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Cognex Corp. Reports Operating Results (10-Q)

October 29, 2012 | About:
10qk

10qk

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Cognex Corp. (CGNX) filed Quarterly Report for the period ended 2012-09-30.

Cognex Corporation has a market cap of $1.53 billion; its shares were traded at around $35.66 with a P/E ratio of 21.7 and P/S ratio of 4.8. The dividend yield of Cognex Corporation stocks is 1.2%.

Highlight of Business Operations:

Revenue for the third quarter of 2012 totaled $80,076,000. Revenue for the current quarter was relatively flat with the third quarter of 2011, as higher sales in the factory automation market were offset by lower sales in the cyclical semiconductor and electronics capital equipment market. Although the gross margin percentage rounded to 76% in both the third quarter of 2012 and 2011, the gross margin contribution was slightly lower in the third quarter of 2012 due primarily to higher new product introduction costs. Operating expenses were relatively flat with the third quarter of 2011 due principally to expenses associated with increased headcount in strategic areas, offset by lower company bonus accruals and the favorable impact of foreign currency exchange rates on operating expenses. The Company recorded operating income of $21,803,000, or 27% of revenue, in the third quarter of 2012, compared to $22,389,000, or 28% of revenue, in the third quarter of 2011. Net income was $17,805,000, or 22% of revenue, in the third quarter of 2012, compared to $18,037,000, or 23% of revenue, in the third quarter of 2011.

Sales to customers in the factory automation market represented 77% and 75% of total revenue for the three-month and nine-month periods in 2012, respectively, compared to 74% and 73% for the same periods in 2011. Sales to these customers increased by $2,147,000, or 4%, for the three-month period and increased by $9,643,000, or 6%, for the nine-month period. A weaker Euro in 2012 compared to the prior year had a negative impact on reported factory automation revenue, as sales denominated in Euros were translated to U.S. Dollars at a lower rate. Excluding the impact of foreign currency exchange rate changes on revenue, sales to factory automation customers increased by $5,209,000, or 9%, for the three-month period and increased by $15,127,000, or 9%, for the nine-month period.

Sales to customers who make automation equipment for the semiconductor and electronics industries represented 8% and 10% of total revenue for the three-month and nine-month periods in 2012, respectively, compared to 11% and 14% for the same periods in 2011. Sales to these customers decreased by $2,060,000, or 23%, for the three-month period and decreased by $9,456,000, or 29%, for the nine-month period. Furthermore, sales to these customers decreased by $2,982,000, or 30%, from the second quarter of 2012. The semiconductor and electronics capital equipment market has historically been highly cyclical and management has limited visibility regarding future order levels from these customers.

Service revenue, which is derived from the sale of maintenance and support, training, consulting, and installation services, increased by $1,719,000, or 29%, for the three-month period and increased by $2,554,000, or 15%, for the nine-month period. For the three-month period, service revenue included $1,300,000 related to a custom software development arrangement with an MVSD customer for which the work was performed over the prior two years, but revenue was deferred until the final software obligation was completed in the third quarter of 2012. For the nine-month period, the increase was also due to higher revenue from SISD training services and spare part sales. Service revenue as a percentage of total revenue was 10% and 8% for the three-month and nine-month periods in 2012, respectively, compared to 7% for both the three-month and nine-month periods in 2011.

The Companys effective tax rate for the third quarter of 2012 included a decrease in tax expense of $441,000 due to the expiration of statutes of limitations for certain reserves for income tax uncertainties. This reduction in tax expense was partially offset by the final true-up of the prior years tax accrual upon filing the actual tax returns, which increased tax expense by $84,000. These discrete tax events decreased the effective tax rate from a provision of 21% to a provision of 19% for the three-month period in 2012 and decreased the effective tax rate from a provision of 21% to a provision of 20% for the nine-month period in 2012. Included in the effective tax rate is the reversal of a $2,457,000 valuation allowance against foreign tax credits recorded in the prior year. Management believes that the Company will have sufficient foreign source earnings taxable in the United States to allow for full realization of these credits in 2012.

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