UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 29, 2018

Cognex Corporation

(Exact name of registrant as specified in charter)

Massachusetts

001-34218

04-2713778

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

One Vision Drive, Natick, Massachusetts

01760-2059

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code:    (508) 650-3000

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

   


Item 2.02              Results of Operations and Financial Condition

On October 29, 2018, Cognex Corporation (the “Company”) issued a news release to report its financial results for the quarter ended September 30, 2018. The release is furnished as Exhibit 99.1 hereto. The information in Item 2.02 of this Current Report on Form 8-K, including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.


Item 8.01              Other Events

On October 29, 2018, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on November 30, 2018 to all shareholders of record at the close of business on November 16, 2018. This dividend represents an increase of $0.005 per share, or 11%, over the $0.045 per share dividend paid in the prior quarter.

On October 29, 2018, the Company announced that its Board of Directors has authorized the purchase of up to $200 million of the Company’s common stock in open market transactions.  This new authorization is in addition to the $150 million stock repurchase program that was announced by the Company on February 15, 2018, of which approximately $53 million remains available as of the date of this Current Report on Form 8-K.  Purchases under the new authorization can commence once the Company completes the existing program and will be subject to market conditions and other relevant factors.  The Company may suspend or discontinue the stock repurchase program at any time.


Item 9.01              Financial Statements and Exhibits

(d)        Exhibits

Exhibit No.

Description

 

99.1

News release, dated October 29, 2018, by Cognex Corporation


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

COGNEX CORPORATION

 

Dated:

October 29, 2018

By: /s/ John J. Curran

John J. Curran

Senior Vice President of Finance,

Chief Financial Officer and

Treasurer

Exhibit 99.1

Cognex Reports Results for the Third Quarter of 2018

NATICK, Mass.--(BUSINESS WIRE)--October 29, 2018--Cognex Corporation (NASDAQ: CGNX) today announced financial results for the third quarter of 2018. Table 1 below shows selected financial data for Q3-18 compared with Q3-17 and Q2-18, and the first nine months of 2018 compared with the first nine months of 2017. All periods presented reflect the two-for-one stock split that occurred in Q4-17.

       

Table 1*

(Dollars in thousands, except per share amounts)

                 
   

 

 

Revenue

 

 

 

Net Income

 

Net Income
per Diluted
Share

 

Non-GAAP
Net Income
per Diluted
Share**

Quarterly Comparisons

               
Current quarter : Q3-18   $232,221   $80,436   $0.45   $0.39
Prior year’s quarter: Q3-17   $266,042   $102,493   $0.57   $0.51
Change: Q3-17 to Q3-18   (13%)   (22%)   (21%)   (24%)
Prior quarter: Q2-18  

$211,264

  $56,196   $0.32   $0.31
Change: Q2-18 to Q3-18   10%   43%   41%   26%

Year-to-Date Comparisons

               
Nine months ended Sep. 30, 2018   $613,052   $173,849   $0.98   $0.88
Nine months ended Oct. 1, 2017   $583,161   $204,459   $1.14   $0.98
Change from first nine months of 2017 to first nine months of 2018   5%   (15%)   (14%)   (10%)

* The financial results for all periods presented reflect the retroactive adoption of a new revenue recognition standard (ASC 606, “Revenue from Contracts with Customers”) that became effective on January 1, 2018. This standard did not have a material impact on total revenue. For a historical perspective, Exhibit 4 of this news release includes the company’s quarterly Statement of Operations for 2017 adjusted for the impact of the new standard.
**Non-GAAP net income per diluted share excludes tax adjustments. A reconciliation from GAAP to Non-GAAP is shown in Exhibit 2 of this news release.


“Our results for Q3-18 were very good,” said Dr. Robert J. Shillman, Chairman of Cognex. “We reported the second-best quarterly revenue, net income and earnings per share from continuing operations in our company’s 37-year history. These results were surpassed only by our spectacular performance in last year’s third quarter, which was driven by exceptional growth across our business, particularly in our largest end market—consumer electronics.”

“I am pleased with the substantial revenue growth and operating margin expansion that we achieved on a sequential basis,” said Robert J. Willett, Chief Executive Officer of Cognex. “More importantly, we accomplished significant company objectives that are expected to set us up for long-term growth. These include successfully implementing our new Enterprise Resource Planning (ERP) system and passing a number of key product development milestones.”

Mr. Willett continued, “While we are pleased with our Q3-18 results, slower spending trends that we are experiencing in China have reduced our revenue outlook for Q4-18.”

In separate news releases issued today, Cognex announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on November 30, 2018 to all shareholders of record at the close of business on November 16, 2018. This dividend represents an increase of $0.005 per share, or 11%, over the $0.045 per share dividend paid in the prior quarter. In addition, the Board authorized the repurchase of up to $200 million of Cognex stock in open market transactions, subject to market conditions and other relevant factors. This new authorization will commence after Cognex completes an existing $150 million repurchase program, of which approximately $53 million remains available.

Details of the Quarter

Statement of Operations Highlights – Third Quarter of 2018


Balance Sheet Highlights – September 30, 2018


Financial Outlook – Q4 2018

This financial outlook reflects the new revenue recognition standard (ASC 606, “Revenue from Contracts with Customers”) that took effect on January 1, 2018. This standard did not have a material impact on total revenue. For a historical perspective, Exhibit 4 of this news release includes the company’s quarterly Statement of Operations for 2017 adjusted for the impact of the new standard.


Non-GAAP Financial Measures

Analyst Conference Call and Simultaneous Webcast


About Cognex Corporation

Cognex Corporation designs, develops, manufactures and markets a wide range of image-based products, all of which use artificial intelligence (AI) techniques that give them the human-like ability to make decisions on what they see. Cognex products include machine vision systems, machine vision sensors and barcode readers that are used in factories and distribution centers around the world where they eliminate production and shipping errors.

Cognex is the world's leader in the machine vision industry, having shipped more than 1.5 million vision-based products, representing over $5 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has offices and distributors located throughout the Americas, Europe and Asia. For details visit Cognex online at www.cognex.com.

Certain statements made in this news 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 and other statements of a similar sense. These forward-looking statements, which include statements regarding business and market trends, future financial performance, customer order rates and timing of related revenue, expected areas of growth, new product introductions, research and development activities, Cognex’s stock repurchase program and further stock repurchases, investments, strategic plans and tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the loss of a large customer; (2) current and future conditions in the global economy, including the imposition of tariffs; (3) the reliance on revenue from the consumer electronics or automotive industries; (4) the inability to penetrate new markets; (5) the inability to achieve significant international revenue; (6) fluctuations in foreign currency exchange rates and the use of derivative instruments; (7) information security breaches or business system disruptions; (8) the inability to attract and retain skilled employees; (9) the failure to effectively manage our growth; (10) the reliance upon key suppliers to manufacture and deliver critical components for our products; (11) the failure to effectively manage product transitions or accurately forecast customer demand; (12) the inability to design and manufacture high-quality products; (13) the technological obsolescence of current products and the inability to develop new products; (14) the failure to properly manage the distribution of products and services; (15) the inability to protect our proprietary technology and intellectual property; (16) our involvement in time-consuming and costly litigation; (17) the impact of competitive pressures; (18) the challenges in integrating and achieving expected results from acquired businesses; (19) potential impairment charges with respect to our investments or for acquired intangible assets or goodwill; (20) exposure to additional tax liabilities; and (21) the other risks detailed in Cognex reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2017. 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

September 30,
2018

  July 1, 2018  

October 1,
2017

September 30,
2018

 

October 1,
2017

 
Revenue (1) $ 232,221 $ 211,264 $ 266,042 $ 613,052 $ 583,161
Cost of revenue (1) 58,860   54,169   68,061   153,227   142,757  
Gross margin 173,361 157,095 197,981 459,825 440,404
Percentage of revenue 75 % 74 % 74 % 75 % 76 %
Research, development, and engineering expenses (1) 29,700 26,888 26,078 87,664 72,225
Percentage of revenue 13 % 13 % 10 % 14 % 12 %
Selling, general, and administrative expenses (1) 65,817 66,752 61,054 196,266 160,093
Percentage of revenue 28 % 32 % 23 % 32 % 27 %
Operating income 77,844 63,455 110,849 175,895 208,086
Percentage of revenue 34 % 30 % 42 % 29 % 36 %
Foreign currency (loss) (379 ) (195 ) (127 ) (708 ) (574 )
Investment and other income 3,808   3,313   2,030   10,638   6,281  
Income before income tax expense 81,273 66,573 112,752 185,825 213,793
Income tax expense 837   10,377   10,259   11,976   9,334  
Net income $ 80,436   $ 56,196   $ 102,493   $ 173,849   $ 204,459  
Percentage of revenue 35 % 27 % 39 % 28 % 35 %
 
Earnings per weighted-average common and common-equivalent share (2):
Basic $ 0.47   $ 0.33   $ 0.59   $ 1.01   $ 1.18  
Diluted $ 0.45   $ 0.32   $ 0.57   0.98   1.14  
 
 
Weighted-average common and common-equivalent shares outstanding (2):
Basic 172,189   172,370   173,234   172,613   173,052  
Diluted 177,245   177,149   179,354   178,021   179,124  
 
Cash dividends per common share (2) $ 0.0450   $ 0.0450   $ 0.0425   $ 0.1350   $ 0.1225  
Cash and investments per common share (2) $ 4.70   $ 4.39   $ 4.45   $ 4.70   $ 4.45  
Book value per common share (2) $ 6.68   $ 6.27   $ 6.55   $ 6.68   $ 6.55  
 
(1) Amounts include stock option expense, as follows:
Cost of revenue $ 544 $ 557 $ 520 $ 1,898 $ 1,404
Research, development, and engineering 3,197 3,154 2,765 11,166 8,090
Selling, general, and administrative 5,402   5,291   4,741   18,275   13,861  
Total stock option expense $ 9,143   $ 9,002   $ 8,026   $ 31,339   $ 23,355  

(2) Prior periods share and per share amounts have been adjusted to reflect the 2-for-1 stock split of the Company's common stock that occurred in the fourth quarter of 2017.


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

September 30,
2018

  July 1, 2018  

October 1,
2017

September 30,
2018

 

October 1,
2017

Adjustment for stock option expense and tax benefit for stock option exercises
Operating income (GAAP) $ 77,844   $ 63,455   $ 110,849 $ 175,895   $ 208,086
Stock option expense 9,143   9,002   8,026   31,339   23,355  
Operating income (Non-GAAP) $ 86,987   $ 72,457   $ 118,875   $ 207,234   $ 231,441  
Percentage of revenue (Non-GAAP) 37 % 34 % 45 % 34 % 40 %
 
Net income (GAAP) $ 80,436 $ 56,196 $ 102,493 $ 173,849 $ 204,459
Stock option expense 9,143 9,002 8,026 31,339 23,355
Tax effect on stock option expense (1,654 ) (1,607 ) (2,639 ) (5,608 ) (7,661 )
Discrete tax benefit related to employee stock option exercises (2,811 ) (654 ) (8,620 ) (8,400 ) (27,574 )
Net income (Non-GAAP) $ 85,114   $ 62,937   $ 99,260   $ 191,180   $ 192,579  
Percentage of revenue (Non-GAAP) 37 % 30 % 37 % 31 % 33 %
 
Net income per diluted weighted-average common and common-equivalent share (GAAP) (1) $ 0.45 $ 0.32 $ 0.57 $ 0.98 $ 1.14
Share impact of non-GAAP adjustments identified above (1) 0.03   0.04   (0.02 ) 0.09   (0.06 )
Net income per diluted weighted-average common and common-equivalent share (Non-GAAP) (1) $ 0.48   $ 0.36   $ 0.55   $ 1.07   $ 1.08  
 
Diluted weighted-average common and common-equivalent shares outstanding (GAAP) (1) 177,245   177,149   179,354   178,021   179,124  
                             
 
Exclusion of tax adjustments                            
Income before income tax expense (GAAP) $ 81,273   $ 66,573   $ 112,752   $ 185,825   $ 213,793  
 
Income tax expense (GAAP) $ 837 $ 10,377 $ 10,259 $ 11,976 $ 9,334
Effective tax rate (GAAP) 1 % 16 % 9 % 6 % 4 %
 
Tax adjustments:
Discrete tax benefit related to employee stock option exercises (2,811 ) (654 ) (8,620 ) (8,400 ) (27,574 )
Discrete tax benefit related to Tax Act (7,699 ) (7,699 )
Other discrete tax events (1,657 )   (1,765 ) (1,657 ) (1,908 )
Income tax expense excluding tax adjustments (Non-GAAP) $ 13,004   $ 11,031   $ 20,644   $ 29,732   $ 38,816  
Effective tax rate (Non-GAAP) 16 % 17 % 18 % 16 % 18 %
 
Net income excluding tax adjustments (Non-GAAP) $ 68,269   $ 55,542   $ 92,108   $ 156,093   $ 174,977  
Percentage of revenue (Non-GAAP) 29 % 26 % 35 % 25 % 30 %
 
Net income per diluted weighted-average common and common-equivalent share (GAAP) (1) $ 0.45 $ 0.32 $ 0.57 $ 0.98 $ 1.14
Share impact of non-GAAP adjustments identified above (1) (0.06 ) (0.01 ) (0.06 ) (0.10 ) (0.16 )
Net income per diluted weighted-average common and common-equivalent share (Non-GAAP) (1) $ 0.39   $ 0.31   $ 0.51   $ 0.88   $ 0.98  
 
Diluted weighted-average common and common-equivalent shares outstanding (GAAP) (1) 177,245   177,149   179,354   178,021   179,124  

(1) Prior periods share and per share amounts have been adjusted to reflect the 2-for-1 stock split of the Company's common stock that occurred in the fourth quarter of 2017.


Exhibit 3

   

COGNEX CORPORATION
Balance Sheets
(Unaudited)
Dollars in thousands

 
September 30, 2018 December 31, 2017
Assets
Cash and investments $ 809,316 $ 827,984
Accounts receivable 135,441 119,388
Unbilled revenue 13,948 7,454
Inventories 94,035 67,923
Property, plant, and equipment 88,930 78,048
Goodwill and intangible assets 124,090 126,397
Other assets 58,936 60,559
   
Total assets $ 1,324,696 $ 1,287,753
 
Liabilities and Shareholders' Equity
Accounts payable and accrued expenses $ 88,927 $ 91,712
Deferred revenue and customer deposits 13,252 9,420
Income taxes 67,599 85,044
Other liabilities 5,474 5,904
Shareholders' equity 1,149,444 1,095,673
   
Total liabilities and shareholders' equity $ 1,324,696 $ 1,287,753
 

Exhibit 4

 

COGNEX CORPORATION
Restated Statements of Operations under ASC 606 "Revenue from Contracts with Customers"
(Unaudited)
Dollars in thousands

 
Three-months Ended

April 2,
2017

 

July 2,
2017

 

October 1,
2017

 

December 31,
2017

 
Revenue $ 139,039 $ 178,080 $ 266,042 $ 182,922
Cost of revenue 32,532   42,164   68,061   44,532  
Gross margin 106,507 135,916 197,981 138,390
Percentage of revenue 77 % 76 % 74 % 76 %
Research, development, and engineering expenses 22,770 23,377 26,078 26,980
Percentage of revenue 16 % 13 % 10 % 15 %
Selling, general, and administrative expenses 46,521 52,518 61,054 60,635
Percentage of revenue 33 % 29 % 23 % 33 %
Operating income 37,216 60,021 110,849 50,775
Percentage of revenue 27 % 34 % 42 % 28 %
Foreign currency (loss) (263 ) (184 ) (127 ) (1,027 )
Investment and other income 2,282   1,969   2,030   2,923  
Income before income tax expense 39,235 61,806 112,752 52,671
Income tax expense (benefit) (6,236 ) 5,311   10,259   80,418  
Net income (loss) $ 45,471   $ 56,495   $ 102,493   $ (27,747 )
Percentage of revenue 33 % 32 % 39 % (15 )%
 
Earnings per weighted-average common and common-equivalent share (1):
Basic $ 0.26   $ 0.33   $ 0.59   $ (0.16 )
Diluted $ 0.25   $ 0.32   $ 0.57   $ (0.16 )
 
Weighted-average common and common-equivalent shares outstanding (1):
Basic 172,646   173,278   173,234   173,397  
Diluted 178,354   179,228   179,354   173,397  

(1) Prior periods share and per share amounts have been adjusted to reflect the 2-for-1 stock split of the Company's common stock that occurred in the fourth quarter of 2017.


 

Adjustments to certain financial data as a result of the implementation of ASC 606 "Revenue from Contracts with Customers on Jan. 1 2018"

 
Three-months Ended

April 2,
2017

 

July 2,
2017

 

October 1,
2017

 

December 31,
2017

 
Revenue as reported $ 134,942 $ 172,904 $ 259,739 $ 180,365
Adjustments to revenue 4,097   5,176   6,303   2,557  
Revenue as restated $ 139,039   $ 178,080   $ 266,042   $ 182,922  
 
Cost of revenue as reported 28,225 37,471 62,360 40,642
Adjustments to cost of revenue 4,307   4,693   5,701   3,890  
Cost of revenue as restated $ 32,532   $ 42,164   $ 68,061   $ 44,532  
 
Gross margin as reported $ 106,717 $ 135,433 $ 197,379 $ 139,723
Adjustments to gross margin (210 ) 483   602   (1,333 )
Gross margin as restated $ 106,507   135,916   $ 197,981   $ 138,390  
 
Gross margin percentage as reported 79 % 78 % 76 % 77 %
Adjustments to gross margin percentage (2 )% (2 )% (2 )% (1 )%
Gross margin percentage as restated 77 % 76 % 74 % 76 %
 
Operating income as reported $ 37,426 $ 59,538 $ 110,247 $ 52,108
Adjustments to operating income (210 ) 483   602   (1,333 )
Operating income as restated $ 37,216   $ 60,021   $ 110,849   $ 50,775  
 
Operating margin as reported 28 % 34 % 42 % 29 %
Adjustments to operating margin (1 )% % % (1 )%
Operating margin as restated 27 % 34 % 42 % 28 %

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