What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 152 added, 151 removed, 531 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three-months Ended Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

(unaudited) (unaudited)

6 unchanged sentences

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

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

Operating income 87,547 96,635 258,581 111,444

Foreign currency gain (loss) ( 586 ) 2,357 ( 2,233 ) ( 310 )

1 unchanged sentence

Other income (expense) ( 125 ) ( 173 ) ( 420 ) ( 153 )

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:

Income before income tax expense 88,584 101,309 260,953 121,991

Income tax expense 9,684 13,803 34,607 15,150

Net income $ 78,900 $ 87,506 $ 226,346 $ 106,841

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

Basic $ 0.45 $ 0.50 $ 1.28 $ 0.62

8 unchanged sentences

(In thousands)

Three-months Ended Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

(unaudited) (unaudited)

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

Net income $ 78,900 $ 87,506 $ 226,346 $ 106,841

Other comprehensive income (loss), net of tax:

Available-for-sale investments:

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

Net unrealized gain (loss), net of tax of $( 162 ) and $ 2,855 in the three-month periods and net of tax of $( 808 ) and $ 1,067 in the nine-month periods, respectively

( 521 ) ( 2,308 ) ( 2,617 ) 6,282

11 unchanged sentences

(In thousands)

July 4, 2021 December 31, 2020

October 3, 2021 December 31, 2020

Current assets:

46 unchanged sentences

(In thousands)

Six-months Ended

July 4, 2021 June 28, 2020

Nine-months Ended

October 3, 2021 September 27, 2020

Cash flows from operating activities:

48 unchanged sentences

Shares Par Value

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

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

Net issuance of common stock under stock plans 415 1 14,693 — — 14,694

8 unchanged sentences

Foreign currency translation adjustment — — — — ( 2,136 ) ( 2,136 )

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

Balance as of October 3, 2021 (unaudited) 176,799 $ 354 $ 900,190 $ 634,165 $ ( 41,748 ) $ 1,492,961

Common Stock Additional

3 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

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

2 unchanged sentences

— — — ( 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 )

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

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 786 ) ( 786 )

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

Balance as of 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

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

18 unchanged sentences

Foreign currency translation adjustment — — — — ( 5,243 ) ( 5,243 )

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

Balance as of October 3, 2021 (unaudited) 176,799 $ 354 $ 900,190 $ 634,165 $ ( 41,748 ) $ 1,492,961

Common Stock Additional

15 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

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, 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.

In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, excess and obsolete inventory charges (Note 5), intangible asset impairment charges (Note 8), restructuring charges (Note 16) and financial statement reclassifications necessary to present fairly the Company’s financial position as of October 3, 2021, and the results of its operations for the three-month and nine-month periods ended October 3, 2021 and September 27, 2020, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.

The results disclosed in the Consolidated Statements of Operations for the three-month and nine-month periods ended October 3, 2021 are not necessarily indicative of the results to be expected for the full year.

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 July 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 October 3, 2021 (in thousands):

Quoted Prices in

23 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 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)

in 2017 was written down to zero in 2019 resulting from a lower level of revenue in the Americas' automotive industry, and the balance remains at zero as of October 3, 2021.

The undiscounted potential outcomes related to future contingent consideration range from $ 0 to $ 2,500,000 based upon certain revenue levels through April of 2022.

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

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.

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.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

No triggering event occurred in the six-month period ended July 4, 2021 that would indicate a potential impairment of long-lived assets.

No triggering event occurred in the nine-month period ended October 3, 2021 that would indicate a potential impairment of long-lived assets.

However, the Company continues to monitor global economic conditions, as events or changes in circumstances could result in an impairment of long-lived assets in a future period.

1 unchanged sentence

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

July 4, 2021 December 31, 2020

October 3, 2021 December 31, 2020

Cash $ 199,863 $ 266,609

4 unchanged sentences

Asset-backed securities 23,133 25,160

Sovereign bonds 4,196 8,660

Municipal bonds 6,320 1,303

Agency bonds 2,802 —

Sovereign bonds — 8,660

Current investments 189,113 103,240

3 unchanged sentences

Agency bonds 16,164 19,006

Municipal bonds 4,593 5,735

Sovereign bonds 1,089 3,440

Municipal bonds 646 5,735

Non-current investments 592,794 395,125

5 unchanged sentences

asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement;

sovereign bonds consist of direct debt issued by foreign governments;

municipal bonds consist of debt securities issued by state and local government entities;

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 July 4, 2021 and December 31, 2020 were denominated in U.S.

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

and sovereign bonds consist of direct debt issued by foreign governments.

All of the Company's securities as of October 3, 2021 and December 31, 2020 were denominated in U.S.

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

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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):

The following table summarizes the Company’s available-for-sale investments as of October 3, 2021 (in thousands):

Losses Fair Value

2 unchanged sentences

Asset-backed securities 22,990 147 ( 4 ) 23,133

Sovereign bonds 4,189 7 — 4,196

Municipal bonds 6,340 3 ( 23 ) 6,320

Agency bonds 2,800 2 — 2,802

Corporate bonds 485,290 1,631 ( 773 ) 486,148

2 unchanged sentences

Agency bonds 16,124 40 — 16,164

Municipal bonds 4,592 12 ( 11 ) 4,593

Sovereign bonds 1,090 — ( 1 ) 1,089

Municipal bonds 635 11 — 646

$ 779,727 $ 2,990 $ ( 810 ) $ 781,907

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of July 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 October 3, 2021 (in thousands):

Unrealized Loss Position For:

4 unchanged sentences

Corporate bonds $ 216,480 $ ( 781 ) $ — $ — $ 216,480 $ ( 781 )

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

Municipal bonds 3,917 ( 23 ) — — 3,917 ( 23 )

Asset-backed securities 3,732 ( 5 ) — — 3,732 ( 5 )

Sovereign bonds 1,089 ( 1 ) — — 1,089 ( 1 )

$ 225,218 $ ( 810 ) $ — $ — $ 225,218 $ ( 810 )

The Company's allowance for credit losses on debt securities was zero as of 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.

The Company's allowance for credit losses on debt securities was zero as of October 3, 2021 and December 31, 2020.

There was no activity recorded in the allowance for credit losses during the three-month and nine-month periods ended October 3, 2021.

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

The Company recorded gross realized gains on the sale of debt securities totaling $ 19,000 and $ 87,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and no gross realized losses on the sale of debt securities for the three-month and nine-month periods ended October 3, 2021.

The Company recorded gross realized gains on the sale of debt securities totaling $ 787,000 and $ 3,613,000 for the three-month and nine-month periods ended September 27, 2020, respectively, and gross realized losses on the sale of debt securities totaling $ 1,000 and $ 22,000 , respectively, for the three-month and nine-month periods ended September 27, 2020.

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

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 July 4, 2021 (in thousands):

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

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of October 3, 2021 (in thousands):

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

Corporate bonds $ 69,844 $ 192,354 $ 151,615 $ 94,993 $ 47,186 $ 555,992

6 unchanged sentences

Inventories consisted of the following (in thousands):

July 4, 2021 December 31, 2020

October 3, 2021 December 31, 2020

Raw materials $ 32,598 $ 26,800

2 unchanged sentences

$ 81,170 $ 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.

The Company recorded provisions for excess and obsolete inventories of $ 304,000 and $ 2,120,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and $ 603,000 and $ 9,386,000 for the three-month and nine-month periods ended September 27, 2020, respectively, which reduced the carrying value of the inventories to their net realizable value.

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

2 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 July 4, 2021.

There were no options to extend or terminate that were included in the determination of the lease term for the leases outstanding as of October 3, 2021.

Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index.

There were no restrictions or covenants for outstanding leases as of 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.

There were no restrictions or covenants for outstanding leases as of October 3, 2021.

The total operating lease expense for the three-month and nine-month periods ended October 3, 2021 was $ 2,068,000 and $ 6,091,000 , respectively.

The total operating lease cash payments for the three-month and nine-month periods ended October 3, 2021 were $ 2,079,000 and $ 6,154,000 , respectively.

The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended October 3, 2021 was $ 36,000 and $ 114,000 , respectively.

The total operating lease expense for the three-month and nine-month periods ended September 27, 2020 was $ 2,047,000 and $ 6,100,000 , respectively.

The total operating lease cash payments for the three-month and nine-month periods ended September 27, 2020 were $ 2,041,000 and $ 5,995,000 , respectively.

The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended September 27, 2020 was $ 22,000 and $ 84,000 , respectively.

COGNEX CORPORATION

4 unchanged sentences

Thereafter 5,160

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.

The discounted present value of the future lease cash payments resulted in a lease liability of $ 26,811,000 and $ 26,230,000 as of October 3, 2021 and December 31, 2020, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of October 3, 2021 or December 31, 2020.

The weighted-average discount rate was 3.5 % and 4.0 % for the leases outstanding as of October 3, 2021 and December 31, 2020, respectively.

The weighted-average remaining lease term was 5.2 and 5.1 years for the leases outstanding as of October 3, 2021 and December 31, 2020, respectively.

Management closed eleven leased offices in 2020, prior to the end of their lease terms, as a part of the Company's restructuring plan (refer to Note 16).

The carrying value of the lease assets associated with the majority of these offices was reduced to zero 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 carrying value of the lease assets associated with the majority of these offices was reduced to zero , resulting in operating lease asset impairment charges of $ 2,534,000 in the second quarter of 2020 that are included in "Restructuring charges" on the Consolidated Statements of Operations.

Management is currently negotiating early contract terminations for the remaining lease liability obligations associated with these abandoned offices, which obligations totaled $ 2,019,000 and $ 2,877,000 as of October 3, 2021 and December 31, 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.

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

1 unchanged sentence

Foreign exchange rate changes ( 2,279 )

Balance as of July 4, 2021 $ 242,906

Balance as of October 3, 2021 $ 241,799

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

12 unchanged sentences

Trademarks 110 107 3

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

Balance as of October 3, 2021 $ 73,675 $ 60,893 $ 12,782

Value Accumulated

6 unchanged sentences

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

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

As of October 3, 2021, estimated future amortization expense related to intangible assets was as follows (in thousands):

Year Ended December 31, Amount

11 unchanged sentences

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.

The Company did not record impairment charges related to intangible assets during the three-month or nine-month periods ended October 3, 2021.

Warranty Obligations

8 unchanged sentences

Fulfillment of warranty obligations ( 2,517 )

Balance as of July 4, 2021 $ 5,864

Balance as of October 3, 2021 $ 5,417

Derivative Instruments

6 unchanged sentences

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

July 4, 2021 December 31, 2020

October 3, 2021 December 31, 2020

Currency Notional

1 unchanged sentence

Derivatives Not Designated as Hedging Instruments:

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

Euro 38,500 $ 44,687 50,000 $ 61,342

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

Chinese Renminbi 55,069 8,500 — —

Mexican Peso 120,000 5,823 155,000 7,776

Korean Won 6,770,000 5,714 6,925,000 6,377

Japanese Yen 600,000 5,405 600,000 5,808

Hungarian Forint 1,235,000 4,149 1,330,000 4,494

British Pound 3,115 4,224 1,675 2,287

Hungarian Forint 1,235,000 3,992 1,330,000 4,494

Taiwanese Dollar 45,405 1,637 38,035 1,362

Canadian Dollar 1,435 1,160 1,285 1,010

Singapore Dollar 1,800 1,328 1,465 1,110

Canadian Dollar 1,370 1,080 1,285 1,010

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 July 4, 2021 December 31, 2020 Sheet

Location July 4, 2021 December 31, 2020

Location October 3, 2021 December 31, 2020 Sheet

Location October 3, 2021 December 31, 2020

Derivatives Not Designated as Hedging Instruments:

2 unchanged sentences

Asset Derivatives Liability Derivatives

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

October 3, 2021 December 31, 2020 October 3, 2021 December 31, 2020

Gross amounts of recognized assets $ 129 $ 265 Gross amounts of recognized liabilities $ 88 $ 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 Six-months Ended

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

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

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 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 Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Americas $ 113,758 $ 86,482 $ 330,012 $ 215,696

4 unchanged sentences

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

Three-months Ended Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Standard products and services $ 212,567 $ 174,797 $ 669,215 $ 486,458

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 $ 25,328,000 and $ 6,846,000 as of July 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 $ 13,308,000 and $ 6,846,000 as of October 3, 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 six-month period ended July 4, 2021 (in thousands):

The following table summarizes the allowance for credit losses activity for the nine-month period ended October 3, 2021 (in thousands):

Balance as of December 31, 2020 $ 831

2 unchanged sentences

Foreign exchange rate changes —

Balance as of July 4, 2021 $ 803

Balance as of October 3, 2021 $ 792

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 July 4, 2021 (in thousands):

The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended October 3, 2021 (in thousands):

Balance as of December 31, 2020 $ 21,274

2 unchanged sentences

Foreign exchange rate changes ( 189 )

Balance as of July 4, 2021 $ 76,445

Balance as of October 3, 2021 $ 37,843

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.

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 July 4, 2021, the Company had 15,692,000 shares available for grant under its stock plans.

As of October 3, 2021, the Company had 15,661,000 shares available for grant under its stock plans.

Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date.

2 unchanged sentences

Stock Options

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

The following table summarizes the Company’s stock option activity for the nine-month period ended October 3, 2021:

(in thousands) Weighted-

6 unchanged sentences

Forfeited or expired ( 225 ) 50.29

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

Outstanding as of October 3, 2021 7,712 $ 49.15 6.79 $ 252,476

Exercisable as of October 3, 2021 3,290 $ 39.03 5.56 $ 139,215

Options vested or expected to vest as of October 3, 2021 (1) 7,157 $ 48.36 6.70 $ 239,568

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

Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Three-months Ended Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Risk-free rate 1.4 % — % 1.3 % 1.6 %

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Expected term (in years) 7.1 — 6.0 6.0

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Risk-free rate

6 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 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.

The weighted-average grant-date fair values of stock options granted during the three-month and nine-month periods ended October 3, 2021 were $ 35.64 and $ 33.78 , respectively, and during the nine-month period ended September 27, 2020 was $ 18.52 .

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

The total intrinsic values of stock options exercised for the three-month and nine-month periods ended October 3, 2021 were $ 21,415,000 and $ 75,363,000 , respectively, and for the three-month and nine-month periods ended September 27, 2020 were $ 62,787,000 and $ 116,600,000 , respectively.

The total fair values of stock options vested for the three-month and nine-month periods ended October 3, 2021 were $ 1,498,000 and $ 38,928,000 , respectively, and for the three-month and nine-month periods ended September 27, 2020 were $ 1,331,000 and $ 39,282,000 , respectively.

Restricted Stock Units (RSUs)

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

The following table summarizes the Company's RSUs activity for the nine-month period ended October 3, 2021:

(in thousands) Weighted-Average

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Forfeited or expired ( 43 ) 56.49

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.

Nonvested as of October 3, 2021 814 $ 65.01

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The weighted-average grant-date fair values of RSUs granted during the three-month and nine-month periods ended October 3, 2021 were $ 86.34 and $ 87.38 , respectively, and during the three-month and nine-month periods ended September 27, 2020 were $ 67.14 and $ 51.73 , respectively.

There were 15,000 RSUs that vested during the nine-month period ended October 3, 2021.

There were no RSUs that vested during the three-month period ended October 3, 2021 or the three-month and nine-month periods ended September 27, 2020.

Stock-Based Compensation Expense

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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.

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.

As of October 3, 2021, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $ 56,579,000 , which is expected to be recognized over a weighted-average period of 1.6 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended October 3, 2021 were $ 10,614,000 and $ 1,637,000 , respectively, and for the nine-month period ended October 3, 2021 were $ 33,353,000 and $ 5,101,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended September 27, 2020 were $ 9,268,000 and $ 1,524,000 , respectively, and for the nine-month period ended September 27, 2020 were $ 32,076,000 and $ 5,365,000 , respectively.

Stock-based compensation expense recognized for the three-month and nine-month periods ended September 27, 2020 included credits of $ 1,401,000 relating to grants cancelled as a result of the Company's workforce reduction in the second quarter of 2020.

No compensation expense was capitalized as of October 3, 2021 or December 31, 2020.

The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):

Three-months Ended Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Cost of revenue $ 366 $ 324 $ 965 $ 1,041

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

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.

As of October 3, 2021, the Company repurchased 3,398,000 shares at a cost of $ 169,643,000 under this program, including 581,000 shares at a cost of $ 48,294,000 during the nine-month period ended October 3, 2021, leaving a remaining balance of $ 30,357,000 .

1,215,000 shares at a cost of $ 51,036,000 were repurchased during the nine-month period ended September 27, 2020 under this October 2018 program.

On March 12, 2020, the Company's Board of Directors authorized the repurchase of an additional $ 200,000,000 of the Company's common stock.

5 unchanged sentences

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

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

Income tax expense (benefit) at U.S.

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Income tax expense at U.S.

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

3 unchanged sentences

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

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

Tax rate adjustment — % 18 % — % — %

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

Other 1 % 2 % 1 % 2 %

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.

Income tax expense 11 % 14 % 13 % 12 %

The Company recorded discrete tax benefits arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises that resulted in a favorable impact to the effective tax rate of 4 % for both the three-month and nine-month periods ended October 3, 2021, and 4 % and 9 % for the three-month and nine-month periods ended September 27, 2020, respectively.

In addition to stock option exercises, other discrete adjustments recorded included the final true-up of the prior year's tax accrual upon filing the related tax return that resulted in a favorable impact to the effective tax rate of 3 % and 1 % for the three-month and nine-month periods ended October 3, 2021, respectively, and an unfavorable impact to the effective tax rate of 3 % for the nine-month period ended September 27, 2020.

Excluding the impact of these discrete items, the Company’s effective tax rate was 18 % of pre-tax income for the three-month and nine-month periods ended October 3, 2021, and 18 % of pre-tax income for the same periods in 2020.

During the nine-month period ended October 3, 2021, the Company recorded a $ 495,000 increase in reserves for income taxes, net of deferred tax benefit.

Estimated interest and penalties included in these amounts totaled $ 450,000 for the nine-month period ended October 3, 2021.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 15,833,000 as of October 3, 2021, which included $ 14,805,000 classified as a non-current liability and $ 1,028,000 recorded as a reduction to non-current deferred tax assets.

If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period.

As a result of the expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $ 450,000 to $ 500,000 over the next twelve months.

During the three-month period ending October 3, 2021, the Company released $ 648,000 in reserves related to statute expiration and tax return positions.

The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts.

1 unchanged sentence

federal statutory corporate tax rate of 21 %.

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)

These differences resulted in a favorable impact to the effective tax rate of 5 % for both the three-month and nine-month periods ended October 3, 2021, and for the same periods in 2020.

Within the United States, the tax years 2017 through 2020 remain open to examination by the Internal Revenue Service ("IRS") and various state tax authorities.

4 unchanged sentences

The final determination of tax audits could result in favorable or unfavorable changes in our estimates.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Weighted-Average Shares

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

Three-months Ended Six-months Ended

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

Three-months Ended Nine-months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Basic weighted-average common shares outstanding 176,812 173,943 176,572 172,881

1 unchanged sentence

Weighted-average common and common-equivalent shares outstanding 180,342 177,138 180,109 176,038

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.

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

Restricted stock units totaling 1,000 shares of common stock, on a weighted-average basis, were outstanding during both the three-month and nine-month periods ended October 3, 2021, respectively, and 3,000 and 2,000 for the same periods in 2020, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

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 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

There were no restructuring charges recognized during the three-month or nine-month periods ended October 3, 2021.

The following table summarizes the restructuring charges incurred in the three-month and nine-month periods ended September 27, 2020 (in thousands):

Incurred in the Three-months Ended September 27, 2020 Incurred in the Nine-months Ended September 27, 2020

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

1 unchanged sentence

Other associated costs 183 600

$ 251 $ 15,049

One-time termination benefits included severance, health insurance, and outplacement services for 181 employees who were either terminated during the second quarter of 2020, or were notified during the second quarter of 2020 that they would be terminated at a future date.

For employees not required to render service beyond a minimum retention period, the one-time termination benefits were recognized in the three-month period ended June 28, 2020.

For employees not required to render service beyond a minimum retention period, the one-time termination benefits were recognized in the second quarter of 2020.

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

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.

1 unchanged sentence

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

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other associated costs primarily included legal fees related to the employee termination actions, which were recognized when the services were performed.

The following table summarizes the activity for the 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):

The following table summarizes the activity for the nine-month period ended October 3, 2021 in the Company’s restructuring reserve which is included in “Accrued expenses” on the Consolidated Balance Sheets (in thousands):

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

2 unchanged sentences

Foreign exchange rate changes — ( 5 ) — ( 5 )

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

Balance as of October 3, 2021 $ 491 $ 569 $ — $ 1,060

Subsequent Events

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.

On November 4, 2021, the Company’s Board of Directors declared a cash dividend of $ 0.065 per share.

The dividend is payable on December 3, 2021 to all shareholders of record as of the close of business on November 19, 2021.

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