Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. COGNEX CORP (851205) 10-Q published on Apr 29, 2019 at 4:07 pm
Reporting Period: Mar 30, 2019
The Company classifies a lease as a finance lease when it meets any of the following criteria at the lease commencement date: a) the lease transfers ownership of the underlying asset to the Company by the end of the lease term; b) the lease grants the Company an option to purchase the underlying asset that the Company is reasonably certain to exercise; c) the lease term is for the major part of the remaining economic life of the underlying asset (the Company considers a major part to be 75% or more of the remaining economic life of the underlying asset); d) the present value of the sum of the lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value of the underlying asset (the Company considers substantially all the fair value to be 90% or more of the fair value of the underlying asset amount); e) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. When none of the criteria above are met, the Company classifies the lease as an operating lease.
On the lease commencement date, the Company records a lease asset and lease liability on the balance sheet. The lease asset consists of: 1) the amount of the initial lease liability; 2) any lease payments made to the lessor at or before the lease commencement date, minus any lease incentives received; and 3) any initial direct cost incurred by the Company. Initial direct costs are incremental costs of a lease that would not have been incurred if the lease had not been obtained and are capitalized as part of the lease asset.
The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations. All of these leases are classified as operating leases. Certain leases may contain options to extend or terminate the lease at the Company's sole discretion. There were no options to extend or terminate that were included in the determination of the lease term for the leases outstanding as of March 31, 2019. Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index. There were no restrictions or covenants for the leases outstanding as of March 31, 2019.
Revenue for the first quarter of 2019 totaled $173,484,000, representing an increase of 2% from the first quarter of 2018. Strong sales in the logistics industry were partially offset by slowing order trends in the automotive industry in the Americas, lower demand from customers based in Greater China, and the unfavorable impact of changes in foreign currency exchange rates on revenue. Unfavorable absorption of manufacturing overhead costs over a declining inventory balance contributed to a decrease in the gross margin percentage to 73% of revenue in the first quarter of 2019 compared to 76% of revenue in the first quarter of 2018. Operating expenses increased by 2% over the prior year's first quarter due principally to the impact of headcount additions to support our future growth plans. Operating income was 17% of revenue in the first quarter of 2019 compared to 20% of revenue in the first quarter of 2018; net income was 19% of revenue in the first quarter of 2019 compared to 22% of revenue in the first quarter of 2018; and net income per diluted share was $0.19 in the first quarter of 2019 compared to $0.21 in the first quarter of 2018.
On December 5, 2018, the Company’s Board of Directors allowed the Company’s Shareholder Rights Agreement and associated rights to expire in accordance with their terms without renewal. In connection with the adoption of the Shareholder Rights Agreement, the Company had filed Articles of Amendment to its Restated Articles of Organization establishing Series E Junior Participating Cumulative Preferred Stock with the Secretary of State of The Commonwealth of Massachusetts, setting forth the rights, powers, and preferences of the Series E Junior Participating Cumulative Preferred Stock issuable upon exercise of the rights (the “Preferred Shares”). Effective on April 26, 2019, the Company filed Articles of Amendment to the Company’s Restated Articles of Organization with the Secretary of State of The Commonwealth of Massachusetts eliminating the Preferred Shares and returning them to authorized but undesignated shares of the Company’s preferred stock.