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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-05 · 93 added, 72 removed, 96 unchanged (63% of the section changed)

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These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given.

These forward-looking statements, which include statements regarding business and market trends, future financial performance and financial targets, the expected impact of the COVID-19 pandemic on our assets, business and results of operations, customer demand and order rates and timing of related revenue, managing supply shortages, delivery lead times, future product mix, research and development activities, sales and marketing activities, new product offerings and product development activities, capital expenditures, investments, liquidity, dividends and stock repurchases, strategic and growth plans, and estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected.

These forward-looking statements, which include statements regarding business and market trends, future financial performance and financial targets, the expected impact of the fire at our primary contract manufacturer's warehouse on our assets, business and results of operations and related insurance recoveries, customer demand and order rates and timing of related revenue, managing supply shortages, delivery lead times, future product mix, research and development activities, sales and marketing activities, new product offerings and product development activities, capital expenditures, investments, liquidity, dividends and stock repurchases, strategic and growth plans, and estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected.

Such risks and uncertainties include:

(1) the reliance on key suppliers to manufacture and deliver quality products;

(2) the inability to obtain components for our products;

(1) the reliance on key suppliers such as our primary contract manufacturer to manufacture and deliver quality products;

(2) delays in the delivery of our products, the failure to meet delivery schedules, and resulting customer dissatisfaction or loss of sales;

(3) the inability to obtain, or the delay in obtaining components for our products at reasonable prices;

(4) the failure to effectively manage product transitions or accurately forecast customer demand;

(4) the inability to manage disruptions to our distribution centers;

(5) the inability to manage disruptions to our distribution centers or to our key suppliers;

(6) the inability to design and manufacture high-quality products;

(6) the impact, duration, and severity of the COVID-19 pandemic, including the availability and effectiveness of vaccines;

(7) the loss of, or curtailment of purchases by, large customers in the logistics industry;

(7) the impact, duration, and severity of the COVID-19 pandemic, including the availability and effectiveness of vaccines as well as government lockdowns;

(8) the loss of, or curtailment of purchases by, large customers in the logistics or consumer electronics industries;

(9) information security breaches;

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(12) the technological obsolescence of current products and the inability to develop new products;

(12) the failure to properly manage the distribution of products and services;

(13) the failure to properly manage the distribution of products and services, including the management of lead times and delivery dates;

(14) the impact of competitive pressures;

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(20) unfavorable global economic conditions, including high inflation rates;

(20) business disruptions from natural or man-made disasters or public health issues;

(21) business disruptions from natural or man-made disasters, such as fire, or public health issues;

(22) economic, political, and other risks associated with international sales and operations, including the impact of the war in Ukraine;

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Virtually every manufacturer or distributor can achieve better quality and efficiency by using machine vision, and therefore, Cognex products are used by a broad base of customers across a variety of industries, including logistics, automotive, consumer electronics, medical-related, semiconductor, consumer products, and food and beverage.

Revenue for the first quarter of 2022 totaled $282,407,000, representing an increase of 18% from the first quarter of 2021.

The increase was driven by higher revenue from the logistics industry, as well as growth in the automotive, semiconductor, consumer electronics, and medical-related industries.

Gross margin as a percentage of revenue was 72% for the first quarter of 2022 compared to 77% for the first quarter of 2021 due largely to higher inventory

purchase prices paid to secure strategic inventories during the global supply chain shortage.

Operating expenses increased 10% from the prior year primarily due to additional headcount to support higher business levels.

As a result of the lower gross margin percentage, operating income declined to 31% of revenue for the first quarter of 2022 from 33% of revenue for the first quarter of 2021.

Higher income tax expense further resulted in a decline in net income of 24% of revenue for the first quarter of 2022 compared to 29% of revenue for the first quarter of 2021.

These unfavorable impacts were partially offset by the favorable impact of the Company's stock buy-back program, that resulted in net income per diluted share of $0.38 for the first quarter of 2022 compared to $0.39 for the first quarter of 2021.

Revenue for the second quarter of 2022 totaled $274,628,000, representing an increase of 2% from the second quarter of 2021.

The increase was driven by higher revenue from the consumer electronics industry, offset by lower revenue in the logistics industry and the unfavorable impact of foreign currency exchange rate changes on revenue.

Gross margin as a percentage of revenue was 72% for the second quarter of 2022 compared to 75% for the second quarter of 2021 due largely to higher inventory purchase prices paid to secure strategic inventories during the global supply chain shortage.

Operating expenses of $131,344,000 increased 21% for the second quarter of 2022 over the prior year.

On June 7, 2022, our third-party contract manufacturer suffered a fire at its Indonesian facility destroying a large portion of the Company's component inventories.

The Company recorded a net loss related to the fire of $17,403,000, consisting of losses from inventories and other assets of $44,903,000, offset by an estimated insurance recovery of $27,500,000.

Excluding this recorded net loss, operating expenses grew 5% from the second quarter of 2021 due primarily to additional headcount to support our continued growth plans.

As a result of the loss from the fire and lower gross margin percentage, operating income declined to 24% of revenue for the second quarter of 2022 as compared to 34% of revenue for the second quarter of 2021.

Operating income excluding the impact of the loss from fire was 30% of revenue for the second quarter of 2022.

Tax expense declined as a result of favorable discrete tax adjustments related to the loss of assets from the fire and reversal of reserves for an Internal Revenue Service (IRS) audit closed in the second quarter, as well as a more favorable effective tax rate.

Net income declined to 21% of revenue for the second quarter of 2022 from 29% of revenue for the second quarter of 2021.

Results of Operations

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GAAP) and should be considered in addition to, and not as a substitute for, results prepared in accordance with U.S.

Revenue for the first quarter of 2022 was $282,407,000, representing an increase of $43,380,000, or 18%, over the first quarter of 2021.

Changes in foreign currency exchange rates did not have a material impact on total revenue growth.

The increase in revenue from the prior year came from multiple industries, led by strong growth in the logistics industry from a variety of customers.

Growth in the automotive industry, driven by electric vehicle investments, as well as the semiconductor, consumer electronics, and medical-related industries, also contributed to the increase in revenue.

Additionally, revenue for the first quarter of 2022 benefited from improved product supply conditions as compared to the fourth quarter of 2021 as orders requested to ship in the fourth quarter were delayed into the first quarter as supply improved.

From a geographic perspective, revenue from customers based in the Americas increased by 17% from the prior year driven primarily by higher revenue in the logistics industry.

Revenue from customers based in Europe increased by 10% from the prior year.

Revenue increased by $5,470,000, or 2%, for the three-month period and increased by $48,850,000, or 10%, for the six-month period compared to the same periods in 2021.

Changes in foreign exchange rates resulted in a lower level of reported revenue in 2022 as compared to 2021.

Excluding the impact of foreign currency exchange rate changes, revenue increased by 6% for the three-month period and by 13% for the six-month period compared to the same periods in 2021.

The largest contributor to growth over the prior year came from the consumer electronics industry, which also increased in the second quarter of 2022 from the first quarter of 2022 due to the timing of large customer deployments.

In contrast, revenue from the logistics industry declined in the second quarter of 2022 from the first quarter of 2022 due to the timing of large customer projects.

This trend resulted in a decrease in logistics revenue for the three-month period, while revenue for the six-month period was slightly higher than the prior year benefiting from a strong first quarter of 2022.

The broader factory automation market experienced slower spending trends in the second quarter of 2022 from the first quarter of 2022, although the majority of these markets delivered higher revenue than the prior year, including the automotive industry.

Changes in revenue from a geographic perspective were as follows:

• Revenue from customers based in the Americas decreased from the prior year by 16% for the three-month period and was slightly higher for the six-month period compared to the same periods in 2021.

The decrease in revenue for the three-month period was driven by lower revenue in the logistics industry.

• Revenue from customers based in Europe increased by 3% for the three-month period and 7% for the six-month period compared to the same periods in 2021.

Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2022, as sales denominated in Euros were translated into U.S.

Dollars at a lower rate.

Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Europe increased by 17% from the prior year.

The increase came from customers in a variety of industries, most notably logistics, automotive, and medical-related.

Revenue from customers based in Greater China increased by 27% from the prior year.

Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Europe increased by 13% for the three-month period and 15% for the six-month period, coming from customers in a variety of industries.

• Revenue from customers based in Greater China increased by 32% for the three-month period and 30% for the six-month period compared to the same periods in 2021.

Changes in foreign currency exchange rates did not have a material impact on revenue.

The increase was driven primarily by higher revenue in the consumer electronics, automotive, and semiconductor industries.

Revenue from other countries in Asia increased by 24% from the prior year.

The increase came from multiple industries, led by strong growth in consumer electronics.

• Revenue from other countries in Asia increased by 4% for the three-month period and 13% for the six-month period compared to the same periods in 2021.

Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2022, primarily from sales denominated in Japanese Yen and Korean Won.

Excluding the impact of foreign currency exchange rate changes, revenue from these customers increased by 30% from the prior year, coming from a variety of industries, most notably logistics and automotive.

As of the date of this report, we expect revenue for the second quarter of 2022 to be relatively consistent with or slightly lower than the first quarter of 2022.

On a sequential basis, we believe that higher revenue from the consumer electronics industry will be offset by the timing of large projects in the logistics industry and slower spending trends in the broader factory automation market.

Gross margin as a percentage of revenue decreased to 72% for the first quarter of 2022 compared to 77% for the first quarter of 2021.

Excluding the impact of foreign currency exchange rate changes, revenue from these customers increased by 11% for the three-month period and 20% for the six-month period, coming from a variety of industries, most notably semiconductor.

Based on our ongoing assessment and as of the date of this report, we currently expect that revenue for the third quarter of 2022 will be significantly lower than the second quarter of 2022 due to the impact of the fire on June 7, 2022 at our primary contract manufacturer in Indonesia.

Although production has resumed, a large amount of component inventories were destroyed in the fire restricting our ability to manufacture finished products.

Accordingly, we anticipate challenges in meeting certain customer-requested delivery dates in the third quarter, resulting in delayed shipments or possible loss of sales.

Further contributing to the decline in revenue for the third quarter of 2022, we currently expect lower revenue from e-commerce logistics customers.

Gross margin as a percentage of revenue was 72% for both the three-month and six-month periods in 2022 compared to 75% and 76% for the three-month and six-month periods in 2021, respectively.

The decrease was almost entirely due to higher prices paid to purchase inventories, including higher costs for components and freight, due largely to global supply chain constraints.

A relatively smaller portion of the decrease was due to less favorable revenue mix, primarily attributable to a greater percentage of total revenue coming from the logistics industry, which has relatively lower gross margins and included some comparatively lower margins from strategic logistics projects in 2022.

As of the date of this report, we expect gross margin as a percentage of revenue for the second quarter of 2022 to be in the low-70% range.

The expected gross margin percentage reflects our expectations that higher inventory purchase prices will continue throughout and beyond the second quarter of 2022.

Based on our ongoing assessment and as of the date of this report, we currently expect that gross margin as a percentage of revenue for the third quarter of 2022 will be approximately 70%.

The expected gross margin percentage reflects our expectations that higher inventory purchase prices will continue to put pressure on margins throughout and beyond the third quarter of 2022 as we work to replenish inventories destroyed by the fire on June 7, 2022 at our primary contract manufacturer.

These efforts are expected to include broker-buy purchases at higher-than-normal prices.

Operating Expenses

Research, Development, and Engineering Expenses

Research, development, and engineering (RD&E) expenses increased by $1,949,000, or 6%, over the first quarter of 2021 as detailed in the table below (in thousands).

Three-month period

Research, development, and engineering (RD&E) expenses increased by $2,689,000, or 9%, for the three-month period and increased by $4,638,000, or 7%, for the six-month period as detailed in the table below (in thousands).

Three-month period Six-month period

RD&E expenses in 2021 $ 31,302 $ 65,407

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Foreign currency exchange rate changes (1,282) (2,158)

Other 1,303 1,667

RD&E expenses in 2022 $ 33,991 $ 70,045

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These increases were partially offset by lower incentive compensation expenses than the prior year.

Relevant performance goals for these plans are set at the beginning of each year, with the ability to earn upside if the goals are exceeded.

Performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in the first quarter of 2021.

RD&E expenses were also lower than the prior year due to the impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated into U.S.

Relevant performance goals for these compensation plans are set at the beginning of each year, with the ability to earn

upside if the goals are exceeded.

Performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in the first half of 2021.

RD&E expenses were also lower than the prior year due primarily to the impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated into U.S.

Dollars at a lower rate.

RD&E expenses as a percentage of revenue were 13% for the first quarter of 2022 compared to 14% for the first quarter of 2021.

We believe that a continued commitment to RD&E activities is essential in order to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers.

RD&E expenses as a percentage of revenue were 12% and 13% for the three-month period and six-month period, respectively, compared to 12% and 13% for the same periods in 2021.

We believe that a continued commitment to RD&E activities is essential to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers.

In addition, we consider our ability to accelerate the time to market for new products to be critical to our revenue growth.

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Selling, General, and Administrative Expenses

Selling, general, and administrative (SG&A) expenses increased by $8,411,000, or 12%, over the first quarter of 2021 as detailed in the table below (in thousands).

Three-month period

Selling, general, and administrative (SG&A) expenses increased by $3,107,000, or 4%, for the three-month period and $11,518,000, or 8%, for the six-month period of 2021 as detailed in the table below (in thousands).

Three-month period Six-month period

SG&A expenses in 2021 $ 76,843 $ 149,267

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Foreign currency exchange rate changes (3,271) (5,237)

Other 1,876 4,094

SG&A expenses in 2022 $ 79,950 $ 160,785

SG&A expenses increased due to higher personnel-related costs due to headcount additions, primarily for Sales personnel to support the company's revenue growth, and salary increases provided to employees.

SG&A expenses increased due to higher personnel-related costs due to headcount additions, primarily for Sales personnel to support the Company's revenue growth, and salary increases provided to employees given the increasingly competitive job market within certain regions and specialties.

In addition to salaries and fringe benefits, these personnel-related costs included sales commissions and travel expenses related to the additional headcount.

Stock-based compensation expense was also higher than the prior year due to a higher average economic value of stock-based grants, as well as the impact of a forfeiture rate true-up that resulted in higher expense.

While travel expenses increased due to the number of sales personnel added, they also increased due to a higher level of travel activity as restrictions related to COVID-19 continued to ease.

Higher spending on sales demonstration equipment tied to new product launches also contributed to the increase.

While travel expenses increased due to the number of sales personnel added, expenses also increased due to a higher level of travel activity as restrictions related to COVID-19 continued to ease.

Higher spending on sales demonstration equipment tied to new product launches in the first quarter also contributed to the year-over-year increase.

These increases were partially offset by lower incentive compensation expenses than the prior year, which included sales commissions and incentive bonuses.

Relevant performance goals for these plans are set at the beginning of each year, with the ability to earn upside if the goals are exceeded.

Performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in the first quarter of 2021.

Performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in the first half of 2021.

SG&A expenses were also lower than the prior year due to the impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated into U.S.

Dollars at a lower rate.

Loss from Fire

On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia.

The fire destroyed a significant amount of Cognex-owned consigned inventories, as well as component inventories owned by the contract manufacturer that were designated for Cognex products.

There was no significant damage to the Company's production equipment.

Since the date of the fire and continuing through the date of this report, the Company has worked with the contract manufacturer to assess the damage, resume production, and begin the process of replenishing inventories destroyed by the fire.

Additionally, beginning last year, the Company has been working to ramp up an additional contract manufacturer to further mitigate risk, diversify supply chain, and expand production capacity.

We expect this additional contract manufacturer to commence production later in the year.

As a result of the fire, the Company recorded $44,903,000 in gross losses in the second quarter of 2022, including $36,484,000 of Cognex-owned inventories and $8,419,000 of primarily prepayments related to Cognex-designated components that were owned by the contract manufacturer.

Based on the provisions of the Company's insurance policies, the gross losses have been reduced by the estimated insurance proceeds expected to be received from the Company’s insurance carrier.

The Company has determined

that partial recovery of the incurred losses is probable and therefore recorded an insurance recovery of $27,500,000 in the second quarter of 2022.

The gross losses, net of insurance recovery, total $17,403,000 and is presented in the caption “Loss from fire” on the Consolidated Statements of Operations.

As of July 3, 2022 and through the date of financial statement issuance, management cannot yet estimate additional recoveries that could be available from the contract manufacturer.

Any future, additional recoveries in excess of recognized losses will be treated as gain contingencies and will be recognized when the gain is realized or realizable.

There can be no assurance, however, that the expected insurance coverage and/or recoveries from the contract manufacturer will be available to cover the losses from the fire.

Non-operating Income (Expense)

The Company recorded foreign currency losses of $444,000 for the first quarter of 2022 and $1,008,000 for the first quarter of 2021.

The Company recorded foreign currency losses of $2,043,000 and $2,487,000 for the three-month and six-month periods in 2022, respectively, compared to foreign currency losses of $639,000 and $1,647,000 for the same periods in 2021.

Foreign currency gains and losses result primarily from the revaluation and settlement of assets and liabilities that are denominated in currencies other than the functional currency of the Company, which is the U.S.

Dollar, or its subsidiaries.

Investment income decreased by $86,000, or 6%, from the prior year.

Investment income decreased $218,000, or 13%, for the three-month period and $303,000, or 9%, for the six-month period, compared to the same periods in 2021.

The decrease was due primarily to lower yields on the Company's portfolio of debt securities, partially offset by higher invested balances.

The Company recorded other expense of $48,000 for the first quarter of 2022 and $168,000 for the first quarter of 2021.

Other income (expense) includes fair value adjustments of contingent consideration liabilities arising from business acquisitions.

The Company recorded other expense of $188,000 and $236,000 for the three-month and six-month periods in 2022, respectively, compared to $127,000 and $295,000 for the same periods in 2021.

Income Tax Expense (Benefit)

The Company’s effective tax rate was 23% of pre-tax income for the first quarter of 2022 and 11% of pre-tax income for the first quarter of 2021.

Discrete tax items for the first quarter of 2021 included a decrease in tax expense of $5,207,000 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.

This amount was not material for the first quarter of 2022.

The Company cannot accurately predict the level of stock option exercises by employees or the Company's stock price in future periods.

Discrete tax items for the first quarter of 2022 included an increase in tax expense of $1,417,000 arising from an Internal Revenue Service (IRS) audit.

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.

Discrete tax items for the first quarter of 2022 also included an increase in tax expense of $1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits.

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

Remaining discrete tax expenses for the first quarter of 2022 totaled $3,187,000 and consisted primarily of transfer pricing and return-to-provision adjustments.

Excluding the impact of these discrete items, the Company’s effective tax rate was 16% of pre-tax income for the first quarter of 2022 and 18% of pre-tax income for the first quarter of 2021.

The decrease in the effective tax rate was due to more of the Company's profits being earned and taxed in lower tax jurisdictions, as well as higher estimated R&D tax credit utilization.

The Company's effective tax rate was 9% and 17% for the three-month and six-month periods ended July 3, 2022, respectively, and 17% and 14% for the three-month and six-month periods ended July 4, 2021, respectively.

The Company recorded a net discrete tax benefit totaling $4,792,000 and a net discrete tax expense totaling $1,546,000 for the three-month and six-month periods ended July 3, 2022, respectively, and net discrete tax benefits totaling $896,000 and $6,103,000 for the same periods in 2021.

Discrete tax items for the six-month period ended July 3, 2022 included (1) a decrease in tax expense of $2,440,000 arising from the impact of the loss from fire recorded during the three-month period ended July 3, 2022 (refer to Note 17), (2) an increase in tax expense of $1,417,000 arising from an Internal Revenue Service (IRS) audit recorded during the three-month period ended April 3, 2022, which was offset by a decrease in tax expense of $2,519,000 related to releases of reserves for income taxes due to the closure of this Internal Revenue Service (IRS) audit during the three-month period ended July 3, 2022, (3) an increase in tax expense of $1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits recorded during the three-month period ended April 3, 2022, and (4) an increase in tax expense of $3,353,000 primarily consisting of transfer pricing and return-to-provision adjustments.

Discrete tax items for the three-month and six-month periods ended July 4, 2021 included a decrease in tax expense of $1,431,000 and $6,638,000, respectively, 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 and six-month periods ended July 3, 2022.

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

The decrease in the effective tax rate for the three-month and six-month periods ended July 3, 2022 and July 4, 2021 was due to more of the Company's profits being earned and taxed in lower tax jurisdictions, as well as lower state taxes.

Liquidity and Capital Resources

The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and has resulted in an accumulated cash and investment balance of $794,164,000 as of April 3, 2022.

The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments that maintain liquidity.

The Company’s cash requirements for the first quarter of 2022 were primarily met with positive cash flows from operations, as well as the sale and maturity of investments.

The Company’s cash requirements for the six-month period in 2022 were primarily met with positive cash flows from operations, as well as the sale and maturity of investments.

Cash requirements consisted of operating activities, the repurchase of common stock, the payment of dividends, and capital expenditures.

Cash flows from operating activities included an increase in accounts receivable and inventories to support higher business levels.

The increase in inventories also resulted from the Company's initiative to secure key strategic components to meet customer demand, as well as carry higher stocking levels to mitigate the Company's exposure to demand changes or supply disruptions.

The Company expects inventory levels to continue to increase for the remainder of the year as inventory is received that was purchased in response to global supply chain challenges.

Capital expenditures for the first quarter of 2022 totaled $4,585,000 and consisted primarily of computer hardware and software, as well as manufacturing test equipment related to new product introductions.

Cash flows from operating activities included the purchase of inventories intended to support higher business levels, secure key strategic components to meet customer demand, and carry higher stocking levels to mitigate the Company's exposure to demand changes or supply disruptions.

It is expected that the Company's efforts to replenish inventories destroyed by the fire on June 7, 2022 at the Company's primary contract manufacturer will result in significant cash outflows for inventories through at least the remainder of the year.

Capital expenditures for the six-month period in 2022 totaled $11,253,000 and consisted primarily of computer hardware and software, manufacturing test equipment related to new product introductions, and leasehold improvements related to a new distribution center in Southborough, Massachusetts.

During the first quarter of 2022, the Company placed into service new business systems related to its sales process.

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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 first quarter of 2022, which completed purchases under this program.

As of July 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 six-month period ended July 3, 2022, which completed the authorized 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.

During the first quarter of 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.

During the six-month period ended July 3, 2022, the Company repurchased 590,000 shares at a cost of $37,317,000 under this program, leaving a remaining balance of $462,683,000 as of July 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.

The Company’s Board of Directors declared and paid cash dividends of $0.065 per share for the first quarter of 2022, totaling $11,303,000.

The Company’s Board of Directors declared and paid cash dividends of $0.065 per share for the first and second quarters of 2022, totaling $22,573,000.

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.

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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 2. Management’s Discussion and Analysis