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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
(Mark One)
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 3, 2021 or
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________

Commission File Number 001-34218
COGNEX CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2713778
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.002 per shareCGNXThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
 Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
 Yes   No  
As of October 3, 2021, there were 176,799,003 shares of Common Stock, $.002 par value per share, of the registrant outstanding.



INDEX
 
PART IFINANCIAL INFORMATION
Financial Statements (interim periods unaudited)

2


PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
 (unaudited)(unaudited)
Revenue$284,848 $251,073 $793,033 $587,405 
Cost of revenue85,712 59,741 208,189 151,261 
Gross margin199,136 191,332 584,844 436,144 
Research, development, and engineering expenses34,476 30,240 99,883 96,583 
Selling, general, and administrative expenses77,113 64,206 226,380 193,497 
Restructuring charges (Note 16) 251  15,049 
Intangible asset impairment charges (Note 8)   19,571 
Operating income87,547 96,635 258,581 111,444 
Foreign currency gain (loss)(586)2,357 (2,233)(310)
Investment income1,748 2,490 5,025 11,010 
Other income (expense)(125)(173)(420)(153)
Income before income tax expense88,584 101,309 260,953 121,991 
Income tax expense9,684 13,803 34,607 15,150 
Net income$78,900 $87,506 $226,346 $106,841 
Net income per weighted-average common and common-equivalent share:
Basic$0.45 $0.50 $1.28 $0.62 
Diluted$0.44 $0.49 $1.26 $0.61 
Weighted-average common and common-equivalent shares outstanding:
Basic176,812 173,943 176,572 172,881 
Diluted180,342 177,138 180,109 176,038 
Cash dividends per common share$0.060 $0.055 $0.180 $0.165 












 
The accompanying notes are an integral part of these consolidated financial statements.
3


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
 
 Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
 (unaudited)(unaudited)
Net income$78,900 $87,506 $226,346 $106,841 
Other comprehensive income (loss), net of tax:
Available-for-sale investments:
Net unrealized gain (loss), net of tax of $(162) and $2,855 in the three-month periods and net of tax of $(808) and $1,067 in the nine-month periods, respectively
(521)(2,308)(2,617)6,282 
Reclassification of credit loss (recovery) on investments into current operations   75 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations(19)(786)(87)(3,591)
Net change related to available-for-sale investments(540)(3,094)(2,704)2,766 
Foreign currency translation adjustments:
Foreign currency translation adjustments(2,136)2,098 (5,243)(3,364)
Net change related to foreign currency translation adjustments(2,136)2,098 (5,243)(3,364)
Other comprehensive income (loss), net of tax(2,676)(996)(7,947)(598)
Total comprehensive income$76,224 $86,510 $218,399 $106,243 
















The accompanying notes are an integral part of these consolidated financial statements.
4


COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
October 3, 2021December 31, 2020
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$203,479 $269,073 
Current investments, amortized cost of $188,349 and $102,258 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020
189,113 103,240 
Accounts receivable, allowance for credit losses of $792 and $831 in 2021 and 2020, respectively
129,784 125,696 
Unbilled revenue7,325 5,632 
Inventories81,170 60,830 
Prepaid expenses and other current assets61,196 37,220 
Total current assets672,067 601,691 
Non-current investments, amortized cost of $591,378 and $390,417 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020
592,794 395,125 
Property, plant, and equipment, net76,882 79,173 
Operating lease assets24,154 22,582 
Goodwill241,799 244,078 
Intangible assets, net12,782 15,555 
Deferred income taxes420,962 434,704 
Other assets7,363 7,794 
Total assets$2,048,803 $1,800,702 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$26,797 $16,270 
Accrued expenses80,337 77,264 
Accrued income taxes12,271 9,379 
Deferred revenue and customer deposits37,843 21,274 
Operating lease liabilities7,889 8,110 
Total current liabilities165,137 132,297 
Non-current operating lease liabilities18,922 18,120 
Deferred income taxes302,019 314,952 
Reserve for income taxes14,805 14,257 
Non-current accrued income taxes40,963 48,915 
Other liabilities13,996 9,959 
Total liabilities555,842 538,500 
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2021 and 2020, respectively, no shares issued and outstanding
  
Common stock, $.002 par value – Authorized: 300,000 shares in 2021 and 2020, respectively, issued and outstanding: 176,799 and 175,790 shares in 2021 and 2020, respectively
354 352 
Additional paid-in capital900,190 807,739 
Retained earnings634,165 487,912 
Accumulated other comprehensive loss, net of tax(41,748)(33,801)
Total shareholders’ equity1,492,961 1,262,202 
Total liabilities and shareholders' equity$2,048,803 $1,800,702 


The accompanying notes are an integral part of these consolidated financial statements.
5


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine-months Ended
October 3, 2021September 27, 2020
 (unaudited)
Cash flows from operating activities:
Net income$226,346 $106,841 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense33,353 32,076 
Depreciation of property, plant, and equipment12,641 16,467 
Loss on disposal of property, plant, and equipment4 1,654 
Amortization of intangible assets2,773 3,437 
Intangible asset impairment charges 19,571 
Excess and obsolete inventory charges2,120 9,386 
Operating lease asset impairment charges 2,534 
Amortization of discounts or premiums on investments3,316 765 
Realized gain on sale of investments(87)(3,591)
Credit loss on investments 75 
Revaluation of contingent consideration (114)
Change in deferred income taxes1,411 3,194 
Change in operating assets and liabilities:
Accounts receivable(4,295)(23,878)
Unbilled revenue(1,689)(10,606)
Inventories(22,534)(3,065)
Prepaid expenses and other current assets(24,607)(10,718)
Accounts payable10,576 3,587 
Accrued expenses4,416 17,028 
Accrued income taxes(4,936)(23,627)
Deferred revenue and customer deposits16,751 19,066 
Other3,297 (632)
Net cash provided by operating activities258,856 159,450 
Cash flows from investing activities:
Purchases of investments(607,458)(601,447)
Maturities and sales of investments317,174 567,245 
Purchases of property, plant, and equipment(10,689)(9,829)
Net cash provided by (used in) investing activities(300,973)(44,031)
Cash flows from financing activities:
Net proceeds from issuance of common stock under stock plans59,101 91,390 
Repurchase of common stock(48,294)(51,036)
Payment of dividends(31,800)(28,554)
Payment of contingent consideration (1,039)
Net cash provided by (used in) financing activities(20,993)10,761 
Effect of foreign exchange rate changes on cash and cash equivalents(2,484)745 
Net change in cash and cash equivalents(65,594)126,925 
Cash and cash equivalents at beginning of period269,073 171,431 
Cash and cash equivalents at end of period$203,479 $298,356 






The accompanying notes are an integral part of these consolidated financial statements.
6


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of July 4, 2021176,707 $353 $874,883 $593,290 $(39,072)$1,429,454 
Net issuance of common stock under stock plans415 1 14,693 — — 14,694 
Repurchase of common stock(323) — (27,417)— (27,417)
Stock-based compensation expense— — 10,614 — — 10,614 
Payment of dividends ($0.060 per common share)
— — — (10,608)— (10,608)
Net income— — — 78,900 — 78,900 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(162)
— — — — (521)(521)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (19)(19)
Foreign currency translation adjustment— — — — (2,136)(2,136)
Balance as of October 3, 2021 (unaudited)176,799 $354 $900,190 $634,165 $(41,748)$1,492,961 
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of June 28, 2020173,047 $346 $710,412 $702,597 $(36,877)$1,376,478 
Net issuance of common stock under stock plans1,586 3 43,152 — — 43,155 
Stock-based compensation expense— — 9,268 — — 9,268 
Payment of dividends ($0.055 per common share)
— — — (9,582)— (9,582)
Net income— — — 87,506 — 87,506 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $2,855
— — — — (2,308)(2,308)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (786)(786)
Foreign currency translation adjustment— — — — 2,098 2,098 
Balance as of September 27, 2020 (unaudited)174,633 $349 $762,832 $780,521 $(37,873)$1,505,829 










The accompanying notes are an integral part of these consolidated financial statements.
7


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2020175,790 $352 $807,739 $487,912 $(33,801)$1,262,202 
Net issuance of common stock under stock plans1,590 3 59,098 — — 59,101 
Repurchase of common stock(581)(1)— (48,293)— (48,294)
Stock-based compensation expense— — 33,353 — — 33,353 
Payment of dividends ($0.180 per common share)
— — — (31,800)— (31,800)
Net income— — — 226,346 — 226,346 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(808)
— — — — (2,617)(2,617)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (87)(87)
Foreign currency translation adjustment— — — — (5,243)(5,243)
Balance as of October 3, 2021 (unaudited)176,799 $354 $900,190 $634,165 $(41,748)$1,492,961 

 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2019172,440 $345 $639,372 $753,268 $(37,275)$1,355,710 
Net issuance of common stock under stock plans3,408 6 91,384 — — 91,390 
Repurchase of common stock(1,215)(2)— (51,034)— (51,036)
Stock-based compensation expense— — 32,076 — — 32,076 
Payment of dividends ($0.165 per common share)
— — — (28,554)— (28,554)
Net income— — — 106,841 — 106,841 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $1,067
— — — — 6,282 6,282 
Reclassification of credit loss (recovery) on investments— — — — 75 75 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (3,591)(3,591)
Foreign currency translation adjustment— — — — (3,364)(3,364)
Balance as of September 27, 2020 (unaudited)174,633 $349 $762,832 $780,521 $(37,873)$1,505,829 








The accompanying notes are an integral part of these consolidated financial statements.
8


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: Summary of Significant Accounting Policies
As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles (GAAP). Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a full description of other significant accounting policies.
In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, excess and obsolete inventory charges (Note 5), intangible asset impairment charges (Note 8), restructuring charges (Note 16) and financial statement reclassifications necessary to present fairly the Company’s financial position as of October 3, 2021, and the results of its operations for the three-month and nine-month periods ended October 3, 2021 and September 27, 2020, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.
The results disclosed in the Consolidated Statements of Operations for the three-month and nine-month periods ended October 3, 2021 are not necessarily indicative of the results to be expected for the full year.
NOTE 2: New Pronouncements
Accounting Standards Update (ASU) 2019-12, "Simplifying the Accounting for Income Taxes"
The amendments in this ASU eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. They also clarify and simplify other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 on January 1, 2021. Upon adoption, ASU 2019-12 did not have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs"
The amendments in this ASU clarify that for each reporting period, for callable debt with multiple call dates and call prices that may change at each call date, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess is amortized to the next call date. The Company adopted ASU 2020-08 on January 1, 2021. Upon adoption, ASU 2020-08 did not have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and (ASU) 2021-01, "Reference Rate Reform (Topic 848): Scope"
The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. Management does not expect ASU 2020-04 or ASU 2021-01 to have a material impact on the Company's consolidated financial statements and disclosures.

9


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3: Fair Value Measurements
Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of October 3, 2021 (in thousands):
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Unobservable Inputs (Level 3)
Assets:
Money market instruments$3,616 $ $ 
Corporate bonds 555,992  
Treasury bills 114,998  
Asset-backed securities 83,896  
Agency bonds 18,966  
Municipal bonds 6,966  
Sovereign bonds 1,089  
Economic hedge forward contracts 129  
Liabilities:
Economic hedge forward contracts 88  

The Company’s money market instruments are reported at fair value based upon the daily market price for identical assets in active markets, and are therefore classified as Level 1.
The Company’s debt securities and forward contracts are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2. Management is responsible for estimating the fair value of these financial assets and liabilities, and in doing so, considers valuations provided by a large, third-party pricing service. For debt securities, this service maintains regular contact with market makers, brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data. They use this information to structure yield curves for various types of debt securities and arrive at the daily valuations. The Company's forward contracts are typically traded or executed in over-the-counter markets with a high degree of pricing transparency. The market participants are generally large commercial banks.
The Company's contingent consideration liabilities are reported at fair value based upon probability-adjusted present values of the consideration expected to be paid using significant inputs that are not observable in the market, and are therefore classified as Level 3. Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving certain revenue milestones. The fair values of these contingent consideration liabilities were calculated using discount rates consistent with the level of risk of achievement, and are remeasured each reporting period.

The fair value of the contingent consideration liability related to the Company's acquisition of GVi Ventures, Inc. in 2017 was written down to zero in 2019 resulting from a lower level of revenue in the Americas' automotive industry, and the balance remains at zero as of October 3, 2021. The undiscounted potential outcomes related to future contingent consideration range from $0 to $2,500,000 based upon certain revenue levels through April of 2022.

Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis

Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. The Company evaluates these long-lived assets for impairment whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value may not be recoverable. The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets for potential impairment as of May 26, 2020, which resulted in operating lease asset impairment charges of $2,534,000 (refer to Notes 6 and 16) that were
10


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $19,571,000 (refer to Note 8) in the second quarter of 2020. These fair value measurements were based upon the present values of future cash flows using significant inputs that were not observable in the market, and were therefore classified as Level 3.
No triggering event occurred in the nine-month period ended October 3, 2021 that would indicate a potential impairment of long-lived assets. However, the Company continues to monitor global economic conditions, as events or changes in circumstances could result in an impairment of long-lived assets in a future period.

NOTE 4: Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following (in thousands):
October 3, 2021December 31, 2020
Cash$199,863 $266,609 
Money market instruments3,616 2,464 
Cash and cash equivalents203,479 269,073 
Treasury bills87,014 35,403 
Corporate bonds69,844 32,714 
Asset-backed securities23,133 25,160 
Municipal bonds6,320 1,303 
Agency bonds2,802  
Sovereign bonds 8,660 
Current investments189,113 103,240 
Corporate bonds486,148 203,428 
Asset-backed securities60,763 67,058 
Treasury bills27,984 96,458 
Agency bonds16,164 19,006 
Sovereign bonds1,089 3,440 
Municipal bonds646 5,735 
Non-current investments592,794 395,125 
$985,386 $767,438 

Cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition. Cash equivalents consist primarily of government and institutional money market funds; treasury bills consist of debt securities issued by the U.S. government; corporate bonds consist of debt securities issued by both domestic and foreign companies; asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement; municipal bonds consist of debt securities issued by state and local government entities; agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government backing; and sovereign bonds consist of direct debt issued by foreign governments. All of the Company's securities as of October 3, 2021 and December 31, 2020 were denominated in U.S. Dollars.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $3,481,000 and $1,560,000 as of October 3, 2021 and December 31, 2020, respectively.
11


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the Company’s available-for-sale investments as of October 3, 2021 (in thousands):
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Current:
Treasury bills$86,657 $357 $ $87,014 
Corporate bonds69,562 290 (8)69,844 
Asset-backed securities22,990 147 (4)23,133 
Municipal bonds6,340 3 (23)6,320 
Agency bonds2,800 2  2,802 
Non-current:
Corporate bonds485,290 1,631 (773)486,148 
Asset-backed securities60,418 346 (1)60,763 
Treasury bills27,821 163  27,984 
Agency bonds16,124 40  16,164 
Sovereign bonds1,090  (1)1,089 
Municipal bonds635 11  646 
$779,727 $2,990 $(810)$781,907 
The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of October 3, 2021 (in thousands):
 Unrealized Loss Position For: 
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Corporate bonds$216,480 $(781)$ $ $216,480 $(781)
Municipal bonds3,917 (23)  3,917 (23)
Asset-backed securities3,732 (5)  3,732 (5)
Sovereign bonds1,089 (1)  1,089 (1)
$225,218 $(810)$ $ $225,218 $(810)
The Company's allowance for credit losses on debt securities was zero as of October 3, 2021 and December 31, 2020. There was no activity recorded in the allowance for credit losses during the three-month and nine-month periods ended October 3, 2021. The Company recorded no gross credit losses or gross credit recoveries for the three-month period ended September 27, 2020, and gross credit losses of $160,000 and gross credit recoveries of $85,000 for the nine-month period ended September 27, 2020.

The Company recorded gross realized gains on the sale of debt securities totaling $19,000 and $87,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and no gross realized losses on the sale of debt securities for the three-month and nine-month periods ended October 3, 2021. The Company recorded gross realized gains on the sale of debt securities totaling $787,000 and $3,613,000 for the three-month and nine-month periods ended September 27, 2020, respectively, and gross realized losses on the sale of debt securities totaling $1,000 and $22,000, respectively, for the three-month and nine-month periods ended September 27, 2020. These gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, are recorded in shareholders’ equity as accumulated other comprehensive loss.
12


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents the effective maturity dates of the Company’s available-for-sale investments as of October 3, 2021 (in thousands):
<1 year1-2 Years2-3 Years3-4 Years4-5 YearsTotal
Corporate bonds$69,844 $192,354 $151,615 $94,993 $47,186 $555,992 
Treasury bills87,014 27,984    114,998 
Asset-backed securities23,133 41,115 6,217 13,431  83,896 
Agency bonds2,802 16,164    18,966 
Municipal bonds6,320 646    6,966 
Sovereign bonds    1,089 1,089 
$189,113 $278,263 $157,832 $108,424 $48,275 $781,907 

NOTE 5: Inventories
Inventories consisted of the following (in thousands):
October 3, 2021December 31, 2020
Raw materials$32,598 $26,800 
Work-in-process2,975 4,780 
Finished goods45,597 29,250 
$81,170 $60,830 

The Company recorded provisions for excess and obsolete inventories of $304,000 and $2,120,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and $603,000 and $9,386,000 for the three-month and nine-month periods ended September 27, 2020, respectively, which reduced the carrying value of the inventories to their net realizable value. Estimates in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.
NOTE 6: Leases
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 October 3, 2021. 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 outstanding leases as of October 3, 2021.
The total operating lease expense for the three-month and nine-month periods ended October 3, 2021 was $2,068,000 and $6,091,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended October 3, 2021 were $2,079,000 and $6,154,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended October 3, 2021 was $36,000 and $114,000, respectively.
The total operating lease expense for the three-month and nine-month periods ended September 27, 2020 was $2,047,000 and $6,100,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended September 27, 2020 were $2,041,000 and $5,995,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended September 27, 2020 was $22,000 and $84,000, respectively.

13


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Future operating lease cash payments are as follows (in thousands):
Year Ended December 31,Amount
Remainder of fiscal 2021$2,348 
20228,221 
20236,588 
20243,526 
20252,033 
20261,297 
Thereafter5,160 
$29,173 
The discounted present value of the future lease cash payments resulted in a lease liability of $26,811,000 and $26,230,000 as of October 3, 2021 and December 31, 2020, respectively. The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of October 3, 2021 or December 31, 2020.
The weighted-average discount rate was 3.5% and 4.0% for the leases outstanding as of October 3, 2021 and December 31, 2020, respectively. The weighted-average remaining lease term was 5.2 and 5.1 years for the leases outstanding as of October 3, 2021 and December 31, 2020, respectively.
Management closed eleven leased offices in 2020, prior to the end of their lease terms, as a part of the Company's restructuring plan (refer to Note 16). The carrying value of the lease assets associated with the majority of these offices was reduced to zero, resulting in operating lease asset impairment charges of $2,534,000 in the second quarter of 2020 that are included in "Restructuring charges" on the Consolidated Statements of Operations. Management is currently negotiating early contract terminations for the remaining lease liability obligations associated with these abandoned offices, which obligations totaled $2,019,000 and $2,877,000 as of October 3, 2021 and December 31, 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.
NOTE 7: Goodwill
The changes in the carrying value of goodwill were as follows (in thousands):
Balance as of December 31, 2020$244,078 
  Foreign exchange rate changes(2,279)
Balance as of October 3, 2021$241,799 
The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets, including goodwill, for potential impairment during the second quarter of 2020. Based on this assessment, management concluded that events and circumstances did not indicate the fair value of the reporting unit was less than its carrying value. Factors that management considered in this qualitative assessment included macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management or strategy, changes in the composition or carrying amount of net assets, and market capitalization.

14


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8: Intangible Assets
Amortized intangible assets consisted of the following (in thousands):
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Distribution networks$38,060 $38,060 $ 
Completed technologies24,217 14,548 9,669 
Customer relationships10,578 7,700 2,878 
Non-compete agreements710 478 232 
Trademarks110 107 3 
Balance as of October 3, 2021$73,675 $60,893 $12,782 
 Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Distribution networks$38,060 $38,060 $ 
Completed technologies24,217 12,397 11,820 
Customer relationships10,578 7,160 3,418 
Non-compete agreements710 436 274 
Trademarks110 67 43 
Balance as of December 31, 2020$73,675 $58,120 $15,555 

As of October 3, 2021, estimated future amortization expense related to intangible assets was as follows (in thousands):
Year Ended December 31,Amount
Remainder of fiscal 2021$883 
20223,286 
20232,594 
20242,080 
20251,757 
20261,452 
Thereafter730 
$12,782 

The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets, including intangible assets, for potential impairment during the second quarter of 2020. Based on this assessment, management concluded that certain of the Company's finite-lived intangible assets failed the recoverability test, and recorded impairment charges for these assets equal to the amount by which their carrying value exceeded their fair value. The Company also measured the fair value and recorded an impairment charge for its indefinite-lived intangible asset related to in-process technologies. The fair values were established, with the assistance of an outside valuation advisor, using the income approach based on a discounted cash flow model that estimated future revenue streams and expenses attributable to those revenue streams provided by management.
15


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
This review resulted in intangible asset impairment charges totaling $19,571,000 in the second quarter of 2020, primarily related to lower projected cash flows from the technologies and customer relationships acquired from Sualab Co. Ltd. ("Sualab") as a result of the deteriorating global economic conditions from the COVID-19 pandemic. Completed technologies, in-process technologies, and customer relationships acquired from Sualab were impaired in the amounts of $10,070,000, $5,900,000, and $3,382,000, respectively. In addition, customer relationships acquired from EnShape GmbH that had a gross carrying value of $447,000 and accumulated amortization of $228,000 on the measurement date were reduced to zero, resulting in an impairment charge of $219,000. The Company did not record impairment charges related to intangible assets during the three-month or nine-month periods ended October 3, 2021.
NOTE 9: Warranty Obligations
The Company records the estimated cost of fulfilling product warranties at the time of sale based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time of sale whenever specific events or changes in circumstances impacting product quality become known that would not have been taken into account using historical data. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers and third-party contract manufacturers, the Company’s warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. An adverse change in any of these factors may result in the need for additional warranty provisions. Warranty obligations are included in “Accrued expenses” on the Consolidated Balance Sheets.
The changes in the warranty obligation were as follows (in thousands):
Balance as of December 31, 2020$5,406 
Provisions for warranties issued during the period2,528 
Fulfillment of warranty obligations(2,517)
Balance as of October 3, 2021$5,417 
NOTE 10: Derivative Instruments
The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency forward contracts with maturities of up to 95 days to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment.

16


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company had the following outstanding forward contracts (in thousands):
October 3, 2021December 31, 2020
CurrencyNotional
Value
USD
Equivalent
Notional
Value
USD
Equivalent
Derivatives Not Designated as Hedging Instruments:
Euro38,500 $44,687 50,000 $61,342 
Chinese Renminbi55,069 8,500   
Mexican Peso120,000 5,823 155,000 7,776 
Korean Won6,770,000 5,714 6,925,000 6,377 
Japanese Yen600,000 5,405 600,000 5,808 
British Pound3,115 4,224 1,675 2,287 
Hungarian Forint1,235,000 3,992 1,330,000 4,494 
Taiwanese Dollar45,405 1,637 38,035 1,362 
Singapore Dollar1,800 1,328 1,465 1,110 
Canadian Dollar1,370 1,080 1,285 1,010 

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):
 Asset DerivativesLiability Derivatives
 BalanceFair ValueBalanceFair Value
 Sheet
Location
October 3, 2021December 31, 2020Sheet
Location
October 3, 2021December 31, 2020
Derivatives Not Designated as Hedging Instruments:
Economic hedge forward contractsPrepaid expenses and other current assets$129 $265 Accrued expenses$88 $38 

The following table presents the gross activity for all derivative assets and liabilities which were presented on a net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):
Asset DerivativesLiability Derivatives
October 3, 2021December 31, 2020October 3, 2021December 31, 2020
Gross amounts of recognized assets$129 $265 Gross amounts of recognized liabilities$88 $38 
Gross amounts offset  Gross amounts offset  
Net amount of assets presented$129 $265 Net amount of liabilities presented$88 $38 

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):
 Location in Financial StatementsThree-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Derivatives Not Designated as Hedging Instruments:
Gains (losses) recognized in current operationsForeign currency gain (loss)$1,529 $(1,521)$3,676 $(9,701)

17


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11: Revenue Recognition
The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):
Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Americas$113,758 $86,482 $330,012 $215,696 
Europe65,146 60,189 182,161 144,758 
Greater China65,813 77,292 163,757 135,593 
Other Asia40,131 27,110 117,103 91,358 
$284,848 $251,073 $793,033 $587,405 

The following table summarizes disaggregated revenue information by revenue type (in thousands):
Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Standard products and services$212,567 $174,797 $669,215 $486,458 
Application-specific customer solutions72,281 76,276 123,818 100,947 
$284,848 $251,073 $793,033 $587,405 

Costs to Fulfill a Contract
Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $13,308,000 and $6,846,000 as of October 3, 2021 and December 31, 2020, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities
Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the allowance for credit losses activity for the nine-month period ended October 3, 2021 (in thousands):
Balance as of December 31, 2020$831 
Increases to the allowance for credit losses 
Write-offs, net of recoveries(39)
Foreign exchange rate changes 
Balance as of October 3, 2021$792 
18


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended October 3, 2021 (in thousands):
Balance as of December 31, 2020$21,274 
Deferral of revenue billed in the current period, net of recognition33,888 
Recognition of revenue deferred in prior period(17,130)
Foreign exchange rate changes(189)
Balance as of October 3, 2021$37,843 

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.
NOTE 12: Stock-Based Compensation Expense
Stock Plans
The Company’s stock-based awards that result in compensation expense consist of stock options and restricted stock units ("RSUs"). As of October 3, 2021, the Company had 15,661,000 shares available for grant under its stock plans. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date. RSUs generally vest upon three years of continuous employment or incrementally over such three-year period. Participants are not entitled to dividends on RSUs.
Stock Options
The following table summarizes the Company’s stock option activity for the nine-month period ended October 3, 2021:
Shares
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of December 31, 20208,970 $44.73 
Granted549 88.80 
Exercised(1,582)37.70 
Forfeited or expired(225)50.29 
Outstanding as of October 3, 20217,712 $49.15 6.79$252,476 
Exercisable as of October 3, 20213,290 $39.03 5.56$139,215 
Options vested or expected to vest as of October 3, 2021 (1)7,157 $48.36 6.70$239,568 
 (1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.
19


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:
 Three-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Risk-free rate1.4 % %1.3 %1.6 %
Expected dividend yield0.28 % %0.27 %0.43 %
Expected volatility39 % %39 %37 %
Expected term (in years)7.1— 6.06.0

No stock options were granted during the three-month period ended September 27, 2020.

Risk-free rate
The risk-free rate was based upon a treasury instrument whose term was consistent with the contractual term of the option.
Expected dividend yield
Generally, the current dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date. 
Expected volatility
The expected volatility was based upon a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock.
Expected term
The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.
The weighted-average grant-date fair values of stock options granted during the three-month and nine-month periods ended October 3, 2021 were $35.64 and $33.78, respectively, and during the nine-month period ended September 27, 2020 was $18.52. There were no stock options granted during the three-month period ended September 27, 2020.
The total intrinsic values of stock options exercised for the three-month and nine-month periods ended October 3, 2021 were $21,415,000 and $75,363,000, respectively, and for the three-month and nine-month periods ended September 27, 2020 were $62,787,000 and $116,600,000, respectively. The total fair values of stock options vested for the three-month and nine-month periods ended October 3, 2021 were $1,498,000 and $38,928,000, respectively, and for the three-month and nine-month periods ended September 27, 2020 were $1,331,000 and $39,282,000, respectively.
Restricted Stock Units (RSUs)
The following table summarizes the Company's RSUs activity for the nine-month period ended October 3, 2021:
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
Nonvested as of December 31, 2020554 $51.27 
Granted318 87.38 
Vested(15)56.61 
Forfeited or expired(43)56.49 
Nonvested as of October 3, 2021814 $65.01 
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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The weighted-average grant-date fair values of RSUs granted during the three-month and nine-month periods ended October 3, 2021 were $86.34 and $87.38, respectively, and during the three-month and nine-month periods ended September 27, 2020 were $67.14 and $51.73, respectively. There were 15,000 RSUs that vested during the nine-month period ended October 3, 2021. There were no RSUs that vested during the three-month period ended October 3, 2021 or the three-month and nine-month periods ended September 27, 2020.
Stock-Based Compensation Expense
The Company segments its employee population into two groups: one consisting of senior management and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 8% to all stock-based awards for senior management and a rate of 12% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. This resulted in a decrease to compensation expense of $255,000 in 2021 and an increase to compensation expense of $1,787,000 in 2020.
As of October 3, 2021, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $56,579,000, which is expected to be recognized over a weighted-average period of 1.6 years.
The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended October 3, 2021 were $10,614,000 and $1,637,000, respectively, and for the nine-month period ended October 3, 2021 were $33,353,000 and $5,101,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended September 27, 2020 were $9,268,000 and $1,524,000, respectively, and for the nine-month period ended September 27, 2020 were $32,076,000 and $5,365,000, respectively. Stock-based compensation expense recognized for the three-month and nine-month periods ended September 27, 2020 included credits of $1,401,000 relating to grants cancelled as a result of the Company's workforce reduction in the second quarter of 2020. No compensation expense was capitalized as of October 3, 2021 or December 31, 2020.
The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):
 Three-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Cost of revenue$366 $324 $965 $1,041 
Research, development, and engineering3,091 2,815 10,158 10,582 
Selling, general, and administrative7,157 6,129 22,230 20,453 
$10,614 $9,268 $33,353 $32,076 
NOTE 13: Stock Repurchase Program
In October 2018, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's common stock. As of October 3, 2021, the Company repurchased 3,398,000 shares at a cost of $169,643,000 under this program, including 581,000 shares at a cost of $48,294,000 during the nine-month period ended October 3, 2021, leaving a remaining balance of $30,357,000. 1,215,000 shares at a cost of $51,036,000 were repurchased during the nine-month period ended September 27, 2020 under this October 2018 program. On March 12, 2020, the Company's Board of Directors authorized the repurchase of an additional $200,000,000 of the Company's common stock. Purchases under this March 2020 program will commence upon completion of the October 2018 program. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

21


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 14: Income Taxes
A reconciliation of the United States federal statutory corporate tax rate to the Company’s income tax expense, or effective tax rate, was as follows:
 Three-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Income tax expense at U.S. federal statutory corporate tax rate21 %21 %21 %21 %
State income taxes, net of federal benefit2 %1 %2 %1 %
Foreign tax rate differential(5)%(5)%(5)%(5)%
Tax credit(1)%(1)%(1)%(1)%
Discrete tax benefit related to stock options(4)%(4)%(4)%(9)%
Discrete tax expense (benefit) related to tax return filings(3)% %(1)%3 %
Other1 %2 %1 %2 %
Income tax expense11 %14 %13 %12 %

The Company recorded discrete tax benefits arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises that resulted in a favorable impact to the effective tax rate of 4% for both the three-month and nine-month periods ended October 3, 2021, and 4% and 9% for the three-month and nine-month periods ended September 27, 2020, respectively. In addition to stock option exercises, other discrete adjustments recorded included the final true-up of the prior year's tax accrual upon filing the related tax return that resulted in a favorable impact to the effective tax rate of 3% and 1% for the three-month and nine-month periods ended October 3, 2021, respectively, and an unfavorable impact to the effective tax rate of 3% for the nine-month period ended September 27, 2020.
Excluding the impact of these discrete items, the Company’s effective tax rate was 18% of pre-tax income for the three-month and nine-month periods ended October 3, 2021, and 18% of pre-tax income for the same periods in 2020.
During the nine-month period ended October 3, 2021, the Company recorded a $495,000 increase in reserves for income taxes, net of deferred tax benefit. Estimated interest and penalties included in these amounts totaled $450,000 for the nine-month period ended October 3, 2021.
The Company’s reserve for income taxes, including gross interest and penalties, was $15,833,000 as of October 3, 2021, which included $14,805,000 classified as a non-current liability and $1,028,000 recorded as a reduction to non-current deferred tax assets. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period. During the three-month period ending October 3, 2021, the Company released $648,000 in reserves related to statute expiration and tax return positions.
The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and 25% in Korea compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in a favorable impact to the effective tax rate of 5% for both the three-month and nine-month periods ended October 3, 2021, and for the same periods in 2020.
Within the United States, the tax years 2017 through 2020 remain open to examination by the Internal Revenue Service ("IRS") and various state tax authorities. The tax years 2016 through 2020 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates. The Company is under audit by the IRS for the tax years 2017 and 2018. Additionally, the Company is under audit by the Commonwealth of Massachusetts for tax years 2017 and 2018. Management believes the Company is adequately reserved for these audits. The final determination of tax audits could result in favorable or unfavorable changes in our estimates.
22


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 15: Weighted-Average Shares
Weighted-average shares were calculated as follows (in thousands):
 Three-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Basic weighted-average common shares outstanding176,812 173,943 176,572 172,881 
Effect of dilutive equity awards3,530 3,195 3,537 3,157 
Weighted-average common and common-equivalent shares outstanding180,342 177,138 180,109 176,038 

Stock options to purchase 586,000 and 655,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended October 3, 2021, respectively, and 1,416,000 and 5,540,000 for the same periods in 2020, but were not included in the calculation of dilutive net income per share because they were anti-dilutive. Restricted stock units totaling 1,000 shares of common stock, on a weighted-average basis, were outstanding during both the three-month and nine-month periods ended October 3, 2021, respectively, and 3,000 and 2,000 for the same periods in 2020, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.
NOTE 16: Restructuring Charges

On May 26, 2020, the Company's Board of Directors approved a restructuring plan intended to reduce the Company's operating costs, optimize its business model, and address the impact of the COVID-19 pandemic. The restructuring plan included a global workforce reduction of approximately 8% and office closures.

As of December 31, 2020, the majority of these actions were completed and no additional charges are expected to be incurred in future periods in relation to this restructuring plan. There were no restructuring charges recognized during the three-month or nine-month periods ended October 3, 2021.

The following table summarizes the restructuring charges incurred in the three-month and nine-month periods ended September 27, 2020 (in thousands):
Incurred in the Three-months Ended September 27, 2020Incurred in the Nine-months Ended September 27, 2020
One-time termination benefits$(36)$10,350 
Contract termination costs104 4,099 
Other associated costs183 600 
$251 $15,049 

One-time termination benefits included severance, health insurance, and outplacement services for 181 employees who were either terminated during the second quarter of 2020, or were notified during the second quarter of 2020 that they would be terminated at a future date. For employees not required to render service beyond a minimum retention period, the one-time termination benefits were recognized in the second quarter of 2020. Otherwise, these benefits, including retention bonuses for selected employees, were recognized over the service period, which was completed by December 31, 2020.

Contract termination costs included operating lease asset impairment charges for offices closed prior to the end of the contractual lease term. These costs also included the write-off of leasehold improvements and other equipment related to these abandoned offices that had no alternative use, as well as other associated operating costs, such as utilities, that the Company is obligated to pay for the remainder of the lease term. These contract termination costs were primarily recognized in the second quarter of 2020 when the Company ceased using the property for economic benefit.
23


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other associated costs primarily included legal fees related to the employee termination actions, which were recognized when the services were performed.

The following table summarizes the activity for the nine-month period ended October 3, 2021 in the Company’s restructuring reserve which is included in “Accrued expenses” on the Consolidated Balance Sheets (in thousands):
One-time Termination BenefitsContract Termination CostsOther Associated CostsTotal
Balance as of December 31, 2020$1,624 $750 $15 $2,389 
Cash payments(1,133)(176)(15)(1,324)
Foreign exchange rate changes (5) (5)
Balance as of October 3, 2021$491 $569 $ $1,060 
NOTE 17: Subsequent Events
On November 4, 2021, the Company’s Board of Directors declared a cash dividend of $0.065 per share. The dividend is payable on December 3, 2021 to all shareholders of record as of the close of business on November 19, 2021.

24


ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements
Certain statements made in this report, as well as oral statements made by the Company from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can identify these forward-looking statements by our 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 statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given. These forward-looking statements, which include statements regarding business and market trends, future financial performance, the expected impact of the COVID-19 pandemic on our assets, business and results of operations, customer demand and order rates and timing of related revenue, managing supply shortages, future product mix, restructuring and other cost-savings initiatives, research and development activities, sales and marketing activities, new product offerings, capital expenditures, investments, liquidity, dividends and stock repurchases, strategic and growth plans, and estimated tax benefits and expenses and other 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 impact, duration, and severity of the COVID-19 pandemic; (2) potential disruptions to our business due to restructuring activities; (3) the loss of, or curtailment of purchases by, large customers in the consumer electronics and logistics industries; (4) the reliance on revenue from the automotive industry; (5) the reliance on key suppliers to manufacture and deliver critical components for our products; (6) disruptions in the supply chain, which could impact timely delivery of customer orders, cause customer orders to decrease, or increase costs to fulfill orders, including costs for components or freight; (7) the failure to effectively manage product transitions or accurately forecast customer demand; (8) the inability to design and manufacture high-quality products; (9) the inability to attract and retain skilled employees and maintain our unique corporate culture; (10) the failure to effectively manage our growth; (11) the inability to achieve growth in revenue and profits from the logistics industry; (12) the technological obsolescence of current products and the inability to develop new products; (13) the failure to properly manage the distribution of products and services; (14) the impact of competitive pressures; (15) the challenges in integrating and achieving expected results from acquired businesses; (16) potential disruptions in our business systems; (17) information security breaches and cyber-attacks; (18) the inability to protect our proprietary technology and intellectual property; (19) potential impairment charges with respect to our investments or acquired intangible assets; (20) exposure to additional tax liabilities; (21) fluctuations in foreign currency exchange rates and the use of derivative instruments; (22) our involvement in time-consuming and costly litigation; (23) unfavorable global economic conditions; and (24) economic, political, and other risks associated with international sales and operations. The foregoing list should not be construed as exhaustive and we encourage readers to refer to the detailed discussion of risk factors included in Part I - Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as updated by Part II - Item 1A of this Quarterly Report on Form 10-Q. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are made.
Executive Overview
Cognex Corporation is a leading worldwide provider of machine vision products that capture and analyze visual information in order to automate manufacturing and distribution tasks where vision is required. In addition to product revenue derived from the sale of machine vision products, the Company also generates revenue by providing maintenance and support, consulting, and training services to its customers; however, service revenue accounted for less than 10% of total revenue for all periods presented.
Cognex machine vision is used to automate manufacturing and distribution processes in a variety of industries, where the technology is widely recognized as an important component of automated production and quality assurance. Virtually every manufacturer can achieve better quality and manufacturing efficiency by using machine vision, and therefore, Cognex products are used by a broad base of customers across a variety of industries, including consumer electronics, automotive, consumer products, food and beverage, and medical-related. Cognex products are also used to automate distribution processes in the logistics industry, including for applications in retail distribution and e-commerce to scan, track, and sort goods through distribution centers.
Revenue for the third quarter of 2021 totaled $284,848,000, an increase of 13% from the third quarter of 2020. The
25


increase was due to significantly higher revenue from the logistics industry, which was our largest and fastest-growing market in the third quarter of 2021, partially offset by lower consumer electronics revenue that was primarily driven by the timing of large customer deployments.
Gross margin as a percentage of revenue was 70% for the third quarter of 2021 compared to 76% for the third quarter of 2020, primarily due to an unfavorable revenue mix, as well as higher prices paid to purchase inventories in the third quarter of 2021.
Operating expenses increased by $16,892,000, or 18%, for the third quarter of 2021 compared to the same quarter in 2020, which had relatively low operating expenses due to our restructuring actions in the second quarter of 2020. The increase was due, in part, to higher personnel-related costs, which included the impact of headcount additions to support our future growth plans, as well as higher incentive compensation costs and the impact of foreign currency exchange rate changes.
As a result of the lower gross margin percentage and higher operating expenses, operating income decreased to 31% of revenue for the third quarter of 2021 from 38% of revenue for the third quarter of 2020. Net income was 28% of revenue for the third quarter of 2021, or $0.44 per diluted share, compared to 35% of revenue for the third quarter of 2020, or $0.49 per diluted share.
Results of Operations
As foreign currency exchange rates are a factor in understanding period-to-period comparisons, we believe the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. We also use results on a constant-currency basis as one measure to evaluate our performance. Constant-currency information compares results between periods as if exchange rates had remained constant period-over-period. We generally refer to such amounts calculated on a constant-currency basis as excluding the impact of foreign currency exchange rate changes. Results on a constant-currency basis are not in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and should be considered in addition to, and not as a substitute for, results prepared in accordance with U.S. GAAP.
Revenue
Revenue increased by $33,775,000, or 13%, for the three-month period and increased by $205,628,000, or 35%, for the nine-month period. The most significant increase came from customers in the logistics industry, particularly in the e-commerce and omni-channel retail sectors. Growth in the automotive, semiconductor, medical-related, and consumer products industries also contributed to the increase. The increases in these industries were partially offset by a decrease in revenue from the consumer electronics industry. A higher concentration of consumer electronics revenue from large customer deployments in the third quarter of 2020 resulted in a more significant decrease in revenue in this industry for the three-month period in 2021.
We believe the increases in revenue for the three-month and nine-month periods would have been moderately higher were it not for global supply shortages that continued to delay customer deliveries of certain products and worsened throughout the quarter. Based in part on product availability, the Company was able to fulfill customer orders in the logistics industry in the third quarter of 2021 that were originally expected to be fulfilled in the fourth quarter of 2021, which lessened the impact of delays of other customer deliveries during the third quarter.
From a geographic perspective, revenue from customers based in the Americas increased by 32% for the three-month period and 53% for the nine-month period driven primarily by higher revenue in the logistics industry. Revenue from customers in medical-related industries was also notably higher for nine-month period.
Revenue from customers based in Europe increased by 8% for the three-month period and 26% for the nine-month period. Changes in foreign currency exchange rates resulted in a higher level of reported revenue in 2021, as sales denominated in Euros were translated into U.S. Dollars at a higher rate. Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Europe increased by 7% for the three-month period and 20% for the nine-month period. The increase came from customers in a variety of industries, most notably logistics, automotive, and consumer products, partially offset by lower revenue in the consumer electronics industry. The decline in revenue from consumer electronics was partially a result of procurement changes made by certain customers, shifting their purchases to China from Europe.
Revenue from customers based in Greater China decreased by 15% for the three-month period and increased by 21% for the nine-month period. Changes in foreign currency exchange rates resulted in a higher level of reported revenue in 2021, as sales denominated in Chinese Renminbi were translated into U.S. Dollars at a higher rate. Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Greater China
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decreased by 22% for the three-month period and increased by 13% for the nine-month period. Although revenue increased in a variety of industries over the prior year, most notably automotive and semiconductor, this increase was offset by a decrease in consumer electronics revenue for the three-month period, as there was a higher concentration of this revenue from large customer deployments in the third quarter of 2020 as compared to the third quarter of 2021.
Revenue from other countries in Asia increased by 48% for the three-month period and 28% for the nine-month period due to higher revenue in a range of industries, including automotive and semiconductor.
As of the date of this report, we expect revenue for the fourth quarter of 2021 to be lower than the third quarter of 2021 and relatively flat with the fourth quarter of 2020. The decrease from the third quarter of 2021 is expected to result from lower revenue in the consumer electronics and logistics industries, due particularly to the timing of large customer deployments in these industries, as well as the earlier fulfillment of customer orders in the logistics industry in the third quarter of 2021. Revenue in the fourth quarter of 2020 benefited from higher consumer demand for electronic products that we believe related to the COVID-19 pandemic. Our current expectations regarding revenue for the fourth quarter of 2021 assume continued delays of customer deliveries for certain products due to global supply shortages that we believe will continue throughout the quarter, while similar challenges did not exist in the prior year.
Gross Margin
Gross margin as a percentage of revenue was 70% and 74% for the three-month and nine-month periods in 2021, respectively, compared to 76% and 74% for the same periods in 2020. The decrease for the three-month period was primarily due to an unfavorable revenue mix. This decrease was a result of delays of higher-margin product sales due to global supply shortages, as well as a greater percentage of total revenue coming from the logistics industry, which has relatively lower gross margins. Logistics revenue for the third quarter of 2021 included some comparatively lower margins from strategic logistics projects. The decrease for the three-month period was also due to higher prices paid to purchase inventories in 2021 due primarily to global supply chain constraints, including higher costs for components and freight, that we expect to continue for several quarters.
For the nine-month period, the unfavorable impact of a higher percentage of logistics revenue and higher inventory purchases prices was offset by lower provisions for excess and obsolete inventories as compared to the prior year and manufacturing efficiencies related to the higher revenue level. The higher provisions for excess and obsolete inventories in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.
As of the date of this report, we expect gross margin as a percentage of revenue for the fourth quarter of 2021 to be in the low-70% range. We expect to have a more favorable revenue mix in the fourth quarter of 2021 as compared to the third quarter of 2021. We also expect higher inventory purchase prices in the fourth quarter of 2021 as compared to the third quarter of 2021.
Operating Expenses
Research, Development, and Engineering Expenses
Research, development, and engineering (RD&E) expenses increased by $4,236,000, or 14%, for the three-month period and $3,300,000, or 3%, for the nine-month period as detailed in the table below (in thousands).
Three-month periodNine-month period
RD&E expenses in 2020$30,240 $96,583 
Foreign currency exchange rate changes492 3,057 
Incentive compensation377 1,928 
Outsourced engineering services1,171 950 
Personnel-related costs1,506 (1,131)
Other690 (1,504)
RD&E expenses in 2021$34,476 $99,883 
RD&E expenses increased due to foreign currency exchange rate changes, as costs denominated in foreign currencies were translated into U.S. Dollars at a higher rate. Incentive bonus accruals were also higher than the prior year based on management's assessment of the Company's expected performance against relevant full-year goals. Higher spending on outsourced engineering services due to the timing of product development activities,
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including engineering prototypes for large sales opportunities, also contributed to the increase.
These increases were partially offset by lower personnel-related costs for the nine-month period due to a workforce reduction in the second quarter of 2020. Higher costs from annual salary increases and fringe benefits provided to employees, as well as headcount additions to support new product initiatives, partially offset the lower costs from the workforce reduction in the nine-month period and resulted in an increase in costs for the three-month period.
RD&E expenses as a percentage of revenue were 12% and 13% for the three-month period and nine-month period, respectively, compared to 12% and 16% for the same periods in 2020. We believe that a continued commitment to RD&E activities is essential in order to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers. In addition, we consider our ability to accelerate the time to market for new products to be critical to our revenue growth. This quarterly percentage is impacted by revenue levels and investing cycles.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses increased by $12,907,000, or 20%, for the three-month period and $32,883,000, or 17%, for the nine-month period as detailed in the table below (in thousands).
Three-month periodNine-month period
SG&A expenses in 2020$64,206 $193,497 
Incentive compensation2,931 14,292 
Foreign currency exchange rate changes1,207 7,029 
Personnel-related costs4,313 3,292 
Business system investments624 1,931 
Stock-based compensation expense1,037 1,486 
Marketing programs455 1,426 
Recruiting costs524 1,187 
Travel expenses949 754 
Other867 1,486 
SG&A expenses in 2021$77,113 $226,380 
SG&A expenses increased due to higher expenses related to annual incentive compensation plans, which include incentive bonuses and sales commissions. Incentive bonus accruals were higher than the prior year based on management's assessment of the Company's expected performance against relevant full-year goals. Likewise, sales commissions increased due to the higher business levels. Personnel-related costs increased due to higher costs from annual salary increases and fringe benefits provided to employees, as well as sales headcount additions in strategic growth areas of the business. The increase was more significant in the three-month period than in the nine-month period due to the impact of the workforce reduction that took place in the second quarter of 2020. In addition to salaries and fringe benefits, these personnel-related costs included sales commissions and travel expenses related to the additional headcount. The headcount additions also drove higher recruiting costs.
Foreign currency exchange rate changes resulted in a higher level of SG&A expenses as compared to the prior year, as costs denominated in foreign currencies were translated into U.S. Dollars at a higher rate. Expenses were also higher due to investments the Company is making in business systems related to its sales process, including systems to help our sales team more efficiently manage customer relationships and sales opportunities. A portion of these costs is expensed as incurred, while the majority of these investments will be accounted for as a capital asset that is expected to be placed into service in the first quarter of 2022. In addition, stock-based compensation increased as a result of changes in equity awards over time (e.g., increased number of restricted stock units, varied vesting schedules, timing of awards, etc.), partially offset by decreases due to the impact of forfeiture rates revised in the first quarter of 2021. Stock-based compensation expense for the nine-month period also increased due to credits related to the workforce reduction that were recorded in the second quarter of 2020 and did not repeat. The Company also increased spending on marketing programs in an effort to generate future sales opportunities, particularly related to new product introductions, and incurred higher travel expenses as restrictions related to COVID-19 continued to ease in certain regions.
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Restructuring and Intangible Asset Impairment Charges
On May 26, 2020, the Company's Board of Directors approved a restructuring plan intended to reduce the Company's operating costs, optimize its business model, and address the impact of the COVID-19 pandemic. The Company recorded restructuring charges of $251,000 and $15,049,000 for the three-month and nine-month periods in 2020, respectively, as a result of actions related to the restructuring plan, which included a global workforce reduction of approximately 8% and office closures. In addition, the adverse impact of the COVID-19 pandemic triggered a review of long-lived assets for potential impairment in the second quarter of 2020. This review resulted in intangible asset impairment charges totaling $19,571,000 recorded in the second quarter of 2020.
Non-operating Income (Expense)
The Company recorded foreign currency losses of $586,000 and $2,233,000 for the three-month and nine-month periods in 2021, respectively, compared to foreign currency gains of $2,357,000 and foreign currency losses of $310,000 for the same periods in 2020. Foreign currency gains and losses result primarily from the revaluation and settlement of accounts receivable, accounts payable, and intercompany balances that are reported in one currency and collected in another.
Investment income decreased by $742,000, or 30%, for the three-month period and $5,985,0000, or 54%, for the nine-month period. The decrease was due primarily to lower yields on the Company's portfolio of debt securities, partially offset by higher invested balances.
The Company recorded other expense of $125,000 and $420,000 for the three-month and nine-month periods in 2021, respectively, compared to other expense of $173,000 and $153,000 for the same periods in 2020. Other income (expense) includes fair value adjustments of contingent consideration liabilities arising from business acquisitions.
Income Tax Expense (Benefit)
The Company’s effective tax rate was 11% and 13% of pre-tax income for the three-month and nine-month periods in 2021, respectively, compared to 14% and 12% for the same periods in 2020.
The effective tax rate included a decrease in tax expense of $3,250,000 and $9,888,000 for the three-month and nine-month periods in 2021, respectively, and $4,354,000 and $10,447,000 for the same periods in 2020, related to stock options, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises. The Company cannot accurately predict the level of stock option exercises by employees in future periods.
Other discrete tax items included a decrease in tax expense of $3,012,000 and $2,477,000 for the three-month and nine-month periods in 2021, respectively, and an increase in tax expense of $129,000 and $3,638,000 for the same periods in 2020, respectively, from the final true-up of the prior year's tax accrual upon filing the related tax return.
Excluding the impact of these discrete items, the Company’s effective tax rate was 18% of pre-tax income for the three-month and nine-month periods in both 2021 and 2020.
Liquidity and Capital Resources
The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and has resulted in an accumulated cash and investment balance of $985,386,000 as of October 3, 2021. The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments that maintain liquidity.
The Company’s cash requirements for the nine-month period ended October 3, 2021 were primarily met with positive cash flows from operations and the proceeds from stock option exercises. Cash requirements consisted of operating activities, the repurchase of common stock, the payment of dividends, and capital expenditures. Cash flows from operating activities included an increase in inventories to support higher business levels and to secure key strategic components. The Company expects inventory levels to continue to increase for the remainder of the year as we receive inventory that we are purchasing in response to global supply chain challenges.
Capital expenditures for the nine-month period ended October 3, 2021 totaled $10,689,000 and consisted primarily of computer hardware and software, manufacturing test equipment related to new product introductions, and improvements made to the Company's headquarters building in Natick, Massachusetts. In 2021, the Company is making investments in business systems related to its sales process, the majority of which will be accounted for as a capital asset that is expected to be placed into service in the first quarter of 2022.
In October 2018, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's
29


common stock. As of October 3, 2021, the Company repurchased 3,398,000 shares at a cost of $169,643,000 under this program, including 581,000 shares at a cost of $48,294,000 during the nine-month period ended October 3, 2021, leaving a remaining balance of $30,357,000. On March 12, 2020, the Company's Board of Directors authorized the repurchase of an additional $200,000,000 of the Company's common stock. Purchases under this March 2020 program will commence upon completion of the October 2018 program. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.
The Company’s Board of Directors declared and paid cash dividends of $0.060 per share in the first, second, and third quarters of 2021, totaling $31,800,000. Future dividends will be declared at the discretion of the Company's Board of Directors and will depend upon such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.
The Company believes that its existing cash and investment balances, together with cash flow from operations, will be sufficient to meet its operating, investing, and financing activities for the next twelve months. In addition, the Company has no long-term debt and does not anticipate needing debt financing in the near future. We believe that our strong cash position has put us in a relatively good position with respect to our longer-term liquidity needs.

New Pronouncements
Refer to Part I - Note 2 within this Form 10-Q, for a full description of recently issued accounting pronouncements including the expected dates of adoption and the expected impact on the financial position and results of operations of the Company.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company’s exposures to market risk since December 31, 2020.

ITEM 4: CONTROLS AND PROCEDURES
As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of that date. From time to time, the Company reviews its disclosure controls and procedures, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.
There was no change in the Company's internal control over financial reporting that occurred during the quarter ended October 3, 2021 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. We have considered the impact of COVID-19 on our internal controls over financial reporting. Personnel constraints related to working from home have made our ability to execute certain controls more challenging; however, we have enhanced existing monitoring controls in an effort to ensure we continue to have effective internal controls during this time.
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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations.

ITEM 1A. RISK FACTORS
For a list of factors that could affect the Company’s business, results of operations, and financial condition, see the risk factors discussion provided in Part I—Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information with respect to purchases by the Company of shares of its common stock during the three-month period ended October 3, 2021:
Total
Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)
Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (1)
July 5, 2021 - August 1, 202154,000 $84.64 54,000 $253,216,000 
August 2, 2021 - August 29, 202186,000 85.53 86,000 245,817,000 
August 30, 2021 - October 3, 2021183,000 84.70 183,000 230,357,000 
Total323,000 $84.91 323,000 $230,357,000 
(1) In October 2018, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's common stock. Purchases under this program commenced in October 2018. On March 12, 2020, the Company's Board of Directors authorized the repurchase of an additional $200,000,000 of the Company's common stock. This new authorization will commence once the Company completes the October 2018 program, with repurchases subject to market conditions and other relevant factors. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
None.
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 ITEM 6. EXHIBITS
Exhibit Number
31.1
31.2
32.1
32.2
101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.LABInline XBRL Taxonomy Extension Label Linkbase Document*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
104Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
*Filed herewith
**Furnished herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Date:November 4, 2021 COGNEX CORPORATION
 By:/s/ Robert J. Willett
 Robert J. Willett
 President and Chief Executive Officer
 (Principal Executive Officer)
 By:/s/ Paul D. Todgham
 Paul D. Todgham
 Senior Vice President of Finance and Chief Financial Officer
 (Principal Financial Officer)

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