What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-02 · 128 added, 126 removed, 527 unchanged (33% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three-months Ended Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(unaudited) (unaudited)

23 unchanged sentences

(In thousands)

Three-months Ended Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(unaudited) (unaudited)

2 unchanged sentences

Available-for-sale investments:

Net unrealized gain (loss), net of tax of $( 698 ) and $( 61 ) in the three-month periods, and net of tax of $( 4,734 ) and $( 646 ) in the six-month

Net unrealized gain (loss), net of tax of $( 1,564 ) and $( 162 ) in the three-month periods, and net of tax of $( 6,298 ) and $( 808 ) in the nine-month

periods, respectively

11 unchanged sentences

(In thousands)

July 3, 2022 December 31, 2021

October 2, 2022 December 31, 2021

Current assets:

49 unchanged sentences

(In thousands)

Six-months Ended

July 3, 2022 July 4, 2021

Nine-months Ended

October 2, 2022 October 3, 2021

Cash flows from operating activities:

3 unchanged sentences

Depreciation of property, plant, and equipment 12,176 12,641

Loss (gain) on disposal of property, plant, and equipment 12 4

Loss on disposal of property, plant, and equipment 12 4

Amortization of intangible assets 2,468 2,773

21 unchanged sentences

Cash flows from financing activities:

Net proceeds from issuance of common stock under stock plans 4,414 44,407

Net payments from issuance of common stock under stock plans 4,225 59,101

Repurchase of common stock ( 178,387 ) ( 48,294 )

14 unchanged sentences

Shares Par Value

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

Balance as of July 3, 2022 173,397 $ 347 $ 947,269 $ 512,230 $ ( 69,861 ) $ 1,389,985

Net issuance of common stock under stock plans 73 — ( 189 ) — — ( 189 )

8 unchanged sentences

Foreign currency translation adjustment — — — — ( 7,352 ) ( 7,352 )

Balance as of July 3, 2022 (unaudited) 173,397 $ 347 $ 947,269 $ 512,230 $ ( 69,861 ) $ 1,389,985

Balance as of October 2, 2022 (unaudited) 172,930 $ 346 $ 960,446 $ 510,877 $ ( 82,449 ) $ 1,389,220

Common Stock Additional

3 unchanged sentences

Shares Par Value

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

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

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

8 unchanged sentences

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

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

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

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

18 unchanged sentences

Foreign currency translation adjustment — — — — ( 13,425 ) ( 13,425 )

Balance as of July 3, 2022 (unaudited) 173,397 $ 347 $ 947,269 $ 512,230 $ ( 69,861 ) $ 1,389,985

Balance as of October 2, 2022 (unaudited) 172,930 $ 346 $ 960,446 $ 510,877 $ ( 82,449 ) $ 1,389,220

Common Stock Additional

14 unchanged sentences

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

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

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

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, adjustments related to the loss from fire (Note 17), and financial statement reclassifications necessary to present fairly the Company’s financial position as of July 3, 2022, and the results of its operations for the three-month and six-month periods ended July 3, 2022 and July 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 and six-month periods ended July 3, 2022 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, adjustments related to the loss from fire (Note 17), and financial statement reclassifications necessary to present fairly the Company’s financial position as of October 2, 2022, and the results of its operations for the three-month and nine-month periods ended October 2, 2022 and October 3, 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 and nine-month periods ended October 2, 2022 are not necessarily indicative of the results to be expected for the full year.

New Pronouncements

18 unchanged sentences

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

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

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of October 2, 2022 (in thousands):

Quoted Prices in

21 unchanged sentences

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 through the remainder of the five-year assessment period which concluded during the six-month period ended July 3, 2022.

The balance remained at zero through the remainder of the five-year assessment period which concluded during the second quarter of 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 did not record impairment charges related to non-financial assets during the three-month or six-month periods ended July 3, 2022 or July 4, 2021.

The Company did not record impairment charges related to non-financial assets during the three-month or nine-month periods ended October 2, 2022 or October 3, 2021.

COGNEX CORPORATION

2 unchanged sentences

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

July 3, 2022 December 31, 2021

October 2, 2022 December 31, 2021

Cash $ 265,500 $ 185,624

Money market instruments 504 537

Treasury bills 524 —

Cash and cash equivalents 266,004 186,161

13 unchanged sentences

$ 817,632 $ 907,364

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

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

1 unchanged sentence

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

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

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 July 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 $ 2,732,000 and $ 3,037,000 as of July 3, 2022 and December 31, 2021, respectively.

All of the Company's securities as of October 2, 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 $ 3,011,000 and $ 3,037,000 as of October 2, 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 July 3, 2022 (in thousands):

The following table summarizes the Company’s available-for-sale investments as of October 2, 2022 (in thousands):

Losses Fair Value

9 unchanged sentences

$ 582,912 $ 1 $ ( 31,285 ) $ 551,628

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

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of October 2, 2022 (in thousands):

Unrealized Loss Position For:

12 unchanged sentences

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 July 3, 2022 or December 31, 2021.

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

The Company recorded gross realized gains on the sale of debt securities totaling $ 15,000 and $ 133,000 for the three-month and six-month periods ended July 3, 2022, respectively, and gross realized losses on the sale of debt securities totaling $ 3,000 and $ 157,000 for the three-month and six-month periods ended July 3, 2022.

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

Based on this evaluation, no allowance for credit losses on debt securities was recorded as of October 2, 2022 or December 31, 2021.

There was no activity recorded in the allowance for credit losses during the three-month or nine-month periods ended October 2, 2022 or October 3, 2021.

The Company recorded no gross realized gains on the sale of debt securities for the three-month period ended October 2, 2022 and gross realized gains on the sale of debt securities totaling $ 133,000 for the nine-month period ended October 2, 2022, and gross realized losses on the sale of debt securities totaling $ 79,000 and $ 236,000 for the three-month and nine-month periods ended October 2, 2022, respectively.

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.

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of October 2, 2022 (in thousands):

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

7 unchanged sentences

Inventories consisted of the following (in thousands):

July 3, 2022 December 31, 2021

October 2, 2022 December 31, 2021

Raw materials $ 55,801 $ 50,452

2 unchanged sentences

$ 108,553 $ 113,102

Refer to Note 17 for information regarding losses incurred from the fire at the Company's primary contract manufacturer's plant in Indonesia during the three-month period ended July 3, 2022, including the impact on inventories.

Refer to Note 17 for information regarding losses incurred from the fire at the Company's primary contract manufacturer's plant in Indonesia during the second quarter of 2022, including the impact on inventories.

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

1 unchanged sentence

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

As of July 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.

As of October 2, 2022, there were two options to terminate and six options to extend that were accounted for in the determination of the lease term for outstanding leases.

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

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

The total operating lease expense for the three-month and six-month periods ended July 3, 2022 were $ 2,215,000 and $ 4,444,000 , respectively.

The total operating lease cash payments for the three-month and six-month periods ended July 3, 2022 were $ 2,227,000 and $ 4,306,000 , respectively.

The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and six-month periods ended July 3, 2022 were $ 37,000 and $ 75,000 , respectively.

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

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

There were no restrictions or covenants for outstanding leases as of October 2, 2022.

The total operating lease expense for the three-month and nine-month periods ended October 2, 2022 were $ 2,255,000 and $ 6,699,000 , respectively.

The total operating lease cash payments for the three-month and nine-month periods ended October 2, 2022 were $ 2,161,000 and $ 6,467,000 , 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 2, 2022 was $ 35,000 and $ 110,000 , respectively.

The total operating lease expense for the three-month and nine-month periods ended October 3, 2021 were $ 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.

COGNEX CORPORATION

4 unchanged sentences

Thereafter 10,808

The discounted present value of the future lease cash payments resulted in a lease liability of $ 34,252,000 and $ 25,581,000 as of July 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 July 3, 2022.

The discounted present value of the future lease cash payments resulted in a lease liability of $ 33,371,000 and $ 25,581,000 as of October 2, 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 October 2, 2022.

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

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

This lease commenced during the six-month period ended July 3, 2022, and therefore the Company recorded approximately $ 9,271,000 within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date.

The weighted-average discount rate was 2.9 % and 3.4 % for the leases outstanding as of July 3, 2022 and December 31, 2021, respectively.

The weighted-average remaining lease term was 6.9 and 5.1 years for the leases outstanding as of July 3, 2022 and December 31, 2021, respectively.

This lease commenced during the first quarter of 2022, and therefore the Company recorded approximately $ 9,271,000 within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date.

The weighted-average discount rate was 2.9 % and 3.4 % for the leases outstanding as of October 2, 2022 and December 31, 2021, respectively.

The weighted-average remaining lease term was 6.7 and 5.1 years for the leases outstanding as of October 2, 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 ( 4,204 )

Balance as of July 3, 2022 $ 239,798

Balance as of October 2, 2022 $ 237,509

COGNEX CORPORATION

9 unchanged sentences

Trademarks 110 110 —

Balance as of July 3, 2022 $ 73,675 $ 63,449 $ 10,226

Balance as of October 2, 2022 $ 73,675 $ 64,255 $ 9,420

Value Accumulated

6 unchanged sentences

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

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

As of October 2, 2022, estimated future amortization expense related to intangible assets was as follows (in thousands):

Year Ended December 31, Amount

10 unchanged sentences

Fulfillment of warranty obligations ( 2,170 )

Balance as of July 3, 2022 $ 5,221

Balance as of October 2, 2022 $ 4,990

COGNEX CORPORATION

1 unchanged sentence

Commitments and Contingencies

As of July 3, 2022, the Company had outstanding purchase orders totaling $ 67,516,000 to procure inventory from various vendors, due in part to higher inventory purchases in response to global supply chain constraints.

As of October 2, 2022, the Company had outstanding purchase orders totaling $ 81,565,000 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.

The Company expects the level of outstanding purchase orders to increase for the remainder of the year as it replenishes inventories destroyed in the fire on June 7, 2022 at its primary contract manufacturer (refer to Note 17).

A significant portion of the Company's outstanding inventory purchase orders as of July 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 expects the level of outstanding purchase orders to increase for the remainder of the year as it continues to replenish inventories destroyed in the fire on June 7, 2022 at its primary contract manufacturer (refer to Note 17).

A significant portion of the Company's outstanding inventory purchase orders as of October 2, 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.

5 unchanged sentences

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

July 3, 2022 December 31, 2021

October 2, 2022 December 31, 2021

Currency Notional

7 unchanged sentences

Hungarian Forint 1,280,000 2,948 1,355,000 4,155

Korean Won 4,270,000 3,302 — —

Canadian Dollar — — 1,480 1,167

2 unchanged sentences

Balance Fair Value Balance Fair Value

Location July 3, 2022 December 31, 2021 Sheet

Location July 3, 2022 December 31, 2021

Location October 2, 2022 December 31, 2021 Sheet

Location October 2, 2022 December 31, 2021

Derivatives Not Designated as Hedging Instruments:

4 unchanged sentences

Asset Derivatives Liability Derivatives

July 3, 2022 December 31, 2021 July 3, 2022 December 31, 2021

October 2, 2022 December 31, 2021 October 2, 2022 December 31, 2021

Gross amounts of recognized assets $ 835 $ 39 Gross amounts of recognized liabilities $ 442 $ 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 Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

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

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 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 Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Americas $ 65,847 $ 113,758 $ 284,057 $ 330,012

4 unchanged sentences

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

Three-months Ended Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Standard products and services $ 158,244 $ 212,567 $ 637,598 $ 669,215

2 unchanged sentences

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 14,428,000 and $ 10,854,000 as of July 3, 2022 and December 31, 2021, respectively.

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 15,581,000 and $ 10,854,000 as of October 2, 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 six-month period ended July 3, 2022 (in thousands):

The following table summarizes the allowance for credit losses activity for the nine-month period ended October 2, 2022 (in thousands):

Balance as of December 31, 2021 $ 776

1 unchanged sentence

Foreign exchange rate changes 1

Balance as of July 3, 2022 $ 741

Balance as of October 2, 2022 $ 741

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended October 2, 2022 (in thousands):

Balance as of December 31, 2021 $ 35,743

2 unchanged sentences

Foreign exchange rate changes ( 2,912 )

Balance as of July 3, 2022 $ 75,385

Balance as of October 2, 2022 $ 54,777

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

1 unchanged sentence

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

As of July 3, 2022, the Company had 14,250,000 shares available for grant under its stock plans.

As of October 2, 2022, the Company had 13,748,000 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.

3 unchanged sentences

Stock Options

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

The following table summarizes the Company’s stock option activity for the nine-month period ended October 2, 2022:

(in thousands) Weighted-

6 unchanged sentences

Forfeited or expired ( 170 ) 58.01

Outstanding as of July 3, 2022 8,389 $ 51.11 6.47 $ 26,951

Exercisable as of July 3, 2022 4,347 $ 43.46 5.30 $ 26,615

Options vested or expected to vest as of July 3, 2022 (1) 7,927 $ 50.45 6.36 $ 26,938

Outstanding as of October 2, 2022 8,681 $ 51.03 6.40 $ 22,376

Exercisable as of October 2, 2022 4,335 $ 43.54 5.08 $ 22,334

Options vested or expected to vest as of October 2, 2022 (1) 8,189 $ 50.48 6.27 $ 22,375

(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 Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Risk-free rate 2.7 % 1.4 % 2.1 % 1.3 %

10 unchanged sentences

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

The weighted-average grant-date fair values of stock options granted during the three-month and six-month periods ended July 3, 2022 were $ 18.21 and $ 22.33 , respectively, and during the three-month and six-month periods ended July 4, 2021 were $ 32.07 and $ 33.47 , respectively.

The total intrinsic values of stock options exercised for the three-month and six-month periods ended July 3, 2022 were $ 934,000 and 3,099,000 , respectively, and for the three-month and six-month periods ended July 4, 2021 were $ 11,621,000 and $ 53,948,000 , respectively.

The total fair values of stock options vested for the three-month and six-month periods ended July 3, 2022 were $ 1,188,000 and $ 26,723,000 , respectively, and for the three-month and six-month periods ended July 4, 2021 were $ 1,830,000 and $ 37,430,000 , respectively.

The weighted-average grant-date fair values of stock options granted during the three-month and nine-month periods ended October 2, 2022 were $ 18.81 and $ 21.40 , respectively, and during the three-month and nine-month periods ended October 3, 2021 were $ 35.64 and $ 33.78 , respectively.

The total intrinsic values of stock options exercised for the three-month and nine-month periods ended October 2, 2022 were $ 516,000 and $ 3,615,000 , respectively, and for the three-month and nine-month periods ended October 3, 2021 were $ 21,415,000 and $ 75,363,000 , respectively.

The total fair values of stock options vested for the three-month and nine-month periods ended October 2, 2022 were $ 1,159,000 and $ 27,882,000 , respectively, and for the three-month and nine-month periods ended October 3, 2021 were $ 1,498,000 and $ 38,928,000 , respectively.

Restricted Stock Units (RSUs)

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

The following table summarizes the Company's RSUs activity for the nine-month period ended October 2, 2022:

(in thousands) Weighted-Average

4 unchanged sentences

Forfeited or expired ( 61 ) 65.18

Nonvested as of July 3, 2022 1,194 $ 63.47

Nonvested as of October 2, 2022 1,312 $ 61.67

COGNEX CORPORATION

1 unchanged sentence

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 and six-month periods ended July 3, 2022 were $ 45.25 and $ 63.37 , respectively, and during the three-month and six-month periods ended July 4, 2021 were $ 75.98 and $ 87.46 , respectively.

There were 20,000 and 74,000 RSUs that vested during the three-month and six-month periods ended July 3, 2022, respectively, and 13,000 and 15,000 that vested during the three-month and six-month periods ended July 4, 2021, respectively.

The weighted-average grant-date fair values of RSUs granted during the three-month and nine-month periods ended October 2, 2022 were $ 47.12 and $ 58.44 , respectively, and during the three-month and nine-month periods ended October 3, 2021 were $ 86.34 and $ 87.38 , respectively.

There were 67,000 and 141,000 RSUs that vested during the three-month and nine-month periods ended October 2, 2022, respectively, and 0 and 15,000 that vested during the three-month and nine-month periods ended October 3, 2021, respectively.

Performance Restricted Stock Units (PRSUs)

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

The following table summarizes the Company's PRSUs activity for the nine-month period ended October 2, 2022:

(in thousands) Weighted-Average

3 unchanged sentences

Forfeited or expired — —

Nonvested as of July 3, 2022 33 $ 62.49

No PRSUs were granted or vested during the three-month period ended July 3, 2022.

No PRSUs were granted or vested during the three-month and six-month periods ended July 4, 2021.

Nonvested as of October 2, 2022 33 $ 62.49

No PRSUs were granted or vested during the three-month period ended October 2, 2022.

No PRSUs were granted or vested during the three-month and nine-month periods ended October 3, 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.

5 unchanged sentences

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 July 3, 2022, total unrecognized compensation expense related to non-vested equity awards, including stock options, RSUs and PRSUs, was $ 69,142,000 , 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 July 3, 2022 were $ 12,997,000 and $ 2,044,000 , respectively, and for the six-month period ended July 3, 2022 were $ 28,053,000 and $ 4,363,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended July 4, 2021 were $ 10,730,000 and $ 1,651,000 , respectively, and for the six-month period ended July 4, 2021 were $ 22,739,000 and $ 3,464,000 , respectively.

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

As of October 2, 2022, total unrecognized compensation expense related to non-vested equity awards, including stock options, RSUs, and PRSUs, was $ 68,089,000 , 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 2, 2022 were $ 13,366,000 and $ 2,133,000 , respectively, and for the nine-month period ended October 2, 2022 were $ 41,419,000 and $ 6,496,000 , respectively.

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.

No compensation expense was capitalized as of October 2, 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 Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Cost of revenue $ 468 $ 366 $ 1,513 $ 965

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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 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 purchases under this program.

As of October 2, 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.

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 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.

During the nine-month period ended October 2, 2022, the Company repurchased 1,125,000 shares, and an additional 5,000 shares that were repurchased in 2021 and settled in 2022, at a total cost of $ 61,387,000 under this additional authorization, leaving a remaining balance of $ 438,613,000 as of October 2, 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 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 tax 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 Company's effective tax rate was 14 % and 16 % for the three-month and nine-month periods ended October 2, 2022, respectively, and 11 % and 13 % for the three-month and nine-month periods ended October 3, 2021, respectively.

The Company recorded a net discrete tax benefit totaling $ 930,000 and a net discrete tax expense totaling $ 616,000 for the three-month and nine-month periods ended October 2, 2022, respectively, and net discrete tax benefits totaling $ 6,262,000 and $ 12,365,000 for the same periods in 2021.

Discrete tax items for the three-month and nine-month periods ended October 2, 2022 included (1) a decrease in tax expense during the three-month and nine-month periods ended October 2, 2022 of $ 928,000 and $ 3,368,000 , respectively, arising from the impact of the loss from fire recorded (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 during the three-month period ended April 3, 2022, (4) an increase in tax expense of $ 883,000 and $ 4,236,000 during the three-month and nine-month periods ended October 2, 2022, respectively, primarily consisting of transfer pricing and return-to-provision adjustments, and (5) a decrease in tax expense of $ 884,000 during both the three-month and nine-month periods ended October 2, 2022 related to the release of tax reserves due to closed periods.

Discrete tax items for the three-month and nine-month periods ended October 3, 2021 included a decrease in tax expense of $ 3,250,000 and $ 9,888,000 , 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 nine-month periods ended October 2, 2022.

The remaining discrete tax benefits for the three-month and nine-month periods ended October 3, 2021 of $ 3,012,000 and $ 2,477,000 , respectively, consisted of primarily return-to-provision adjustments and the release of tax reserves.

Excluding the impact of these discrete tax items, the Company’s effective tax rate was 16 % for both the three-month and nine-month periods ended October 2, 2022, and 18 % for both the three-month and nine-month periods ended October 3, 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 lower effective tax rate for the three-month and six-month periods ended July 3, 2022 as compared to the same periods 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 and six-month periods was primarily attributable to lower state taxes.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 13,444,000 as of July 3, 2022, which included $ 12,876,000 classified as a non-current liability and $ 568,000 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.

These differences resulted in a lower effective tax rate for the three-month and nine-month periods ended October 2, 2022 as compared to the same periods 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 and nine-month periods was primarily attributable to lower state taxes.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company’s reserve for income taxes, including gross interest and penalties, was $ 12,772,000 as of October 2, 2022, which included $ 12,204,000 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 2019 through 2020 remain open to examination by the IRS, and 2017 through 2020 remain open to examination by various state tax authorities.

1 unchanged sentence

The Company received the Closing Letter for Agreed Income Tax Cases from the IRS and the Company is no longer under audit by the IRS for the tax years 2017 and 2018.

As a result, management released reserves associated with the periods under audit which decreased tax expense by approximately $ 2,519,000 during the three-month period ended July 3, 2022.

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

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

These audits were completed during the nine-month period ended October 2, 2022 and resulted in no material tax impact to the Company's financial statements.

Weighted-Average Shares

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

Three-months Ended Six-months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three-months Ended Nine-months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Basic weighted-average common shares outstanding 173,256 176,812 173,640 176,572

1 unchanged sentence

Weighted-average common and common-equivalent shares outstanding 174,327 180,342 175,233 180,109

Stock options to purchase 4,048,000 and 1,818,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 3, 2022, respectively, and 701,000 and 591,000 for the same periods in 2021, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 480,000 and 21,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 3, 2022, respectively and 500 and 1,000 for the same periods in 2021, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Performance restricted stock units totaling 33,000 and 0 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 3, 2022, 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 and six-month periods July 4, 2021.

Stock options to purchase 6,167,000 and 3,297,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended October 2, 2022, respectively, and 586,000 and 655,000 for the same periods in 2021, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 607,000 and 26,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended October 2, 2022, respectively, and 1,000 for both the three-month and nine-month periods in 2021, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

PRSUs totaling 33,000 and 0 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended October 2, 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

There were no anti-dilutive PRSUs outstanding, on a weighted-average basis, during the three-month and nine-month periods October 3, 2021.

Loss from Fire

2 unchanged sentences

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.

Since the date of the fire and through the date of financial statement issuance, the Company has worked with the contract manufacturer to assess the damage, resume production, and replenish 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, including $ 36,484,000 of primarily Cognex-owned inventory that was destroyed or deemed to have a net realizable value of zero and $ 8,419,000 of primarily prepayments related to Cognex-designated components that were owned by the contract manufacturer.

As a result of the fire, the Company recorded $ 47,794,000 in gross losses in 2022, including $ 44,903,000 during the three-month period ended July 3, 2022 and $ 2,891,000 during the three-month period ended October 2, 2022.

Gross losses related to $ 37,643,000 of primarily Cognex-owned inventory that was destroyed or deemed to have a net realizable value of zero, $ 8,184,000 of primarily prepayments related to Cognex-designated components that were owned by the contract manufacturer, and $ 1,967,000 related to deleveraging of costs related to our distribution centers.

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 during the three-month period ended July 3, 2022.

The insurance receivable is included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets.

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 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

The Company has determined that partial recovery of the incurred losses is probable and therefore recorded an insurance recovery of $ 27,500,000

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

during the three-month period ended July 3, 2022.

The insurance receivable is included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets as of October 2, 2022.

Gross losses, net of insurance recovery, total $ 2,891,000 and $ 20,294,000 for the three-month and nine-month periods ended October 2, 2022, respectively, and are presented in the caption “Loss from fire” on the Consolidated Statements of Operations.

Subsequent to the October 2, 2022 balance sheet date, but prior to the date of financial statement issuance, the Company received insurance proceeds of $ 27,560,000 from the Company's insurance carrier.

In the fourth quarter of 2022, the loss from fire will be reduced by the proceeds received in excess of the original estimated insurance recovery recorded of $ 27,500,000 .

As of October 2, 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 insurance coverage and/or recoveries from the contract manufacturer will be available to cover the losses from the fire.

After considering all the relevant events and circumstances resulting from the fire, management does not believe that the carrying value of the Company exceeds its fair value, or that the carrying amount of the Company’s intangible assets may not be recoverable.

As such, no goodwill or intangible asset impairment charges were recorded during the three-month period ended July 3, 2022 as a result of the fire.

As such, no goodwill or intangible asset impairment charges were recorded during 2022 as a result of the fire.

Subsequent Events

On August 2, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.065 per share.

The dividend is payable on September 2, 2022 to all shareholders of record as of the close of business on August 19, 2022.

On November 3, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.07 per share.

The dividend is payable on December 2, 2022 to all shareholders of record as of the close of business on November 18, 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