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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 1 million vision-based products, representing over $4 billion in cumulative revenue, since the company’s founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout the Americas, Europe, and Asia.

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Cognex Reports 4Q and Fiscal Year 2010 Financial Results

POSTED 02/16/2011

Cognex Corp. announced that for the quarter and year ended December 31, 2010 the company set new records for both annual and quarterly bookings, revenue and net income per share. 

In a release on February 10, the Company noted details:
"Cognex had an outstanding year in 2010," said Dr. Robert J. Shillman, Cognex's Chairman and Chief Executive Officer. "We set new records for annual bookings, revenue and earnings per share, and we ended the record year with a record quarter as well. Sales of our machine vision products were particularly strong in the Factory Automation and Surface Inspection markets; in fact, we had record annual and quarterly revenue in both of those markets. And, the substantial leverage that incremental revenue has on our profitability drove our operating margin to 26 percent and net income to 21 percent of revenue for the year."
Dr. Shillman continued, "From an operational standpoint, we executed very well on our strategic initiatives. We gained significant revenue in two industries that we believe have high potential for long-term growth (solar and pharmaceuticals). We completed development of a number of new products, such as DataMan 500 for the logistics market, and we expanded our market presence in China and other geographic regions that are in the early stages of adopting machine vision technology." 

"In order to continue the progress we made in 2010, we intend to invest in both engineering and sales while maintaining a disciplined approach to controlling costs," Dr. Shillman concluded. 

Details of the Quarter
Statement of Operations Highlights - Fourth Quarter of 2010
Revenue for the fourth quarter of 2010 increased 66 percent from the fourth quarter of 2009 and 13 percent from the prior quarter. Contributing to these increases was $6,500,000 of service revenue from the Factory Automation market that had been deferred until a single customer contract was completed. Even excluding this revenue, the largest increase, both year-on-year and sequentially, was still from Factory Automation, which set a new revenue record in the fourth quarter of 2010. Revenue from the Surface Inspection market also set a new record in the fourth quarter. 

Gross margin was 72 percent in the fourth quarter of 2010, 69 percent in the fourth quarter of 2009 and 75 percent in the prior quarter. Gross margin increased year-on-year primarily due to manufacturing efficiencies achieved from the higher revenue level. Gross margin decreased on a sequential basis primarily due to the $6,500,000 service order mentioned above. Product mix also contributed because software-only products, which have a relatively higher margin than other Cognex products, represented a lower percentage of revenue. 

Research, Development & Engineering (R, D & E) spending in the fourth quarter of 2010 increased 14 percent from the fourth quarter of 2009 and 12 percent from the prior quarter. R, D & E spending increased, both year-on-year and sequentially, primarily due to higher personnel-related costs and a bonus accrual.
Selling, General & Administrative (S, G & A) spending in the fourth quarter of 2010 increased 9 percent from the fourth quarter of 2009 and 12 percent from the prior quarter. S, G & A spending increased year-on-year due to the bonus accrual and higher sales commissions, personnel-related costs and spending on marketing initiatives. Lower stock option expense partially offset this higher spending. S, G & A spending increased on a sequential basis also due to the bonus accrual and higher personnel-related costs and marketing spending as well as the impact of foreign exchange rates on the company's international operations. 

As reported, the tax rate was 14 percent in the fourth quarter of 2010 as compared to 2 percent in the fourth quarter of 2009 and 20 percent in the prior quarter. The effective tax rate, excluding tax adjustments, was 20 percent in the fourth quarter of 2010 as compared to 19 percent in the fourth quarter of 2009 and 23 percent in the prior quarter. The increase year-on-year is due to more of the company's profits being earned in higher tax jurisdictions. The decrease from the prior quarter is primarily due to a true-up of the annual tax rate.

Balance Sheet Highlights - December 31, 2010
Cognex's financial position as of December 31, 2010 was very strong, with no debt and $283,081,000 in cash and investments. In the fourth quarter of 2010, Cognex generated positive cash flow from operations of nearly $39,000,000, and paid out approximately $3,300,000 in dividends to shareholders.
Inventories as of December 31, 2010 increased by $5,885,000, or 35 percent, from the end of 2009 in support of a significantly higher level of business in 2010. 

Financial Outlook
In Q1-11, revenue is expected to be between $70 million and $73 million, which is a decrease of 14 percent to 18 percent from Q4-10 (or 7 percent to 11 percent excluding the $6.5 million service order in Q4-10). Cognex typically experiences a revenue decline from Q4 to Q1 due to seasonality in the Factory Automation market, and also expects lower revenue from the Semiconductor and Electronics Capital Equipment market. Operating expenses are expected to increase by less than 3 percent from Q4-10. And, the effective tax rate is expected to be 25 percent. 

Cognex Corp. designs, develops, manufactures and markets machine vision sensors and systems, or devices that can "see." Cognex vision sensors and systems are used in factories around the world where they guide, inspect, gauge, identify and assure the quality of a range of items during the manufacturing process.
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