What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-11 · 239 added, 309 removed, 972 unchanged (36% of the section changed)

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Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Fir m (PCAOB ID N um ber 248 )

Consolidated Statements of Operations for the Years Ended December 31, 202 1 , 20 20 , and 2019

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Notes to the Consolidated Financial Statements

Selected Quarterly Financial Data (unaudited)

Financial Statement Schedule:

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Revenue Recognition – Application-Specific Customer Solutions

As described further in Notes 1 and 14 to the consolidated financial statements, the Company recognizes revenue from application-specific customer solutions.

As described further in Notes 1 and 14 to the financial statements, the Company recognizes revenue from application-specific customer solutions.

For these transactions, revenue is recognized at the point in time when the solution is validated, which is when the Company can objectively determine that the agreed-upon specifications in the contract have been met and the customer will accept the performance obligation in the contract.

We identified revenue recognition related to application-specific customer solutions as a critical audit matter.

The principal considerations for our determination that application-specific customer solutions revenue is a critical audit matter are that determining the timing of validation and that the agreed-upon specifications in the contract have been met relies on the use of management estimates and requires a higher degree of auditor subjectivity and judgment in designing and executing audit procedures.

Accounting for application-specific customer solutions requires the Company to monitor and evaluate customer contracts on an ongoing basis to determine the point in time at which the agreed-upon specifications in the contract have been met.

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• For a sample of transactions, we inspected source documents, including the customer contract or purchase order, third-party shipping information, invoice, and evidence of acceptance.

Impairment Loss – Long Lived Assets of Sualab Co., Ltd.

As described further in Notes 1 and 9 to the consolidated financial statements, during the second quarter of the fiscal year ended December 31, 2020, the Company recorded an impairment charge of $19.6M related to certain definite and indefinite lived intangible assets.

The Company evaluates the recoverability of the carrying value of its intangible assets whenever events or circumstances indicate the carrying value may not be recoverable.

The identified assets did not pass the recoverability test, and accordingly, the Company recognized an impairment charge for the amount the carrying values of the assets exceeded their fair values.

The fair values were determined based on the present values of future cash flows using significant inputs and assumptions not observable in the market.

We identified the Company’s determination of the fair value of the identified indefinite and definite-lived intangible assets as a critical audit matter.

The principal considerations for our determination that the fair value of the identified indefinite and definite-lived intangible assets evaluated for impairment is a critical audit matter are that the determination of the fair value of the intangible assets relies on the use of management estimates related to forecasted future cash flows and discount rates.

This requires management to evaluate historical results and expectations of future operating performance based on relevant information available to them regarding expectations of industry performance, as well as, expectations for company-specific performance.

Determining the discount rate requires management to evaluate the appropriate risk premium based on their judgment of industry and company-specific risks.

Significant management judgments and estimates utilized to determine the fair value are subject to estimation uncertainty and require significant auditor subjectivity in evaluating the reasonableness of those judgments and estimates.

Our audit procedures related to the determination of the fair value of the identified indefinite and definite-lived intangible assets evaluated for impairment included the following, among others.

• We tested the design and operating effectiveness of internal controls relating to management’s determination of the fair value of the identified indefinite and definite-lived intangible assets evaluated for impairment, including controls over the determination of key inputs and assumptions related to forecasting of future cash flows and determination of the discount rate.

• We evaluated management’s historical ability to achieve forecasted revenue and operating results.

• We compared management’s forecasts of future revenue and operating margin to third-party industry projections and historical operating results.

• We utilized a valuation specialist to assist in testing the Company’s discounted cash flow model and in evaluating the reasonableness of significant assumptions to the model, including the discount rate.

/s/ GRANT THORNTON LLP

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Net unrealized gain (loss), net of tax of $( 2,206 ), $ 981 , and $ 515 in 2021, 2020, and 2019, respectively

( 7,152 ) 6,478 5,219

Reclassification of net realized (gain) loss into current operations ( 236 ) ( 4,119 ) ( 1,452 )

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Current investments, amortized cost of $ 137,124 and $ 102,258 in 2021 and 2020, respectively, allowance for credit losses of $ 0 in 2021 and 2020

137,455 103,240

Accounts receivable, allowance for credit losses of $ 776 and $ 831 in 2021 and 2020, respectively

130,348 125,696

Unbilled revenue 3,990 5,632

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Non-current investments, amortized cost of $ 587,981 and $ 390,417 in 2021 and 2020, respectively, allowance for credit losses of $ 0 in 2021 and 2020

583,748 395,125

Property, plant, and equipment, net 77,546 79,173

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Cash flows from financing activities:

Issuance of common stock under stock plans 125,715 64,581 26,783

Net proceeds from issuance of common stock under stock plans 63,292 125,715 64,581

Repurchase of common stock ( 161,652 ) ( 51,036 ) ( 61,690 )

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Balance as of December 31, 2018 170,820 $ 342 $ 529,208 $ 646,214 $ ( 40,501 ) $ 1,135,263

Issuance of common stock under stock plans 1,493 3 26,780 — — 26,783

Net issuance of common stock under stock plans 3,018 6 64,575 — — 64,581

Repurchase of common stock ( 1,398 ) ( 3 ) — ( 61,687 ) — ( 61,690 )

Stock-based compensation expense — — 45,589 — — 45,589

Payment of dividends — — — ( 31,865 ) — ( 31,865 )

Adjustment as a result of the adoption of ASU 2016-06 "Income Taxes - Intra-Entity Transfers Other than Inventory" — — — ( 5,961 ) — ( 5,961 )

Payment of dividends ($0.205 per common share) — — — ( 35,124 ) — ( 35,124 )

Net income — — — 203,865 — 203,865

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Balance as of December 31, 2019 172,440 $ 345 $ 639,372 $ 753,268 $ ( 37,275 ) $ 1,355,710

Issuance of common stock under stock plans 3,018 6 64,575 — — 64,581

Net issuance of common stock under stock plans 4,565 9 125,706 — — 125,715

Repurchase of common stock ( 1,215 ) ( 2 ) — ( 51,034 ) — ( 51,036 )

Stock-based compensation expense — — 42,661 — — 42,661

Payment of dividends — — — ( 35,124 ) — ( 35,124 )

Payment of dividends ($2.225 per common share) — — — ( 390,508 ) — ( 390,508 )

Net income — — — 176,186 — 176,186

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

Issuance of common stock under stock plans 4,565 9 125,706 — — 125,715

Net issuance of common stock under stock plans 1,703 3 63,289 — — 63,292

Repurchase of common stock ( 2,012 ) ( 4 ) — ( 161,648 ) — ( 161,652 )

Stock-based compensation expense — — 43,774 — — 43,774

Payment of dividends — — — ( 390,508 ) — ( 390,508 )

Payment of dividends ($0.245 per common share) — — — ( 43,263 ) — ( 43,263 )

Net income — — — 279,881 — 279,881

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Actual results could differ from those estimates.

Significant estimates and judgments include those related to revenue recognition, investments, inventories, intangible assets, stock-based compensation, income taxes, business combinations, and restructuring charges.

Basis of Consolidation

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The financial statements of the Company’s foreign subsidiaries, where the local currency is the functional currency, are translated using exchange rates in effect at the end of the year for assets and liabilities and average exchange rates during the year for results of operations.

The resulting foreign currency translation adjustment, net of tax, is included in shareholders’ equity as other comprehensive income (loss).

The resulting foreign currency translation adjustment, net of tax, is included in shareholders’ equity as accumulated other comprehensive loss.

Fair Value Measurements

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Cash, Cash Equivalents, and Investments

Money market instruments, as well as certificates of deposit and debt securities with original maturities of three months or less, are classified as cash equivalents and are stated at amortized cost.

Certificates of deposit and debt securities with original maturities greater than three months and remaining maturities of one year or less are classified as current investments.

Money market instruments, as well as debt securities with original maturities of three months or less, are classified as cash equivalents and are stated at amortized cost.

Debt securities with original maturities greater than three months and remaining maturities of one year or less are classified as current investments.

Debt securities with remaining maturities greater than one year are classified as non-current investments.

It is the Company’s policy to invest in investment-grade debt securities with effective maturities that do not exceed ten years .

Debt securities with original maturities greater than three months are designated as available-for-sale and are reported at fair value, with unrealized gains and losses, net of tax, included in shareholders’ equity as other comprehensive income (loss).

Realized gains and losses are calculated using the specific identification method.

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Credit losses continue to be remeasured in subsequent reporting periods.

Credit losses and

Credit losses and recoveries related to debt securities are included in “Other income (expense)” on the Consolidated Statements of

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recoveries related to debt securities are included in “Other income (expense)” on the Consolidated Statements of Operations.

When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts that project the expected future cash flows.

Accounts Receivable

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Accounts that are outstanding longer than the payment terms are considered to be past due.

The Company establishes an allowance against accounts receivable for credit losses when it determines receivables are at risk for collection based on the length of time the receivable has been outstanding, the customer’s current ability to pay its obligations to the Company, general economic and industry conditions, and reasonable forecasts about the future, as well as various other factors.

The Company establishes an allowance against accounts receivable for credit losses when it determines receivables are at risk for collection based on the length of time the receivable has been outstanding, the customer’s current ability to pay its obligations to the Company, and general economic and industry conditions, as well as various other factors.

Receivables are written off against this allowance in the period they are determined to be uncollectible and payments subsequently received on previously written-off receivables are recorded as a recovery of the credit loss.

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Cost is determined using standard costs, which approximates actual costs under the first-in, first-out (FIFO) method.

Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Purchase price variances are incurred when actual costs are different than standard costs due to favorable or unfavorable market prices.

Management applies judgment to recognize purchase price variances in the same period that the associated standard costs of the finished goods that consume these components are sold.

The Company’s inventory is subject to technological change or obsolescence.

The Company reviews inventory quantities on hand and estimates excess and obsolescence exposures based on assumptions about future demand, product transitions, and market conditions, and records reserves to reduce the carrying value of inventories to their net realizable value.

The Company reviews inventory quantities on hand and estimates excess and obsolescence exposures based on assumptions about future demand, product transitions, and general economic and industry conditions, and records reserves to reduce the carrying value of inventories to their net realizable value.

If actual future demand is less than estimated, additional inventory write-downs would be required.

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When inventory has been written down below cost, such reduced amount is considered the new cost basis for subsequent accounting purposes.

As a result, the Company would recognize a higher than normal gross margin if the reserved inventory were subsequently sold.

As a result, the Company could recognize a higher than normal gross margin if the reserved inventory were subsequently sold.

Property, Plant, and Equipment

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Internal-use Software

Internal-use software is software acquired, internally developed, or modified solely to meet the entity's internal needs, and during the software's development, no substantive plan exists to sell the software.

The accounting treatment for computer software developed for internal use depends upon the nature of activities performed at each stage of development.

Internal-use software is software acquired, internally developed, or modified solely to meet the Company's internal needs, and during the software's development, no substantive plan exists to sell the software.

The accounting treatment for computer software developed for internal use depends on the nature of activities performed at each stage of development.

The preliminary project stage includes conceptual formulation of design alternatives, determination of system requirements, vendor demonstrations, and final selection of vendors, and during this stage costs are expensed as incurred.

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The post-implementation stage includes support and maintenance, and during this stage costs are expensed as incurred.

Capitalization begins when both the preliminary project stage is completed and management commits to funding the project.

Capitalization ceases at the point the project is substantially complete and ready for its intended use, that is,

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

after all substantial testing is completed.

Capitalization begins when both the preliminary project stage is completed and management commits to funding the project.

Capitalization ceases at the point the project is substantially complete and ready for its intended use, that is, after all substantial testing is completed.

Costs of specified upgrades and enhancements to internal-use software are capitalized if it is probable that those expenditures result in additional functionality.

Capitalized costs are amortized on a straight-line basis over the estimated useful life.

At inception of a contract, the Company determines whether that contract is or contains a lease.

The Company determines whether a contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration.

At inception of a contract, the Company determines whether that contract is or contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration.

The Company has control of the asset if it has the right to direct the use of the asset and obtains substantially all of the economic benefits from the use of the asset throughout the period of use.

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The lease liability is reduced by the cash payment less the interest each period.

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Goodwill is stated at cost.

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The Company performs a qualitative assessment of goodwill to determine whether further impairment testing is necessary.

Factors that management considers in this assessment include 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.

Factors that management considers in this assessment include general economic and industry conditions, overall financial performance (both current and projected), changes in strategy, changes in the composition or carrying amount of net assets, and market capitalization.

If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company would proceed to perform a quantitative impairment test.

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The Company estimates the fair value of its reporting unit using the income approach based on a discounted cash flow model.

In addition, the Company uses the market approach, which compares the reporting unit to publicly-traded companies and transactions involving similar businesses, to support the conclusions based on the income approach.

In addition, the Company uses the market approach, which compares the reporting unit to publicly-traded companies and transactions involving

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

similar businesses, to support the conclusions based on the income approach.

Intangible Assets

Intangible assets are stated at cost and amortized over the assets’ estimated useful lives.

Intangible assets are either amortized in relation to the relative cash flows anticipated from the intangible asset or using the straight-line method, depending upon facts and circumstances.

The useful lives of distribution networks range from eleven to twelve years , of completed technologies from five to eight years , of customer relationships from five to eight years , of non-compete agreements from three to seven years , and trademarks two years .

Intangible assets are either amortized in relation to the relative cash flows anticipated from the intangible asset or using the straight-line method, depending on facts and circumstances.

The useful lives of distribution networks range from eleven to twelve years , completed technologies from five to eight years , customer relationships from five to eight years , non-compete agreements from three to seven years , and trademarks two years .

In-process technology is an indefinite-lived intangible asset until the technology is completed, at which point it is amortized over its estimated useful life.

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Legal costs associated with potential loss contingencies are expensed as incurred.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Instruments

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and (5) recognizing revenue when (or as) the performance obligations are satisfied.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Identifying the Contract with the Customer

The Company identifies contracts with customers as agreements that create enforceable rights and obligations, which typically take the form of customer contracts or purchase orders.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectibility of consideration is probable.

Identifying the Performance Obligations in the Contract

The Company identifies performance obligations as promises in contracts to transfer distinct goods or services.

Standard products and services that the Company regularly sells separately are accounted for as distinct performance obligations.

Standard products and services that the Company regularly sells separately, which customers can benefit from either on their own or with other readily available resources and are distinct within the context of the customer contract, are accounted for as distinct performance obligations.

Application-specific customer solutions that are comprised of a combination of products and services are accounted for as one performance obligation to deliver a total solution to the customer.

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Amounts collected from customers for sales taxes are excluded from the transaction price.

If a contract includes a variable amount, such as a rebate, then the Company estimates the transaction price using either the expected value or the most likely amount of consideration to be received, depending upon the specific facts and circumstances.

The Company includes estimated variable consideration in the transaction price only to the extent it is probable that a significant reversal of revenue will not occur when the uncertainty is resolved.

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However, from time to time, the Company may allow a customer to return a product.

As a practical expedient, the Company estimates the transaction price using the expected value based on its history of return experience using a portfolio approach in

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which the Company’s total revenue is reduced by an estimate of total customer returns.

As a practical expedient, the Company estimates the transaction price using the expected value based on its history of return experience using a portfolio approach in which the Company’s total revenue is reduced by an estimate of total customer returns.

Management reasonably expects that the effect of applying a portfolio approach to a group of contracts would not differ materially from considering each contract separately.

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Revenue for application-specific customer solutions is recognized at the point in time when the solution is validated, which is the point in time when the Company can objectively determine that the agreed-upon specifications in the contract have been met and the customer will accept the performance obligations in the arrangement.

Although the customer may have taken legal title and physical possession of the goods when they arrived at the customer’s designated site, the significant risks and rewards of ownership transfer to the customer only upon validation.

Although the customer may have taken legal title and physical possession of the goods when they arrived at the customer’s

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

designated site, the significant risks and rewards of ownership transfer to the customer only upon validation.

Revenue for on-site support services related to these solutions is recognized over the time the service is provided.

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Research and Development

Research and development costs primarily include personnel-related costs, outside services, and prototyping materials.

Research and development costs primarily include personnel-related costs, prototyping materials, and outside services.

Research and development costs are expensed when incurred until technological feasibility has been established for the product.

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Historically, the time incurred between beta and general release to customers has been short, and therefore, the costs have been insignificant.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Costs

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The fair values of stock options are estimated on the grant date using a binomial lattice model.

Management is responsible for determining the appropriate valuation model and estimating these fair values, and in doing so, considers a number of factors, including information provided by an outside valuation advisor.

The fair value of RSUs is determined based on the market value of the Company's common stock on the grant date.

The Company recognizes compensation expense related to stock options and RSUs using the graded attribution method, in which expense is recognized on a straight-line basis over the service period for each separately vesting portion of the stock option or RSU as if the award was, in substance, multiple awards.

The fair value of RSUs is determined based on the observable market price of the Company's common stock on the grant date less the present value of expected future dividends.

When determining the grant-date fair value of stock-based awards, management further considers whether an adjustment is required to the observable market price or volatility of the Company's common stock that is used in the valuation as a result of material non-public information, if that information is expected to result in a material increase in share price.

The Company recognizes compensation expense related to stock-based awards using the graded attribution method, in which expense is recognized on a straight-line basis over the service period for each separately vesting

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

portion of the stock option or RSU as if the award was, in substance, multiple awards.

The amount of compensation expense recognized at the end of the vesting period is based on the number of awards for which the requisite service has been completed.

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Amounts collected from customers and retained by the Company during tax holidays are recognized as non-operating income when earned.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net Income Per Share

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Accumulated other comprehensive loss, net of tax, consists of foreign currency translation adjustment losses of $ 43,665,000 and $ 36,912,000 , as of December 31, 2021 and December 31, 2020, respectively;

net unrealized gains on available-for-sale investments of $ 4,382,000 and $ 2,023,000 as of December 31, 2020 and December 31, 2019, respectively;

net unrealized losses on available-for-sale investments of $ 3,006,000 as of December 31, 2021, and net unrealized gains on available-for-sale investments of $ 4,382,000 as of December 31, 2020;

and losses on currency swaps, net of gains on long-term intercompany loans of $ 1,271,000 at each year end.

Amounts reclassified from accumulated other comprehensive income (loss) to investment income on the Consolidated Statements of Operations were net realized gains of $ 4,119,000 , $ 1,452,000 , and $ 501,000 for 2020, 2019, and 2018, respectively.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts reclassified from accumulated other comprehensive loss, net of tax, to investment income on the Consolidated Statements of Operations were net realized gains of $ 236,000 , $ 4,119,000 , and $ 1,452,000 for 2021, 2020, and 2019, respectively.

Concentrations of Risk

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The Company has historically not experienced any significant realized losses on its debt securities.

The Company has two large customers that each represented a significant portion of revenue in 2020 and accounts receivable as of December 31, 2020.

A single customer accounted for 17% of total revenue in 2021 and 15% of total accounts receivable as of December 31, 2021.

Accounts receivable from a second customer accounted for 11% of total accounts receivable as of December 31, 2021.

The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.

The Company has historically not experienced any significant losses related to the collection of its accounts receivable.

A significant portion of the Company's product is manufactured by a third-party contractor located in Indonesia.

This contractor has agreed to provide Cognex with termination notification periods and last-time-buy rights, if and when that may be applicable.

We rely upon this contractor to provide quality product and meet delivery schedules.

We engage in extensive product quality programs and processes, including actively monitoring the performance of our third-party manufacturers;

however, we may not detect all product quality issues through these programs and processes.

Certain components are presently sourced from a single vendor that is selected based on price and performance considerations.

In the event of a supply disruption from a single-source vendor, these components may be purchased from alternative vendors, which may result in manufacturing delays based on the lead time of the new vendor and higher costs.

Certain key electronic and mechanical components that are purchased from strategic suppliers, such as processors or imagers, are fundamental to the design of Cognex products.

A disruption in the supply of these key components, such as a last-time-buy announcement, natural disaster, financial bankruptcy, or other event, may require us to purchase a significant amount of inventory at unfavorable prices resulting in lower gross margins and higher risk of carrying excess inventory.

If we are unable to secure adequate supply from alternative sources, we may have to redesign our products, which may lead to a delay in manufacturing and a possible loss of sales.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A significant portion of the Company's products is presently manufactured by a third-party contractor located in Indonesia.

This contract manufacturer has agreed to provide the Company with termination notification periods and last-time-buy rights, if and when that may be applicable.

Our contract manufacturer's challenges in obtaining components and maintaining production have resulted in delays, and may continue to result in delays, in meeting our delivery schedules that, as a result, delay deliveries to our customers past their requested delivery date.

Certain key electronic and mechanical components, such as integrated circuit chips, are fundamental to the design of Cognex products.

Due to the impact of the COVID-19 pandemic or other factors, we have experienced, and may continue to experience, disruptions to the supply of components for our products that have resulted, and may continue to result, in higher purchase costs, delivery costs, and manufacturing delays.

The Company sources components from preferred vendors that are selected based on price and performance considerations.

In the event of a supply disruption from a preferred vendor, these components may typically be purchased from alternative vendors, which may result in higher purchase costs and manufacturing delays based on the time required to identify and obtain sufficient quantities from an alternative source.

Certain of the Company’s products utilize components that are available from only one source.

If we are unable to secure adequate supply from these sources, we may have to redesign our products, which may lead to higher costs, delays in manufacturing, and possible loss of sales.

Business Acquisitions

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Transaction costs are expensed as incurred.

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Restructuring Charges

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Subsequent negotiations that result in early contract terminations are recorded as favorable restructuring adjustments.

Other associated costs typically associated with restructuring activities include costs to consolidate facilities, costs to relocate employees, and legal fees incurred to research local statutory requirements and prepare termination agreements.

Other associated costs as part of a restructuring activity include costs to consolidate facilities, costs to relocate employees, and legal fees incurred to research local statutory requirements and prepare termination agreements.

These costs are recognized in the period in which the liability is incurred, which generally corresponds to the period in which the services are rendered.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

New Pronouncements

Accounting Standards Update (ASU) 2019-12, "Simplifying the Accounting for Income Taxes"

ASU 2019-12 applies to all entities within the scope of Topic 740, Income Taxes.

The amendments in this ASU simplify the accounting for income taxes by removing the following exceptions:

(1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items;

(2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment;

(3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary;

and (4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments in this ASU also simplify the accounting for income taxes by doing the following:

(1) requiring that an entity recognize a franchise tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax;

(2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction;

(3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements;

and (4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that included the enacted date.

The amendments in this ASU are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2020.

Early adoption is permitted;

however, an entity that elects to early adopt the amendments must adopt all the amendments in the same period.

The amendments in this ASU related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented.

The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

All other amendments should be applied on a prospective basis.

Management does not expect ASU 2019-12 to have a material impact on the Company's consolidated financial statements and disclosures.

Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848)"

The amendments in this ASU apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this ASU provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022.

Management does not expect ASU 2020-04 to have a material impact on the Company's consolidated financial statements and disclosures.

The amendments in this ASU eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.

They also clarify and simplify other aspects of the accounting for income taxes.

The Company adopted ASU 2019-12 on January 1, 2021.

Upon adoption, ASU 2019-12 did not have a material impact on the Company's consolidated financial statements and disclosures.

Accounting Standards Update (ASU) 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs"

The amendments in this ASU clarify that for each reporting period, for callable debt with multiple call dates and call prices that may change at each call date, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess is amortized to the next call date.

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early application is not permitted.

The amendments in this ASU should be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.

Management does not expect ASU 2020-08 to have a material impact on the Company's consolidated financial statements and disclosures.

The Company adopted ASU 2020-08 on January 1, 2021.

Upon adoption, ASU 2020-08 did not have a material impact on the Company's consolidated financial statements and disclosures.

Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and (ASU) 2021-01, "Reference Rate Reform (Topic 848):

The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022.

Management does not expect ASU 2020-04 or ASU 2021-01 to have a material impact on the Company's consolidated financial statements and disclosures.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Standards Update (ASU) 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers"

The amendments in this ASU primarily address the accounting for contract assets and contract liabilities related to revenue contracts with customers in a business combination.

The ASU clarifies that an acquirer should account for the related revenue contracts in accordance with Accounting Standards Codification 606 as if the acquirer had originated the contracts.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, although early adoption is permitted.

The amendments in the ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

The expected financial statement impact of this new accounting standard cannot be reasonably estimated at this time, as the impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations.

Management does not expect this ASU to have a material impact on the Company's disclosures.

Fair Value Measurements

8 unchanged sentences

Corporate bonds — 554,306 —

Treasury bills 131,861

Asset-backed securities — 81,595 —

Treasury bills 58,665

Agency bonds — 18,879 —

Sovereign bonds — 12,100 —

Municipal bonds — 5,639

Sovereign bonds — 2,119 —

Economic hedge forward contracts — 39 —

13 unchanged sentences

Balance as of December 31, 2019 $ 1,153

Fair value adjustment to GVi contingent consideration ( 1,646 )

Fair value adjustment to Chiaro contingent consideration ( 114 )

Balance as of December 31, 2019 1,153

Fair value adjustment to Chiaro contingent consideration ( 114 )

Payment of Chiaro contingent consideration ( 1,039 )

Balance as of December 31, 2020 —

Balance as of December 31, 2021 $ —

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

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

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 December 31, 2021.

The undiscounted potential outcomes related to future contingent consideration range from $ 0 to $ 2,500,000 based on 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.

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

These conditions triggered a review of long-lived assets for potential impairment as of May 26, 2020, which resulted in operating lease asset impairment charges of $ 3,427,000 (refer to Notes 7 and 22) that are included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $ 19,571,000 (refer to Note 9).

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

The Company did not record impairment charges related to non-financial assets in 2019 and 2018.

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 $ 3,427,000 (refer to Notes 7 and 22) that were included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $ 19,571,000 (refer to Note 9) in the second quarter of 2020.

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

The Company did not record impairment charges related to non-financial assets in 2021 or 2019.

Cash, Cash Equivalents, and Investments

3 unchanged sentences

Cash and cash equivalents 186,161 269,073

Treasury bills 35,403 92,914

Corporate bonds 73,088 32,714

Asset-backed securities 37,655 25,160

Sovereign bonds 8,660 6,294

Treasury bills 18,912 35,403

Municipal bonds 4,998 1,303

Certificate of deposit — 4,328

Agency bonds 2,802 —

Sovereign bonds — 8,660

Current investments 137,455 103,240

Corporate bonds 481,218 203,428

Treasury bills 96,458 216,334

Asset-backed securities 43,940 67,058

Treasury bills 39,753 96,458

Agency bonds 16,077 19,006

Municipal bonds 5,735 2,322

Sovereign bonds 2,119 3,440

Municipal bonds 641 5,735

Non-current investments 583,748 395,125

$ 907,364 $ 767,438

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s cash balance included foreign bank balances totaling $ 142,009,000 and $ 225,853,000 as of December 31, 2021 and 2020, respectively.

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Corporate bonds consist of debt securities issued by both domestic and foreign companies;

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

sovereign bonds consist of direct debt issued by foreign governments;

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

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

certificates of deposit are time deposits held by financial institutions with a fixed interest rate;

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

All securities are denominated in U.S.

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

Accrued interest receivable is included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 1,560,000 and $ 2,874,000 as of December 31, 2020 and 2019, respectively.

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

Accrued interest receivable is included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 3,037,000 and $ 1,560,000 as of December 31, 2021 and 2020, respectively.

The following table summarizes the Company’s available-for-sale investments as of December 31, 2021 (in thousands):

Losses Fair Value

Corporate bonds $ 72,863 $ 251 $ ( 26 ) $ 73,088

Asset-backed securities 37,568 112 ( 25 ) 37,655

Treasury bills 18,864 51 ( 3 ) 18,912

Municipal bonds 5,029 1 ( 32 ) 4,998

Agency bonds 2,800 2 — 2,802

Corporate bonds 485,140 555 ( 4,477 ) 481,218

Asset-backed securities 44,197 45 ( 302 ) 43,940

Treasury bills 39,740 46 ( 33 ) 39,753

Agency bonds 16,128 — ( 51 ) 16,077

Sovereign bonds 2,141 — ( 22 ) 2,119

Municipal bonds 635 6 — 641

$ 725,105 $ 1,069 $ ( 4,971 ) $ 721,203

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 December 31, 2021 (in thousands):

Unrealized Loss

Position For Less than

12 Months Unrealized Loss

Position For Greater than

12 Months Total

Fair Value Unrealized

Losses Fair Value Unrealized

Corporate bonds $ 431,652 $ ( 4,470 ) $ 3,110 $ ( 33 ) $ 434,762 $ ( 4,503 )

Treasury bills 95,522 936 — 96,458

Asset-backed securities 50,980 ( 317 ) 806 ( 10 ) 51,786 ( 327 )

Treasury bills 25,040 ( 36 ) — — 25,040 ( 36 )

Agency Bonds 16,077 ( 51 ) — — 16,077 ( 51 )

2 unchanged sentences

$ 525,868 $ ( 4,896 ) $ 7,808 $ ( 75 ) $ 533,676 $ ( 4,971 )

On January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2016-13, “Measurement of Credit Losses on Financial Instruments,” using the modified-retrospective approach, which requires the Company to apply the standard on a prospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period in which the guidance is effective.

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

Management monitors debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer.

Based on this evaluation, no allowance for credit losses on debt securities was recorded as of December 31, 2021.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes changes in the allowance for credit losses (in thousands):

Balance as of December 31, 2019 $ —

Balance as of December 31, 2019 —

Increases to the allowance for credit losses 160

1 unchanged sentence

Balance as of December 31, 2020 —

Balance as of December 31, 2021 $ —

The Company recorded gross realized gains on the sale of debt securities totaling $ 246,000 in 2021, $ 4,283,000 in 2020, and $ 1,581,000 in 2019, and gross realized losses on the sale of debt securities totaling $ 10,000 in 2021, $ 164,000 in 2020, and $ 129,000 in 2019.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the effective maturity dates of the Company’s available-for-sale investments as of December 31, 2021 (in thousands):

1 unchanged sentence

Corporate bonds $ 73,088 $ 205,331 $ 175,992 $ 64,356 $ 35,539 $ 554,306

Treasury bills 35,403 68,217 28,241 — — 131,861

Asset-backed securities 37,655 23,370 4,668 8,092 7,810 81,595

Treasury bills 18,912 39,753 — — — 58,665

Agency bonds 2,802 16,077 — — — 18,879

Sovereign bonds 8,660 — 3,440 — — 12,100

Municipal bonds 4,998 641 — — — 5,639

Sovereign bonds — — 1,052 1,067 — 2,119

$ 137,455 $ 285,172 $ 181,712 $ 73,515 $ 43,349 $ 721,203

5 unchanged sentences

The Company recorded provisions for excess and obsolete inventories of $ 2,573,000 and $ 9,908,000 in 2021 and 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 higher provisions in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.

Property, Plant, and Equipment

10 unchanged sentences

$ 77,546 $ 79,173

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company disposed of property, plant, and equipment with a cost basis of $ 20,647,000 and accumulated depreciation of $ 20,614,000 in 2021, resulting in a loss of $ 33,000 .

Disposals in 2020 included leasehold improvements and other assets associated with office closures.

The Company disposed of property, plant, and equipment with a cost basis of $ 26,829,000 and accumulated depreciation of $ 24,977,000 in 2020, resulting in a loss of $ 1,852,000 .

Buildings included rental property with a cost basis of $ 800,000 and accumulated depreciation of $ 255,000 as of December 31, 2019.

This rental property lease was terminated during the second quarter of 2020.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disposals in 2020 included leasehold improvements and other assets associated with office closures as a part of the Company's 2020 restructuring plan (refer to Note 22).

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 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 leases outstanding, and no options to extend that were included in the determination of the lease term for leases outstanding.

As of December 31, 2019 there were no options to extend or terminate that were included in the determination of the lease term for leases outstanding.

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

As of 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 accounted for in the determination of the lease term for outstanding leases.

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

There were no restrictions or covenants for the leases outstanding as of December 31, 2020 or December 31, 2019.

The total operating lease expense and operating lease cash payments in 2020 were $ 8,180,000 and $ 8,009,000 , respectively.

The total operating lease expense and operating lease cash payments in 2019 were $ 6,893,000 and $ 6,530,000 , respectively.

There were no restrictions or covenants for the outstanding leases as of December 31, 2021 or 2020.

The total operating lease expense was $ 8,180,000 in both 2021 and 2020, and $ 6,893,000 in 2019.

The total operating lease cash payments were $ 8,225,000 , $ 8,009,000 , and $ 6,530,000 in 2021, 2020, and 2019, 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 $ 154,000 , $ 123,000 , and $ 275,000 in 2021, 2020, and 2019, respectively.

Annual rental expense was $ 8,186,000 in 2018.

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

1 unchanged sentence

Thereafter 5,069

The discounted present value of the future lease cash payments resulted in a lease liability of $ 26,230,000 and $ 17,973,000 as of December 31, 2020 and December 31, 2019, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of December 31, 2020 or December 31, 2019.

The discounted present value of the future lease cash payments resulted in a lease liability of $ 25,581,000 and $ 26,230,000 as of December 31, 2021 and 2020, respectively.

In December 2021, the Company entered into a lease for a 65,000 square-foot building in Southborough, Massachusetts for a term of ten years to serve as a new distribution center for customers in the Americas.

The transition of the current distribution center to the new Southborough facility is expected to take place during the first half of 2022.

The Company will have the right and option to extend the term of this lease for an additional period of five years, commencing upon the expiration of the original ten-year term.

As of December 31, 2021, this lease had not yet commenced, and therefore was not yet recorded on the Consolidated Balance Sheets, nor did it create any significant rights and obligations.

Future payment obligations associated with this lease, which are not included in the future operating lease cash payments table above, total $ 10,239,000 , of which $ 670,000 is payable in 2022.

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

The weighted-average discount rate was 3.4 % and 4.0 % for the leases outstanding as of December 31, 2021 and December 31, 2020, respectively.

The weighted-average remaining lease term was 5.1 and 3.7 years for the leases outstanding as of December 31, 2020 and December 31, 2019, respectively.

As part of the Company's restructuring plan (refer to Note 22), management closed eleven leased offices in 2020, prior to the end of their lease terms.

The carrying value of the lease assets associated with these offices was reduced to zero , resulting in operating lease asset impairment charges of $ 3,427,000 in 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 totaled $ 2,877,000 as of December 31, 2020 and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.

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

Management closed eleven leased offices in 2020, prior to the end of their lease terms, as a part of a restructuring plan (refer to Note 22).

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

charges" on the Consolidated Statements of Operations.

Remaining lease liability obligations associated with the early contract terminations totaled $ 1,717,000 and $ 2,877,000 as of December 31, 2021 and 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.

The Company did not record impairment charges related to operating lease assets in 2021 or 2019.

The Company owns a building adjacent to its corporate headquarters that was partially occupied by a tenant during a portion of 2020, and for the entirety of 2019 and 2018.

The Company owns a building adjacent to its corporate headquarters that was partially occupied by a tenant during a portion of 2020, and for the entirety of 2019.

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

Annual rental income totaled $ 77,000 in 2020, $ 311,000 in 2019, and $ 1,116,000 in 2018.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Annual rental income totaled $ 77,000 in 2020 and $ 311,000 in 2019.

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

Balance as of December 31, 2019 $ 243,445

Acquisition of Sualab Co., Ltd.

Sualab Co., Ltd.

purchase price adjustment (refer to Note 21) ( 1,004 )

Foreign exchange rate changes 1,637

Balance as of December 31, 2020 244,078

Sualab Co., Ltd.

purchase price adjustment ( 1,004 )

Foreign exchange rate changes ( 2,365 )

Balance as of December 31, 2021 $ 241,713

Refer to Note 21 to the Consolidated Financial Statements for further information regarding acquisitions.

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

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.

For its 2021 annual analysis of goodwill, management elected to perform a qualitative assessment.

Based on this assessment, management believes it is more likely than not that the fair value of the reporting unit exceeds its carrying value.

Factors that management considered in these qualitative assessments include 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.

The Company did not record impairment charges related to goodwill in 2021, 2020, or 2019.

In the fourth quarter of 2020, the Company recorded a credit to goodwill in the amount of $ 1,004,000 , representing a purchase price adjustment related to the Company's 2019 acquisition of Sualab Co., Ltd.

Intangible Assets

13 unchanged sentences

Customer relationships 10,578 7,160 3,418

In-process technologies 8,200 — 8,200

Non-compete agreements 710 436 274

1 unchanged sentence

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

1 unchanged sentence

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

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.

2 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 .

Sualab in-process technologies were completed in the fourth quarter of 2020 and were accordingly reported as completed technologies subject to amortization as of December 31, 2020.

The Company did not record impairment charges related to intangible assets in 2021 or 2019.

4 unchanged sentences

Accrued expenses consisted of the following (in thousands):

Company bonuses $ 19,343 $ —

Salaries, commissions, and payroll taxes 14,025 11,500

Incentive compensation $ 37,917 $ 28,935

Salaries and payroll taxes 8,519 7,911

Foreign retirement obligations 7,572 6,886

11 unchanged sentences

Balance as of December 31, 2021 $ 5,427

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

As of December 31, 2020, the Company had outstanding purchase orders totaling $ 32,315,000 to purchase inventory from various vendors.

As of December 31, 2021, the Company had outstanding purchase orders totaling $ 100,750,000 to procure inventory from various vendors, due in part to higher inventory purchases in response to global supply chain constraints.

Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties.

These purchase commitments relate to expected sales in 2021.

These purchase commitments relate primarily to expected sales in 2022.

A significant portion of the Company's outstanding inventory purchase orders as of December 31, 2021, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products.

The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by this contract manufacturer with the Company's preauthorization, when these components

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer.

As a result of the terms of this agreement, the Company has purchased $ 19,448,000 , $ 4,291,000 , and $ 3,700,000 of inventory in 2021, 2020, and 2019, respectively, prior to the components being consumed by the contract manufacturer to produce the Company's assembled products.

While the Company typically expects such purchased components to be used in future production of Cognex finished goods, these components are considered in the Company's reserve estimate for excess and obsolete inventory.

Furthermore, the Company accrues for losses on commitments for the future purchase of non-cancelable and non-returnable components from this contract manufacturer at the time that circumstances, such as changes in demand, indicate that the value of the components may not be recoverable, the loss is probable, and management has the ability to reasonably estimate the amount of the loss.

Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company.

24 unchanged sentences

Euro 65,000 $ 73,748 50,000 $ 61,342

Chinese Renminbi 54,374 8,500 — —

Mexican Peso 140,000 6,842 155,000 7,776

Korean Won 6,925,000 6,377 161,951,500 139,688

Japanese Yen 600,000 5,213 600,000 5,808

Hungarian Forint 1,330,000 4,494 870,000 2,962

British Pound 3,370 4,552 1,675 2,287

Hungarian Forint 1,355,000 4,155 1,330,000 4,494

Canadian Dollar 1,480 1,167 1,285 1,010

Korean Won — — 6,925,000 6,377

Taiwanese Dollar — — 38,035 1,362

Singapore Dollar — — 1,465 1,110

Canadian Dollar 1,285 1,010 1,300 1,000

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

Asset Derivatives Liability Derivatives

Location Fair Value Balance

Location Fair Value

Sheet Location Fair Value Balance

Sheet Location Fair Value

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

28 unchanged sentences

$ 1,037,098 $ 811,020 $ 725,625

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 6,846,000 and $ 3,963,000 as of December 31, 2020 and 2019, respectively.

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 10,854,000 and $ 6,846,000 as of December 31, 2021 and 2020, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value.

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

The following table summarizes changes in the allowance for credit losses (in thousands):

1 unchanged sentence

Increases to the allowance for credit losses 600

Write-offs ( 286 )

Write-offs, net of recoveries ( 300 )

Foreign exchange rate changes 1

1 unchanged sentence

Increases to the allowance for credit losses —

Write-offs ( 300 )

Write-offs, net of recoveries ( 55 )

Foreign exchange rate changes —

Balance as of December 31, 2021 $ 776

The Company's higher estimate of expected credit losses in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's estimate of expected credit losses in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.

The following table summarizes the deferred revenue and customer deposits activity (in thousands):

Balance as of December 31, 2019 $ 14,432

Increases to deferred revenue and customer deposits 53,422

Recognition of revenue ( 48,730 )

Deferral of revenue billed in the current period, net of recognition 19,014

Recognition of revenue deferred in prior period ( 12,443 )

Foreign exchange rate changes 271

Balance as of December 31, 2020 21,274

Increases to deferred revenue and customer deposits 120,008

Recognition of revenue ( 114,014 )

Deferral of revenue billed in the current period, net of recognition 31,907

Recognition of revenue deferred in prior period ( 17,403 )

Foreign exchange rate changes ( 35 )

9 unchanged sentences

Common shareholders are also entitled to dividends when and if declared by the Company’s Board of Directors.

Shareholder Rights Agreement

On December 5, 2018, the Company’s Board of Directors allowed the Company’s Shareholder Rights Agreement and associated rights to expire in accordance with their terms without renewal.

In connection with the adoption of the Shareholder Rights Agreement, the Company had filed Articles of Amendment to its Restated Articles of Organization establishing Series E Junior Participating Cumulative Preferred Stock with the Secretary of State of The Commonwealth of Massachusetts, setting forth the rights, powers, and preferences of the Series E Junior Participating Cumulative Preferred Stock issuable upon exercise of the rights (the “Preferred Shares”).

Effective on April 26, 2019, the Company filed Articles of Amendment to the Company’s Restated Articles of Organization with the Secretary of State of The Commonwealth of Massachusetts eliminating the Preferred Shares and returning them to authorized but undesignated shares of the Company’s preferred stock.

Stock Repurchases

In April 2017, the Company's Board of Directors authorized the repurchase of $ 100,000,000 of the Company's common stock.

The Company repurchased 1,744,000 shares at a cost of $ 100,000,000 under this April 2017 program, including 803,000 shares at a cost of $ 45,200,000 in 2018.

In February 2018, the Company's Board of Directors authorized the repurchase of $ 150,000,000 of the Company's common stock.

The Company repurchased 3,174,000 shares at a cost of $ 150,000,000 in 2018 under this February 2018 program.

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

The Company repurchased 203,000 shares at a cost of $ 8,622,000 in 2018 under this October 2018 program.

Total stock repurchases amounted to $ 203,822,000 in 2018.

The Company repurchased 1,398,000 shares at a cost of $ 61,690,000 in 2019 and 1,215,000 shares at a cost of $ 51,036,000 in 2020 under this October 2018 program, leaving a remaining balance of $ 78,652,000 .

Under this October 2018 program, the Company repurchased 1,398,000 shares at a cost of $ 61,690,000 in 2019, 1,215,000 shares at a cost of $ 51,036,000 in 2020, and 957,000 shares at a cost of $ 78,652,000 in 2021, which completed purchases under this program.

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

Purchases under this March 2020 program will commence upon completion of the October 2018 program.

Under this March 2020 program, the Company repurchased 1,060,000 shares, including 5,000 shares that had not yet settled as of December 31, 2021, at a cost of $ 83,000,000 in 2021, leaving a remaining balance of $ 117,000,000 .

The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements.

The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

The Company’s Board of Directors declared and paid cash dividends of $0.050 per share in the first, second, and third quarters of 2019, and $0.055 in the fourth quarter of 2019, as well as in the first, second, and third quarters of 2020.

The Company’s Board of Directors declared and paid cash dividends of $ 0.050 per share in the first, second, and third quarters of 2019, $ 0.055 per share in the fourth quarter of 2019 and in the first, second, and third quarters of 2020, and $ 0.060 per share in the fourth quarter of 2020 and in the first, second, and third quarters of 2021.

The dividend was increased to $ 0.065 per share in the fourth quarter of 2021.

Also, in the fourth quarter of 2020, an additional special cash dividend of $ 2.00 per share was declared and paid.

Total dividends amounted to $ 390,508,000 in 2020, which included $ 351,428,000 paid for the special cash dividend, $ 35,124,000 in 2019, and $ 31,865,000 in 2018.

Future dividends will be declared at the discretion of the Company's Board of Directors and will depend upon such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total dividends paid were $ 43,263,000 in 2021, $ 390,508,000 in 2020, which included $ 351,428,000 paid for the special cash dividend, and $ 35,124,000 in 2019.

Future dividends will be declared at the discretion of the Company's Board of Directors and will depend on such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.

Stock-Based Compensation

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Participants are not entitled to dividends on RSUs.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted-average grant-date fair value of stock options granted was $ 33.79 in 2021, $ 19.62 in 2020, and $ 18.62 in 2019.

1 unchanged sentence

The total fair value of stock options vested was $ 45,328,000 in 2021, $ 45,998,000 in 2020, and $ 38,974,000 in 2019.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units (RSUs)

4 unchanged sentences

Granted 335 87.03

Vested ( 16 ) 57.31

Forfeited or expired ( 50 ) 58.47

Nonvested as of December 31, 2021 823 $ 65.26

The weighted-average grant-date fair value of RSUs granted in 2019 was $ 48.61 .

There were no RSUs granted in 2018.

There were no RSUs that vested in 2020, 2019, and 2018.

The fair value of RSUs is determined based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends.

The weighted-average grant-date fair value of RSUs granted in 2020 and 2019 was $ 52.09 and $ 48.61 , respectively.

There were 16,000 RSUs that vested in 2021, and no RSUs that vested in 2020 and 2019.

Stock-Based Compensation Expense

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Each year during the first quarter, the Company revises its forfeiture rate.

This resulted in an increase to compensation expense of $ 1,787,000 in 2020, a decrease to compensation expense of $ 499,000 in 2019, and an increase to compensation expense of $ 1,283,000 in 2018.

This resulted in a decrease to compensation expense of $ 255,000 in 2021, an increase to compensation expense of $ 1,787,000 in 2020, and a decrease to compensation expense of $ 499,000 in 2019.

As of December 31, 2021, total unrecognized compensation expense related to non-vested stock-based awards, including stock options and RSUs, was $ 47,690,000 , which is expected to be recognized over a weighted-average period of 1.4 years.

The total stock-based compensation expense and the related income tax benefit recognized was $ 42,661,000 , which includes credits of $ 1,401,000 relating to grants cancelled as a result of the Company's workforce reduction, and $ 6,569,000 , respectively, in 2020, $ 45,589,000 and $ 7,756,000 , respectively, in 2019, and $ 41,090,000 and $ 7,317,000 , respectively, in 2018.

The total stock-based compensation expense and the related income tax benefit recognized was $ 43,774,000 and $ 6,764,000 , respectively, in 2021, $ 42,661,000 and $ 6,569,000 , respectively, in 2020, and $ 45,589,000 and $ 7,756,000 , respectively, in 2019.

Stock-based compensation expense recognized in 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 in 2021, 2020, or 2019.

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Discrete tax benefit related to employee stock options ( 3 ) ( 7 ) ( 4 )

Discrete tax expense (benefit) related to tax return filings ( 5 ) — —

Discrete tax benefit related to tax return filings ( 1 ) ( 5 ) —

Discrete tax expense related to German withholding

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Discrete tax expense related to GILTI impact of change in tax structure — — 214

Discrete tax expense (benefit) related to Tax Act — — ( 3 )

Other discrete tax events — — ( 1 )

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Retained earnings $ 753,268 $ 1,105,714 $ ( 352,446 )

There were no material differences to the Company's reported results in prior years.

Discrete Tax Items

The effective tax rate included a decrease in tax expense of $ 12,788,000 in 2020, $ 6,472,000 in 2019, and $ 8,488,000 in 2018 related to stock options, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises.

Income tax expense included a decrease of $ 11,036,000 in 2021, $ 12,788,000 in 2020, and $ 6,472,000 in 2019 related to stock options, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises.

The Company cannot predict the level of stock option exercises by employees in future periods.

In 2020, the Company recorded discrete tax items related to the final true-up of the prior year's tax accrual upon filing the related tax return.

This included a tax benefit of $ 13,984,000 primarily to recognize a foreign tax benefit on certain gains taxed outside of the United States based on clarifications to rules relating to the use of foreign tax credits.

Income tax expense in 2021 and 2020 also included discrete tax items related to the final true-up of the prior year's tax accrual upon filing the related tax return.

In 2020, this included a tax benefit of $ 13,984,000 primarily to recognize a foreign tax benefit on certain gains taxed outside of the United States based on clarifications to rules relating to the use of foreign tax credits.

This benefit was partially offset by tax expense for a transfer price adjustment in China of $ 3,267,000 and smaller tax expense adjustments related to foreign tax filings of $ 843,000 .

In 2020, interpretations of a German law relating to withholding taxes on intellectual property rights emerged.

The Company conducted a careful review of the interpretation and believes it has adequate reserves for this German tax exposure.

Management will continue to monitor this law and court rulings in Germany.

The Company conducted a careful review of the interpretation, submitted required tax filings, and believes it has adequate reserves for this German tax exposure.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2019, the Company made changes to its international tax structure as a result of legislation by the European Union regarding low tax structures that resulted in an intercompany sale of intellectual property.

The Company recorded an associated deferred tax asset and income tax benefit of $ 437,500,000 in Ireland based on the fair value of the intellectual property, that will be realized over 15 years as future tax deductions.

From a United States perspective, the sale is disregarded, and any future deductions claimed in Ireland were added back to taxable income as part of GILTI minimum tax.

The Company recorded an associated deferred tax asset and income tax benefit of $ 437,500,000 in Ireland based on the fair value of the intellectual property, that is being realized over 15 years as future tax deductions.

From a United States perspective, the sale was disregarded, and any future deductions claimed in Ireland were added back to taxable income as part of GILTI minimum tax.

The Company recorded an associated deferred tax liability and income tax expense of $ 350,000,000 , representing the GILTI minimum tax related to the fair value of the intellectual property.

The result of these transactions was a net discrete tax benefit of $ 87,500,000 .

Management expects its current effective tax rate excluding discrete items to increase slightly in future years as a result of this change.

Management expects an immaterial impact on its current effective tax rate excluding discrete items in future years as a result of this change.

In 2019, in connection with the acquisition of Sualab, Co.

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As a result of this transaction, the Company recorded a discrete tax expense of $ 28,528,000 , which included a reserve of $ 3,700,000 for certain related tax uncertainties.

In December 2017, the Tax Cuts and Jobs Act of 2017 (Tax Act) was signed into law.

In 2018, the Company recorded an increase in tax expense of $ 3,240,000 from the write-down of its deferred tax assets primarily relating to guidance under the Tax Act regarding stock-based compensation.

In 2018, the Company recorded a decrease in tax expense of $ 11,028,000 to revise its estimate of a one-time transition tax on unrepatriated foreign earnings resulting from the Tax Act, which resulted in a revised estimate for the one-time transition tax of $ 90,351,000 .

Other discrete tax items, none of which were individually material, resulted in a net decrease in tax expense of $ 307,000 in 2020, $ 1,932,000 in 2019, and $ 1,847,000 in 2018.

The changes in the reserve for income taxes, excluding gross interest and penalties, were as follows (in thousands):

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Balance of reserve for income taxes as of December 31, 2020 13,952

Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken in prior periods ( 280 )

Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in prior periods 100

4 unchanged sentences

The Company's reserve for income taxes, including gross interest and penalties, was $ 15,285,000 as of December 31, 2020, which included $ 14,257,000 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 $ 1,332,000 and $ 1,000,000 as of December 31, 2020 and December 31, 2019, respectively.

The amount of gross interest and penalties included in these balances was $ 1,996,000 and $ 1,332,000 as of December 31, 2021 and 2020, respectively.

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 $ 2,000,000 to $ 3,500,000 over the next twelve months.

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

The statutory tax rate is 12.5 % in Ireland and 25 % in China, compared to the U.S.

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

The statutory tax rate is 12.5 % in Ireland, 25 % in China, and 22 % in Korea, compared to the U.S.

federal statutory corporate tax rate of 21 %.

These differences resulted in a favorable impact to the effective tax rate of 6 percentage points for 2020 and 9 percentage points for both 2019 and 2018.

These differences resulted in a favorable impact to the effective tax rate of 5 percentage points for 2021, 6 percentage points for 2020, and 9 percentage points for 2019.

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Within the United States, the tax years 2017 through 2020 remain open to examination by the Internal Revenue Service ("IRS") and various state taxing 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 recently been notified that it is under audit by the IRS for the tax year 2017.

Management believes the Company is adequately reserved for this audit.

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Any reserves associated with this audit period will not be released until the issue is settled or the audit is concluded.

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Deferred tax assets and liabilities, presented on a gross basis by jurisdiction, consisted of the following (in thousands):

Non-current gross deferred tax assets:

Gross deferred tax assets:

Intangible asset in connection with change in tax structure $ 404,526 $ 424,156

6 unchanged sentences

Other 9,023 4,342

Gross non-current deferred tax assets 467,684 476,934

Gross deferred tax assets 460,714 467,684

Valuation allowance ( 8,188 ) ( 8,568 )

$ 452,526 $ 459,116

Non-current gross deferred tax liabilities:

Gross deferred tax liabilities:

GILTI tax basis differences in connection with change in tax structure $ ( 327,725 ) $ ( 339,364 )

Other GILTI tax basis differences ( 39 ) ( 2,446 )

$ ( 339,364 ) $ ( 352,446 )

Net deferred taxes $ 124,801 $ 119,752

As of December 31, 2021, the Company had a deferred tax asset for foreign tax credit carryforwards of $ 1,730,000 .

These credits are considered to be realizable and will be utilized in a future period.

As of December 31, 2021, the Company had a valuation allowance for state research and development tax credits of $ 11,750,000 that was not considered to be realizable.

Should these credits be utilized in a future period, the reserve associated with these credits would be reversed in the period when it is determined that the credits can be utilized to offset future state income tax liabilities.

As of December 31, 2020, the Company had state research and development tax credit carryforwards of $ 11,361,000 , net of federal tax, which will begin to expire for the 2020 tax return.

As of December 31, 2021, the Company had state research and development tax credit carryforwards of $ 13,250,000 , which will begin to expire for the 2025 tax return.

While the deferred tax assets, net of valuation allowance, are not assured of realization, management has evaluated the realizability of these deferred tax assets and has determined that it is more likely than not that these assets will be realized.

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Restricted stock units totaling 605 , 3,826 , and 13,092 shares of common stock, on a weighted-average basis, were outstanding in 2021, 2020, and 2019, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

There were no anti-dilutive restricted stock units outstanding, on a weighted-average basis, in 2018.

Segment and Geographic Information

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Accounts receivable from this same customer accounted for 15 % and 19 % of total accounts receivable as of December 31, 2021 and 2020, respectively.

In 2020, a second customer accounted for 14 % of total revenue.

Accounts receivable from this second customer accounted for 19 % of total accounts receivable as of December 31, 2020.

Revenue from a second customer accounted for 13 % of total revenue in 2020.

Revenue from this customer was not greater than 10% of total revenue in 2021 or 2019.

Accounts receivable from this same customer accounted for 11 % and 20 % of total accounts receivable as of December 31, 2021 and 2020, respectively.

Business Acquisitions

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In the fourth quarter of 2020, the Company recorded a credit to goodwill in the amount of $ 1,004,000 representing a purchase price adjustment.

The remaining consideration consists of deferred payments of $ 24,040,000 that may become payable on the fourth anniversary date of the closing, contingent upon continued employment of key talent, and will be recorded as compensation expense over this four-year period.

Sualab's intellectual property, engineering expertise, and market coverage are expected to increase the Company's existing deep learning capabilities.

Combined with intellectual property acquired from ViDi Systems S.A.

in 2017, the Company is now a leading provider of deep learning-based industrial vision software.

The purchase price that was not related to employment was allocated as follows (in thousands):

Cash and cash equivalents $ 3,691

Current investments 9,487

Accounts receivable 1,200

Inventories 115

Prepaid expenses and other current assets 252

Property, plant, and equipment 726

Operating lease assets 2,792

Deferred income tax asset 3,087

Other assets 513

Accounts payable ( 28 )

Accrued expenses ( 2,633 )

Deferred revenue and customer deposits ( 764 )

Operating lease liabilities ( 448 )

Non-current operating lease liabilities ( 2,344 )

Deferred income tax liabilities ( 7,926 )

Other liabilities ( 10 )

Completed technologies 18,300

In-process technologies 8,200

Customer relationships 5,800

Non-compete agreements 340

Trademarks 110

Goodwill 129,138

Purchase price $ 169,598

The completed technologies, in-process technologies, customer relationships, trademarks, and non-compete agreements are included in "Intangible assets" on the Consolidated Balance Sheet.

The completed technologies are being amortized to cost of revenue over eight years , the customer relationships are being amortized to SG&A expenses over seven years , the trademarks are being amortized to SG&A expenses over two years , and the non-compete agreements are being amortized to RD&E expenses over six to seven years .

The in-process technologies were completed in the fourth quarter of 2020 and are being amortized to cost of revenue over six years .

The portion of the acquired goodw ill deductible for tax purposes is $ 104,609,000 .

The remaining consideration consists of deferred payments of $ 24,040,000 that may become payable in October 2023, contingent upon the continued employment of key talent, and is being recorded as compensation expense over the four-year period.

Deteriorating global economic conditions from the COVID-19 pandemic triggered a review of long-lived assets for potential impairment in the second quarter of 2020.

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.

This transaction was accounted for as a business combination.

Pro-forma information is not presented because it is not significant.

Revenue and earnings since the date of the acquisition included in the Company's Consolidated Statements of Operations are also not presented because they are not material.

Transaction costs were immaterial and were expensed as incurred.

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.

Restructuring Charges

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

The Company recorded restructuring charges from these actions totaling $ 15,924,000 in 2020 which are included in “Restructuring charges” on the Consolidated Statements of Operation s.

The Company recorded restructuring charges from these actions totaling $ 15,924,000 in 2020 which are included in “Restructuring charges” on the Consolidated Statements of Operations.

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 in 2021.

The following table summarizes the restructuring charges for the year ended December 31, 2020 (in thousands):

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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 b enefits, including retention bonuses for selected employees, were recognized over the remaining service period which was completed by December 31, 2020.

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

Contract termination costs included operating lease asset impairment charges for eleven 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 recognize d in the second quarter of 2020 when th e Company ceased using the property for economic benefit.

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

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

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Balance as of December 31, 2020 1,624 750 15 2,389

Cash payments ( 1,142 ) ( 227 ) ( 15 ) ( 1,384 )

Foreign exchange rate changes — ( 7 ) — ( 7 )

Balance as of December 31, 2021 $ 482 $ 516 $ — $ 998

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

1 unchanged sentence

On February 17, 2022, the Company's Board of Directors declared a cash dividend of $ 0.065 per share.

The dividend is payable March 12, 2021 to all shareholders of record as of the close of business on February 26, 2021 .

COGNEX CORPORATION - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarter Ended

March 29, 2020 June 28, 2020 September 27, 2020 December 31,

(In thousands, except per share amounts)

Revenue $ 167,235 $ 169,097 $ 251,073 $ 223,615

Gross margin 126,035 118,777 191,332 168,455

Restructuring charges — 14,798 251 875

Intangible asset impairment charges — 19,571 — —

Operating income (loss) 20,951 ( 6,142 ) 96,635 59,085

Net income (loss) $ 20,477 $ ( 1,142 ) $ 87,506 $ 69,345

Basic net income (loss) per share $ 0.12 $ ( 0.01 ) $ 0.50 $ 0.40

Diluted net income (loss) per share $ 0.12 $ ( 0.01 ) $ 0.49 $ 0.39

Quarter Ended

March 31, 2019 June 30, 2019 September 29, 2019 December 31,

(In thousands, except per share amounts)

Revenue $ 173,484 $ 199,047 $ 183,325 $ 169,769

Gross margin 127,200 148,080 135,693 124,898

Operating income 30,147 51,756 43,092 17,607

Net income $ 33,104 $ 48,749 $ 41,685 $ 80,327

Basic net income per share $ 0.19 $ 0.28 $ 0.24 $ 0.47

Diluted net income per share $ 0.19 $ 0.28 $ 0.24 $ 0.46

The dividend is payable March 18, 2022 to all shareholders of record as of the close of business on March 4, 2022 .

COGNEX CORPORATION – SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

21 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data