 to first nine months of 2012		2%			2%		0%

A reconciliation of certain financial measures from GAAP to non-GAAP is shown in Exhibit 2.

"In view of the pull back in spending by manufacturers, we are quite pleased that third quarter revenue was in line with our expectations and that we reported a high level of profitability (operating margin was 27% and net margin was 22%)," said Dr. Robert J. Shillman, Chairman of Cognex. "While these results were good, it is frustrating to see our momentum dampened by the slowing global economy."

"We performed well during what is typically a seasonally soft quarter for Cognex," said Robert J. Willett, Chief Executive Officer of Cognex. "Despite total revenue being flat year-on-year, factory automation revenue grew 4% over the third quarter of 2011 (9% in constant currency), helped by our continued strong performance in ID products and in China."

Details of the Quarter

Statement of Operations Highlights — Third Quarter of 2012

• Revenue for the third quarter of 2012 was flat with the third quarter of 2011 and decreased 5% from the prior quarter. Factory automation, the company's largest market segment, performed better than expected in what is typically a seasonally soft quarter, increasing 4% year-on-year and remaining flat on a sequential basis. Growth year-on-year in factory automation was offset by lower revenue from the semiconductor and electronics capital equipment market (SEMI). Revenue declined on a sequential basis primarily due to lower SEMI revenue. Surface inspection revenue, which is impacted by the timing of deliveries, installations and revenue deferrals, decreased 1% year-on-year and 8% on a sequential basis.
• Gross margin was 76% in all periods presented.
• Research, Development & Engineering (RD&E) spending in the third quarter of 2012 decreased 6% from the third quarter of 2011 and 3% from the prior quarter. The company's investment in engineering personnel hired to accelerate new product introductions was more than offset by a lower bonus accrual and the impact of currency exchange rates on the company's international operations. RD&E decreased on a sequential basis due to higher employee vacation time and the timing of outside services for products under development.

• Selling, General & Administrative (SG&A) spending in the third quarter of 2012 increased 2% from the third quarter of 2011 and decreased 5% from the prior quarter. SG&A increased year-on-year due to sales force expansion offset by a lower bonus accrual and the impact of currency exchange rates. The sequential decrease is due to the timing of marketing initiatives, lower stock option expense and higher employee vacation time.
• Investment and other income was $692,000 in the third quarter of 2012, $761,000 in the third quarter of 2011 and $1,702,000 in the prior quarter. The decrease year-on-year is due to lower yields on investments offset by a higher average invested balance. The sequential decrease is due to gains of approximately $1,000,000 recognized in the prior quarter on the sale of euro-denominated investments.
• The tax rate was 19% in the third quarter of 2012 compared to 21% in both the third quarter of 2011 and the prior quarter. Excluding tax adjustments, the tax rate was 21% in the third quarter of 2012 and 23% in the third quarter of 2011. The decrease year-on-year is primarily because a higher percentage of income in the third quarter of 2012 was earned in lower tax jurisdictions.

Balance Sheet Highlights — September 30, 2012

• Cognex's financial position as of September 30, 2012, was very strong, with no debt and $415,938,000 in cash and investments. Cognex paid out $4,721,000 in dividends to shareholders in the third quarter of 2012.

Financial Outlook

• Cognex expects revenue for Q4-12 to be between $78 million and $81 million. Gross margin is expected to continue in the mid-70% range. Operating expenses are expected to increase by up to 5% on a sequential basis, primarily as a result of lower employee vacation time. And the effective tax rate is expected to be 21% before discrete tax items.

Non-GAAP Financial Measures

• Exhibit 2 of this press release includes a reconciliation of certain financial measures from GAAP to non-GAAP. Cognex believes these non-GAAP financial measures are useful because they allow investors to more accurately assess and compare Cognex results over multiple periods, and to evaluate the effectiveness of the methodology used by management to review its operating results. In particular, the GAAP presentation of cost of revenue, RD&E and SG&A expenditures includes stock option expense. Cognex excludes these expenses for the purpose of calculating non-GAAP adjusted operating income, non-GAAP adjusted net income and non-GAAP adjusted net income 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 if they are one-time discrete events, such as the impact of tax adjustments. Cognex does not intend for these non-GAAP financial measures to be considered in isolation, nor as a substitute for financial information provided in accordance with GAAP.
• The tax effect of items identified in the reconciliation is estimated by applying the effective tax rate to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment. In that case, the tax effect of such items is estimated by applying such specific tax rate or tax treatment.

Analyst Conference Call and Simultaneous Webcast

• Cognex will host a conference call on Thursday, November 1, 2012 at 5:00 p.m. eastern time. The call was originally scheduled for today but has been rescheduled due to the state of emergency declared for many states along the Eastern Seaboard on account of Hurricane Sandy. The telephone number is (866) 814-8448 (or (703) 639-1367 if outside the United States). A replay will begin at 8:00 p.m. eastern time on Thursday, November 1, 2012 and will run continuously until 11:59 p.m. eastern time on Sunday, November 4, 2012. The telephone number for the replay is (888) 266-2081 (or (703) 925-2533 if outside the United States) and the access code is 1591612.
• Internet users can listen to a real-time audio broadcast of the conference call, or an archived replay on the Cognex Investor Relations website at http://www.cognex.com/Investor.

About Cognex Corporation

Cognex Corporation designs, develops, manufactures and markets a range of products that incorporate sophisticated machine vision technology that gives them the ability to "see." Cognex products include barcode readers, machine vision sensors and machine vision systems that are used in factories, warehouses and distribution centers around the world to guide, gauge, inspect, identify and assure the quality of items during the manufacturing and distribution process. Cognex is the world's leader in the machine vision industry, having shipped more than 800,000 vision-based products, representing over $3 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout North America, Japan, Europe, Asia and Latin America. For details visit Cognex online at http://www.cognex.com.

Certain statements made in this press release, which do not relate solely to historical matters, are forward-looking statements. These statements can be identified by use of the words "expects," "anticipates," "estimates," "believes," "projects," "intends," "plans," "will," "may," "shall," "could," "should," and similar words. These forward-looking statements, which include statements regarding business and market trends, future financial performance, customer order rates, expected areas of growth, research and development activities and investments, and strategic plans, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) current and future conditions in the global economy; (2) the cyclicality of the semiconductor and electronics industries; (3) the inability to penetrate new markets; (4) the inability to achieve significant international revenue; (5) fluctuations in foreign currency exchange rates; (6) the loss of a large customer; (7) the inability to attract and retain skilled employees; (8) the reliance upon key suppliers to manufacture and deliver critical components for Cognex products; (9) the failure to effectively manage product transitions or accurately forecast customer demand; (10) the inability to design and manufacture high-quality products; (11) the technological obsolescence of current products and the inability to develop new products; (12) the failure to properly manage the distribution of products and services; (13) the inability to protect Cognex proprietary technology and intellectual property; (14) involvement in time-consuming and costly litigation; (15) the impact of competitive pressures; (16) the challenges in integrating and achieving expected results from acquired businesses; (17) potential impairment charges with respect to Cognex's investments or for acquired intangible assets or goodwill; (18) exposure to additional tax liabilities; (19) information security breaches or business systems disruptions; and (20) the other risks detailed in Cognex reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2011. You should not place undue reliance upon any such forward-looking statements, which speak only as of the date made. Cognex disclaims any obligation to update forward-looking statements after the date of such statements.

Exhibit 1
COGNEX CORPORATION
Statements of Operations
(Unaudited)
Dollars in thousands, except per share amounts
				Three-months Ended												Nine-months Ended
				Sept. 30,				Jul. 1,				Oct. 2,				Sept. 30,				Oct. 2,
					2012				2012				2011				2012				2011
Revenue				$	80,076			$	84,326			$	80,085			$	242,111			$	237,872
Cost of revenue (1)					19,506				20,549				18,953				59,113				56,715
Gross margin					60,570				63,777				61,132				182,998				181,157
Percentage of revenue					76	%			76	%			76	%			76	%			76	%
Research, development, and engineering expenses (1)					10,002				10,300				10,608				30,663				30,596
Percentage of revenue					12	%			12	%			13	%			13	%			13	%
Selling, general, and administrative expenses (1)					28,765				30,127				28,135				89,441				86,762
Percentage of revenue					36	%			36	%			35	%			37	%			36	%
Operating income					21,803				23,350				22,389				62,894				63,799
Percentage of revenue					27	%			28	%			28	%			26	%			27	%
Foreign currency loss					(409	)			(30	)			(231	)			(1,077	)			(80	)
Investment and other income					692				1,702				761				3,369				1,710
Income before income tax expense					22,086				25,022				22,919				65,186				65,429
Income tax expense					4,281				5,255				4,882				13,332				14,659
Net income				$	17,805			$	19,767			$	18,037			$	51,854			$	50,770
Percentage of revenue					22	%			23	%			23	%			21	%			21	%
Earnings per weighted-average common and common-equivalent share:
	Basic			$	0.42			$	0.46			$	0.43			$	1.21			$	1.22
	Diluted			$	0.41			$	0.45			$	0.42			$	1.19			$	1.19
Weighted-average common and common-equivalent shares outstanding:
	Basic				42,912				42,851				42,128				42,777				41,765
	Diluted				43,629				43,601				42,976				43,610				42,682
Cash dividends per common share				$	0.11			$	0.11			$	0.09			$	0.32			$	0.26
Cash and investments per common share				$	9.68			$	9.11			$	8.23			$	9.68			$	8.23
Book value per common share				$	14.09			$	13.80			$	12.87			$	14.09			$	12.87
(1)	Amounts include stock option expense, as follows:
		Cost of revenue		$	125			$	175			$	107			$	608			$	486
		Research, development, and engineering			385				483				394				1,735				1,732
		Selling, general, and administrative			982				1,331				1,019				4,452				3,611
		Total stock option expense		$	1,492			$	1,989			$	1,520			$	6,795			$	5,829

Exhibit 2
COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
Dollars in thousands, except per share amounts
				Three-months Ended												Nine-months Ended
				Sept. 30,				Jul. 1,				Oct. 2,				Sept. 30,				Oct. 2,
					2012				2012				2011				2012				2011
Revenue (GAAP)				$	80,076			$	84,326			$	80,085			$	242,111			$	237,872
Operating income (GAAP)				$	21,803			$	23,350			$	22,389			$	62,894			$	63,799
		Stock option expense			1,492				1,989				1,520				6,795				5,829
		Operating income excluding stock option expense (Non-GAAP)		$	23,295			$	25,339			$	23,909			$	69,689			$	69,628
		Percentage of revenue (Non-GAAP)			29	%			30	%			30	%			29	%			29	%
Income before income tax expense (GAAP)				$	22,086			$	25,022			$	22,919			$	65,186			$	65,429
		Income tax expense (GAAP)		$	4,281			$	5,255			$	4,882			$	13,332			$	14,659
		Effective tax rate (GAAP)			19	%			21	%			21	%			20	%			22	%
		Tax adjustments:
		Discrete tax events			(357	)			-				(389	)			(357	)			(389	)
					(357	)			-				(389	)			(357	)			(389	)
		Income tax expense excluding tax adjustments (Non-GAAP)		$	4,638			$	5,255			$	5,271			$	13,689			$	15,048
		Effective tax rate (Non-GAAP)			21	%			21	%			23	%			21	%			23	%
Net income excluding tax adjustments (Non-GAAP)				$	17,448			$	19,767			$	17,648			$	51,497			$	50,381
		Percentage of revenue (Non-GAAP)			22	%			23	%			22	%			21	%			21	%
Net Income (GAAP)				$	17,805			$	19,767			$	18,037			$	51,854			$	50,770
		Stock option expense, net of tax			1,013				1,343				1,019				4,583				3,882
		Net income excluding stock option expense (Non-GAAP)		$	18,818			$	21,110			$	19,056			$	56,437			$	54,652
		Percentage of revenue (Non-GAAP)			24	%			25	%			24	%			23	%			23	%
Net income per diluted share (GAAP)				$	0.41			$	0.45			$	0.42			$	1.19			$	1.19
		Stock option expense per diluted share, net of tax		$	0.02			$	0.03			$	0.02			$	0.10			$	0.09
		Net income per diluted share excluding stock option expense (Non-GAAP)		$	0.43			$	0.48			$	0.44			$	1.29			$	1.28

Exhibit 3
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
		September 30,			December 31,
		2012			2011
Assets
Cash and investments		$	415,938		$	357,440
Accounts receivable			44,761			48,206
Inventories			24,995			28,098
Property, plant, and equipment			34,344			31,744
Goodwill and intangible assets			97,472			100,939
Other assets			44,605			45,454
Total assets		$	662,115		$	611,881
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities		$	36,485		$	39,388
Income taxes			8,473			6,055
Deferred revenue and customer deposits			11,755			13,458
Shareholders' equity			605,402			552,980
Total liabilities and shareholders' equity		$	662,115		$	611,881

Exhibit 4
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
		Three-months Ended												Nine-months Ended
		Sept. 30,				Jul. 1,				Oct. 2,				Sept. 30,				Oct. 2,
			2012				2012				2011				2012				2011
Revenue		$	80,076			$	84,326			$	80,085			$	242,111			$	237,872
Revenue by division:
Modular Vision Systems Division			85	%			85	%			85	%			85	%			87	%
Surface Inspection Systems Division			15	%			15	%			15	%			15	%			13	%
Total			100	%			100	%			100	%			100	%			100	%
Revenue by geography:
Americas			36	%			32	%			33	%			35	%			34	%
Europe			30	%			31	%			37	%			31	%			34	%
Asia			22	%			21	%			15	%			20	%			17	%
Japan			12	%			16	%			15	%			14	%			15	%
Total			100	%			100	%			100	%			100	%			100	%
Revenue by market:
Factory automation			77	%			73	%			74	%			75	%			73	%
Web and surface inspection			15	%			15	%			15	%			15	%			13	%
Semiconductor and electronics capital equipment			8	%			12	%			11	%			10	%			14	%
Total			100	%			100	%			100	%			100	%			100	%
		Three-months Ended
		Sept. 30,				Jul. 1,
			2012				2012			Increase/				Operational				Currency
		(GAAP)				(GAAP)				(Decrease)				Change				Impact
Revenue		$	80,076			$	84,326			$	(4,250	)		$	(3,444	)		$	(806	)
Research, development, and engineering expenses			10,002				10,300				(298	)			(236	)			(62	)
Selling, general & administrative expenses			28,765				30,127				(1,362	)			(1,130	)			(232	)
		Sept. 30,				Oct. 2,
			2012				2011			Increase/				Operational				Currency
		(GAAP)				(GAAP)				(Decrease)				Change				Impact
Revenue		$	80,076			$	80,085			$	(9	)		$	3,413			$	(3,422	)
Research, development, and engineering expenses			10,002				10,608				(606	)			(293	)			(313	)
Selling, general & administrative expenses			28,765				28,135				630				1,725				(1,095	)

Cognex Corporation
Susan Conway, 508-650-3353
Director of Investor Relations
susan.conway@cognex.com

Source: Cognex Corporation

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