What changed in this filing

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Item 1. Financial Statements

2020-10-28 compared with 2020-07-29 · 164 added, 161 removed, 588 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

(unaudited) (unaudited)

6 unchanged sentences

Intangible asset impairment charges (Note 8) — — 19,571 —

Operating income (loss) ( 6,142 ) 51,756 14,809 81,903

Operating income 96,635 43,092 111,444 124,995

Foreign currency gain (loss) 2,357 ( 1,295 ) ( 310 ) ( 1,403 )

1 unchanged sentence

Other income (expense) ( 173 ) 456 ( 153 ) 1,239

Income (loss) before income tax expense (benefit) ( 2,312 ) 56,975 20,682 92,706

Income tax expense (benefit) ( 1,170 ) 8,226 1,347 10,853

Net income (loss) $ ( 1,142 ) $ 48,749 $ 19,335 $ 81,853

Net income (loss) per weighted-average common and common-equivalent share:

Income before income tax expense 101,309 47,367 121,991 140,073

Income tax expense 13,803 5,682 15,150 16,535

Net income $ 87,506 $ 41,685 $ 106,841 $ 123,538

Net income per weighted-average common and common-equivalent share:

Basic $ 0.50 $ 0.24 $ 0.62 $ 0.72

8 unchanged sentences

(In thousands)

Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

(unaudited) (unaudited)

Net income (loss) $ ( 1,142 ) $ 48,749 $ 19,335 $ 81,853

Other comprehensive income, net of tax:

Net income $ 87,506 $ 41,685 $ 106,841 $ 123,538

Other comprehensive income (loss), net of tax:

Available-for-sale investments:

Net unrealized gain (loss), net of tax of ($836) and $239 in the three-month periods and net of tax of ($1,788) and $507 in the six-month periods, respectively 12,451 2,311 8,590 4,562

Net unrealized gain (loss), net of tax of $2,855 and ($5) in the three-month periods and net of tax of $1,067 and $502 in the nine-month periods, respectively ( 2,308 ) 265 6,282 4,827

Reclassification of credit (recovery) loss on investments into current operations — — 75 —

4 unchanged sentences

Net change related to foreign currency translation adjustments 2,098 ( 1,099 ) ( 3,364 ) ( 1,544 )

Other comprehensive income, net of tax 13,314 1,266 398 3,695

Other comprehensive income (loss), net of tax ( 996 ) ( 1,128 ) ( 598 ) 2,567

Total comprehensive income $ 86,510 $ 40,557 $ 106,243 $ 126,105

3 unchanged sentences

(In thousands)

June 28, 2020 December 31, 2019

September 27, 2020 December 31, 2019

Current assets:

43 unchanged sentences

(In thousands)

Six-months Ended

June 28, 2020 June 30, 2019

Nine-months Ended

September 27, 2020 September 29, 2019

Cash flows from operating activities:

47 unchanged sentences

Shares Par Value

Balance as of March 29, 2020 171,688 $ 344 $ 664,132 $ 713,208 $ ( 50,191 ) $ 1,327,493

Balance as of June 28, 2020 173,047 $ 346 $ 710,412 $ 702,597 $ ( 36,877 ) $ 1,376,478

Issuance of common stock under stock plans 1,586 3 43,152 — — 43,155

2 unchanged sentences

Payment of dividends — — — ( 9,582 ) — ( 9,582 )

Net income (loss) — — — ( 1,142 ) — ( 1,142 )

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 )

2 unchanged sentences

Foreign currency translation adjustment — — — — 2,098 2,098

Balance as of June 28, 2020 (unaudited) 173,047 $ 346 $ 710,412 $ 702,597 $ ( 36,877 ) $ 1,376,478

Balance as of September 27, 2020 (unaudited) 174,633 $ 349 $ 762,832 $ 780,521 $ ( 37,873 ) $ 1,505,829

Common Stock Additional

3 unchanged sentences

Shares Par Value

Balance as of March 31, 2019 171,537 $ 343 $ 555,834 $ 670,754 $ ( 38,072 ) $ 1,188,859

Balance as of June 30, 2019 170,661 $ 341 $ 578,871 $ 649,234 $ ( 36,806 ) $ 1,191,640

Issuance of common stock under stock plans 236 1 5,362 — — 5,363

6 unchanged sentences

Foreign currency translation adjustment — — — — ( 1,099 ) ( 1,099 )

Balance as of June 30, 2019 (unaudited) 170,661 $ 341 $ 578,871 $ 649,234 $ ( 36,806 ) $ 1,191,640

Balance as of September 29, 2019 (unaudited) 170,897 $ 342 $ 594,427 $ 682,383 $ ( 37,934 ) $ 1,239,218

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

17 unchanged sentences

Foreign currency translation adjustment — — — — ( 3,364 ) ( 3,364 )

Balance as of June 28, 2020 (unaudited) 173,047 $ 346 $ 710,412 $ 702,597 $ ( 36,877 ) $ 1,376,478

Balance as of September 27, 2020 (unaudited) 174,633 $ 349 $ 762,832 $ 780,521 $ ( 37,873 ) $ 1,505,829

Common Stock Additional

12 unchanged sentences

Foreign currency translation adjustment — — — — ( 1,544 ) ( 1,544 )

Balance as of June 30, 2019 (unaudited) 170,661 $ 341 $ 578,871 $ 649,234 $ ( 36,806 ) $ 1,191,640

Balance as of September 29, 2019 (unaudited) 170,897 $ 342 $ 594,427 $ 682,383 $ ( 37,934 ) $ 1,239,218

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

5 unchanged sentences

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, 2019 for a full description of other significant accounting policies.

In the opinion of the management of 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 June 28, 2020, and the results of its operations for the three-month and six-month periods ended June 28, 2020 and June 30, 2019, 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 six-month periods ended June 28, 2020 are not necessarily indicative of the results to be expected for the full year.

In the opinion of the management of 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 September 27, 2020, and the results of its operations for the three-month and nine-month periods ended September 27, 2020 and September 29, 2019, 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 September 27, 2020 are not necessarily indicative of the results to be expected for the full year.

Cash, Cash Equivalents, and Investments

15 unchanged sentences

When developing an estimate of the expected credit losses, the Company considers all available information relevant to assessing the collectability of cash flows.

This information includes internal and external factors, historical and current events, reasonable and supportable forecasts including management's expectations of future economic conditions, the type of security, the credit rating of the security, the size of the loss position, as well as other relevant information.

This information includes internal and external factors, historical and current events, reasonable and supportable forecasts including management's expectations of future economic conditions, the type of security, the credit rating of the security, and the size of the loss position, as well as other relevant information.

An impairment is recognized as a write-down if (i) the Company has the intent to sell the security or (ii) it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis.

40 unchanged sentences

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 June 28, 2020 (in thousands):

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of September 27, 2020 (in thousands):

Quoted Prices in

4 unchanged sentences

Money market instruments $ 3,926 $ — $ —

Corporate bonds — 236,660

Treasury bills — 270,091 —

Corporate bonds — 259,887 —

Asset-backed securities — 129,543 —

Sovereign bonds — 27,517 —

Agency bonds — 28,274 —

Sovereign bonds — 24,496 —

Municipal bonds — 2,417 —

9 unchanged sentences

The market participants are generally large commercial banks.

The Company recorded gross credit losses and gross credit recoveries on debt securities totaling $ 0 and $ 85,000 , respectively, for the three-month period ended June 28, 2020, and $ 160,000 and $ 85,000 , respectively, for the six-month period ended June 28, 2020.

No credit losses or recoveries on debt securities were recorded for the three-month or six-month periods ended June 30, 2019.

The Company recorded no gross credit losses or gross credit recoveries on debt securities for the three-month period ended September 27, 2020, and $ 160,000 and $ 85,000 , respectively, for the nine-month period ended September 27, 2020.

No credit losses or recoveries on debt securities were recorded for the three-month or nine-month periods ended September 29, 2019.

Credit losses and recoveries are included in "Other income (expense)" on the Consolidated Statements of Operations.

3 unchanged sentences

The fair value of the contingent consideration liability related to the Company's acquisition of Chiaro Technologies, LLC was $ 1,153,000 as of December 31, 2019.

During the three-month period ended June 28, 2020, the Company paid out $ 1,039,000 based upon the revenue levels achieved, with the remaining $ 114,000 recorded as a fair value adjustment in "Other income (expense)" on the Consolidated Statements of Operations.

During the second quarter of 2020, the Company paid out $ 1,039,000 based upon the revenue levels achieved, with the remaining $ 114,000 recorded as a fair value adjustment in "Other income (expense)" on the Consolidated Statements of Operations.

The fair value of the contingent consideration liability related to the Company's acquisition of GVi Ventures, Inc.

was written down to zero as of December 31, 2019 resulting from a lower level of revenue in the Americas' automotive industry, and the balance remains at zero as of June 28, 2020.

was written down to zero as of December 31, 2019 resulting from a lower level of revenue in the Americas' automotive industry, and the balance remains at zero as of September 27, 2020.

The undiscounted potential outcomes related to future contingent consideration range from $ 0 to $ 2,500,000 based upon certain revenue levels over the next two years.

5 unchanged sentences

Our business has been adversely and materially impacted by deteriorating global economic conditions resulting from the COVID-19 pandemic.

The significant decline in business levels 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 are included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $ 19,571,000 (refer to Note 8).

These conditions 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 in the second quarter of 2020 (refer to Notes 6 and 16) that are included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $ 19,571,000 in the second quarter of 2020 (refer to Note 8).

These fair value measurements are based upon the present values of future cash flows using significant inputs that are not observable in the market, and are therefore classified as Level 3.

1 unchanged sentence

Cash, cash equivalents, and investments consisted of the following (in thousands):

June 28, 2020 December 31, 2019

September 27, 2020 December 31, 2019

Cash $ 294,430 $ 155,498

1 unchanged sentence

Cash and cash equivalents 298,356 171,431

Asset-backed securities 50,311 66,680

Corporate bonds 43,436 65,624

Treasury bills 34,018 92,914

Asset-backed securities 34,536 66,680

Sovereign bonds 16,086 6,294

Municipal bonds 1,307 4,630

Treasury bills — 92,914

Certificate of deposit — 4,328

17 unchanged sentences

Dollars, with the exception of the certificate of deposit held as of December 31, 2019 that was denominated in Korean Won.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 1,958,000 and $ 2,874,000 as of June 28, 2020 and December 31, 2019, respectively.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 1,912,000 and $ 2,874,000 as of September 27, 2020 and December 31, 2019, respectively.

COGNEX CORPORATION

2 unchanged sentences

The Company did not record an adjustment to retained earnings, as there were no debt securities with credit losses as of the adoption date.

The following table summarizes the Company’s available-for-sale investments as of June 28, 2020 (in thousands):

The following table summarizes the Company’s available-for-sale investments as of September 27, 2020 (in thousands):

Losses Fair Value

Asset-backed securities $ 49,899 $ 412 $ — $ 50,311

Corporate bonds $ 43,208 $ 254 $ ( 26 ) $ 43,436

Treasury bills 33,480 538 — 34,018

Asset-backed securities 34,277 259 — 34,536

Sovereign bonds 15,978 108 — 16,086

5 unchanged sentences

Sovereign bonds 8,349 61 — 8,410

Municipal bonds 1,105 5 — 1,110

$ 708,599 $ 6,261 $ ( 152 ) $ 714,708

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 June 28, 2020 (in thousands):

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 September 27, 2020 (in thousands):

Unrealized Loss Position For:

5 unchanged sentences

Treasury bills 11,543 ( 10 ) — — 11,543 ( 10 )

Asset-backed securities 5,749 ( 1 ) 260 ( 1 ) 6,009 ( 2 )

Agency bonds 3,128 ( 2 ) 2,784 ( 16 ) 5,912 ( 18 )

Municipal bonds 1,293 ( 5 ) — — 1,293 ( 5 )

$ 53,601 $ ( 152 ) $ — $ — $ 53,601 $ ( 152 )

No credit losses or recoveries on debt securities were recorded for the three-month or six-month periods ended June 30, 2019.

No credit losses or recoveries on debt securities were recorded for the three-month or nine-month periods ended September 29, 2019.

Credit losses and recoveries are included in "Other income (expense)" on the Consolidated Statements of Operations.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the allowance for credit losses activity for the six-month period ended June 28, 2020 (in thousands):

The following table summarizes the allowance for credit losses activity for the nine-month period ended September 27, 2020 (in thousands):

Balance as of December 31, 2019 $ —

1 unchanged sentence

Decreases to the allowance for credit losses ( 85 )

Balance as of June 28, 2020 $ 75

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 962,000 and $ 7,000 , respectively, for the three-month period ended June 28, 2020, and $ 394,000 and $ 12,000 , respectively, for the three-month period ended June 30, 2019.

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 2,826,000 and $ 21,000 , respectively, for the six-month period ended June 28, 2020, and $ 458,000 and $ 36,000 , respectively, for the six-month period ended June 30, 2019.

Balance as of September 27, 2020 $ 75

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 787,000 and $ 1,000 , respectively, for the three-month period ended September 27, 2020, and $ 361,000 and $ 67,000 , respectively, for the three-month period ended September 29, 2019.

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 3,613,000 and $ 22,000 , respectively, for the nine-month period ended September 27, 2020, and $ 818,000 and $ 103,000 , respectively, for the nine-month period ended September 29, 2019.

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.

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of June 28, 2020 (in thousands):

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of September 27, 2020 (in thousands):

<1 year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total

Corporate bonds $ 42,248 $ 81,987 $ 102,034 $ 10,391 $ — $ 236,660

Treasury bills $ — $ 167,677 $ 98,353 $ 4,061 $ — $ 270,091

Corporate bonds 43,436 86,619 126,966 2,866 — 259,887

Asset-backed securities 34,536 45,513 45,457 52 3,985 129,543

Sovereign bonds 14,869 9,218 3,430 — — 27,517

Agency bonds — 5,933 22,341 — — 28,274

Sovereign bonds 16,086 4,973 3,437 — — 24,496

Municipal bonds 1,307 1,110 — — — 2,417

1 unchanged sentence

Inventories consisted of the following (in thousands):

June 28, 2020 December 31, 2019

September 27, 2020 December 31, 2019

Raw materials $ 25,021 $ 27,285

2 unchanged sentences

$ 53,860 $ 60,261

The Company recorded provisions for excess and obsolete inventories of $ 7,718,000 and $ 8,783,000 for the three-month and six-month periods ended June 28, 2020, respectively, which reduced the carrying value of the inventories to their net realizable value.

The charges for the three-month period ended June 28, 2020 were due to lower projected sales of excess inventories as a result of deteriorating global economic conditions from the COVID-19 pandemic.

The Company recorded provisions for excess and obsolete inventories of $ 9,386,000 for the nine-month period ended September 27, 2020, which reduced the carrying value of the inventories to their net realizable value.

Charges of $ 7,718,000 were recorded in the second quarter of 2020 due to lower projected sales of excess inventories as a result of deteriorating global economic conditions from the COVID-19 pandemic.

COGNEX CORPORATION

3 unchanged sentences

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 June 28, 2020.

There were no options to extend or terminate that were included in the determination of the lease term for the leases outstanding as of September 27, 2020.

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 June 28, 2020.

The total operating lease expense for the three-month periods ended June 28, 2020 and June 30, 2019 was $ 2,147,000 and $ 1,742,000 , respectively.

The total operating lease cash payments for the three-month periods ended June 28, 2020 and June 30, 2019 were $ 2,091,000 and $ 1,669,000 , 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 was $ 23,000 and $ 64,000 for the three-month periods ended June 28, 2020 and June 30, 2019, respectively.

The total operating lease expense for the six-month periods ended June 28, 2020 and June 30, 2019 was $ 4,053,000 and $ 3,227,000 , respectively.

The total operating lease cash payments for the six-month periods ended June 28, 2020 and June 30, 2019 were $ 3,954,000 and $ 3,070,000 , 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 was $ 62,000 and $ 233,000 for the six-month periods ended June 28, 2020 and June 30, 2019, respectively.

There were no restrictions or covenants for the leases outstanding as of September 27, 2020.

The total operating lease expense for the three-month periods ended September 27, 2020 and September 29, 2019 was $ 2,047,000 and $ 1,749,000 , respectively.

The total operating lease cash payments for the three-month periods ended September 27, 2020 and September 29, 2019 were $ 2,041,000 and $ 1,708,000 , 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 was $ 22,000 for both of the three-month periods ended September 27, 2020 and September 29, 2019.

The total operating lease expense for the nine-month periods ended September 27, 2020 and September 29, 2019 was $ 6,100,000 and $ 4,976,000 , respectively.

The total operating lease cash payments for the nine-month periods ended September 27, 2020 and September 29, 2019 were $ 5,995,000 and $ 4,778,000 , 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 was $ 84,000 and $ 255,000 for the nine-month periods ended September 27, 2020 and September 29, 2019, respectively.

Future operating lease cash payments are as follows (in thousands):

2 unchanged sentences

Thereafter 4,641

The discounted present value of the future lease cash payments resulted in a lease liability of $ 28,836,000 and $ 17,973,000 as of June 28, 2020 and December 31, 2019, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of June 28, 2020 or June 30, 2019.

The weighted-average discount rate was 4.1 % and 4.8 % for the leases outstanding as of June 28, 2020 and June 30, 2019, respectively.

The weighted-average remaining lease term was 5.3 and 3.6 years for the leases outstanding as of June 28, 2020 and June 30, 2019, respectively.

As part of the Company's restructuring plan (refer to Note 16), management closed ten leased offices as of June 28, 2020 prior to the end of their lease terms.

The carrying value of the lease assets associated with these ten offices has been reduced to zero as of June 28, 2020, resulting in operating lease asset impairment charges of $ 2,534,000 for the three-month period ended June 28, 2020 that are included in "Restructuring charges" on the Consolidated Statements of Operations.

The discounted present value of the future lease cash payments resulted in a lease liability of $ 27,916,000 and $ 17,973,000 as of September 27, 2020 and December 31, 2019, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of September 27, 2020 or September 29, 2019.

The weighted-average discount rate was 4.1 % and 4.6 % for the leases outstanding as of September 27, 2020 and December 31, 2019, respectively.

The weighted-average remaining lease term was 5.2 and 3.7 years for the leases outstanding as of September 27, 2020 and December 31, 2019, respectively.

As part of the Company's restructuring plan (refer to Note 16), management closed ten leased offices as of the end of the second quarter of 2020, prior to the end of their lease terms.

The carrying value of the lease assets associated with these ten 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.

The Company owns a building adjacent to its corporate headquarters that was partially occupied by a tenant for a portion of the current year.

This lease was terminated prior to the end of its lease term during the three-month period ended June 28, 2020.

Rental income was $ 0 and $ 81,000 for the three-month periods ended June 28, 2020 and June 30, 2019, respectively, and $ 77,000 and $ 158,000 for the six-month periods ended June 28, 2020 and June 30, 2019, respectively.

This lease was terminated prior to the end of its lease term during the second quarter of 2020.

Rental income was $ 0 and $ 76,000 for the three-month periods ended September 27, 2020 and September 29, 2019, respectively, and $ 77,000 and $ 234,000 for the nine-month periods ended September 27, 2020 and September 29, 2019, respectively.

The Company is now fully occupying this building for its operations.

4 unchanged sentences

Foreign exchange rate changes ( 316 )

Balance as of June 28, 2020 $ 242,436

The significant decline in business levels resulting from the COVID-19 pandemic triggered a review of long-lived assets, including goodwill, for potential impairment during the three-month period ended June 28, 2020.

Based upon this assessment, management concluded that the reporting unit fair value was not less than its carrying value, and therefore no goodwill impairment charge was recognized for the three-month and six-month periods ended June 28, 2020.

Balance as of September 27, 2020 $ 243,129

The adverse impact of the COVID-19 pandemic on our business triggered a review of long-lived assets, including goodwill, for potential impairment during the second quarter of 2020.

Factors that management considered in this assessment included macroeconomic conditions, industry and market conditions, overall financial performance (both current and projected), changes in management or strategy, changes in the composition or carrying value of net assets, and market capitalization.

9 unchanged sentences

Trademarks 110 53 57

Balance as of June 28, 2020 $ 73,675 $ 56,338 $ 17,337

Balance as of September 27, 2020 $ 73,675 $ 57,193 $ 16,482

Value Accumulated

7 unchanged sentences

Balance as of December 31, 2019 $ 93,474 $ 53,984 $ 39,490

The significant decline in business levels resulting from the COVID-19 pandemic triggered a review of long-lived assets, including intangible assets, for potential impairment during the three-month period ended June 28, 2020.

The adverse impact of the COVID-19 pandemic on our business triggered a review of long-lived assets, including intangible assets, for potential impairment during the second quarter of 2020.

For finite-lived intangible assets that are subject to amortization, the Company follows a two-step process for impairment testing.

8 unchanged sentences

The fair values were established, with the assistance of an outside valuation advisor, using the income approach based upon a discounted cash flow model that estimated future revenue streams and expenses attributable to those revenue streams provided by management.

This review resulted in intangible asset impairment charges totaling $ 19,571,000 for the three-month period ended June 28, 2020, primarily related to lower projected cash flows from the technologies and customer relationships acquired from Sualab Co.

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.

("Sualab") as a result of the deteriorating global economic conditions from the COVID-19 pandemic.

1 unchanged sentence

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 .

As of June 28, 2020, estimated future amortization expense related to intangible assets was as follows (in thousands):

As of September 27, 2020, estimated future amortization expense related to intangible assets was as follows (in thousands):

Year Ended December 31, Amount

14 unchanged sentences

Fulfillment of warranty obligations ( 1,798 )

Balance as of June 28, 2020 $ 5,279

Balance as of September 27, 2020 $ 5,586

Derivative Instruments

5 unchanged sentences

The Company had the following outstanding forward contracts (in thousands):

June 28, 2020 December 31, 2019

September 27, 2020 December 31, 2019

Currency Notional

1 unchanged sentence

Derivatives Not Designated as Hedging Instruments:

Korean Won 138,690,000 $ 115,604 161,951,500 $ 139,688

Euro 66,500 $ 77,643 18,000 $ 20,249

Korean Won 14,840,000 12,695 161,951,500 139,688

Mexican Peso 165,000 7,324 80,000 4,223

8 unchanged sentences

Balance Fair Value Balance Fair Value

Location June 28, 2020 December 31, 2019 Sheet

Location June 28, 2020 December 31, 2019

Location September 27, 2020 December 31, 2019 Sheet

Location September 27, 2020 December 31, 2019

Derivatives Not Designated as Hedging Instruments:

4 unchanged sentences

Asset Derivatives Liability Derivatives

June 28, 2020 December 31, 2019 June 28, 2020 December 31, 2019

September 27, 2020 December 31, 2019 September 27, 2020 December 31, 2019

Gross amounts of recognized assets $ 313 $ 857 Gross amounts of recognized liabilities $ 121 $ 23

2 unchanged sentences

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):

Location in Financial Statements Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Location in Financial Statements Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Derivatives Not Designated as Hedging Instruments:

4 unchanged sentences

The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):

Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Americas $ 86,482 $ 64,983 $ 215,696 $ 207,161

4 unchanged sentences

The following table summarizes disaggregated revenue information by revenue type (in thousands):

Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Standard products and services $ 174,797 $ 139,887 $ 486,458 $ 473,610

2 unchanged sentences

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 $ 10,888,000 and $ 3,963,000 as of June 28, 2020 and December 31, 2019, respectively.

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 12,708,000 and $ 3,963,000 as of September 27, 2020 and December 31, 2019, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

5 unchanged sentences

The Company did not record an adjustment to retained earnings as this ASU did not have a material impact on the Company's consolidated allowance for credit losses.

The Company recorded credit losses on accounts receivable of $ 300,000 and $ 600,000 for the three-month and six-month periods ended June 28, 2020, respectively.

The Company recorded credit losses on accounts receivable of $ 90,000 for the three-month and six-month periods ended June 30, 2019.

The Company recorded credit losses on accounts receivable of $ 0 and $ 600,000 for the three-month and nine-month periods ended September 27, 2020, respectively.

The Company recorded credit losses on accounts receivable of $ 125,000 and $ 215,000 for the three-month and nine-month periods ended September 29, 2019.

The Company's estimate of expected credit losses takes into account the deteriorating global economic conditions from the COVID-19 pandemic.

The following table summarizes the allowance for credit losses activity for the six-month period ended June 28, 2020 (in thousands):

The following table summarizes the allowance for credit losses activity for the nine-month period ended September 27, 2020 (in thousands):

Balance as of December 31, 2019 $ 530

1 unchanged sentence

Write-offs ( 217 )

Foreign exchange rate changes 1

Balance as of June 28, 2020 $ 945

Balance as of September 27, 2020 $ 913

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the deferred revenue and customer deposits activity for the six-month period ended June 28, 2020 (in thousands):

The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended September 27, 2020 (in thousands):

Balance as of December 31, 2019 $ 14,432

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Foreign exchange rate changes 478

Balance as of June 28, 2020 $ 46,738

Balance as of September 27, 2020 $ 33,717

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.

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The Company’s stock-based awards that result in compensation expense consist of stock options and restricted stock units ("RSUs").

As of June 28, 2020, the Company had 16,335,000 shares available for grant under its stock plans.

As of September 27, 2020, the Company had 16,450,000 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.

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Stock Options

The following table summarizes the Company’s stock option activity for the six-month period ended June 28, 2020:

The following table summarizes the Company’s stock option activity for the nine-month period ended September 27, 2020:

(in thousands) Weighted-

6 unchanged sentences

Forfeited or expired ( 529 ) 50.34

Outstanding as of June 28, 2020 11,631 $ 40.45 6.98 $ 212,847

Exercisable as of June 28, 2020 5,331 $ 31.59 5.81 $ 144,694

Options vested or expected to vest as of June 28, 2020 (1) 10,683 $ 39.58 6.85 $ 204,795

Outstanding as of September 27, 2020 9,937 $ 42.45 7.03 $ 191,245

Exercisable as of September 27, 2020 3,807 $ 33.58 5.83 $ 107,040

Options vested or expected to vest as of September 27, 2020 (1) 9,125 $ 41.73 6.92 $ 182,232

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future.

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The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:

Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Risk-free rate — % 2.7 % 1.6 % 2.7 %

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Expected term (in years) — 5.1 6.0 5.2

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

Risk-free rate

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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.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The weighted-average grant-date fair values of stock options granted during the three-month periods ended June 28, 2020 and June 30, 2019 were $ 19.13 and $ 18.68 , respectively.

The weighted-average grant-date fair values of stock options granted during the six-month periods ended June 28, 2020 and June 30, 2019 were $ 18.52 and $ 18.59 , respectively.

The total intrinsic values of stock options exercised for the three-month periods ended June 28, 2020 and June 30, 2019 were $ 39,359,000 and $ 14,220,000 , respectively.

The total intrinsic values of stock options exercised for the six-month periods ended June 28, 2020 and June 30, 2019 were $ 53,814,000 and $ 36,799,000 , respectively.

The total fair values of stock options vested for the three-month periods ended June 28, 2020 and June 30, 2019 were $ 1,287,000 and $ 887,000 , respectively.

The total fair values of stock options vested for the six-month periods ended June 28, 2020 and June 30, 2019 were $ 37,951,000 and $ 30,859,000 , respectively.

Expected term

The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.

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

The weighted-average grant-date fair values of stock options granted during the three-month period ended September 29, 2019 was $ 18.42 .

The weighted-average grant-date fair values of stock options granted during the nine-month periods ended September 27, 2020 and September 29, 2019 were $ 18.52 and $ 18.58 , respectively.

The total intrinsic values of stock options exercised for the three-month periods ended September 27, 2020 and September 29, 2019 were $ 62,787,000 and $ 5,746,000 , respectively.

The total intrinsic values of stock options exercised for the nine-month periods ended September 27, 2020 and September 29, 2019 were $ 116,600,000 and $ 42,545,000 , respectively.

The total fair values of stock options vested for the three-month periods ended September 27, 2020 and September 29, 2019 were $ 1,331,000 and $ 1,213,000 , respectively.

The total fair values of stock options vested for the nine-month periods ended September 27, 2020 and September 29, 2019 were $ 39,282,000 and $ 32,072,000 , respectively.

Restricted Stock Units (RSUs)

The following table summarizes the Company's RSUs activity for the six-month period ended June 28, 2020:

The following table summarizes the Company's RSUs activity for the nine-month period ended September 27, 2020:

(in thousands) Weighted-Average

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Forfeited or expired ( 34 ) 50.60

Nonvested as of June 28, 2020 561 $ 50.79

The weighted-average grant-date fair values of RSUs granted during the three-month and six-month periods ended June 28, 2020 were $ 56.97 and $ 51.53 , respectively.

There were no RSUs that vested during the three-month and six-month periods ended June 28, 2020.

There were no RSUs granted or vested during the three-month and six-month periods ended June 30, 2019.

Nonvested as of September 27, 2020 554 $ 50.96

The weighted-average grant-date fair values of RSUs granted during the three-month periods ended September 27, 2020 and September 29, 2019 were $ 67.14 and $ 45.20 , respectively.

The weighted-average grant-date fair values of RSUs granted during the nine-month periods ended September 27, 2020 and September 29, 2019 were $ 51.73 and $ 45.20 , respectively.

There were no RSUs that vested during the three-month and nine-month periods ended September 27, 2020 and September 29, 2019.

Stock-Based Compensation Expense

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This resulted in an increase to compensation expense of $ 1,787,000 in 2020 and a decrease to compensation expense of $ 499,000 in 2019.

As of June 28, 2020, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $ 65,128,000 , which is expected to be recognized over a weighted-average period of 2.0 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended June 28, 2020 were $ 8,018,000 , which includes credits of $ 1,401,000 relating to grants cancelled as a result of the Company's workforce reduction, and $ 1,277,000 , respectively, and for the three-month period ended June 30, 2019 were $ 10,967,000 and $ 1,813,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the six-month period ended June 28, 2020 were $ 22,808,000 and $ 3,841,000 , respectively, and for the six-month period ended June 30, 2019 were $ 23,248,000 and $ 4,035,000 , respectively.

No compensation expense was capitalized as of June 28, 2020 or December 31, 2019.

As of September 27, 2020, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $ 56,150,000 , which is expected to be recognized over a weighted-average period of 1.8 years.

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 three-month period ended September 29, 2019 were $ 10,194,000 and $ 1,804,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the nine-month period ended September 27, 2020 were $ 32,076,000 , which includes credits of $ 1,401,000 relating to grants cancelled as a result of the Company's workforce reduction, and $ 5,365,000 , respectively, and for the nine-month period ended September 29, 2019 were $ 33,442,000 and $ 5,839,000 , respectively.

No compensation expense was capitalized as of September 27, 2020 or December 31, 2019.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Cost of revenue $ 324 $ 334 $ 1,041 $ 1,114

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$ 9,268 $ 10,194 $ 32,076 $ 33,442

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 June 28, 2020, the Company repurchased 2,816,000 shares at a cost of $ 121,348,000 under this program, including 1,215,000 shares at a cost of $ 51,036,000 during the three-month period ended March 29, 2020, leaving a remaining balance of $ 78,652,000 .

No shares were repurchased during the three-month period ended June 28, 2020.

As of September 27, 2020, the Company repurchased 2,816,000 shares at a cost of $ 121,348,000 under this program, including 1,215,000 shares at a cost of $ 51,036,000 during the nine-month period ended September 27, 2020, leaving a remaining balance of $ 78,652,000 .

No shares were repurchased during the three-month period ended September 27, 2020.

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.

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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 Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Income tax expense (benefit) at U.S.

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Income tax expense at U.S.

federal statutory corporate tax rate 21 % 21 % 21 % 21 %

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Discrete tax benefit related to stock options ( 4 ) % ( 1 ) % ( 9 ) % ( 3 ) %

Discrete tax expense related to tax return filings 141 % — % 17 % — %

Tax rate adjustment 18 % — % — % — %

Discrete tax expense (benefit) related to tax return filings — % ( 3 ) % 3 % ( 1 ) %

Other 2 % 2 % 2 % 2 %

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federal statutory corporate tax rate of 21 %.

These differences resulted in a favorable impact to the effective tax rate of 5 percentage points for both the three-month and six-month periods ended June 28, 2020, and 7 percentage points for the same periods in 2019.

These differences resulted in a favorable impact to the effective tax rate of 5 percentage points for both the three-month and nine-month periods ended September 27, 2020, and 7 percentage points for the same periods in 2019.

Management has determined that earnings from its legal entity in China will be indefinitely reinvested to provide local funding for growth, and that earnings from all other jurisdictions will not be indefinitely reinvested.

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 exercises that resulted in a favorable impact to the effective tax rate of 191 and 29 percentage points for the three-month and six-month periods ended June 28, 2020, respectively, and 2 and 4 percentage points for the same periods in 2019.

In addition, the Company recorded discrete tax expenses related to the final true-up of the prior year tax accrual upon filing the related tax return that resulted in an unfavorable impact to the effective tax rate of 141 and 17 percentage points for the three-month and six-month periods ended June 28, 2020, respectively.

Excluding the impact of these discrete items, the Company’s effective tax rate was a benefit of 1 % of pre-tax loss and an expense of 19 % of pre-tax income for the three-month and six-month periods in 2020, respectively, compared to an expense of 17 % and 16 % of pre-tax income for the same periods in 2019.

The increase in the effective tax rate, excluding the impact of discrete items, for the six-month period from 16 % in 2019 to 19 % in 2020 was due to more of the Company's profits being earned and taxed in higher tax jurisdictions.

This adjustment to the effective tax rate resulted in an 18 percentage-point impact on the effective tax rate for the three-month period ended June 28, 2020.

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 exercises that resulted in a favorable impact to the effective tax rate of 4 and 9 percentage points for the three-month and nine-month periods ended September 27, 2020, respectively, and 1 and 3 percentage points for the same periods in 2019.

In addition, the Company recorded other discrete tax items primarily related to the final true-up of the prior year tax accrual upon

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the six-month period ended June 28, 2020, the Company recorded a $ 710,000 increase in reserves for income taxes, net of deferred tax benefit.

Estimated interest and penalties included in these amounts totaled $ 283,000 for the six-month period ended June 28, 2020.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 13,330,000 as of June 28, 2020, which included $ 12,302,000 classified as a non-current liability and $ 1,028,000 recorded as an increase to a non-current deferred tax liability.

filing the related tax return that resulted in an unfavorable impact to the effective tax rate of 3 percentage points for the nine-month period ended September 27, 2020, and a favorable impact to the effective tax rate of 3 and 1 percentage points for the three-month and nine-month periods ended September 29, 2019, respectively.

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 September 27, 2020, respectively, compared to 16 % for the same periods in 2019.

The increase in the effective tax rate, excluding the impact of discrete items, was due to more of the Company's profits being earned and taxed in higher tax jurisdictions.

During the nine-month period ended September 27, 2020, the Company recorded a $ 198,000 decrease in reserves for income taxes, net of deferred tax benefit.

Estimated interest and penalties included in these amounts totaled $ 212,000 for the nine-month period ended September 27, 2020.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 12,353,000 as of September 27, 2020, which included $ 11,325,000 classified as a non-current liability and $ 1,028,000 recorded as an increase to a non-current deferred tax liability.

The amount of gross interest and penalties included in these balances was $ 1,192,000 .

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Management believes the Company is adequately reserved for this audit.

The Company has filed its U.S.

federal tax return in the fourth quarter of 2020 for tax year 2019, and as a result, is expected to record a discrete tax benefit in excess of $12,000,000 in the fourth quarter.

This benefit was the result of new regulations issued by the IRS relating to the use of foreign tax credits as allowable to reduce the tax associated with foreign operations under Global Intangible Low-Taxed Income (“GILTI”).

These credits were generated from taxes paid relating to the acquisition of Sualab in October 2019.

Weighted-Average Shares

Weighted-average shares were calculated as follows (in thousands):

Three-months Ended Six-months Ended

June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019

Three-months Ended Nine-months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Basic weighted-average common shares outstanding 173,943 170,744 172,881 171,053

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Weighted-average common and common-equivalent shares outstanding 177,138 174,449 176,038 175,164

Stock options to purchase 5,801,000 and 6,328,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended June 28, 2020, respectively, and 6,113,000 and 5,503,000 for the same periods in 2019, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 27,000 and 14,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended June 28, 2020.

Additionally, because the Company recorded a cumulative net loss during the three-month period ended June 28, 2020, potential common stock equivalents of 3,120,000 were not included in the calculation of diluted net loss per share for this period.

There were no anti-dilutive restricted stock units outstanding, on a weighted-average basis, during the three-month and six-month periods ended June 30, 2019, respectively.

Stock options to purchase 1,416,000 and 5,540,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended September 27, 2020, respectively, and 6,078,000 and 5,695,000 for the same periods in 2019, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 3,000 and 2,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended September 27, 2020, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

There were no anti-dilutive restricted stock units outstanding, on a weighted-average basis, during the three-month and nine-month periods ended September 29, 2019.

COGNEX CORPORATION

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The restructuring plan included a global workforce reduction of approximately 8 % and office closures.

The Company estimates the total restructuring charges from these actions to be approximately $ 16,445,000 , of which $ 14,798,000 has been recorded in the three-month period ended June 28, 2020 and included in “Restructuring charges” on the Consolidated Statements of Operations.

The remaining charges are expected to be recognized during the second half of 2020.

The Company estimates the total restructuring charges from these actions to be approximately $ 15,388,000 , of which $ 14,798,000 was recorded in the second quarter and $ 251,000 was recorded in the third quarter of 2020 and are included in “Restructuring charges” on the Consolidated Statements of Operations.

The remaining charges are expected to be recognized during the fourth quarter of 2020.

The following table summarizes the restructuring charges (in thousands):

Total Amount Expected to be Incurred Incurred in the Three-months Ended June 28, 2020

Total Amount Expected to be Incurred Incurred in the Three-months Ended September 27, 2020 Incurred in the Nine-months Ended September 27, 2020

One-time termination benefits $ 10,503 $ ( 36 ) $ 10,350

2 unchanged sentences

$ 15,388 $ 251 $ 15,049

One-time termination benefits include severance, health insurance, and outplacement services for 181 employees who were either terminated or have been notified that they will 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 three-month period ended June 28, 2020.

One-time termination benefits include 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, are being recognized over the service period, which is not expected to exceed the fourth quarter of 2020.

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These costs also include the write-off of leasehold improvements and other equipment related to these abandoned offices that had no alternative use.

These contract termination costs were recognized in the three-month period ended June 28, 2020 when the Company ceased using the property for economic benefit.

These contract termination costs were primarily recognized in the second quarter of 2020 when the Company ceased using the property for economic benefit.

Other associated costs primarily include legal fees related to the employee termination actions, which are being recognized when the services are performed.

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Non-cash restructuring charges — ( 3,145 ) — ( 3,145 )

Restructuring adjustments ( 767 ) 104 — ( 663 )

Foreign exchange rate changes 158 13 17 188

Balance as of June 28, 2020 $ 5,792 $ 829 $ 415 $ 7,036

Balance as of September 27, 2020 $ 2,375 $ 737 $ 205 $ 3,317

Restructuring adjustments related to one-time termination benefits consisted primarily of the favorable true-up of severance estimates based on final agreements and health insurance estimates based on employee elections.

Adjustments related to contract termination costs consisted primarily of lease early termination fees.

COGNEX CORPORATION

1 unchanged sentence

Subsequent Events

On July 29, 2020, the Company’s Board of Directors declared a cash dividend of $ 0.055 per share.

The dividend is payable on August 28, 2020 to all shareholders of record as of the close of business on August 14, 2020.

On October 28, 2020, the Company’s Board of Directors declared a cash dividend of $ 0.06 per share.

The dividend is payable on November 27, 2020 to all shareholders of record as of the close of business on November 13, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements