What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 221 added, 135 removed, 461 unchanged (44% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three-months Ended

April 4, 2021 March 29, 2020

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

(unaudited) (unaudited)

Revenue $ 269,158 $ 169,097 $ 508,185 $ 336,332

3 unchanged sentences

Selling, general, and administrative expenses 76,843 60,153 149,267 129,291

Operating income 78,453 20,951

Restructuring charges (Note 16) — 14,798 — 14,798

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

Operating income (loss) 92,581 ( 6,142 ) 171,034 14,809

Foreign currency gain (loss) ( 639 ) 336 ( 1,647 ) ( 2,667 )

1 unchanged sentence

Other income (expense) ( 127 ) 203 ( 295 ) 20

Income before income tax expense 78,831 22,994

Income tax expense 8,983 2,517

Net income $ 69,848 $ 20,477

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

Income (loss) before income tax expense (benefit) 93,538 ( 2,312 ) 172,369 20,682

Income tax expense (benefit) 15,940 ( 1,170 ) 24,923 1,347

Net income (loss) $ 77,598 $ ( 1,142 ) $ 147,446 $ 19,335

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

Basic $ 0.44 $ ( 0.01 ) $ 0.84 $ 0.11

8 unchanged sentences

(In thousands)

Three-months Ended

April 4, 2021 March 29, 2020

Net income $ 69,848 $ 20,477

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

(unaudited) (unaudited)

Net income (loss) $ 77,598 $ ( 1,142 ) $ 147,446 $ 19,335

Other comprehensive income (loss), net of tax:

Available-for-sale investments:

Net unrealized gain (loss), net of tax of ($585) and ($952) in the three-month periods, respectively ( 1,958 ) ( 3,861 )

Net unrealized gain (loss), net of tax of $( 61 ) and $( 836 ) in the three-month periods and net of tax of $( 646 ) and $( 1,788 ) in the six-month periods, respectively

( 138 ) 12,451 ( 2,096 ) 8,590

Reclassification of credit loss (recovery) on investments into current operations — ( 85 ) — 75

10 unchanged sentences

(In thousands)

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Current assets:

1 unchanged sentence

Current investments, amortized cost of $ 189,818 and $ 102,258 in 2021 and 2020, respectively, allowance for credit losses of $ 0 in 2021 and 2020

190,747 103,240

Accounts receivable, allowance for credit losses of $ 803 and $ 831 in 2021 and 2020, respectively

5 unchanged sentences

Non-current investments, amortized cost of $ 542,015 and $ 390,417 in 2021 and 2020, respectively, allowance for credit losses of $ 0 in 2021 and 2020

543,965 395,125

Property, plant, and equipment, net 76,972 79,173

34 unchanged sentences

(In thousands)

Three-months Ended

April 4, 2021 March 29, 2020

Six-months Ended

July 4, 2021 June 28, 2020

Cash flows from operating activities:

3 unchanged sentences

Depreciation of property, plant, and equipment 8,510 11,162

Loss (gain) on disposal of property, plant, and equipment 3 2

Loss on disposal of property, plant, and equipment 4 1,214

Amortization of intangible assets 1,853 2,582

Intangible asset impairment charges — 19,571

Excess and obsolete inventory charges 1,816 8,783

Operating lease asset impairment charges — 2,534

Amortization of discounts or premiums on investments 1,840 328

1 unchanged sentence

Credit loss on investments — 75

Revaluation of contingent consideration — ( 114 )

Change in deferred income taxes 973 1,395

19 unchanged sentences

Payment of dividends ( 21,192 ) ( 18,972 )

Payment of contingent consideration — ( 1,039 )

Net cash provided by (used in) financing activities 2,338 ( 22,812 )

12 unchanged sentences

Shares Par Value

Balance as of April 4, 2021 176,608 $ 353 $ 854,491 $ 540,686 $ ( 38,529 ) $ 1,357,001

Net issuance of common stock under stock plans 277 1 9,662 — — 9,663

Repurchase of common stock ( 178 ) ( 1 ) — ( 14,397 ) — ( 14,398 )

Stock-based compensation expense — — 10,730 — — 10,730

Payment of dividends ($ 0.060 per common share)

— — — ( 10,597 ) — ( 10,597 )

Net income — — — 77,598 — 77,598

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 61 )

— — — — ( 138 ) ( 138 )

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 68 ) ( 68 )

Foreign currency translation adjustment — — — — ( 337 ) ( 337 )

Balance as of July 4, 2021 (unaudited) 176,707 $ 353 $ 874,883 $ 593,290 $ ( 39,072 ) $ 1,429,454

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Shares Par Value

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

Net issuance of common stock under stock plans 1,359 2 38,262 — — 38,264

Stock-based compensation expense — — 8,018 — — 8,018

Payment of dividends ($ 0.055 per common share)

— — — ( 9,469 ) — ( 9,469 )

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

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 836 )

— — — — 12,451 12,451

Reclassification of credit loss (recovery) on investments — — — — ( 85 ) ( 85 )

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 955 ) ( 955 )

Foreign currency translation adjustment — — — — 1,903 1,903

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

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

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Shares Par Value

Balance as of December 31, 2020 175,790 $ 352 $ 807,739 $ 487,912 $ ( 33,801 ) $ 1,262,202

3 unchanged sentences

Payment of dividends ($ 0.120 per common share)

— — — ( 21,192 ) — ( 21,192 )

Net income — — — 147,446 — 147,446

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 646 )

— — — — ( 2,096 ) ( 2,096 )

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 68 ) ( 68 )

Foreign currency translation adjustment — — — — ( 3,107 ) ( 3,107 )

Balance as of April 4, 2021 (unaudited) 176,608 $ 353 $ 854,491 $ 540,686 $ ( 38,529 ) $ 1,357,001

Balance as of July 4, 2021 (unaudited) 176,707 $ 353 $ 874,883 $ 593,290 $ ( 39,072 ) $ 1,429,454

Common Stock Additional

8 unchanged sentences

Payment of dividends ($ 0.110 per common share)

— — — ( 18,972 ) — ( 18,972 )

Net income — — — 19,335 — 19,335

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 1,788 )

— — — — 8,590 8,590

Reclassification of credit loss (recovery) on investments — — — — 75 75

1 unchanged sentence

Foreign currency translation adjustment — — — — ( 5,462 ) ( 5,462 )

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

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

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

4 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, 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, and financial statement reclassifications necessary to present fairly the Company’s financial position as of April 4, 2021, and the results of its operations for the three-month periods ended April 4, 2021 and March 29, 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 period ended April 4, 2021 are not necessarily indicative of the results to be expected for the full year.

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 July 4, 2021, and the results of its operations for the three-month and six-month periods ended July 4, 2021 and June 28, 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 six-month periods ended July 4, 2021 are not necessarily indicative of the results to be expected for the full year.

New Pronouncements

19 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 April 4, 2021 (in thousands):

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of July 4, 2021 (in thousands):

Quoted Prices in

8 unchanged sentences

Agency bonds — 18,960 —

Sovereign bonds — 12,050 —

Commercial paper — 10,000 —

Municipal bonds — 6,997 —

Sovereign bonds — 5,293 —

Economic hedge forward contracts — 47 —

11 unchanged sentences

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 April 4, 2021.

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 July 4, 2021.

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

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

1 unchanged sentence

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.

No triggering event occurred in the three-month periods ended April 4, 2021 and March 29, 2020 that would indicate a potential impairment of long-lived assets.

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 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 six-month period ended July 4, 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.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cash, Cash Equivalents, and Investments

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

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Cash $ 216,837 $ 266,609

Commercial paper 10,000 —

Money market instruments 200 2,464

7 unchanged sentences

Corporate bonds 415,784 203,428

Treasury bills 65,148 96,458

Asset-backed securities 65,509 67,058

Treasury bills 38,022 96,458

Agency bonds 18,960 19,006

4 unchanged sentences

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 as well as corporate obligations such as commercial paper;

Cash equivalents consist primarily of government and institutional money market funds;

treasury bills consist of debt securities issued by the U.S.

4 unchanged sentences

and agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government backing.

All of the Company's securities as of April 4, 2021 and December 31, 2020 were denominated in U.S.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 2,467,000 and $ 1,560,000 as of April 4, 2021 and December 31, 2020, respectively.

All of the Company's securities as of July 4, 2021 and December 31, 2020 were denominated in U.S.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Company’s available-for-sale investments as of April 4, 2021 (in thousands):

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 2,992,000 and $ 1,560,000 as of July 4, 2021 and December 31, 2020, respectively.

The following table summarizes the Company’s available-for-sale investments as of July 4, 2021 (in thousands):

Losses Fair Value

5 unchanged sentences

Corporate bonds 414,453 1,874 ( 543 ) 415,784

Treasury bills 64,506 642 — 65,148

Asset-backed securities 65,276 315 ( 82 ) 65,509

Treasury bills 37,677 345 — 38,022

Agency bonds 18,921 39 — 18,960

2 unchanged sentences

$ 731,833 $ 3,521 $ ( 642 ) $ 734,712

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 April 4, 2021 (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 July 4, 2021 (in thousands):

Unrealized Loss Position For:

4 unchanged sentences

Corporate bonds $ 179,565 $ ( 546 ) $ — $ — $ 179,565 $ ( 546 )

Municipal bonds 5,257 ( 13 ) — — 5,257 ( 13 )

Asset-backed securities 13,088 ( 85 ) — — 13,088 ( 85 )

Municipal bonds 3,946 ( 11 ) — — 3,946 ( 11 )

$ 196,599 $ ( 642 ) $ — $ — $ 196,599 $ ( 642 )

The Company's allowance for credit losses on debt securities was zero as of April 4, 2021 and December 31, 2020.

There was no activity recorded in the allowance for credit losses during the three-month period ended April 4, 2021.

The Company recorded credit losses on debt securities totaling $ 160,000 during the three-month period ended March 29, 2020.

The Company recorded no gross realized gains or gross realized losses on the sale of debt securities for the three-month period ended April 4, 2021.

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 1,865,000 and $ 15,000 , respectively, for the three-month period ended March 29, 2020.

The Company's allowance for credit losses on debt securities was zero as of July 4, 2021 and December 31, 2020.

There was no activity recorded in the allowance for credit losses during the three-month and six-month periods ended July 4, 2021.

The Company recorded gross credit losses and gross credit recoveries 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.

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 68,000 and $ 0 , respectively, for both the three-month and six-month periods ended July 4, 2021.

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 $ 2,826,000 and $ 21,000 , respectively, for the six-month period ended June 28, 2020.

These gains and losses are included in "Investment income" on the Consolidated Statements of Operations.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of April 4, 2021 (in thousands):

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

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of July 4, 2021 (in thousands):

<1 year 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5-8 Years Total

Corporate bonds $ 66,452 $ 161,596 $ 139,870 $ 77,234 $ 30,143 $ 6,941 $ 482,236

2 unchanged sentences

Agency bonds — 18,960 — — — — 18,960

Sovereign bonds 8,621 — 3,429 — — 12,050

Municipal bonds 2,404 4,593 — — — — 6,997

Sovereign bonds 4,196 — — — 1,097 — 5,293

$ 190,747 $ 253,962 $ 160,065 $ 86,744 $ 31,240 $ 11,954 $ 734,712

Inventories consisted of the following (in thousands):

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Raw materials $ 22,229 $ 26,800

2 unchanged sentences

$ 68,503 $ 60,830

The Company recorded provisions for excess and obsolete inventories of $ 1,111,000 and $ 1,816,000 for the three-month and six-month periods ended July 4, 2021, respectively, and $ 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.

Estimates in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.

The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations.

1 unchanged sentence

Certain leases may contain options to extend or terminate the lease at the Company's sole discretion.

As of April 4, 2021 and December 31, 2020, there was one option to terminate that was accounted for in the determination of the lease term for one of the Company's outstanding leases, and no options to extend that were included in the determination of the lease term for outstanding leases.

There were no options to extend or terminate that were included in the determination of the lease term for the leases outstanding as of July 4, 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 April 4, 2021 and December 31, 2020.

The total operating lease expense for the three-month periods ended April 4, 2021 and March 29, 2020 was $ 2,002,000 and $ 1,906,000 , respectively.

The total operating lease cash payments for the three-month periods ended April 4, 2021 and March 29, 2020 were $ 2,061,000 and $ 1,863,000 , 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 $ 40,000 and $ 39,000 for the three-month periods ended April 4, 2021 and March 29, 2020, respectively.

There were no restrictions or covenants for outstanding leases as of July 4, 2021.

The total operating lease expense for the three-month and six-month periods ended July 4, 2021 was $ 2,021,000 and $ 4,023,000 , respectively.

The total operating lease cash payments for the three-month and six-month periods ended July 4, 2021 were $ 2,014,000 and $ 4,075,000 , 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 six-month periods ended July 4, 2021 was $ 38,000 and $ 78,000 , respectively.

The total operating lease expense for the three-month and six-month periods ended June 28, 2020 was $ 2,147,000 and $ 4,053,000 , respectively.

The total operating lease cash payments for the three-month and six-month periods ended June 28, 2020 were $ 2,091,000 and $ 3,954,000 , 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 six-month periods ended June 28, 2020 was $ 23,000 and $ 62,000 , respectively.

COGNEX CORPORATION

4 unchanged sentences

Thereafter 3,838

The discounted present value of the future lease cash payments resulted in a lease liability of $ 24,028,000 and $ 26,230,000 as of April 4, 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 April 4, 2021 or December 31, 2020.

The weighted-average discount rate was 3.9 % and 4.0 % for the leases outstanding as of April 4, 2021 and December 31, 2020, respectively.

The weighted-average remaining lease term was 4.9 and 5.1 years for the leases outstanding as of April 4, 2021 and December 31, 2020, respectively.

The discounted present value of the future lease cash payments resulted in a lease liability of $ 24,250,000 and $ 26,230,000 as of July 4, 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 July 4, 2021 or December 31, 2020.

The weighted-average discount rate was 3.8 % and 4.0 % for the leases outstanding as of July 4, 2021 and December 31, 2020, respectively.

The weighted-average remaining lease term was 4.8 and 5.1 years for the leases outstanding as of July 4, 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).

Management is currently negotiating early contract terminations for the remaining lease liability obligations associated with these abandoned offices, which obligations totaled $ 2,530,000 and $ 2,877,000 as of April 4, 2021 and December 31, 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.

The Company owns a building adjacent to its corporate headquarters that was partially occupied by a tenant for a portion of 2020.

This lease was terminated prior to the end of its lease term during 2020, and the Company is now fully occupying this building for its operations.

There was no rental income for the three-month period ended April 4, 2021.

Rental income was $ 77,000 for the three-month period ended March 29, 2020 .

The carrying value of the lease assets associated with the majority of these offices was 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.

Management is currently negotiating early contract terminations for the remaining lease liability obligations associated with these abandoned offices, which obligations totaled $ 2,264,000 and $ 2,877,000 as of July 4, 2021 and December 31, 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.

The changes in the carrying value of goodwill were as follows (in thousands):

1 unchanged sentence

Foreign exchange rate changes ( 1,172 )

Balance as of April 4, 2021 $ 243,036

Balance as of July 4, 2021 $ 242,906

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.

COGNEX CORPORATION

9 unchanged sentences

Trademarks 110 94 16

Balance as of April 4, 2021 $ 73,675 $ 59,047 $ 14,628

Balance as of July 4, 2021 $ 73,675 $ 59,973 $ 13,702

Value Accumulated

6 unchanged sentences

Balance as of December 31, 2020 $ 73,675 $ 58,120 $ 15,555

As of April 4, 2021, estimated future amortization expense related to intangible assets was as follows (in thousands):

As of July 4, 2021, estimated future amortization expense related to intangible assets was as follows (in thousands):

Year Ended December 31, Amount

1 unchanged sentence

Thereafter 730

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.

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.

("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 six-month periods ended July 4, 2021.

Warranty Obligations

8 unchanged sentences

Fulfillment of warranty obligations ( 1,235 )

Balance as of April 4, 2021 $ 5,486

Balance as of July 4, 2021 $ 5,864

Derivative Instruments

3 unchanged sentences

These economic hedges are not designated as hedging instruments for hedge accounting treatment.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Currency Notional

1 unchanged sentence

Derivatives Not Designated as Hedging Instruments:

Euro 25,000 $ 29,431 50,000 $ 61,342

Chinese Renminbi 490,000 $ 75,228 — $ —

Euro 35,000 41,457 50,000 61,342

Korean Won 21,000,000 18,483 6,925,000 6,377

Mexican Peso 130,000 6,519 155,000 7,776

5 unchanged sentences

Singapore Dollar 1,550 1,149 1,465 1,110

Korean Won — — 6,925,000 6,377

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):

1 unchanged sentence

Balance Fair Value Balance Fair Value

Location April 4, 2021 December 31, 2020 Sheet

Location April 4, 2021 December 31, 2020

Location July 4, 2021 December 31, 2020 Sheet

Location July 4, 2021 December 31, 2020

Derivatives Not Designated as Hedging Instruments:

2 unchanged sentences

Asset Derivatives Liability Derivatives

April 4, 2021 December 31, 2020 April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020 July 4, 2021 December 31, 2020

Gross amounts of recognized assets $ 47 $ 265 Gross amounts of recognized liabilities $ 585 $ 38

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

April 4, 2021 March 29, 2020

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

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

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

April 4, 2021 March 29, 2020

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Americas $ 108,418 $ 68,966 $ 216,254 $ 129,214

4 unchanged sentences

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

Three-months Ended

April 4, 2021 March 29, 2020

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Standard products and services $ 234,322 $ 158,807 $ 456,648 $ 311,662

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 $ 14,789,000 and $ 6,846,000 as of April 4, 2021 and December 31, 2020, respectively.

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 25,328,000 and $ 6,846,000 as of July 4, 2021 and December 31, 2020, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

3 unchanged sentences

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 three-month period ended April 4, 2021 (in thousands):

The following table summarizes the allowance for credit losses activity for the six-month period ended July 4, 2021 (in thousands):

Balance as of December 31, 2020 $ 831

Increases to the allowance for credit losses —

Write-offs ( 33 )

Write-offs, net of recoveries ( 28 )

Foreign exchange rate changes —

Balance as of April 4, 2021 $ 798

Balance as of July 4, 2021 $ 803

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the deferred revenue and customer deposits activity for the three-month period ended April 4, 2021 (in thousands):

The following table summarizes the deferred revenue and customer deposits activity for the six-month period ended July 4, 2021 (in thousands):

Balance as of December 31, 2020 $ 21,274

Deferral of revenue billed in the current period, net of recognition 69,372

Recognition of revenue deferred in prior periods ( 7,757 )

Recognition of revenue deferred in prior period ( 14,155 )

Foreign exchange rate changes ( 46 )

Balance as of April 4, 2021 $ 51,660

Balance as of July 4, 2021 $ 76,445

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.

1 unchanged sentence

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

As of April 4, 2021, the Company had 15,650,000 shares available for grant under its stock plans.

As of July 4, 2021, the Company had 15,692,000 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.

2 unchanged sentences

Stock Options

The following table summarizes the Company’s stock option activity for the three-month period ended April 4, 2021:

The following table summarizes the Company’s stock option activity for the six-month period ended July 4, 2021:

(in thousands) Weighted-

6 unchanged sentences

Forfeited or expired ( 171 ) 50.95

Outstanding as of April 4, 2021 8,452 $ 47.62 7.11 $ 312,675

Exercisable as of April 4, 2021 3,824 $ 38.18 5.92 $ 176,405

Options vested or expected to vest as of April 4, 2021 (1) 7,733 $ 46.78 7.00 $ 292,344

Outstanding as of July 4, 2021 8,101 $ 48.07 6.91 $ 298,370

Exercisable as of July 4, 2021 3,652 $ 38.46 5.72 $ 168,497

Options vested or expected to vest as of July 4, 2021 (1) 7,474 $ 47.27 6.81 $ 281,063

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

1 unchanged sentence

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

Three-months Ended

April 4, 2021 March 29, 2020

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Risk-free rate 1.5 % 1.6 % 1.3 % 1.6 %

12 unchanged sentences

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 periods ended April 4, 2021 and March 29, 2020 were $ 33.63 and $ 18.46 , respectively.

The total intrinsic values of stock options exercised for the three-month periods ended April 4, 2021 and March 29, 2020 were $ 42,327,000 and $ 14,454,000 , respectively.

The total fair values of stock options vested for the three-month periods ended April 4, 2021 and March 29, 2020 were $ 35,600,000 and $ 36,664,000 , respectively.

The weighted-average grant-date fair values of stock options granted during the three-month and six-month periods ended July 4, 2021 were $ 32.07 and $ 33.47 , respectively, and during the three-month and six-month periods ended June 28, 2020 were $ 19.13 and $ 18.52 , respectively.

The total intrinsic values of stock options exercised for the three-month and six-month periods ended July 4, 2021 were $ 11,621,000 and $ 53,948,000 , respectively, and for the three-month and six-month periods ended June 28, 2020 were $ 39,359,000 and $ 53,814,000 , respectively.

The total fair values of stock options vested for the three-month and six-month periods ended July 4, 2021 were $ 1,830,000 and $ 37,430,000 , respectively, and for the three-month and six-month periods ended June 28, 2020 were $ 1,287,000 and $ 37,951,000 , respectively.

Restricted Stock Units (RSUs)

The following table summarizes the Company's RSUs activity for the three-month period ended April 4, 2021:

The following table summarizes the Company's RSUs activity for the six-month period ended July 4, 2021:

(in thousands) Weighted-Average

4 unchanged sentences

Forfeited or expired ( 27 ) 54.60

Nonvested as of April 4, 2021 782 $ 63.33

The weighted-average grant-date fair values of RSUs granted during the three-month periods ended April 4, 2021 and March 29, 2020 were $ 89.86 and $ 50.94 , respectively.

There were 2,000 RSUs that vested during the three-month period ended April 4, 2021 and no RSUs that vested during the three-month period ended March 29, 2020.

Nonvested as of July 4, 2021 808 $ 64.31

The weighted-average grant-date fair values of RSUs granted during the three-month and six-month periods ended July 4, 2021 were $ 75.98 and $ 87.46 , respectively, and during the three-month and six-month periods ended June 28, 2020 were $ 56.97 and $ 51.53 , respectively.

There were 13,000 and 15,000 RSUs that vested during the three-month and six-month periods ended July 4, 2021, respectively.

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

Stock-Based Compensation Expense

4 unchanged sentences

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 April 4, 2021, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $ 69,821,000 , 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 April 4, 2021 were $ 12,009,000 and $ 1,813,000 , respectively, and for the three-month period ended March 29, 2020, were $ 14,790,000 and $ 2,564,000 , respectively.

No compensation expense was capitalized as of April 4, 2021 or December 31, 2020.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of July 4, 2021, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $ 63,625,000 , 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 July 4, 2021 were $ 10,730,000 and $ 1,651,000 , respectively, and for the six-month period ended July 4, 2021 were $ 22,739,000 and $ 3,464,000 , respectively.

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 and $ 1,277,000 , respectively, and for the six-month period ended June 28, 2020 were $ 22,808,000 and $ 3,841,000 , respectively.

Stock-based compensation expense recognized for the three-month and six-month periods ended June 28, 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 July 4, 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 Ended

April 4, 2021 March 29, 2020

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Cost of revenue $ 351 $ 363 $ 599 $ 717

4 unchanged sentences

In October 2018, the Company's Board of Directors authorized the repurchase of $ 200,000,000 of the Company's common stock.

As of April 4, 2021, the Company repurchased 2,897,000 shares at a cost of $ 127,827,000 under this program, including 80,000 shares at a cost of $ 6,479,000 during the three-month period ended April 4, 2021, leaving a remaining balance of $ 72,173,000 .

During the three-month period ended March 29, 2020, 1,215,000 shares were repurchased at a cost of $ 51,036,000 under this October 2018 program.

As of July 4, 2021, the Company repurchased 3,075,000 shares at a cost of $ 142,225,000 under this program, including 258,000 shares at a cost of $ 20,877,000 during the six-month period ended July 4, 2021, leaving a remaining balance of $ 57,775,000 .

1,215,000 shares at a cost of $ 51,036,000 were repurchased during the six-month period ended June 28, 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.

2 unchanged sentences

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.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

April 4, 2021 March 29, 2020

Income tax expense at U.S.

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Income tax expense (benefit) at U.S.

federal statutory corporate tax rate 21 % ( 21 ) % 21 % 21 %

3 unchanged sentences

Discrete tax benefit related to stock options ( 2 ) % ( 191 ) % ( 4 ) % ( 29 ) %

Other discrete adjustments — % 1 %

Discrete tax expense related to tax return filings 1 % 141 % — % 17 %

Tax rate adjustment — % 18 % — % — %

Other 1 % ( 4 ) % 1 % 4 %

Income tax expense 11 % 11 %

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 7 % for both of the three-month periods ended April 4, 2021 and March 29, 2020.

In addition to stock exercises, other discrete adjustments recorded during the three-month period ended March 29, 2020 included the final true-up of the prior year's tax accrual upon filing the related tax return that resulted in an unfavorable impact to the effective tax rate of 1 %.

Excluding the impact of these discrete items, the Company’s effective tax rate was 18 % of pre-tax income for the three-month period ended April 4, 2021 compared to 17 % for the same period in 2020.

The increase in the effective tax rate, excluding the impact of discrete items, was due to a higher percentage of the Company's pre-tax income being earned and taxed in higher tax jurisdictions.

During the three-month period ended April 4, 2021, the Company recorded a $ 478,000 increase in reserves for income taxes, net of deferred tax benefit.

Estimated interest and penalties included in these amounts totaled $ 183,000 for the three-month period ended April 4, 2021.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company’s reserve for income taxes, including gross interest and penalties, was $ 15,780,000 as of April 4, 2021, which included $ 14,752,000 classified as a non-current liability and $ 1,028,000 recorded as a reduction to non-current deferred tax assets.

The amount of gross interest and penalties included in these balances was $ 1,528,000 .

Income tax expense (benefit) 17 % ( 51 ) % 14 % 7 %

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 2 % and 4 % for the three-month and six-month periods ended July 4, 2021, respectively, and 191 % and 29 % for the three-month and six-month periods ended June 28, 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 an unfavorable impact to the effective tax rate of 1 % for the three-month period ended July 4, 2021 and no impact for the six-month period ended July 4, 2021, and an unfavorable impact to the effective tax rate of 141 % and 17 % for the same periods in 2020.

Excluding the impact of these discrete items, the Company’s effective tax rate was an expense of 18 % of pre-tax income for both the three-month and six-month periods ended July 4, 2021, compared to a benefit of 1 % of pre-tax loss and an expense of 19 % of pre-tax income for the same periods in 2020.

The decrease in the effective tax rate for the six-month period, excluding the impact of discrete items, was due to a lower percentage of the Company's pre-tax income being earned and taxed in higher tax jurisdictions.

There was an adjustment in the three-month period in 2020 to bring the year-to-date effective tax rate to 19 %.

During the six-month period ended July 4, 2021, the Company recorded a $ 935,000 increase in reserves for income taxes, net of deferred tax benefit.

Estimated interest and penalties included in these amounts totaled $ 370,000 for the six-month period ended July 4, 2021.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 16,255,000 as of July 4, 2021, which included $ 15,227,000 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.

3 unchanged sentences

federal statutory corporate tax rate of 21 %.

These differences resulted in a favorable impact to the effective tax rate of 5 % for the three-month period ended April 4, 2021, and 6 % for the same period in 2020.

These differences resulted in an impact to the effective tax rate of 5 % for both the three-month and six-month periods ended July 4, 2021, and an impact of 5 % for the same periods in 2020.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 has been previously notified that it is under audit by the IRS for the tax year 2017.

Additionally, the Company has been recently notified that it is under audit by the IRS for tax year 2018, as well as the Commonwealth of Massachusetts Department of Revenue for tax years 2017 and 2018.

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.

2 unchanged sentences

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

Three-months Ended

April 4, 2021 March 29, 2020

Three-months Ended Six-months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Basic weighted-average common shares outstanding 176,626 172,283 176,454 172,345

1 unchanged sentence

Weighted-average common and common-equivalent shares outstanding 179,991 172,283 179,982 175,499

Stock options to purchase 485,000 and 6,273,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month periods ended April 4, 2021 and March 29, 2020, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 124,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month period ended April 4, 2021, 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 period ended March 29, 2020 .

Stock options to purchase 701,000 and 591,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 4, 2021, respectively, and 5,801,000 and 6,328,000 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 500 and 1,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 4, 2021, respectively, and 27,000 and 14,000 for the same periods in 2020, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

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.

Restructuring Charges

2 unchanged sentences

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 period ended April 4, 2021.

The following table summarizes the activity in the Company’s restructuring reserve, which is included in “Accrued expenses” on the Consolidated Balance Sheets (in thousands):

There were no restructuring charges recognized during the three-month or six-month periods ended July 4, 2021.

The following table summarizes the restructuring charges incurred in the three-month period ended June 28, 2020 (in thousands):

Incurred in the Three-months Ended June 28, 2020

One-time termination benefits $ 10,386

Contract termination costs 3,995

Other associated costs 417

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 three-month period ended June 28, 2020.

Otherwise, these benefits, including retention bonuses for selected employees, were recognized over the service period, which was completed by December 31, 2020.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

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 six-month period ended July 4, 2021 in the Company’s restructuring reserve which is included in “Accrued expenses” on the Consolidated Balance Sheets (in thousands):

One-time Termination Benefits Contract Termination Costs Other Associated Costs Total

2 unchanged sentences

Foreign exchange rate changes — ( 3 ) — ( 3 )

Balance as of April 4, 2021 $ 672 $ 678 $ — $ 1,350

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance as of July 4, 2021 $ 507 $ 616 $ — $ 1,123

Subsequent Events

On May 6, 2021, the Company’s Board of Directors declared a cash dividend of $ 0.060 per share.

The dividend is payable on June 4, 2021 to all shareholders of record as of the close of business on May 21, 2021.

On August 5, 2021, the Company’s Board of Directors declared a cash dividend of $ 0.060 per share.

The dividend is payable on September 3, 2021 to all shareholders of record as of the close of business on August 20, 2021.

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