##### 



Exhibit 13
 Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
 FORWARD-LOOKING STATEMENTS
  EXECUTIVE OVERVIEW
   
    
    Semiconductor and electronics capital equipment manufacturers purchase Cognex machine
vision systems and integrate them into the capital equipment that they manufacture and
then sell to their customers in the semiconductor and electronics industries that either
make computer chips or make printed circuit boards containing computer chips. Although the
Company sells to original equipment manufacturers (OEMs) in a number of industries, these
semiconductor and electronics OEMs have historically been large consumers of the Companys
products. Demand from these
capital equipment manufacturers is highly cyclical, with periods of investment followed by
temporary downturns.
    
    Discrete manufacturers in the factory automation area include a wide array of
manufacturers who use machine vision for applications in a variety of industries,
including the automotive, consumer electronics, food and beverage, healthcare
pharmaceutical, and aerospace industries. These customers purchase Cognex machine vision
systems either




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
 directly from the Company or through a reseller and install them on their production lines.
    
    Surface inspection customers are manufacturers of materials processed in a continuous
fashion, such as paper and metals. These customers need sophisticated machine vision to detect
and classify defects in the surfaces of those materials as they are being processed at high
speeds.
    Year ended December 31,
    
    2006
    
    
    2005
    
    
    2004Revenue
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Cost of revenue
    
    
    27
    
    
    
    29
    
    
    
    28Gross margin
    
    
    73
    
    
    
    71
    
    
    
    72Research, development, and engineering expenses
    
    
    13
    
    
    
    13
    
    
    
    14Selling, general, and administrative expenses
    
    
    41
    
    
    
    38
    
    
    
    35Operating income
    
    
    19
    
    
    
    20
    
    
    
    23Nonoperating income
    
    
    2
    
    
    
    2
    
    
    
    3Income before taxes
    
    
    21
    
    
    
    22
    
    
    
    26Income tax provision
    
    
    4
    
    
    
    6
    
    
    
    7Net income
    
    
    17
    %
    
    
    16
    %
    
    
    19
    %
 STOCK-BASED COMPENSATION EXPENSE




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
    RESULTS OF OPERATIONS
 Year Ended December 31, 2006
Compared to Year Ended December 31, 2005
 Revenue
  Semiconductor
and Electronics Capital Equipment Market
  Discrete
Factory Automation Market
  Commercial
Markets




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
 Surface
Inspection Market
  Product
Revenue
  Service
Revenue
  Gross
Margin
  MVSD
Margin
  SISD
Margin
  Product
Margin
  Service
Margin
  Operating
Expenses




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
     Nonoperating
Income
   Income
Taxes
  Year Ended December 31, 2005  Compared to Year Ended December 31, 2004
 Revenue




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
    Gross
Margin
    Operating
Expenses




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
    Nonoperating Income
  Income Taxes
 LIQUIDITY
AND CAPITAL RESOURCES




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
  VenrockLimited
    
    
    InventoryPartnership
    
    
    PurchaseYear Ended December 31,
    
    Interest
    
    
    Commitments
    
    
    Leases
    
    
    Total2007
    
    $
    1,525
    
    
    $
    12,731
    
    
    $
    4,780
    
    
    $
    19,0362008
    
    
    
    
    
    
    
    
    
    
    2,812
    
    
    
    2,8122009
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    1,4592010
    
    
    
    
    
    
    
    
    
    
    886
    
    
    
    8862011
    
    
    
    
    
    
    
    
    
    
    555
    
    
    
    555Thereafter
    
    
    
    
    
    
    
    
    
    
    1,850
    
    
    
    1,850$
    1,525
    
    
    $
    12,731
    
    
    $
    12,342
    
    
    $
    26,598
   Stock
Repurchase Program
  Dividends
  Acquisitions
  OFFBALANCE SHEET ARRANGEMENTS




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue
Recognition
    Investments




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
   Accounts
Receivable
  Inventories
  LongLived
Assets
  Warranty
Obligations
  Contingencies




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
  Stock-Based
Compensation Expense
  Income
Taxes
    Derivative
Instruments




---



##### 



Cognex Corporation: Managements Discussion and  Analysis of Financial Condition and Results of Operations
 NEW PRONOUNCEMENTS
 FIN No. 48, Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No.
109
  FASB
Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign
Currency Risk




---



##### 



Cognex Corporation: Managements Discussion and
Analysis of Financial Condition and Results of Operations
  Interest
Rate Risk
    Valuation of securities given
    
    
    No change in
    
    
    Valuation of securities givenType of security
    
    an interest rate decrease
    
    
    interest rates
    
    
    an interest rate increase(100 BP)
    
    (50 BP)
    
    
    
    
    
    50 BP
    
    100 BPMunicipal Bonds and Other Debt Securities
    
    $
    168,047
    
    
    $
    168,614
    
    
    $
    169,181
    
    
    $
    169,747
    
    
    $
    170,314
 Other
Market Risks
    27




---



##### 



Cognex Corporation: Consolidated Statements of Operations
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004RevenueProduct
    
    $
    214,938
    
    
    $
    192,804
    
    
    $
    176,569Service
    
    
    23,486
    
    
    
    24,071
    
    
    
    25,388238,424
    
    
    
    216,875
    
    
    
    201,957Cost of revenueProduct (1)
    
    
    50,318
    
    
    
    47,611
    
    
    
    42,788Service (1)
    
    
    14,625
    
    
    
    15,288
    
    
    
    14,58364,943
    
    
    
    62,899
    
    
    
    57,371Gross marginProduct
    
    
    164,620
    
    
    
    145,193
    
    
    
    133,781Service
    
    
    8,861
    
    
    
    8,783
    
    
    
    10,805173,481
    
    
    
    153,976
    
    
    
    144,586Research, development, and engineering expenses (1)
    
    
    32,607
    
    
    
    27,640
    
    
    
    27,063Selling, general, and administrative expenses (1)
    
    
    96,678
    
    
    
    82,332
    
    
    
    70,674Operating income
    
    
    44,196
    
    
    
    44,004
    
    
    
    46,849Foreign currency gain (loss)
    
    
    (333
    )
    
    
    (888
    )
    
    
    1,641Investment and other income
    
    
    6,437
    
    
    
    5,130
    
    
    
    4,670Income before provision for income taxes
    
    
    50,300
    
    
    
    48,246
    
    
    
    53,160Income tax provision
    
    
    10,445
    
    
    
    12,544
    
    
    
    15,416Net income
    
    $
    39,855
    
    
    $
    35,702
    
    
    $
    37,744Net income
per common and commonequivalent share:Basic
    
    $
    0.87
    
    
    $
    0.76
    
    
    $
    0.83Diluted
    
    $
    0.85
    
    




    $
    0.74
    
    
    $
    0.80Weightedaverage common and commonequivalent shares outstanding:Basic
    
    
    45,559
    
    
    
    46,709
    
    
    
    45,480Diluted
    
    
    46,648
    
    
    
    47,935
    
    
    
    47,358Cash dividends per common share
    
    $
    0.33
    
    
    $
    0.32
    
    
    $
    0.28(1) Amounts include stockbased compensation expense, as follows:Product cost of revenue
    
    $
    725
    
    
    $
    
    
    
    $
    Service cost of revenue
    
    
    871
    
    
    
    
    
    
    
    Research, development, and engineering
    
    
    3,627
    
    
    
    
    
    
    
    Selling, general, and administrative
    
    
    8,401
    
    
    
    
    
    
    
    Total
stockbased compensation expense
    
    $
    13,624
    
    
    $
    
    
    
    $
    
  28




---



##### 



Cognex Corporation: Consolidated Balance Sheets
 December 31,
    
    2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    87,361
    
    
    $
    72,856Shortterm investments
    
    
    128,319
    
    
    
    169,156Accounts receivable, less reserves of $1,662 and
$2,370 in 2006 and 2005, respectively
    
    
    40,055
    
    
    
    42,051Inventories, net
    
    
    30,583
    
    
    
    18,819Deferred income taxes
    
    
    8,636
    
    
    
    7,667Prepaid expenses and other current assets
    
    
    18,127
    
    
    
    16,104Total current assets
    
    
    313,081
    
    
    
    326,653Longterm investments
    
    
    50,540
    
    
    
    70,246Property, plant, and equipment, net
    
    
    26,028
    
    
    
    24,175Deferred income taxes
    
    
    9,002
    
    
    
    10,227Intangible assets, net
    
    
    44,988
    
    
    
    50,049Goodwill
    
    
    83,318
    
    
    
    79,807Other assets
    
    
    1,694
    
    
    
    3,405$
    528,651
    
    
    $
    564,562LIABILITIES
AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,463
    
    
    $
    7,118Accrued expenses
    
    
    40,612
    
    
    
    43,476Customer deposits
    
    
    842
    
    
    
    2,142Deferred revenue
    
    
    6,884
    
    
    
    5,305Total current liabilities
    
    
    54,801
    
    
    
    58,041Commitments (Notes 4, 9, 10, 11, and 18)Shareholders equity:Common stock, $.002 par value Authorized: 140,000 shares, issued: 44,403 and
47,171 shares in 2006 and 2005, respectively
    
    
    89
    
    
    
    94Additional paidin capital
    
    
    155,136
    
    
    
    216,031Retained earnings
    
    
    329,251
    
    
    
    304,454Accumulated other comprehensive loss
    
    
    (10,626
    )
    
    
    (14,058
    )Total shareholders equity
    
    
    473,850
    
    
    
    506,521$
    528,651
    
    
    $
    564,562
  29




---



##### 



Cognex Corporation: Consolidated Statements of Shareholders Equity
 AdditionalCommon Stock
    
    
    PaidinShares
    
    
    Par Value
    
    
    CapitalBalance at December 31, 2003
    
    
    48,186
    
    
    $
    96
    
    
    $
    209,679Issuance of common stock under stock option, stock purchase,
and other plans
    
    
    2,232
    
    
    
    4
    
    
    
    44,213Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    11,722Payment of dividends
    
    
    
    
    
    
    
    
    
    
    Common stock received for payment of stock option exercises
    
    
    
    
    
    
    
    
    
    
    Retirement of treasury stock
    
    
    (4,263
    )
    
    
    (8
    )
    
    
    (72,754
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    Losses on currency swaps, net of gains on longterm
intercompany loans, net of tax of $1,016
    
    
    
    
    
    
    
    
    
    
    Net unrealized loss on availableforsale investments,
net of tax of $696
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    Comprehensive incomeBalance at December 31, 2004
    
    
    46,155
    
    
    $
    92
    
    
    $
    192,860Issuance of common stock under stock option, stock purchase,
and other plans
    
    
    1,400
    
    
    
    2
    
    
    
    27,213Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    7,648Repurchase of common stock
    
    
    (384
    )
    
    
    
    
    
    
    (11,690
    )Payment of dividends
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    Gains on longterm intercompany loans, net of losses
on currency swaps, net of tax of $82
    
    
    
    
    
    
    
    
    
    
    Net unrealized loss on availablefor sale investments, net
of tax of $31
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    Comprehensive incomeBalance at December 31, 2005
    
    
    47,171
    
    
    $
    94
    
    
    $
    216,031Issuance of common stock under stock option, stock purchase,
and other plans
    
    
    513
    
    
    
    2
    
    
    
    10,357Stockbased compensation expense
    
    
    
    
    
    
    
    
    
    
    13,624Excess tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    1,413Repurchase of common stock
    
    
    (3,281
    )
    
    
    (7
    )
    
    
    (86,289
    )Payment of dividends
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    Gains on longterm intercompany loans, net of losses on
currency swaps, net of tax of $139
    
    
    
    
    
    
    
    
    
    
    Net unrealized gain on availableforsale investments,
net of tax of $330
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    Comprehensive incomeBalance at December 31, 2006
    
    
    44,403
    
    
    $
    89
    
    
    $
    155,136
  30




---



##### 



AccumulatedOther
    
    
    
    
    
    
    TotalTreasury Stock
    
    
    Retained
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    Cost
    
    
    Earnings
    
    
    Loss
    
    
    Income
    
    
    Equity4,253
    
    $
    (72,445
    )
    
    $
    258,724
    )
    
    $
    (11,060
    )
    
    
    
    
    
    $
    384,994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,722
    
    
    
    
    
    
    (12,756
    )
    
    
    
    
    
    
    
    
    
    
    (12,756
    )10
    
    
    (317
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317
    )(4,263)
    
    
    72,762
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,744
    
    
    
    
    
    
    $
    37,744
    
    
    
    37,744
    
    
    
    
    
    
    
    
    
    
    (1,730
    )
    
    
    (1,730
    )
    
    
    (1,730
    )
    
    
    
    
    
    
    
    
    
    
    (1,185
    )
    
    
    (1,185
    )
    
    
    (1,185
    )
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    118
    
    
    
    118$
    34,947

    
    $
    
    
    
    $
    283,712
    
    
    $
    (13,857
    )
    
    

    
    
    $
    462,807
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,648
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,690
    )
    
    
    
    
    
    
    (14,960
    )
    
    
    
    
    
    
    
    
    
    
    (14,960
    )
    
    
    
    
    
    
    35,702
    
    
    
    
    
    
    $
    35,702
    
    
    
    35,702
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    139
    
    
    
    139
    
    
    
    
    
    
    
    
    
    
    (52
    )
    
    
    (52
    )
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    (288
    )
    
    
    (288
    )
    
    
    (288
    )$
    35,501

    
    $
    
    
    
    $
    304,454
    
    
    $
    (14,058
    )
   
   
 
 
 
    $
    506,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,359
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,624
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,296
    )
    
    
    
    
    
    
    (15,058
    )
    
    
    
    
    
    
    
    
    
    
    (15,058
    )
    
    
    
    
    
    
    39,855
    
    
    
    
    
    
    $
    39,855
    
    
    
    39,855
    
    
    
    
    
    
    
    
    
    
    236
    
    
    
    236
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    562
    
    
    
    562
    
    
    
    
    
    
    
    
    
    
    2,634
    
    
    
    2,634
    
    
    
    2,634$
    43,287
    
    $
    
    
    
    $
    329,251
    
    
    $
    (10,626
    )
    
    
    
    
    
    $
    473,850
 31




---



##### 



Cognex Corporation: Consolidated Statements of Cash Flows
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    39,855
    
    
    $
    35,702
    
    
    $
    37,744Adjustments to reconcile net income to net cash provided by operations:Stockbased compensation expense
    
    
    13,624
    
    
    
    
    
    
    
    Depreciation of property, plant, and equipment
    
    
    4,285
    
    
    
    4,387
    
    
    
    4,548Amortization of intangible assets
    
    
    5,884
    
    
    
    4,283
    
    
    
    1,526Amortization of investments
    
    
    1,498
    
    
    
    2,755
    
    
    
    3,896Excess tax benefit from stock option exercises
    
    
    (1,413
    )
    
    
    
    
    
    
    Tax benefit from stock option exercises
    
    
    
    
    
    
    7,648
    
    
    
    11,722Deferred income tax expense (benefit)
    
    
    (45
    )
    
    
    (2,996
    )
    
    
    (2,568
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    4,216
    
    
    
    (5,770
    )
    
    
    (5,417
    )Inventories
    
    
    (10,178
    )
    
    
    1,048
    
    
    
    (3,642
    )Accounts payable
    
    
    (1,340
    )
    
    
    735
    
    
    
    (290
    )Accrued expenses
    
    
    (6,911
    )
    
    
    (7,089
    )
    
    
    15,785Other
    
    
    (996
    )
    
    
    2,058
    
    
    
    (128
    )Net cash provided by operating activities
    
    
    48,479
    
    
    
    42,761
    
    
    
    63,176Cash flows from investing activities:Purchase of investments
    
    
    (481,086
    )
    
    
    (1,437,264
    )
    
    
    (805,621
    )Maturity and sale of investments
    
    
    541,023
    
    
    
    1,531,830
    
    
    
    716,714Purchase of property, plant, and equipment
    
    
    (4,224
    )
    
    
    (3,819
    )
    
    
    (3,120
    )Cash paid for business acquisitions, net of cash acquired
    
    
    (3,188
    )
    
    
    (111,842
    )
    
    
    (123
    )Net cash provided by (used in) investing activities
    
    
    52,525
    
    
    
    (21,095
    )
    
    
    (92,150
    )Cash flows from financing activities:Issuance of common stock under stock option, stock purchase,
and other plans
    
    
    10,359
    
    
    
    27,215
    
    
    
    43,900Repurchase of common stock
    
    
    (86,296
    )
    
    
    (11,690
    )
    
    
    Payment of dividends
    
    
    (15,058
    )
    
    
    (14,960
    )
    
    
    (12,756
    )Excess tax benefit from stock option exercises
    
    
    1,413
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (89,582
    )
    
    
    565
    
    
    
    31,144Effect of exchange rate changes on cash
    
    
    3,083
    
    
    
    (3,645
    )
    
    
    2,120Net increase in cash and cash equivalents
    
    
    14,505
    
    
    
    18,586
    
    
    
    4,290Cash and cash equivalents at beginning of year
    
    
    72,856
    
    
    
    54,270
    
    
    
    49,980Cash and cash equivalents at end of year
    
    $
    87,361
    
    
    $
    72,856
    
    
    $
    54,270
  32




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Nature
of Operations
  Use of
Estimates in the Preparation of Financial Statements
  Basis
of Consolidation
  Foreign
Currency
  Cash,
Cash Equivalents, and Investments
    Accounts
Receivable
  Inventories
  33




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
    Property,
Plant, and Equipment
  Intangible
Assets
  Goodwill
  Warranty
Obligations
  Revenue
Recognition
   34




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
     Research
and Development
  Income
Taxes
  Net Income Per Share
  Comprehensive
Income (Loss)
  Concentrations
of Risk
  35




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
    Derivative
Instruments
   Stock-Based
Compensation Plans
    36




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 Year Ended December 31,
    
    2005
    
    
    2004Net income, as reported
    
    $
    35,702
    
    
    $
    37,744Less: Total share-based compensation costs determined under fair value
based method, net of tax
    
    
    (9,355
    )
    
    
    (13,183
    )Net income, pro forma
    
    $
    26,347
    
    
    $
    24,561Basic net income per share, as reported
    
    $
    0.76
    
    
    $
    0.83Basic net income per share, pro forma
    
    $
    0.56
    
    
    $
    0.54Diluted net income per share, as reported
    
    $
    0.74
    
    
    $
    0.80Diluted net income per share, pro forma
    
    $
    0.55
    
    
    $
    0.52
    (1)
 
 (1)
    
    Amount was originally reported as $0.49 and has been adjusted to $0.52 due to a
refinement in the calculation. NOTE 2: NEW PRONOUNCEMENTS
 FIN
No. 48, Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
  FASB
Statement no. 159, The Fair Value Option for
Financial Assets and Financial Liabilities
  NOTE 3: FOREIGN CURRENCY RISK MANAGEMENT
   37




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
   NOTE 4: CASH, CASH EQUIVALENTS, AND INVESTMENTS
  December 31,
    
    2006
    
    
    2005Cash
    
    $
    84,361
    
    
    $
    72,856Cash equivalents
    
    
    3,000
    
    
    
    Cash and cash equivalents
    
    
    87,361
    
    
    
    72,856Municipal bonds
    
    
    108,332
    
    
    
    140,718Commercial paper
    
    
    15,988
    
    
    
    24,584Agency notes
    
    
    3,999
    
    
    
    Corporate bonds
    
    
    
    
    
    
    2,500Treasury bills
    
    
    
    
    
    
    1,354Short-term investments
    
    
    128,319
    
    
    
    169,156Municipal bonds
    
    
    39,594
    
    
    
    59,863Limited partnership interest
    
    
    10,946
    
    
    
    10,383Long-term investments
    
    
    50,540
    
    
    
    70,246$
    266,220
    
    
    $
    312,258
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMunicipal bonds
    
    $
    108,467
    
    
    $
    4
    
    
    $
    (139
    )
    
    $
    108,332Commercial paper
    
    
    16,000
    
    
    
    
    
    
    
    (12
    )
    
    
    15,988Agency notes
    
    
    4,000
    
    
    
    
    
    
    
    (1
    )
    
    
    3,999Short-term investments
    
    
    128,467
    
    
    
    4
    
    
    
    (152
    )
    
    
    128,319Long-term municipal bonds
    
    
    39,710
    
    
    
    13
    
    
    
    (129
    )
    
    
    39,594$
    168,177
    
    
    $
    17
    
    
    $
    (281
    )
    
    $
    167,913
   38




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
   NOTE 5: INVENTORIES
  December 31,
    
    2006
    
    
    2005Raw materials
    
    $
    16,746
    
    
    $
    8,958Work-in-process
    
    
    1,630
    
    
    
    3,406Finished goods
    
    
    12,207
    
    
    
    6,455$
    30,583
    
    
    $
    18,819
   Statement ofBalance Sheet
    
    
    OperationsAccruedInventories
    
    
    Expenses
    
    
    BenefitsReserve balance at December 31, 2003
    
    $
    9,383
    
    
    $
    1,400Inventory sold to customers
    
    
    (805
    )
    
    
    
    
    
    
    805Inventory sold to brokers
    
    
    (387
    )
    
    
    
    
    
    
    Write-off and scrap of inventory
    
    
    (743
    )
    
    
    
    
    
    
    Reserve balance at December 31, 2004
    
    $
    7,448
    
    
    $
    1,400Benefits to cost of product revenue recorded in 2004
    
    
    
    
    
    
    
    
    
    $
    805Inventory sold to customers
    
    
    (759
    )
    
    
    
    
    
    
    759Inventory sold to brokers
    
    
    (158
    )
    
    
    
    
    
    
    Write-off and scrap of inventory
    
    
    (647
    )
    
    
    
    
    
    
    Reserve balance at December 31, 2005
    
    $
    5,884
    
    
    $
    1,400Benefits to cost of product revenue recorded in 2005
    
    
    
    
    
    
    
    
    
    $
    759Inventory sold to customers
    
    
    (1,079
    )
    
    
    
    
    
    
    1,079Inventory sold to brokers
    
    
    (617
    )
    
    
    
    
    
    
    Write-off and scrap of inventory
    
    
    (180
    )
    
    
    
    
    
    
    Reserve balance at December 31, 2006
    
    $
    4,008
    
    
    $
    1,400Benefits to cost of product revenue recorded in 2006
    
    
    
    
    
    
    
    
    
    $
    1,079
 39




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 6: PROPERTY, PLANT, AND EQUIPMENT
  December 31,
    
    2006
    
    
    2005Land
    
    $
    3,951
    
    
    $
    3,051Buildings
    
    
    18,371
    
    
    
    17,571Building improvements
    
    
    5,769
    
    
    
    5,206Computer hardware
and software
    
    
    31,911
    
    
    
    31,976Furniture and fixtures
    
    
    4,710
    
    
    
    4,314Leasehold improvements
    
    
    2,240
    
    
    
    2,10566,952
    
    
    
    64,223Less: accumulated
depreciation
    
    
    (40,924
    )
    
    
    (40,048
    )$
    26,028
    
    
    $
    24,175
     NOTE 7: INTANGIBLE ASSETS
  Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueDecember 31, 2006Distribution networks
    
    $
    38,060
    
    
    $
    5,477
    
    
    $
    32,583Customer contracts and relationships
    
    
    13,002
    
    
    
    4,110
    
    
    
    8,892Completed technologies
    
    
    6,834
    
    
    
    4,086
    
    
    
    2,748Other
    
    
    1,422
    
    
    
    657
    
    
    
    765$
    59,318
    
    
    $
    14,330
    
    
    $
    44,988December 31, 2005Distribution networks
    
    $
    38,060
    
    
    $
    2,191
    
    
    $
    35,869Customer contracts and relationships
    
    
    12,186
    
    
    
    2,520
    
    
    
    9,666Completed technologies
    
    
    9,028
    
    
    
    5,491
    
    
    
    3,537Other
    
    
    1,264
    
    
    
    287
    
    
    
    977$
    60,538
    
    
    $
    10,489
    
    
    $
    50,049
 40




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
  Year ended December 31,
    
    Amount2007
    
    
    5,6222008
    
    
    5,6222009
    
    
    5,4342010
    
    
    5,3042011
    
    
    4,401Thereafter
    
    
    18,605$
    44,988
 NOTE 8: GOODWILL
   MVSD
    
    
    SISD
    
    
    ConsolidatedBalance at December 31, 2004
    
    $
    4,121
    
    
    $
    2,912
    
    
    $
    7,033DVT business acquisition (Note 18)
    
    
    
    
    
    
    
    
    
    
    73,478Foreign currency exchange rate changes
    
    
    (333
    )
    
    
    (371
    )
    
    
    (704
    )Balance at December 31, 2005
    
    $
    77,266
    
    
    $
    2,541
    
    
    $
    79,807AssistWare business acquisition (Note 18)
    
    
    2,962
    
    
    
    
    
    
    
       2,962Siemens contingent payment
    
    
    190
    
    
    
    
    
    
    
    190DVT purchase price adjustment (Note 18)
    
    
    (298
    )
    
    
    
    
    
    
    (298
    )Foreign currency exchange rate changes
    
    
    365
    
    
    
    292
    
    
    
    657Balance at December 31, 2006
    
    $
    80,485
    
    
    $
    2,833
    
    
    $
    83,318
 NOTE 9: ACCRUED EXPENSES
 December 31,
    
    2006
    
    
    2005Forward contracts and
currency swaps
    
    $
    9,752
    
    
    
    9,026Income taxes
    
    
    9,548
    
    
    $
    12,653Vacation
    
    
    3,270
    
    
    
    3,094Company bonuses
    
    
    3,236
    
    
    
    3,653Salaries, commissions,
and payroll taxes
    
    
    3,129
    
    
    
    3,693Consumption taxes
    
    
    2,561
    
    
    
    2,624Inventory purchase
commitments (Note 5)
    
    
    1,400
    
    
    
    1,400Warranty obligations
    
    
    1,387
    
    
    
    1,447Professional fees
    
    
    854
    
    
    
    1,050Other
    
    
    5,475
    
    
    
    4,836$
    40,612
    
    
    $
    43,476
  Balance at December 31, 2004
    
    $
    1,758Provisions for warranties issued
during the period
    
    
    696Warranty obligations assumed in
business acquisition (Note 17)
    
    
    200Fulfillment of warranty obligations
    
    
    (1,055
    )Foreign exchange rate changes
    
    
    (152
    )Balance at December 31, 2005
    
    $
    1,447Provisions for warranties issued
during the period
    
    
    993Fulfillment of warranty obligations
    
    
    (1,153
    )Foreign exchange rate changes
    
    
    100Balance at December 31, 2006
    
    $
    1,387
 41




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 10: COMMITMENTS AND CONTINGENCIES
 Commitments
   Year ended December 31,
    
    Amount2007
    
    $
    4,7802008
    
    
    2,8122009
    
    
    1,4592010
    
    
    8862011
    
    
    555Thereafter
    
    
    1,850$
    12,342
  Year ended December 31,
    
    Amount2007
    
    $
    4502008
    
    
    4952009
    
    
    2762010
    
    
    2592011
    
    
    274Thereafter
    
    
    1,700$
    3,454
 Contingencies
   42




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 11: INDEMNIFICATION PROVISIONS
    NOTE 12: SHAREHOLDERS EQUITY
 Preferred Stock
  Stock repurchase Program
  Stock option Plans
   43




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
   Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    Intrinsic ValueOutstanding at December 31, 2005
    
    
    10,675
    
    
    $
    25.36Granted at market value
    
    
    1,730
    
    
    
    28.55Exercised
    
    
    (504
    )
    
    
    20.01Forfeited or Expired
    
    
    (577
    )
    
    
    28.93Outstanding at December 31, 2006
    
    
    11,324
    
    
    $
    25.90
    
    
    
    6.5
    
    
    $
    17,212Exercisable at December 31, 2006
    
    
    6,913
    
    
    $
    25.35
    
    
    
    5.3
    
    
    $
    15,725
 Employee Stock Purchase Plan
   NOTE 13: STOCK-BASED COMPENSATION EXPENSE
   Year Ended December 31,
    
    2006
    
    2005
    
    2004Risk-free rate
    
    
    4.6
    %
    
    
    3.4
    %
    
    
    2.5
    %Expected dividend yield
    
    
    1.12
    %
    
    
    1.26
    %
    
    
    .73
    %Expected volatility
    
    
    45
    %
    
    
    35
    %
    
    
    45
    %Expected term (in years)
    
    
    4.1
    
    
    
    2.8
    
    
    
    3.1
 Risk-Free Rate
  44




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 Expected Dividend Yield
  Expected Volatility
  Expected Term
      NOTE 14: EMPLOYEE SAVINGS PLAN
  45




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 15: INCOME TAXES
   Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004CurrentFederal
    
    $
    9,718
    
    
    $
    3,502
    
    
    $
    9,662State
    
    
    240
    
    
    
    507
    
    
    
    758Foreign
    
    
    5,674
    
    
    
    3,279
    
    
    
    98315,632
    
    
    
    7,288
    
    
    
    11,403Deferred:Federal
    
    
    (4,847
    )
    
    
    3,501
    
    
    
    (177
    )State
    
    
    (101
    )
    
    
    438
    
    
    
    306Foreign
    
    
    (239
    )
    
    
    1,317
    
    
    
    3,884(5,187
    )
    
    
    5,256
    
    
    
    4,013$
    10,445
    
    
    $
    12,544
    
    
    $
    15,416
  Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Income tax provision at federal statutory rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %State income taxes, net of federal benefit
    
    
    3
    
    
    
    1
    
    
    
    2Tax-exempt investment income
    
    
    (4
    )
    
    
    (3
    )
    
    
    (3
    )Foreign tax rate differential
    
    
    (11
    )
    
    
    (9
    )
    
    
    (6
    )Discrete tax events
    
    
    (4
    )
    
    
    
    
    
    
    Other
    
    
    2
    
    
    
    2
    
    
    
    1Provision for income taxes
    
    
    21
    %
    
    
    26
    %
    
    
    29
    %
 46




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
  December 31,
    
    2006
    
    
    2005Current deferred tax assets:Inventory and revenue related
    
    $
    4,881
    
    
    $
    4,805Federal capital loss carryforward
    
    
    1,237
    
    
    
    Bonus, commission, and other compensation
    
    
    1,144
    
    
    
    943Other
    
    
    1,854
    
    
    
    1,919Gross current deferred tax assets
    
    
    9,116
    
    
    
    7,667Valuation allowance
    
    
    (480
    )
    
    
    Net current deferred tax assets
    
    $
    8,636
    
    
    $
    7,667Noncurrent deferred tax assets:Federal and state tax credit carryforwards
    
    $
    11,611
    
    
    $
    11,434Stock-based compensation expense
    
    
    4,741
    
    
    
    Acquired completed
technologies and other intangible assets3,364
    
    
    
    3,664Depreciation
    
    
    1,478
    
    
    
    1,478Unrealized investment gains and losses
    
    
    1,428
    
    
    
    1,390Acquired in-process technology
    
    
    800
    
    
    
    924Net operating loss carryforwards
    
    
    
    
    
    
    5,600Federal and state capital loss carryforwards
    
    
    
    
    
    
    1,708Other
    
    
    771
    
    
    
    76224,193
    
    
    
    26,960Noncurrent deferred tax liabilities:Nondeductible intangible assets
    
    
    (14,990
    )
    
    
    (16,703
    )Other
    
    
    (201
    )
    
    
    (30
    )(15,191
    )
    
    
    (16,733
    )Net noncurrent deferred tax assets
    
    $
    9,002
    
    
    $
    10,227
    47




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
       48




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 16: NET INCOME PER SHARE
  Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Net income
    
    $
    39,855
    
    
    $
    35,702
    
    
    $
    37,744Basic:Weighted-average common shares outstanding
    
    
    45,559
    
    
    
    46,709
    
    
    
    45,480Net income per common share
    
    $
    0.87
    
    
    $
    0.76
    
    
    $
    0.83Diluted:Weighted-average common shares outstanding
    
    
    45,559
    
    
    
    46,709
    
    
    
    45,480Effect of dilutive stock options
    
    
    1,089
    
    
    
    1,226
    
    
    
    1,878Weighted-average common and common-equivalent shares outstanding
    
    
    46,648
    
    
    
    47,935
    
    
    
    47,358Net income per common and common-equivalent share
    
    $
    0.85
    
    
    $
    0.74
    
    
    $
    0.80
  NOTE 17: SEGMENT AND GEOGRAPHIC INFORMATION
  49




---



##### 



Cognex Corporation: Notes to Consolidated Financial Statements
  ReconcilingMVSD
    
    
    SISD
    
    
    Items
    
    
    ConsolidatedYear Ended December 31, 2006Product revenue
    
    $
    195,203
    
    
    $
    19,735
    
    
    
    
    
    
    $
    214,938Service revenue
    
    
    12,978
    
    
    
    10,508
    
    
    
    
    
    
    
    23,486Depreciation and amortization
    
    
    9,684
    
    
    
    260
    
    
    $
    225
    
    
    
    10,169Goodwill and intangibles
    
    
    125,473
    
    
    
    2,833
    
    
    
    
    
    
    
    128,306Operating income
    
    
    65,123
    
    
    
    3,380
    
    
    
    (24,307
    )
    
    
    44,196Year Ended December 31, 2005Product revenue
    
    $
    168,342
    
    
    $
    24,462
    
    
    
    
    
    
    $
    192,804Service revenue
    
    
    14,202
    
    
    
    9,869
    
    
    
    
    
    
    
    24,071Depreciation and amortization
    
    
    8,168
    
    
    
    286
    
    
    $
    216
    
    
    
    8,670Goodwill and intangibles
    
    
    127,315
    
    
    
    2,541
    
    
    
    
    
    
    
    129,856Operating income
    
    
    46,225
    
    
    
    4,956
    
    
    
    (7,177
    )
    
    
    44,004Year Ended December 31, 2004Product revenue
    
    $
    155,966
    
    
    $
    20,603
    
    
    
    
    
    
    $
    176,569Service revenue
    
    
    17,923
    
    
    
    7,465
    
    
    
    
    
    
    
    25,388Depreciation and amortization
    
    
    5,526
    
    
    
    341
    
    
    $
    207
    
    
    
    6,074Goodwill and intangibles
    
    
    11,627
    
    
    
    2,912
    
    
    
    
    
    
    
    14,539Operating income
    
    
    53,572
    
    
    
    1,336
    
    
    
    (8,059
    )
    
    
    46,849
     NorthAmerica
    
    
    Japan
    
    
    Europe
    
    
    Other
    
    
    ConsolidatedYear Ended December 31, 2006Product revenue
    
    $
    73,198
    
    
    $
    61,494
    
    
    $
    60,162
    
    
    $
    20,084
    
    
    $
    214,938Service revenue
    
    
    10,348
    
    
    
    5,430
    
    
    
    6,502
    
    
    
    1,206
    
    
    
    23,486Long-lived assets
    
    
    139,377
    
    
    
    1,820
    
    
    
    14,723
    
    
    
    108
    
    
    
    156,028Year Ended December 31, 2005Product revenue
    
    $
    70,921
    
    
    $
    53,761
    
    
    $
    56,150
    
    
    $
    11,972
    
    
    $
    192,804Service revenue
    
    
    9,531
    
    
    
    6,513
    
    
    
    7,299
    
    
    
    728
    
    
    
    24,071Long-lived assets
    
    
    144,432
    
    
    
    1,895
    
    
    
    10,999
    
    
    
    110
    
    
    
    157,436Year Ended December 31, 2004Product revenue
    
    $
    52,979
    
    
    $
    69,270
    
    
    $
    43,983
    
    
    $
    10,337
    
    
    $
    176,569Service revenue
    
    
    9,703
    
    
    
    8,301
    
    
    
    6,596
    
    
    
    788
    
    
    
    25,388Long-lived assets
    
    
    26,221
    
    
    
    2,396
    
    
    
    13,700
    
    
    
    117
    
    
    
    42,434
  50




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##### 



Cognex Corporation: Notes to Consolidated Financial Statements
 NOTE 18: ACQUISITIONS
 Acquisition
of AssistWare Technology, Inc.
    Weighted-AverageEstimated Fair
    
    
    Amortization PeriodValue
    
    
    (in years)Accounts receivable
    
    $
    58Inventories
    
    
    29Prepaid expenses and other current assets
    
    
    320Property, plant, and equipment
    
    
    32Intangible assetsCustomer contract
    
    
    140
    
    
    
    3.5Customer relationships
    
    
    100
    
    
    
    9Completed technologies
    
    
    100
    
    
    
    5Goodwill
    
    
    2,962Total assets acquired
    
    
    3,741Accounts payable
    
    
    280Accrued expenses
    
    
    463Total liabilities assumed
    
    
    743Total purchase price
    
    $
    2,998
 51




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##### 



Cognex Corporation: Notes to Consolidated Financial Statements
  Acquisition of DVT Corporation Vision Sensor Business
    Weighted-AverageEstimated Fair Value
    
    
    Amortization Period (in years)Accounts receivable
    
    $
    5,785Inventories
    
    
    1,995Prepaid expenses and other current assets
    
    
    5,531Property, plant, and equipment
    
    
    766Other assets
    
    
    66Intangible assetsDistribution networks
    
    
    38,060
    
    
    
    11.6Customer relationships
    
    
    4,740
    
    
    
    12Completed technologies
    
    
    3,680
    
    
    
    6Trade names, trademarks, and
non-competition agreement
    
    
    1,110
    
    
    
    4Goodwill
    
    
    73,180Total assets acquired
    
    
    134,913Accounts payable
    
    
    1,388Accrued expenses
    
    
    6,102Net deferred tax liabilities
    
    
    15,816Total liabilities assumed
    
    
    23,306Total purchase price
    
    $
    111,607
 52




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##### 



Cognex Corporation: Notes to Consolidated Financial Statements
   Year Ended December 31,
    
    2005
    
    
    2004Revenue
    
    $
    227,431
    
    
    $
    230,196Net income
    
    $
    35,266
    
    
    $
    36,263Net income per diluted share
    
    $
    0.74
    
    
    $
    0.77
 NOTE 19: DIVIDENDS
  NOTE 20: SUBSEQUENT EVENTS
  NOTE 21: SUPPLEMENTAL DISCLOSURES
     53




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##### 



Cognex Corporation: Report of Independent Registered Public Accounting Firm
on Financial Statements
 To the Board of Directors and Shareholders of Cognex Corporation:
      
 
 Cognex Corporation: Report of Management on Internal Control
Over Financial Reporting
    54




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##### 



Cognex Corporation: Report of Independent Registered Public Accounting Firm on Internal Control
Over Financial Reporting
 To The Board of Directors and Shareholders of Cognex Corporation:
       
 
 55




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##### 



Cognex Corporation: Five-year Summary of Selected Financial Data
 Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Statement of Operations Data:Revenue
    
    $
    238,424
    
    
    $
    216,875
    
    
    $
    201,957
    
    
    $
    150,092
    
    
    $
    114,107Cost of revenue(1)
    
    
    64,943
    
    
    
    62,899
    
    
    
    57,371
    
    
    
    50,139
    
    
    
    39,859Gross margin
    
    
    173,481
    
    
    
    153,976
    
    
    
    144,586
    
    
    
    99,953
    
    
    
    74,248Research, development, and
engineering expenses(1)
    
    
    32,607
    
    
    
    27,640
    
    
    
    27,063
    
    
    
    24,719
    
    
    
    25,630Selling, general, and
administrative expenses(1)
    
    
    96,678
    
    
    
    82,332
    
    
    
    70,674
    
    
    
    55,724
    
    
    
    58,376Operating income (loss)
    
    
    44,196
    
    
    
    44,004
    
    
    
    46,849
    
    
    
    19,510
    
    
    
    (9,758
    )Nonoperating income
    
    
    6,104
    
    
    
    4,242
    
    
    
    6,311
    
    
    
    3,738
    
    
    
    1,554Income (loss) before taxes
    
    
    50,300
    
    
    
    48,246
    
    
    
    53,160
    
    
    
    23,248
    
    
    
    (8,204
    )Income tax provision (benefit)
    
    
    10,445
    
    
    
    12,544
    
    
    
    15,416
    
    
    
    7,297
    
    
    
    (2,177
    )Net income (loss)
    
    $
    39,855
    
    
    $
    35,702
    
    
    $
    37,744
    
    
    $
    15,951
    
    
    $
    (6,027
    )Basic net income (loss) per share
    
    $
    0.87
    
    
    $
    0.76
    
    
    $
    0.83
    
    
    $
    0.37
    
    
    $
    (0.14
    )Diluted net income (loss) per share
    
    $
    0.85
    
    
    $
    0.74
    
    
    $
    0.80
    
    
    $
    0.36
    
    
    $
    (0.14
    )Basic weighted-average common
shares outstanding
    
    
    45,559
    
    
    
    46,709
    
    
    
    45,480
    
    
    
    43,173
    
    
    
    43,503Diluted weighted-average common
shares outstanding
    
    
    46,648
    
    
    
    47,935
    
    
    
    47,358
    
    
    
    44,466
    
    
    
    43,503Cash dividends per common share
    
    $
    0.33
    
    
    $
    0.32
    
    
    $
    0.28
    
    
    $
    0.12
    
    
    $
    
 
 (1)
    
    Amounts in 2006 include stock-based compensation expense, as follows: Cost of revenue
    
    $
    1,596Research, development, and engineering
    
    
    3,627Selling, general, and administrative
    
    
    8,401Total stock-based compensation expense
    
    $
    13,624
 December 31,
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands)Balance Sheet Data:Working capital
    
    $
    258,280
    
    
    $
    268,612
    
    
    $
    242,460
    
    
    $
    150,311
    
    
    $
    162,808Total assets
    
    
    528,651
    
    
    
    564,562
    
    
    
    533,308
    
    
    
    432,533
    
    
    
    385,934Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    
    473,850
    
    
    
    506,521
    
    
    
    462,807
    
    
    
    384,994
    
    
    
    354,520
 56




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##### 



Cognex Corporation: Selected Quarterly Financial Data (Unaudited)
 Quarter ended 2006
    
    April 2,
    
    
    July 2,
    
    
    October 1,
    
    
    December 31,Revenue
    
    $
    59,040
    
    
    $
    63,074
    
    
    $
    58,005
    
    
    $
    58,305Gross margin
    
    
    42,330
    
    
    
    46,481
    
    
    
    42,558
    
    
    
    42,112Operating income
    
    
    10,634
    
    
    
    12,622
    
    
    
    11,147
    
    
    
    9,793Net income
    
    
    8,800
    
    
    
    11,434
    
    
    
    10,116
    
    
    
    9,505Basic net income per share
    
    
    0.19
    
    
    
    0.25
    
    
    
    0.23
    
    
    
    0.21Diluted net income per share
    
    
    0.18
    
    
    
    0.24
    
    
    
    0.22
    
    
    
    0.21Cash dividends per common share
    
    
    0.080
    
    
    
    0.080
    
    
    
    0.085
    
    
    
    0.085Common stock prices:High
    
    
    33.24
    
    
    
    30.01
    
    
    
    26.20
    
    
    
    26.98Low
    
    
    27.18
    
    
    
    24.25
    
    
    
    20.87
    
    
    
    21.65
 Quarter Ended 2005
    
    April 3,
    
    
    July 3,
    
    
    October 2,
    
    
    December 31,Revenue
    
    $
    43,198
    
    
    $
    54,603
    
    
    $
    58,256
    
    
    $
    60,818Gross margin
    
    
    29,408
    
    
    
    38,538
    
    
    
    42,501
    
    
    
    43,529Operating income
    
    
    5,585
    
    
    
    9,859
    
    
    
    13,926
    
    
    
    14,634Net income
    
    
    5,294
    
    
    
    7,800
    
    
    
    10,858
    
    
    
    11,750Basic net income per share
    
    
    0.11
    
    
    
    0.17
    
    
    
    0.23
    
    
    
    0.25Diluted net income per share
    
    
    0.11
    
    
    
    0.17
    
    
    
    0.22
    
    
    
    0.24Cash dividends per common share
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08Common stock prices:High
    
    
    28.44
    
    
    
    27.28
    
    
    
    33.76
    
    
    
    32.70Low
    
    
    23.80
    
    
    
    21.40
    
    
    
    25.43
    
    
    
    26.78
 57




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##### 



Cognex Corporation: Stock Performance Graph
  Cognex Corporation
Comparison of Five-year
Cumulative Total Returns
 
 
  A.
    
    The lines represent monthly index levels derived from compounded daily returns that include all
dividends.B.
    
    The indexes are reweighted daily using the market capitalization on the previous trading day.C.
    
    If the monthly interval, based on the fiscal year-end, is not a trading day the preceding
trading day is used.D.
    
    The index level for all series was set to $100.0 on I2/31/2OO1. 58




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##### 



Cognex Corporation: Offices
 UNITED STATES
 Corporate Headquarters
 California
 
 
 Georgia
 Illinois
 Michigan
 Oregon
 Pennsylvania
 Tennessee
 Wisconsin
 CANADA
 
 EUROPE
 Finland
 France
 Germany
 
 Ireland
 Italy
 59




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##### 



Cognex Corporation: Offices
 EUROPE
 Spain
 Sweden
 Switzerland
 United Kingdom
 
 
 JAPAN
 Cognex KK-Headquarters
 
 
 
 
 ASIA
 China
 Korea
 Singapore
 Taiwan
 60




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##### 



Cognex Corporation: Company Information
 Transfer Agent
 General Counsel
 Independent Auditors
 Form 10-k
  
    BOARD OF DIRECTORS
 Robert J. Shillman
 Patrick A. Alias
 Jerald G. Fishman
 Anthony Sun
 Reuben Wasserman
 SENIOR MANAGEMENT
 Robert J. Shillman
 James F. Hoffmaster
 Patrick A. Alias
 Patricia Bautz
 Eric Ceyrolle
 Ettore Cucchetti
 Markku Jaaskelainen
 Todd Keebaugh
 Didier Lacroix
 Herb Lade
 Stanley Luboda
 Marilyn Matz
 John McGarry
 Richard A. Morin
 Akira Nakamura
 Kris Nelson
 Brian Phillips
 David Schatz
 Robert Settle
 Hisataka Shitara
 William Silver
 Justin Testa
      61