What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 159 added, 266 removed, 417 unchanged (50% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three-months Ended Nine-months Ended

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

(unaudited) (unaudited)

Three-months Ended

April 3, 2022 April 4, 2021

Revenue $ 282,407 $ 239,027

3 unchanged sentences

Selling, general, and administrative expenses 80,835 72,424

Restructuring charges (Note 16) — 251 — 15,049

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

Operating income 86,728 78,453

16 unchanged sentences

(In thousands)

Three-months Ended Nine-months Ended

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

(unaudited) (unaudited)

Three-months Ended

April 3, 2022 April 4, 2021

Net income $ 67,333 $ 69,848

1 unchanged sentence

Available-for-sale investments:

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

Net unrealized gain (loss), net of tax of $( 4,036 ) and $( 585 ) in the three-month periods, respectively

( 13,548 ) ( 1,958 )

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

Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations 36 —

9 unchanged sentences

(In thousands)

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Current assets:

31 unchanged sentences

Total liabilities 575,370 573,569

Commitments and contingencies (Note 10)

Shareholders’ equity:

Preferred stock, $ .01 par value – Authorized:

400 shares in 2021 and 2020, respectively, no shares issued and outstanding

400 shares in 2022 and 2021, respectively;

no shares issued and outstanding

Common stock, $ .002 par value – Authorized:

300,000 shares in 2021 and 2020, respectively, issued and outstanding:

300,000 shares in 2022 and 2021, respectively;

issued and outstanding:

173,738 and 175,481 shares in 2022 and 2021, respectively

8 unchanged sentences

(In thousands)

Nine-months Ended

October 3, 2021 September 27, 2020

Three-months Ended

April 3, 2022 April 4, 2021

Cash flows from operating activities:

3 unchanged sentences

Depreciation of property, plant, and equipment 4,117 4,259

Loss on disposal of property, plant, and equipment 4 1,654

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

Amortization of intangible assets 840 927

Intangible asset impairment charges — 19,571

Excess and obsolete inventory charges 379 705

Operating lease asset impairment charges — 2,534

Amortization of discounts or premiums on investments 1,402 586

Realized gain on sale of investments ( 87 ) ( 3,591 )

Credit loss on investments — 75

Revaluation of contingent consideration — ( 114 )

Realized loss (gain) on sale of investments 36 —

Change in deferred income taxes ( 3,891 ) 1,250

19 unchanged sentences

Payment of dividends ( 11,303 ) ( 10,595 )

Payment of contingent consideration — ( 1,039 )

Net cash provided by (used in) financing activities ( 138,114 ) 17,670

12 unchanged sentences

Shares Par Value

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

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

Repurchase of common stock ( 323 ) — — ( 27,417 ) — ( 27,417 )

Stock-based compensation expense — — 10,614 — — 10,614

Payment of dividends ($ 0.060 per common share)

— — — ( 10,608 ) — ( 10,608 )

Net income — — — 78,900 — 78,900

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 162 )

— — — — ( 521 ) ( 521 )

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 19 ) ( 19 )

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

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

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Shares Par Value

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

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

Stock-based compensation expense — — 9,268 — — 9,268

Payment of dividends ($ 0.055 per common share)

— — — ( 9,582 ) — ( 9,582 )

Net income — — — 87,506 — 87,506

Net unrealized gain (loss) on available-for-sale investments, net of tax of $ 2,855

— — — — ( 2,308 ) ( 2,308 )

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

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

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

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

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Shares Par Value

Balance as of December 31, 2021 175,481 $ 351 $ 914,802 $ 562,882 $ ( 47,942 ) $ 1,430,093

9 unchanged sentences

Foreign currency translation adjustment — — — — ( 2,111 ) ( 2,111 )

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

Balance as of April 3, 2022 (unaudited) 173,738 $ 347 $ 933,452 $ 488,511 $ ( 63,565 ) $ 1,358,745

Common Stock Additional

12 unchanged sentences

— — — — ( 1,958 ) ( 1,958 )

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

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 3,591 ) ( 3,591 )

Foreign currency translation adjustment — — — — ( 2,770 ) ( 2,770 )

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

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

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

4 unchanged sentences

Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a full description of other significant accounting policies.

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

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

In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, and financial statement reclassifications necessary to present fairly the Company’s financial position as of April 3, 2022, and the results of its operations for the three-month periods ended April 3, 2022 and April 4, 2021, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.

The results disclosed in the Consolidated Statements of Operations for the three-month period ended April 3, 2022 are not necessarily indicative of the results to be expected for the full year.

New Pronouncements

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

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

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

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

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

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

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

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

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

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

5 unchanged sentences

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.

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.

COGNEX CORPORATION

2 unchanged sentences

Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of October 3, 2021 (in thousands):

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of April 3, 2022 (in thousands):

Quoted Prices in

5 unchanged sentences

Corporate bonds — 512,138 —

Treasury bills — 114,998 —

Asset-backed securities — 73,295 —

Treasury bills — 27,588 —

Agency bonds — 18,635 —

Municipal bonds — 6,966 —

Sovereign bonds — 2,007 —

Municipal bonds — 1,733 —

Economic hedge forward contracts — 42 —

7 unchanged sentences

The market participants are generally large commercial banks.

The Company's contingent consideration liabilities are reported at fair value based upon probability-adjusted present values of the consideration expected to be paid using significant inputs that are not observable in the market, and are therefore classified as Level 3.

Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving certain revenue milestones.

The fair values of these contingent consideration liabilities were calculated using discount rates consistent with the level of risk of achievement, and are remeasured each reporting period.

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

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

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

in 2017 was written down to zero in 2019 resulting from a lower level of revenue in the Americas' automotive industry.

The balance remained at zero as of April 3, 2022 and through the remainder of the five-year assessment period which concluded in April 2022.

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

Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized.

The Company evaluates these long-lived assets for impairment whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value may not be recoverable.

The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets for potential impairment as of May 26, 2020, which resulted in operating lease asset impairment charges of $ 2,534,000 (refer to Notes 6 and 16) that were

The Company did not record impairment charges related to non-financial assets during the three-month periods ended April 3, 2022 or April 4, 2021.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

Cash, Cash Equivalents, and Investments

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

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Cash $ 158,285 $ 185,624

Treasury bills 7,001 —

Money market instruments 483 537

Cash and cash equivalents 165,769 186,161

Treasury bills 87,014 35,403

Corporate bonds 97,772 73,088

Asset-backed securities 37,084 37,655

Municipal bonds 6,320 1,303

Treasury bills 10,204 18,912

Agency bonds 2,801 2,802

Sovereign bonds — 8,660

Municipal bonds 1,105 4,998

Current investments 148,966 137,455

1 unchanged sentence

Asset-backed securities 36,211 43,940

Treasury bills 27,984 96,458

Agency bonds 15,834 16,077

Treasury bills 10,383 39,753

Sovereign bonds 2,007 2,119

2 unchanged sentences

$ 794,164 $ 907,364

Cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition.

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

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

1 unchanged sentence

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

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

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

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

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

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

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

All of the Company's securities as of April 3, 2022 and December 31, 2021 were denominated in U.S.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 2,940,000 and $ 3,037,000 as of April 3, 2022 and December 31, 2021, respectively.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The following table summarizes the Company’s available-for-sale investments as of April 3, 2022 (in thousands):

Losses Fair Value

Treasury bills $ 86,657 $ 357 $ — $ 87,014

Corporate bonds $ 98,122 $ 58 $ ( 408 ) $ 97,772

Asset-backed securities 37,300 12 ( 228 ) 37,084

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

Treasury bills 10,247 — ( 43 ) 10,204

Agency bonds 2,800 1 — 2,801

Municipal bonds 1,105 — — 1,105

Corporate bonds 433,204 8 ( 18,846 ) 414,366

Asset-backed securities 37,579 — ( 1,368 ) 36,211

Treasury bills 27,821 163 — 27,984

Agency bonds 16,133 — ( 299 ) 15,834

Treasury bills 10,592 1 ( 210 ) 10,383

Sovereign bonds 2,130 — ( 123 ) 2,007

1 unchanged sentence

$ 649,847 $ 80 $ ( 21,532 ) $ 628,395

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

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of April 3, 2022 (in thousands):

Unrealized Loss Position For:

4 unchanged sentences

Corporate bonds $ 425,643 $ ( 17,258 ) $ 45,219 $ ( 1,996 ) $ 470,862 $ ( 19,254 )

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

Asset-backed securities 65,603 ( 1,592 ) 556 ( 4 ) 66,159 ( 1,596 )

Treasury bills 15,982 ( 250 ) 102 ( 3 ) 16,084 ( 253 )

Agency bonds 15,834 ( 299 ) — — 15,834 ( 299 )

Sovereign bonds 2,007 ( 123 ) — — 2,007 ( 123 )

Municipal bonds 1,733 ( 7 ) — — 1,733 ( 7 )

$ 526,802 $ ( 19,529 ) $ 45,877 $ ( 2,003 ) $ 572,679 $ ( 21,532 )

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

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

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

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

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

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

Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, are recorded in shareholders’ equity as accumulated other comprehensive loss.

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.

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

Based on this evaluation, no allowance for credit losses on debt securities was recorded as of April 3, 2022 or December 31, 2021.

There was no activity recorded in the allowance for credit losses during the three-month periods ended April 3, 2022 or April 4, 2021.

The Company recorded gross realized gains and losses on the sale of debt securities totaling $ 118,000 and $ 154,000 , respectively, for the three-month period ended April 3, 2022, and no gross realized gains or losses on the sale of debt securities for the three-month period ended April 4, 2021.

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

Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in shareholders’ equity as accumulated other comprehensive loss.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of April 3, 2022 (in thousands):

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

Corporate bonds $ 97,772 $ 175,124 $ 168,060 $ 47,259 $ 23,923 $ 512,138

Treasury bills 87,014 27,984 — — — 114,998

Asset-backed securities 37,084 21,883 — 14,328 — 73,295

Treasury bills 10,204 10,383 — — — 20,587

Agency bonds 2,801 15,834 — — — 18,635

Municipal bonds 6,320 646 — — — 6,966

Sovereign bonds — — 1,007 1,000 — 2,007

Municipal bonds 1,105 628 — — — 1,733

$ 148,966 $ 223,852 $ 169,067 $ 62,587 $ 23,923 $ 628,395

Inventories consisted of the following (in thousands):

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Raw materials $ 66,710 $ 50,452

2 unchanged sentences

$ 136,660 $ 113,102

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

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

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.

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

As of April 3, 2022, there were no options to terminate that were accounted for in the determination of the lease term for outstanding leases, and three options to extend that were accounted for in the determination of the lease term of three of the Company's 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 outstanding leases as of October 3, 2021.

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

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

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

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

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

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

There were no restrictions or covenants for outstanding leases as of April 3, 2022.

The total operating lease expense for the three-month periods ended April 3, 2022 and April 4, 2021 were $ 2,229,000 and $ 2,002,000 , respectively.

The total operating lease cash payments for the three-month periods ended April 3, 2022 and April 4, 2021 were $ 2,079,000 and $ 2,061,000 , respectively.

The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month periods ended April 3, 2022 and April 4, 2021 were $ 38,000 and $ 40,000 , respectively.

COGNEX CORPORATION

4 unchanged sentences

Thereafter 9,823

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

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

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

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

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

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

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

The discounted present value of the future lease cash payments resulted in a lease liability of $ 34,530,000 and $ 25,581,000 as of April 3, 2022 and December 31, 2021, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of April 3, 2022.

The weighted-average discount rate was 3.0 % and 3.4 % for the leases outstanding as of April 3, 2022 and December 31, 2021, respectively.

The weighted-average remaining lease term was 6.6 and 5.1 years for the leases outstanding as of April 3, 2022 and December 31, 2021, respectively.

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

1 unchanged sentence

Foreign exchange rate changes ( 533 )

Balance as of October 3, 2021 $ 241,799

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

Based on this assessment, management concluded that events and circumstances did not indicate the fair value of the reporting unit was less than its carrying value.

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

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance as of April 3, 2022 $ 241,180

Intangible Assets

7 unchanged sentences

Trademarks 110 110 —

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

Balance as of April 3, 2022 $ 73,675 $ 62,627 $ 11,048

Value Accumulated

6 unchanged sentences

Balance as of December 31, 2021 $ 73,675 $ 61,787 $ 11,888

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

Year Ended December 31, Amount

Remainder of fiscal 2021 $ 883

Thereafter 730

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

Based on this assessment, management concluded that certain of the Company's finite-lived intangible assets failed the recoverability test, and recorded impairment charges for these assets equal to the amount by which their carrying value exceeded their fair value.

The Company also measured the fair value and recorded an impairment charge for its indefinite-lived intangible asset related to in-process technologies.

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

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

This review resulted in intangible asset impairment charges totaling $ 19,571,000 in the second quarter of 2020, primarily related to lower projected cash flows from the technologies and customer relationships acquired from Sualab Co.

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

Completed technologies, in-process technologies, and customer relationships acquired from Sualab were impaired in the amounts of $ 10,070,000 , $ 5,900,000 , and $ 3,382,000 , respectively.

In addition, customer relationships acquired from EnShape GmbH that had a gross carrying value of $ 447,000 and accumulated amortization of $ 228,000 on the measurement date were reduced to zero , resulting in an impairment charge of $ 219,000 .

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

As of April 3, 2022, estimated future amortization expense related to intangible assets was as follows (in thousands):

Year Ended December 31, Amount

Remainder of fiscal 2022 $ 2,435

Warranty Obligations

8 unchanged sentences

Fulfillment of warranty obligations ( 779 )

Balance as of October 3, 2021 $ 5,417

Balance as of April 3, 2022 $ 5,524

Commitments and Contingencies

As of April 3, 2022, the Company had outstanding purchase orders totaling $ 88,981,000 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 primarily to expected sales in the next twelve months.

A significant portion of the Company's outstanding inventory purchase orders as of April 3, 2022, 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 have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer.

Derivative Instruments

The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates.

The Company enters into economic hedges utilizing foreign currency forward contracts with maturities of up to 95 days to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables.

The Company enters into economic hedges utilizing foreign currency forward contracts with maturities that do not exceed approximately three months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables.

The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged.

3 unchanged sentences

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

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Currency Notional

4 unchanged sentences

Mexican Peso 230,000 11,558 140,000 6,842

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

Japanese Yen 650,000 5,295 600,000 5,213

1 unchanged sentence

Hungarian Forint 1,235,000 3,693 1,355,000 4,155

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

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

Canadian Dollar 1,675 1,339 1,480 1,167

2 unchanged sentences

Balance Fair Value Balance Fair Value

Location October 3, 2021 December 31, 2020 Sheet

Location October 3, 2021 December 31, 2020

Location April 3, 2022 December 31, 2021 Sheet

Location April 3, 2022 December 31, 2021

Derivatives Not Designated as Hedging Instruments:

2 unchanged sentences

Asset Derivatives Liability Derivatives

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

April 3, 2022 December 31, 2021 April 3, 2022 December 31, 2021

Gross amounts of recognized assets $ 42 $ 39 Gross amounts of recognized liabilities $ 441 $ 230

2 unchanged sentences

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

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

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

Location in Financial Statements Three-months Ended

April 3, 2022 April 4, 2021

Derivatives Not Designated as Hedging Instruments:

4 unchanged sentences

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

Three-months Ended Nine-months Ended

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

Three-months Ended

April 3, 2022 April 4, 2021

Americas $ 126,658 $ 107,836

4 unchanged sentences

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

Three-months Ended Nine-months Ended

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

Three-months Ended

April 3, 2022 April 4, 2021

Standard products and services $ 257,880 $ 222,326

2 unchanged sentences

Costs to Fulfill a Contract

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

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 11,429,000 and $ 10,854,000 as of April 3, 2022 and December 31, 2021, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

3 unchanged sentences

Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

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

The following table summarizes the allowance for credit losses activity for the three-month period ended April 3, 2022 (in thousands):

Balance as of December 31, 2021 $ 776

Increases to the allowance for credit losses —

Write-offs, net of recoveries ( 10 )

Foreign exchange rate changes —

Balance as of October 3, 2021 $ 792

Balance as of April 3, 2022 $ 766

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The following table summarizes the deferred revenue and customer deposits activity for the three-month period ended April 3, 2022 (in thousands):

Balance as of December 31, 2021 $ 35,743

2 unchanged sentences

Foreign exchange rate changes 1

Balance as of October 3, 2021 $ 37,843

Balance as of April 3, 2022 $ 54,455

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

Stock-Based Compensation Expense

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

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

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

As of April 3, 2022, the Company had 14,242,000 shares available for grant under its stock plans.

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

RSUs generally vest upon three years of continuous employment or incrementally over such three-year period.

Participants are not entitled to dividends on RSUs.

RSUs generally vest upon three years or four years of continuous employment or incrementally over such three or four-year period.

PRSUs generally vest upon three years of continuous employment and achievement of performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant date.

Participants are not entitled to dividends on RSUs or PRSUs.

Stock Options

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

The following table summarizes the Company’s stock option activity for the three-month period ended April 3, 2022:

(in thousands) Weighted-

6 unchanged sentences

Forfeited or expired ( 86 ) 62.79

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

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

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

Outstanding as of April 3, 2022 8,429 $ 51.06 6.73 $ 233,406

Exercisable as of April 3, 2022 4,332 $ 43.39 5.56 $ 151,220

Options vested or expected to vest as of April 3, 2022 (1) 7,901 $ 50.34 6.62 $ 224,117

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

3 unchanged sentences

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

Three-months Ended Nine-months Ended

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

Three-months Ended

April 3, 2022 April 4, 2021

Risk-free rate 1.9 % 1.3 %

2 unchanged sentences

Expected term (in years) 5.2 5.7

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

Risk-free rate

6 unchanged sentences

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

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

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

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

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

The weighted-average grant-date fair values of stock options granted during the three-month periods ended April 3, 2022 and April 4, 2021 were $ 22.45 and $ 33.63 , respectively.

The total intrinsic values of stock options exercised for the three-month periods ended April 3, 2022 and April 4, 2021 were $ 2,165,000 and $ 42,327,000 , respectively.

The total fair values of stock options vested for the three-month periods ended April 3, 2022 and April 4, 2021 were $ 25,535,000 and $ 35,600,000 , respectively.

Restricted Stock Units (RSUs)

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

The following table summarizes the Company's RSUs activity for the three-month period ended April 3, 2022:

(in thousands) Weighted-Average

4 unchanged sentences

Forfeited or expired ( 18 ) 66.10

Nonvested as of October 3, 2021 814 $ 65.01

Nonvested as of April 3, 2022 1,217 $ 63.78

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 values of RSUs granted during the three-month periods ended April 3, 2022 and April 4, 2021 were $ 63.96 and $ 89.86 , respectively.

The number of RSUs that vested during the three-month periods ended April 3, 2022 and April 4, 2021 were 54,000 and 2,000 , respectively.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

Performance Restricted Stock Units (PRSUs)

The following table summarizes the Company's PRSUs activity for the three-month period ended April 3, 2022:

(in thousands) Weighted-Average

Grant Date Fair Value

Nonvested as of December 31, 2021 — $ —

Granted 33 62.49

Forfeited or expired — —

Nonvested as of April 3, 2022 33 $ 62.49

No PRSUs were granted or vested during the three-month period ended April 4, 2021.

The fair value of PRSUs is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the service and market conditions stipulated in the award grant.

Stock-Based Compensation Expense

The Company segments its employee population into two groups:

The Company stratifies its employee population into two groups:

one consisting of senior management and another consisting of all other employees.

1 unchanged sentence

Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover.

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

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

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

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

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

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

This resulted in an increase to compensation expense of $ 1,536,000 in 2022 and a decrease to compensation expense of $ 255,000 in 2021.

As of April 3, 2022, total unrecognized compensation expense related to non-vested equity awards, including stock options, RSUs and PRSUs, was $ 81,239,000 , which is expected to be recognized over a weighted-average period of 1.8 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended April 3, 2022 were $ 15,056,000 and $ 2,319,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended April 4, 2021 were $ 12,009,000 and $ 1,813,000 , respectively.

No compensation expense was capitalized as of April 3, 2022 or December 31, 2021.

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

Three-months Ended Nine-months Ended

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

Three-months Ended

April 3, 2022 April 4, 2021

Cost of revenue $ 563 $ 248

2 unchanged sentences

$ 15,056 $ 12,009

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Stock Repurchase Program

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

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

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

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

As of April 3, 2022, the Company repurchased 2,737,000 shares at a cost of $ 200,000,000 under this program, including 1,677,000 shares at a cost of $ 117,000,000 during the three-month period ended April 3, 2022, which completed purchases under this program.

On March 3, 2022, the Company's Board of Directors authorized the repurchase of an additional $ 500,000,000 of the Company's common stock.

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

During the three-month period ended April 3, 2022, the Company repurchased 202,000 shares at a cost of $ 13,405,000 under this program, leaving a remaining balance of $ 486,595,000 as of April 3, 2022.

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.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

A reconciliation of the United States federal statutory corporate tax rate to the Company’s income tax expense, or effective tax rate, was as follows:

Three-months Ended Nine-months Ended

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

Income tax expense at U.S.

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

State income taxes, net of federal benefit 2 % 1 % 2 % 1 %

Foreign tax rate differential ( 5 ) % ( 5 ) % ( 5 ) % ( 5 ) %

Tax credit ( 1 ) % ( 1 ) % ( 1 ) % ( 1 ) %

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

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

Other 1 % 2 % 1 % 2 %

Income tax expense 11 % 14 % 13 % 12 %

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

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

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

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

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

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

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

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

The Company's effective tax rate was 23 % for the three-month period ended April 3, 2022 and 11 % for the three-month period ended April 4, 2021.

Discrete tax items for the three-month period ended April 4, 2021 included a decrease in tax expense of $ 5,207,000 related to stock-based compensation, 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.

This impact was not material for the three-month period ended April 3, 2022.

Discrete tax items for the three-month period ended April 3, 2022 included (1) an increase in tax expense of $ 1,417,000 arising from an Internal Revenue Service (IRS) audit, (2) an increase in tax expense of $ 1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits, and (3) an increase in tax expense of $ 3,187,000 consisting primarily of transfer pricing and return-to-provision adjustments.

Excluding the impact of these discrete tax items, the Company’s effective tax rate was 16 % for the three-month period ended April 3, 2022 and 18 % for the three-month period ended April 4, 2021.

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

1 unchanged sentence

federal statutory corporate tax rate of 21 %.

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

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

These differences resulted in a lower effective tax rate for the three-month period ended April 3, 2022 as compared to the same period in 2021 due to more of the Company's profits being earned and taxed in lower tax jurisdictions.

The remaining decrease in the effective tax rate for the three-month period was primarily attributable to higher estimated R&D tax credit utilization.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 15,678,000 as of April 3, 2022, which included $ 15,110,000 classified as a non-current liability and $ 568,000 recorded as a reduction to non-current deferred tax assets.

Within the United States, the tax years 2017 through 2020 remain open to examination by the IRS and various state tax authorities.

The tax years 2016 through 2021 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates.

The Company is under audit by the IRS for the tax years 2017 and 2018.

Additionally, the Company is under audit by the Commonwealth of Massachusetts for tax years 2017 and 2018.

Management believes the Company is adequately reserved for these audits.

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

Management expects to release reserves associated with the periods under audit in the second or third quarter of 2022 when the Company receives the Closing Letter for Agreed Income Tax Cases from the IRS, resulting in a decrease in tax expense of approximately $ 2,400,000 .

The Company is no longer under audit by the Commonwealth of Massachusetts for tax years 2017 and 2018.

The audit was completed during the three-month period ended April 3, 2022 and resulted in no material tax impact to the Company's financial statements.

COGNEX CORPORATION

2 unchanged sentences

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

Three-months Ended Nine-months Ended

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

Three-months Ended

April 3, 2022 April 4, 2021

Basic weighted-average common shares outstanding 174,146 176,288

1 unchanged sentence

Weighted-average common and common-equivalent shares outstanding 176,668 179,971

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

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

Restructuring Charges

On May 26, 2020, the Company's Board of Directors approved a restructuring plan intended to reduce the Company's operating costs, optimize its business model, and address the impact of the COVID-19 pandemic.

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

As of December 31, 2020, the majority of these actions were completed and no additional charges are expected to be incurred in future periods in relation to this restructuring plan.

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

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

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

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

Contract termination costs 104 4,099

Other associated costs 183 600

$ 251 $ 15,049

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

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

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

Contract termination costs included operating lease asset impairment charges for offices closed prior to the end of the contractual lease term.

These costs also included the write-off of leasehold improvements and other equipment related to these abandoned offices that had no alternative use, as well as other associated operating costs, such as utilities, that the Company is obligated to pay for the remainder of the lease term.

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

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

Cash payments ( 1,133 ) ( 176 ) ( 15 ) ( 1,324 )

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

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

Stock options to purchase 1,282,000 and 485,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month periods ended April 3, 2022 and April 4, 2021, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 20,000 and 124,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month periods ended April 3, 2022 and April 4, 2021, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

There were no anti-dilutive performance restricted stock units outstanding, on a weighted-average basis, during the three-month periods ended April 3, 2022 or April 4, 2021.

Subsequent Events

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

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

On May 5, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.065 per share.

The dividend is payable on June 3, 2022 to all shareholders of record as of the close of business on May 20, 2022.

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

What changed 10-Q

Item 1. Financial Statements