##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
 (Mark One)
 December 31, 2009
  
  Commission File Number
    001-34218
  COGNEX CORPORATION
  (Exact name of registrant as
    specified in its charter)
 Massachusetts

04-2713778(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   One Vision
    Drive
    Natick, Massachusetts
    01760-2059(508) 650-3000
 (Address, including zip code,
    and telephone number,
 including area code, of
    principal executive offices)
   Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, par value $.002 per share

The NASDAQ Stock Market LLCPreferred Stock Purchase Rights

The NASDAQ Stock Market LLC       X
    X
    X
  Regulation S-T
  
  Regulation S-K Form 10-K Form 10-K.  [  ]
  Rule 12b-2
  x  Large
    accelerated
    filer     o  Accelerated
    filer     o  Non-accelerated
    filer     o  Smaller
    reporting company
  (Do not check if a smaller
    reporting company)
  Rule 12b-2
 Yes                          No X
   as of July 5, 2009:
    $507,504,000
 $.002 par value common stock
    outstanding as of January 31, 2010:
    39,665,559 shares




---



##### 





COGNEX
    CORPORATION ANNUAL REPORT ONFORM 10-K
    FOR THE YEAR ENDED DECEMBER 31, 2009
   INDEX
   
 PART IITEM 1.

BUSINESS


1ITEM 1A.

RISK FACTORS


8ITEM 1B.

UNRESOLVED STAFF COMMENTS


14ITEM 2.

PROPERTIES


14ITEM 3.

LEGAL PROCEEDINGS


15ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


15ITEM 4A.

EXECUTIVE OFFICERS OF THE REGISTRANT


16PART IIITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


17ITEM 6.

SELECTED FINANCIAL DATA


19ITEM 7.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


20ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


41ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


44ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


84ITEM 9A.

CONTROLS AND PROCEDURES


84ITEM 9B.

OTHER INFORMATION


86PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


87ITEM 11.

EXECUTIVE COMPENSATION


87ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


87ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


88ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


88PART IVITEM 15.

EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


89Ex-10Q Form of Stock Option Agreement (Non-Qualified) under 1998 Non-Employee Director Stock PlanEx-10S Supplemental Retirement and Deferred Compensation Plan effective April 1, 1995Ex-10T Summary of Annual Bonus ProgramEx-10U Summary of Director CompensationEx-10AA Memorandum to Eric Ceyrolle regarding separation, dated April 24, 2009Ex-14 Code of Business Conduct and Ethics as amended March 12, 2004Ex-21 Subsidiaries of the registrantEx-23.1 Consent of Grant Thronton LLPEx-31.1 Section 302 Certification of Chief Executive OfficerEx-31.2 Section 302 Certification of Chief Financial OfficerEx-32.1 Section 906 Certification of Chief Executive OfficerEx-32.2 Section 906 Certification of Chief Financial Officer




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##### Table of Contents



PART I  Form 10-K Form 10-K.
    ITEM 1.
    BUSINESS  Corporate
    Profile
  (508) 650-3000.
    Form 10-K.
  What is Machine Vision?
  ease-of-use,
 1




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Question

Description

ExampleGUIDANCEWhere is it?

Determining the exact physical location and orientation of an
    object.

Determining the position of a printed circuit board so that a
    robot can automatically be guided to place electronic components.IDENTIFICATIONWhat is it?

Identifying an object by analyzing its physical appearance or by
    reading a serial number or symbol.

Reading a two-dimensional barcode directly marked on an
    automotive airbag so that it can be tracked and processed
    correctly through manufacturing.INSPECTIONHow good is it?

Inspecting an object for flaws or defects.

Inspecting the paper that US currency is printed on.GAUGINGWhat size is it?

Determining the dimensions of an object.

Determining the diameter of a bearing prior to final assembly.   Machine Vision
    Market
           2




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Business
    Strategy
      Acquisitions and
    Divestitures
        Form 10-K.
 3




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##### Table of Contents



Products
    Vision
    Software
  ®
  Vision
    Systems
  ®
  Vision
    Sensors
  ®
  ID
    Products
  ®
  Surface
    Inspection Systems
  ® tm
 4




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Research,
    Development, and Engineering
          Manufacturing and
    Order Fulfillment
    sub-assembly
 5




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Sales Channels
    and Support Services
        Form 10-K.
      Intellectual
    Property
   6




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® ® ® ® ® ® tm tm
  Compliance with
    Environmental Provisions
    Competition
      Backlog
    Employees
   7




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Available
    Information
  www.cognex.com. Form 10-K, Form 10-Q, Form 8-K, www.sec.gov. Form 10-K.
  ITEM 1A.
    RISK
    FACTORS  Form 10-K.
  Current and
    future conditions in the global economy may negatively impact
    our operating results.
        
    our customers may not have sufficient cash flow or access to
    financing to purchase our products,
    our customers may not pay us within agreed upon terms or may
    default on their payments altogether,
    our vendors may be unable to fulfill their delivery obligations
    to us in a timely manner,
    lower demand for our products may result in charges for excess
    and obsolete inventory if we are unable to sell inventory that
    is either already on hand or committed to purchase,
    lower cash flows may result in impairment charges for acquired
    intangible assets or goodwill,
    a decline in the fair value of our limited partnership interest
    in a venture capital fund, which is invested primarily in young
    and emerging companies, may result in an impairment charge,
    a decline in our stock price may make stock options a less
    attractive form of compensation and a less effective form of
    retention for our employees, and
    the trading price of our common stock may be volatile.   8




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Our restructuring
    programs may result in disruption to our business and may
    negatively impact our operating results.
    Downturns in the
    semiconductor and electronics capital equipment market may
    adversely affect our business.
    Economic,
    political, and other risks associated with international sales
    and operations could adversely affect our business and operating
    results.
    
    various regulatory requirements,
    export and import restrictions,
    transportation delays, 9




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
    employment regulations and local labor conditions,
    difficulties in staffing and managing foreign sales operations,
    instability in economic or political conditions,
    difficulties protecting intellectual property,
    business systems connectivity issues, and
    potentially adverse tax consequences.    Fluctuations in
    foreign currency exchange rates and the use of derivative
    instruments to hedge these exposures could adversely affect our
    reported results, liquidity, and competitive position.
        The loss of a
    large customer could have an adverse effect on our
    business.
    Our business
    could suffer if we lose the services of, or fail to attract, key
    personnel.
   10




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The failure of a
    key supplier to deliver quality product in a timely manner or
    our inability to obtain components for our products could
    adversely affect our operating results.
      Our failure to
    effectively manage product transitions or accurately forecast
    customer demand could result in excess or obsolete inventory and
    resulting charges.
  ease-of-use,
 11




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Our products may
    contain design or manufacturing defects, which could result in
    reduced demand, significant delays, or substantial
    costs.
    
    substantial delays in shipment,
    significant repair or replacement costs, or
    potential damage to our reputation.    Our failure to
    develop new products and to respond to technological changes
    could result in the loss of our market share and a decrease in
    our revenues and profits.
  ease-of-use,
  Our failure to
    properly manage the distribution of our products and services
    could result in the loss of revenues and profits.
    If we fail to
    successfully protect our intellectual property, our competitive
    position and operating results could suffer.
    
    protect our proprietary technology,
    protect our patents from challenge, invalidation, or
    circumvention, or
    ensure that our intellectual property will provide us with
    competitive advantages.   12




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Our company may
    be subject to time-consuming and costly litigation.
  Form 10-K.
  Increased
    competition may result in decreased demand or prices for our
    products and services.
  ease-of-use Form 10-K
  Implementation of
    our acquisition strategy may not be successful, which could
    affect our ability to increase our revenue or profitability and
    result in the impairment of acquired intangible
    assets.
    
    the inability to find or close attractive acquisition
    opportunities,
    the diversion of managements attention from other
    operational matters,
    the inability to realize expected synergies resulting from the
    acquisition,
    the failure to retain key customers or employees, and
    the impairment of acquired intangible assets resulting from
    lower-than-expected
    cash flows from the acquired assets.    We are at risk
    for impairment charges with respect to our investments or for
    acquired intangible assets or goodwill, which could have a
    material adverse effect on our results of operations.
     13




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other-than-temporary
        We may have
    additional tax liabilities, which could adversely affect out
    operating results and financial condition.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2:
    PROPERTIES         14




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ITEM 3:
    LEGAL
    PROCEEDINGS    patents-at-issue
  and/or and/or
  and/or
  ITEM 4:
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   15




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ITEM 4A: EXECUTIVE
    OFFICERS AND OTHER MEMBERS OF THE MANAGEMENT TEAM OF THE
    REGISTRANT    Name

Age

TitleRobert J. Shillman

63

Chief Executive Officer and Chairman of the Board of DirectorsRichard A. Morin

60

Executive Vice President of Finance and Administration, Chief
    Financial Officer, and TreasurerRobert J. Willett

42

Executive Vice President and President, Modular Vision Systems
    Division        16




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PART II ITEM 5: MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES      First


Second


Third


Fourth2009High

$
15.30


$
14.85


$
17.87


$
18.17Low


9.46



12.41



13.58



15.642008High

$
22.16


$
28.10


$
25.00


$
21.23Low


14.67



21.25



16.57



10.82         Total Number of

Approximate DollarShares Purchased as

Value of SharesTotal

Average

Part of Publicly

that May Yet BeNumber of

Price Paid

Announced Plans or

Purchased Under theShares Purchased

per Share

Programs (1)

Plans or ProgramsOctober 5  November 1, 2009


-



-



-


$
30,000,000November 2  November 29, 2009


-



-



-


$
30,000,000November 30  December 31, 2009


-



-



-


$
30,000,000Total


-



-



-


$
30,000,000     (1)
    
    In April 2008, the Companys Board of Directors authorized
    the repurchase of up to $50,000,000 of the Companys common
    stock. 17




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3820-3829
  COMPARISON OF
    5 YEAR CUMULATIVE TOTAL RETURN* Among
    Cognex Corporation, The NASDAQ Composite Index
    And NASDAQ Stocks
    (SIC 3820-3829
    U.S. Companies) Lab Apparatus & Analyt, Opt, Measuring, and
    Controlling Instr
  
  
  12/2004

12/2005

12/2006

12/2007

12/2008

12/2009Cognex Corporation


100.00



109.10



87.50



75.13



56.69



69.49NASDAQ Composite


100.00



101.33



114.01



123.71



73.11



105.61NASDAQ Stocks


100.00



130.33



152.91



194.83



125.99



152.60   (SIC
    3820-3829
    U.S. Companies) Lab Apparatus & Analyt, Opt,
    Measuring, and Controlling Instr
 18




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ITEM 6: SELECTED
    FINANCIAL DATA  Year Ended December 31,2009


2008


2007


2006


2005(In thousands, except per share amounts)Statement of Operations Data:Revenue

$
175,727


$
242,680


$
225,683


$
238,318


$
216,875Cost of revenue (1)


56,387



68,427



64,350



64,838



62,899Gross margin


119,340



174,253



161,333



173,480



153,976Research, development, and engineering expenses (1)


31,132



36,262



33,384



32,332



27,640Selling, general, and administrative expenses (1)


96,350



112,629



99,813



96,675



82,332Restructuring charges


4,526



258



-



-



-Operating income (loss)


(12,668
)


25,104



28,136



44,473



44,004Nonoperating income


2,292



10,264



7,986



6,104



4,242Income (loss) from continuing operations before income tax
    expense (benefit)


(10,376
)


35,368



36,122



50,577



48,246Income tax expense (benefit) on continuing operations


(5,507
)


4,869



8,575



10,549



12,544Income (loss) from continuing operations


(4,869
)


30,499



27,547



40,028



35,702Loss from operations of discontinued business, net of tax


-



(3,224
)


(648
)


(173
)


-Net income (loss)

$
(4,869
)

$
27,275


$
26,899


$
39,855


$
35,702Basic earnings (loss) per weighted-average common and
    common-equivalent share:Income (loss) from continuing operations

$
(0.12
)

$
0.74


$
0.63


$
0.88


$
0.76Loss from discontinued operations

$
0.00


$
(0.08
)

$
(0.01
)

$
(0.01
)

$
0.00Net income (loss)

$
(0.12
)

$
0.66


$
0.62


$
0.87


$
0.76Diluted earnings (loss) per weighted-average common and
    common-equivalent share:Income (loss) from continuing operations

$
(0.12
)

$
0.73


$
0.63


$
0.86


$
0.74Loss from discontinued operations

$
0.00


$
(0.07
)

$
(0.02
)

$
(0.01
)

$
0.00Net income (loss)

$
(0.12
)

$
0.66


$
0.61


$
0.85


$
0.74Weighted-average common and common equivalent shares outstanding:Basic


39,659



41,437



43,725



45,559



46,709Diluted


39,659



41,554



44,063



46,648



47,935Cash dividends per common share

$
0.30


$
0.47


$
0.34


$
0.33


$
0.32(1) Amounts include stock-based compensation expense, as follows:Cost of revenue

$
774


$
1,116


$
1,215


$
1,596


$
-Research, development, and engineering


2,163



3,067



3,239



3,627



-Selling, general, and administrative


6,286



6,048



7,261



8,401



-Total stock-based compensation expense

$
9,223


$
10,231


$
11,715


$
13,624


$
-   December 31,2009


2008


2007


2006


2005(In thousands)Balance Sheet Data:Working capital

$
210,674


$
213,374


$
269,528


$
266,647


$
268,612Total assets


439,869



474,047



539,546



528,651



564,562Long-term debt


-



-



-



-



-Shareholders equity


394,448



413,075



476,365



473,850



506,521  19




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ITEM 7: MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  FORWARD-LOOKING
    STATEMENTS
  Form 10-K.
  EXECUTIVE
    OVERVIEW
      
    Discrete factory automation customers purchase Cognex vision
    products and incorporate them into their manufacturing
    processes. Virtually every manufacturer can achieve better
    quality and manufacturing efficiency by using machine vision,
    and therefore, this segment includes a broad base of customers
    across a variety of industries, including automotive, consumer
    electronics, food and beverage, health and beauty, medical
    devices, packaging, and pharmaceutical. Sales to 20




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discrete factory automation customers represented approximately
    70% of total revenue in 2009, compared to 68% of total revenue
    in 2008.  
    Semiconductor and electronics capital equipment manufacturers
    purchase Cognex vision products and integrate them into the
    automation equipment that they manufacture and then sell to
    their customers to either make semiconductor chips or assemble
    printed circuit boards. Demand from these capital equipment
    manufacturers has historically been highly cyclical, with
    periods of investment followed by downturn. This market has been
    in a prolonged downturn since early 2006. Sales to semiconductor
    and electronics capital equipment manufacturers represented
    approximately 9% of total revenue in 2009, compared to 17% of
    total revenue in 2008.
    Surface inspection customers are manufacturers of materials
    processed in a continuous fashion, such as metals, paper,
    non-wovens, plastics, and glass. These customers need
    sophisticated machine vision to detect, classify, and analyze
    defects on the surfaces of those materials as they are being
    processed at high speeds. Surface inspection sales represented
    approximately 21% of total revenue in 2009, compared to 15% of
    total revenue in 2008.    Form 10-K.
    Year ended December 31,2009


2008


2007Revenue


100
%


100
%


100
%Cost of revenue


32



28



29Gross margin


68



72



71Research, development, and engineering expenses


18



15



15Selling, general, and administrative expenses


54



47



44Restructuring charges


3



-



-Operating income (loss)


(7
)


10



12Nonoperating income


1



5



4Income (loss) from continuing operations before income tax
    expense (benefit)


(6
)


15



16Income tax expense (benefit) on continuing operations


(3
)


2



4Income (loss) from continuing operations


(3
)


13



12Loss from operations of discontinued business, net of tax


-



2



-Net income (loss)


(3
)%


11
%


12
%  21




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STOCK-BASED
    COMPENSATION
  Form 10-K).
    RESULTS OF
    OPERATIONS
  Year Ended
    December 31, 2009 Compared to Year Ended December 31,
    2008
  Revenue
    Discrete Factory
    Automation Market
    Semiconductor and
    Electronics Capital Equipment Market
   22




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Surface
    Inspection Market
    Product
    Revenue
    Service
    Revenue
    Gross
    Margin
    MVSD
    Margin
  higher-than-average
 23




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##### Table of Contents



SISD
    Margin
    Product
    Margin
  higher-than-average
  Service
    Margin
    Operating
    Expenses
  Research,
    Development, and Engineering Expenses
     24




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MVSD RD&E balance in 2008

$
32,883Headcount reductions


(1,861
)Stock-based compensation expense


(881
)Outside services, materials, and supplies


(574
)Fringe benefit costs


(529
)Foreign currency exchange rate changes


(409
)Company bonus accruals


(317
)Other


(376
)MVSD RD&E balance in 2009

$
27,936       Selling, General,
    and Administrative Expenses
     25




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##### Table of Contents



MVSD SG&A balance in 2008

$
88,107Headcount reductions


(5,753
)Marketing and promotional expenses


(3,094
)Intangible asset impairment and amortization


(2,278
)Travel expenses


(1,274
)Outside services, materials, and supplies


(1,204
)Foreign currency exchange rate changes


(685
)Sales kick-off meetings


(609
)Stock-based compensation expense


1,254Other


(712
)MVSD SG&A balance in 2009

$
73,752       Restructuring
    Charges
  November
    2008
     26




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Total Amount


Incurred in


Cumulative AmountExpected to be


the Year Ended


Incurred throughIncurred


December 31,
    2009


December 31,
    2009One-time termination benefits

$
552


$
298


$
552Contract termination costs


372



372



372Other associated costs


310



306



310$
1,234


$
976


$
1,234       One-time


Contract


OtherTermination


Termination


AssociatedBenefits


Costs


Costs


TotalBalance as of December 31, 2008

$
207


$
-


$
-


$
207Restructuring charges


393



374



306



1,073Cash payments


(505
)


(372
)


(294
)


(1,171
)Restructuring adjustments


(95
)


(2
)


-



(97
)Balance as of December 31, 2009

$
-


$
-


$
12


$
12     April
    2009
   27




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##### Table of Contents



Incurred inthe Year EndedDecember 31,
    2009One-time termination benefits

$
2,775Contract termination costs


167Other associated costs


103$
3,045       One-time


Contract


OtherTermination


Termination


AssociatedBenefits


Costs


Costs


TotalBalance as of December 31, 2008

$
-


$
-


$
-


$
-Restructuring charges


2,830



183



107



3,120Cash payments


(2,768
)


(167
)


(94
)


(3,029
)Restructuring adjustments


(55
)


(16
)


(4
)


(75
)Balance as of December 31, 2009

$
7


$
-


$
9


$
16     September
    2009
     28




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Total Amount


Incurred inExpected to be


the Year EndedIncurred


December 31,
    2009One-time termination benefits

$
370


$
301Contract termination costs


153



153Other associated costs


94



51$
617


$
505       One-time


Contract


OtherTermination


Termination


AssociatedBenefits


Costs


Costs


TotalBalance as of December 31, 2008

$
-


$
-


$
-


$
-Restructuring charges


301



153



51



505Cash payments


(188
)


-



(51
)


(239
)Restructuring adjustments


-



-



-



-Balance as of December 31, 2009

$
113


$
153


$
-


$
266   Nonoperating
    Income (Expense)
       29




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Income Tax
    Expense (Benefit) on Continuing Operations
    true-up
  true-up
    Year Ended
    December 31, 2008 Compared to Year Ended December 31,
    2007
  Revenue
    Discrete Factory
    Automation Market
    Semiconductor and
    Electronics Capital Equipment Market
   30




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Surface
    Inspection Market
    Product
    Revenue
    Service
    Revenue
    Gross
    Margin
    MVSD
    Margin
    SISD
    Margin
   31




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Product
    Margin
    Service
    Margin
    Operating
    Expenses
  Research,
    Development, and Engineering Expenses
    Selling, General,
    and Administrative Expenses
         32




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Restructuring
    Charges
      Incurred InYear EndedDecember 31,
    2008One-time termination benefits

$
254Contract termination costs


-Other associated costs


4$
258     Balance as of January 1, 2008

$
-Restructuring charges


258Cash payments


(51
)Balance as of December 31, 2008

$
207
   Nonoperating
    Income (Expense)
           33




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##### Table of Contents



Income Tax
    Expense (Benefit) on Continuing Operations
    true-up
  true-up
    Discontinued
    Operations
    held-for-sale
 34




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##### Table of Contents



LIQUIDITY AND
    CAPITAL RESOURCES
              VenrockLimited


InventoryPartnership


PurchaseYear Ended December
    31,

Interest


Commitments


Leases


Total2010

$
614


$
10,643


$
3,708


$
14,9652011


-



-



2,008



2,0082012


-



-



1,507



1,5072013


-



-



959



9592014


-



-



713



713Thereafter


-



-



718



718$
614


$
10,643


$
9,613


$
20,870    35




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##### Table of Contents



Stock Repurchase
    Program
    Dividends
    Acquisitions
    OFF-BALANCE SHEET
    ARRANGEMENTS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
   36




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##### Table of Contents



Revenue
    Recognition
    Investments
          other-than-temporary other-than-temporary, other-than-temporary,
 37




---



##### Table of Contents



other-than-temporary, other-than-temporary
  Accounts
    Receivable
    Inventories
    Long-lived
    Assets
     38




---



##### Table of Contents



Goodwill
      Warranty
    Obligations
    Contingencies
   39




---



##### Table of Contents



Stock-Based
    Compensation
    Income
    Taxes
         40




---



##### Table of Contents



Derivative
    Instruments
    Purchase
    Accounting
    NEW
    PRONOUNCEMENTS
  Accounting
    Standards Update (ASU)
    2009-13,
    Multiple Deliverable Revenue Arrangements
  2009-13 2009-13
  Accounting
    Standards Update (ASU)
    2009-14,
    Certain Revenue Arrangements That Include Software
    Elements
  2009-13 2009-14
  ITEM 7A:
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign Currency
    Risk
   41




---



##### Table of Contents




    transactional currency/functional currency exchange rate
    exposures from transactions that are denominated in currencies
    other than the functional currency of the subsidiary (for
    example, a Japanese Yen receivable on the Companys Irish
    subsidiarys books for which the functional currency is the
    Euro), and
    functional currency/reporting currency exchange rate exposures
    from transactions that are denominated in currencies other than
    the U.S. Dollar, which is the reporting currency of the
    Company.         42




---



##### Table of Contents



Interest Rate
    Risk
  available-for-sale
      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


$74,811


$74,571


$74,330


$74,091


$73,851   Other Market
    Risks
        other-than-temporary
 43




---



##### Table of Contents



ITEM 8:
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   INDEX TO
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Consolidated Financial Statements:Report of Independent Registered Public Accounting Firm


45Consolidated Statements of Operations for the
    Years Ended December 31, 2009, 2008, and 2007


46Consolidated Balance Sheets as of
    December 31, 2009 and 2008


47Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2009, 2008, and 2007


48Consolidated Statements of Shareholders
    Equity and Comprehensive Income (Loss) for the Years Ended
    December 31, 2009, 2008, and 2007


49Notes to the Consolidated Financial Statements


50Selected Quarterly Financial Data (unaudited)


81Financial Statement Schedule:Report of Independent Registered Public
    Accounting Firm on the Financial Statement Schedule


82Schedule II  Valuation and
    Qualifying Accounts for the Years Ended December 31, 2009,
    2008, and 2007


83  44




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors and Shareholders of Cognex
    Corporation:            
    45




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##### Table of Contents



COGNEX
    CORPORATION  CONSOLIDATED STATEMENTS OF
    OPERATIONS  Year Ended December 31,2009


2008


2007(In thousands, except per share amounts)RevenueProduct

$
158,379


$
223,243


$
201,660Service


17,348



19,437



24,023175,727



242,680



225,683Cost of revenueProduct


45,026



56,423



49,945Service


11,361



12,004



14,40556,387



68,427



64,350Gross marginProduct


113,353



166,820



151,715Service


5,987



7,433



9,618119,340



174,253



161,333Research, development, and engineering expenses


31,132



36,262



33,384Selling, general, and administrative expenses


96,350



112,629



99,813Restructuring charges (Note 17)


4,526



258



-Operating income (loss)


(12,668
)


25,104



28,136Foreign currency gain (loss)


(1,265
)


2,497



279Investment income


2,185



7,101



7,908Other income (expense)


1,372



666



(201
)Income (loss) from continuing operations before income tax
    expense (benefit)


(10,376
)


35,368



36,122Income tax expense (benefit) on continuing operations


(5,507
)


4,869



8,575Income (loss) from continuing operations


(4,869
)


30,499



27,547Loss from operations of discontinued business, net of tax
    (Note 20)


-



(3,224
)


(648
)Net income (loss)

$
(4,869
)

$
27,275


$
26,899Basic earnings (loss) per weighted-average common and
    common-equivalent share:Income (loss) from continuing operations

$
(0.12
)

$
0.74


$
0.63Loss from discontinued operations

$
0.00


$
(0.08
)

$
(0.01
)Net income (loss)

$
(0.12
)

$
0.66


$
0.62Diluted earnings (loss) per weighted-average common and
    common-equivalent share:Income (loss) from continuing operations

$
(0.12
)

$
0.73


$
0.63Loss from discontinued operations

$
0.00


$
(0.07
)

$
(0.02
)Net income (loss)

$
(0.12
)

$
0.66


$
0.61Weighted-average common and common-equivalent shares outstanding:Basic


39,659



41,437



43,725Diluted


39,659



41,554



44,063Cash dividends per common share

$
0.30


$
0.47


$
0.34    46




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##### Table of Contents



COGNEX
    CORPORATION  CONSOLIDATED BALANCE SHEETS  December 31,2009


2008(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
119,831


$
127,138Short-term investments


55,563



52,559Accounts receivable, less reserves of $1,358 and $1,290 in 2009
    and 2008, respectively


30,964



30,510Inventories


16,832



25,063Deferred income taxes


7,693



10,231Prepaid expenses and other current assets


18,471



18,923Total current assets


249,354



264,424Long-term investments


26,633



41,389Property, plant, and equipment, net


28,576



27,764Deferred income taxes


14,643



17,673Intangible assets, net


28,337



31,278Goodwill


82,604



80,765Other assets


9,722



10,754$
439,869


$
474,047LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,959


$
6,780Accrued expenses


18,811



21,855Accrued income taxes


2



2,986Deferred revenue and customer deposits


14,908



19,429Total current liabilities


38,680



51,050Reserve for income taxes


6,741



9,922Commitments and contingencies (Notes 9 and 10)Shareholders equity:Common stock, $.002 par value Authorized: 140,000 shares, issued: 39,665 and
    39,655 shares in 2009 and 2008, respectively


79



79Additional paid-in capital


69,271



73,280Retained earnings


328,459



345,225Accumulated other comprehensive loss, net of tax


(3,361
)


(5,509
)Total shareholders equity


394,448



413,075$
439,869


$
474,047    47




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##### Table of Contents



COGNEX
    CORPORATION - CONSOLIDATED STATEMENTS OF CASH
    FLOWS  Year Ended December 31,2009


2008


2007(In thousands)Cash flows from operating activities:Net income (loss)

$
(4,869
)

$
27,275


$
26,899Adjustments to reconcile net income (loss) to net cash provided
    by operations:Impairment loss related to discontinued business (Note 20)


-



2,987



-Intangible asset impairment charge (Note 7)


1,000



1,500



-Stock-based compensation expense


9,223



10,231



11,715Depreciation of property, plant, and equipment


4,701



4,742



4,271Amortization of intangible assets


4,879



6,633



5,648Amortization of premiums or discounts on investments


1,512



1,320



1,439Provision for excess and obsolete inventory


3,478



2,779



4,672Reversal of accrued inventory purchase commitments


-



-



(1,400
)Tax effect of stock option exercises


472



(1,671
)


(241
)Deferred income tax


1,985



(441
)


(5,460
)Changes in operating assets and liabilities:Accounts receivable


(287
)


8,551



3,198Inventories


5,140



(959
)


124Accrued expenses


(3,208
)


2,405



(8,122
)Income taxes


(6,611
)


(10,476
)


4,118Deferred revenue and customer deposits


(4,532
)


6,142



5,458Other


(600
)


(2,081
)


(3,846
)Net cash provided by operating activities


12,283



58,937



48,473Cash flows from investing activities:Purchase of investments


(33,779
)


(120,622
)


(277,876
)Maturity and sale of investments


43,720



189,375



292,213Purchase of property, plant, and equipment


(5,466
)


(6,012
)


(4,635
)Cash paid for business acquisitions, net of cash acquired
    (Note 21)


(4,941
)


(1,000
)


(1,002
)Cash received related to discontinued business (Note 20)


-



2,797



-Net cash provided by (used in) investing activities


(466
)


64,538



8,700Cash flows from financing activities:Issuance of common stock under stock option and stock purchase
    plans


146



15,052



6,819Stock option buyback


(9,075
)


-



-Repurchase of common stock


-



(92,969
)


(32,663
)Payment of dividends


(11,897
)


(19,281
)


(14,898
)Tax effect of stock option exercises


(472
)


1,671



241Net cash used in financing activities


(21,298
)


(95,527
)


(40,501
)Effect of foreign exchange rate changes on cash


2,174



(4,954
)


111Net change in cash and cash equivalents


(7,307
)


22,994



16,783Cash and cash equivalents at beginning of year


127,138



104,144



87,361Cash and cash equivalents at end of year

$
119,831


$
127,138


$
104,144    48




---



##### Table of Contents



COGNEX
    CORPORATION  CONSOLIDATED STATEMENTS OF
    SHAREHOLDERS EQUITY
    AND COMPREHENSIVE INCOME (LOSS)  AccumulatedAdditional





Other





TotalCommon Stock


Paid-in


Retained


Comprehensive


Comprehensive


Shareholders(In thousands)

Shares


Par Value


Capital


Earnings


Income (Loss)


Income (Loss)


EquityBalance as of December 31, 2006


44,403


$
89


$
155,136


$
329,251


$
(10,626
)





$
473,850Issuance of common stock under stock option and stock purchase
    plans


374



1



6,818



-



-



-



6,819Stock-based compensation expense


-



-



11,715



-



-



-



11,715Excess tax benefit from stock option exercises


-



-



241



-



-



-



241Reduction of previously-recognized tax benefit from stock option
    exercises


-



-



(307
)


-



-



-



(307
)Repurchase of common stock


(1,430
)


(3
)


(32,660
)


-



-







(32,663
)Payment of dividends


-



-



-



(14,898
)


-



-



(14,898
)Reduction in retained earnings related to the adoption of
    FIN 48


-



-



-



(4,021
)


-



-



(4,021
)Comprehensive income:Net income


-



-



-



26,899



-


$
26,899



26,899Gains on long-term intercompany loans, net of losses on currency
    swaps, net of tax of $321


-



-



-



-



546



546



546Net unrealized gain on
    available-for-sale
    investments, net of tax of $245


-



-



-



-



416



416



416Foreign currency translation adjustment


-



-



-



-



7,768



7,768



7,768Comprehensive income





















$
35,629Balance as of December 31, 2007


43,347


$
87


$
140,943


$
337,231


$
(1,896
)





$
476,365Issuance of common stock under stock option and stock purchase
    plans


927



2



15,050



-



-



-



15,052Stock-based compensation expense


-



-



10,231



-



-



-



10,231Excess tax benefit from stock option exercises


-



-



1,671



-



-



-



1,671Reduction of tax benefit for research and development credits


-



-



(1,656
)


-



-



-



(1,656
)Repurchase of common stock


(4,619
)


(10
)


(92,959
)


-



-



-



(92,969
)Payment of dividends


-



-



-



(19,281
)


-



-



(19,281
)Comprehensive income:Net income


-



-



-



27,275



-


$
27,275



27,275Net unrealized loss on
    available-for-sale
    investments, net of tax of $102


-



-



-



-



175



175



175Foreign currency translation adjustment, net of tax expense of
    $649


-



-



-



-



(3,788
)


(3,788
)


(3,788
)Comprehensive income





















$
23,662Balance as of December 31, 2008


39,655


$
79


$
73,280


$
345,225


$
(5,509
)





$
413,075Issuance of common stock under stock option and stock purchase
    plans


10



-



146



-



-



-



146Stock-based compensation expense


-



-



9,223



-



-



-



9,223Stock option buyback


-



-



(9,158
)


-



-



-



(9,158
)Relief of deferred tax asset related to stock option buyback


-



-



(3,748
)


-



-



-



(3,748
)Excess tax benefit from stock option exercises


-



-



(472
)


-



-



-



(472
)Payment of dividends


-



-



-



(11,897
)


-



-



(11,897
)Comprehensive income (loss):Net loss


-



-



-



(4,869
)


-


$
(4,869
)


(4,869
)Net unrealized loss on
    available-for-sale
    investments, net of tax of $110


-



-



-



-



(189
)


(189
)


(189
)Foreign currency translation adjustment, net of tax of $271


-



-



-



-



2,337



2,337



2,337Comprehensive loss





















$
(2,721
)Balance as of December 31, 2009


39,665


$
79


$
69,271


$
328,459


$
(3,361
)





$
394,448    49




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##### Table of Contents






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
    Fair Value
    Measurements
    Cash, Cash
    Equivalents, and Investments
   50




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  available-for-sale
  other-than-temporary other-than-temporary, other-than-temporary
  Accounts
    Receivable
      Inventories
  first-in,
    Property, Plant, and Equipment
   51




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)    Intangible
    Assets
    Goodwill
      Warranty
    Obligations
    Contingencies
   52




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Revenue
    Recognition
        out-of-pocket
  Research and
    Development
    Advertising
    Costs
    Stock-Based
    Compensation
   53




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)      Taxes
          Net Income (Loss)
    Per Share
   54




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Comprehensive
    Income (Loss)
  available-for-sale
  Concentrations of
    Risk
        Derivative
    Instruments
    NOTE 2:
    New
    Pronouncements  Accounting
    Standards Update (ASU)
    2009-13,
    Multiple Deliverable Revenue Arrangements
  2009-13 2009-13
 55




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 2:
    New
    Pronouncements (continued)    Accounting
    Standards Update (ASU)
    2009-14,
    Certain Revenue Arrangements That Include Software
    Elements
  2009-13 2009-14
  NOTE 3:
    Fair Value
    Measurements  Financial Assets
    and Liabilities that are Measured at Fair Value on a Recurring
    Basis
    Quoted Prices inActive Markets


Significant Otherfor Identical


ObservableAssets (Level 1)


Inputs (Level 2)AssetsMunicipal bond investments


-


$
74,330Currency forward contracts

$
111



-$
111


$
74,330LiabilitiesCurrency forward contracts

$
301$
301       Balance as of December 31, 2008

$
2,000Unrealized loss recorded in the first quarter of 2009


(400
)Reversal of unrealized loss due to sale of investments in the
    second quarter of 2009


400Sale of investments in the second quarter of 2009


(2,000
)Balance as of December 31, 2009

$
-  56




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 3:
    Fair Value
    Measurements (continued)    Financial Assets
    that are Measured at Fair Value on a Non-recurring
    Basis
  other-than-temporary other-than-temporary, other-than-temporary
  Non-financial
    Assets that are Measured at Fair Value on a Non-recurring
    Basis
      SignificantUnobservableInputs (Level 3)


Total


Total LossSiemens Customer Relationships

$
300


$
300


$
(1,000
)      57




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 3:
    Fair Value
    Measurements (continued)    SignificantUnobservableInputs (Level 3)


Total


Total LossDVT OEM Customer Relationships

$
1,900


$
1,900


$
(1,500
)     NOTE 4:
    Cash, Cash
    Equivalents, and Investments    December 31,2009


2008Cash

$
119,831


$
124,339Cash equivalents


-



2,799Cash and cash equivalents


119,831



127,138Municipal bonds


55,563



52,559Short-term investments


55,563



52,559Municipal bonds


18,767



33,921Limited partnership interest (accounted for using cost method)


7,866



7,468Long-term investments


26,633



41,389$
202,027


$
221,086     available-for-sale
  Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


Fair ValueShort-term municipal bonds

$
55,318


$
247


$
(2
)

$
55,563Long-term municipal bonds


18,637



132



(2
)


18,767$
73,955


$
379


$
(4
)

$
74,330    58




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 4:
    Cash, Cash
    Equivalents, and Investments (continued)      other-than- other-than-temporary, other-than-temporary
  NOTE 5:
    Inventories   December 31,2009


2008Raw materials

$
10,405


$
14,722Work-in-process


652



976Finished goods


5,775



9,365$
16,832


$
25,063   NOTE 6:
    Property, Plant,
    and Equipment    December 31,2009


2008Land

$
3,951


$
3,951Buildings


18,371



18,371Building improvements


10,021



8,183Leasehold improvements


3,259



3,945Computer hardware and software


21,642



22,619Manufacturing test equipment


9,744



9,169Furniture and fixtures


3,545



3,88970,533



70,127Less: accumulated depreciation


(41,957
)


(42,363
)$
28,576


$
27,764  59




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 6:
    Property, Plant,
    and Equipment (continued)      NOTE 7:
    Intangible
    Assets    Gross





NetCarrying


Accumulated


CarryingValue


Amortization


ValueYear Ended December 31, 2009Distribution networks

$
38,060


$
15,334


$
22,726Customer contracts and relationships


15,432



11,639



3,793Completed technologies


4,350



2,886



1,464Other


750



396



354$
58,592


$
30,255


$
28,337Year Ended December 31, 2008Distribution networks

$
38,060


$
12,049


$
26,011Customer contracts and relationships


13,300



9,556



3,744Completed technologies


3,680



2,249



1,431Other


1,110



1,018



92$
56,150


$
24,872


$
31,278   fully-amortized
    Year Ended December 31,

Amount2010

$
4,9532011


4,4422012


4,1722013


3,7962014


3,650Thereafter


7,324$
28,337    60




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 7:
    Intangible Assets
    (continued)      NOTE 8:
    Goodwill      MVSD


SISD


ConsolidatedBalance as of December 31, 2007

$
77,899


$
3,133


$
81,032Foreign currency exchange rate changes


(132
)


(135
)


(267
)Balance as of December 31, 2008

$
77,767


$
2,998


$
80,765Acquisition of web monitoring business (Note 21)


-



1,692



1,692Foreign currency exchange rate changes


73



74



147Balance as of December 31, 2009

$
77,840


$
4,764


$
82,604    61




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 8:
    Goodwill
    (continued)    NOTE 9:
    Accrued
    Expenses    December 31,2009


2008Salaries, commissions, and payroll taxes

$
5,346


$
4,355Vacation


3,347



4,232Japanese retirement allowance


2,626



2,813Warranty obligations


1,377



1,657Consumption taxes


809



3,606Bonuses


439



1,429Other


4,867



3,763$
18,811


$
21,855     Balance as of December 31, 2007

$
1,462Provisions for warranties issued during the period


1,828Fulfillment of warranty obligations


(1,593
)Foreign exchange rate changes


(40
)Balance as of December 31, 2008

$
1,657Provisions for warranties issued during the period


1,212Fulfillment of warranty obligations


(1,523
)Foreign exchange rate changes


31Balance as of December 31, 2009

$
1,377   NOTE 10:
    Commitments and
    Contingencies  Commitments
     62




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 10:
    Commitments and
    Contingencies (continued)    Year Ended December 31,

Amount2010

$
3,7082011


2,0082012


1,5072013


9592014


713Thereafter


718$
9,613     Year Ended December 31,

Amount2010

$
5922011


5782012


5722013


3062014


328Thereafter


792$
3,168   Contingencies
    patents-at-issue
  and/or and/or
 63




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 10:
    Commitments and
    Contingencies (continued)    and/or
  NOTE 11:
    Indemnification
    Provisions        NOTE 12:
    Derivative
    Instruments   64




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 12:
    Derivative
    Instruments (continued)    
    transactional currency/functional currency exchange rate
    exposures from transactions that are denominated in currencies
    other than the functional currency of the subsidiary (for
    example, a Japanese Yen receivable on the Companys Irish
    subsidiarys books for which the functional currency is the
    Euro), and
    functional currency/reporting currency exchange rate exposures
    from transactions that are denominated in currencies other than
    the U.S. Dollar, which is the reporting currency of the
    Company.        Currency

AmountJapanese Yen/Euro


1,083,750 Japanese YenU.S. Dollar/Euro


15,142,877 U.S. Dollars     Asset Derivatives

Liability DerivativesBalance

Fair Value

Balance

Fair ValueSheet

December 31,

December 31,

Sheet

December 31,

December 31,Location

2009

2008

Location

2009

2008Currency forward contracts

Prepaid expenses and other current assets

$
111


$
207


Accrued expenses

$
301


$
255     Location of

Amount of Gain (Loss)Gain (Loss)

Recognized In Income onRecognized

Derivative Year endedin Income

December 31,on Derivative

2009

2008

2007Currency
    forward
    contracts

Foreign currency gain (loss)

$
(526
)

$
1,317


$
174
   65




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 13:
    Shareholders
    Equity  Preferred
    Stock
    Common
    Stock
    Shareholder
    Rights Plan
  Form 8-A
    Stock Repurchase
    Program
    Stock Option
    Plans
   66




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 13:
    Shareholders
    Equity (continued)          Weighted-AverageWeighted-


Remaining


AggregateAverage


Contractual


IntrinsicShares


Exercise


Term


Value(in thousands)


Price


(in years)


(in thousands)Outstanding as of December 31, 2008


11,406


$
25.10Granted


93



14.73Exercised


(1
)


1.00Forfeited or expired


(1,769
)


25.56Options tendered under buyback


(4,901
)


29.37Outstanding as of December 31, 2009


4,828


$
20.41



6.0


$
1,032Exercisable as of December 31, 2009


2,639


$
20.89



4.3


$
849   Employee Stock
    Purchase Plan
   67




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 14:
    Stock-Based
    Compensation    Year Ended December 31,2009

2008

2007Risk-free rate


3.3
%


3.9
%


4.9
%Expected dividend yield


1.4
%


1.7
%


1.5
%Expected volatility


43
%


42
%


40
%Expected term (in years)


4.8



6.0



5.4   Risk-free
    rate
    Expected dividend
    yield
    Expected
    volatility
    Expected
    term
           68




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 14:
    Stock-Based
    Compensation (continued)    Year Ended December 31,2009


2008


2007Product cost of revenue

$
532


$
599


$
624Service cost of revenue


242



517



591Research, development, and engineering


2,163



3,067



3,239Selling, general, and administrative


6,286



6,048



7,261$
9,223


$
10,231


$
11,715       NOTE 15:
    Employee Savings
    Plan    NOTE 16:
    Taxes   69




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 16:
    Taxes
    (continued)    Year Ended December 31,2009


2008


2007Current:Federal

$
(12,771
)

$
2,047


$
10,343State


(774
)


1,227



1,341Foreign


1,053



5,356



5,381(12,492
)


8,630



17,065Deferred:Federal


6,434



(2,878
)


(7,768
)State


57



(518
)


(660
)Foreign


494



(365
)


(62
)6,985



(3,761
)


(8,490
)$
(5,507
)

$
4,869


$
8,575     Year Ended December 31,2009


2008


2007Income tax provision at federal statutory rate


(35
)%


35
%


35
%State income taxes, net of federal benefit


(2
)


2



2Tax-exempt investment income


(5
)


(3
)


(6
)Foreign tax rate differential


22



(10
)


(13
)Tax credit


(3
)


(1
)


(1
)Discrete tax events


(34
)


(11
)


5Other


4



2



2Income tax provision (benefit)


(53
)%


14
%


24
%       true-up
 70




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 16:
    Taxes
    (continued)  true-up
  true-up
    Balance of reserve for income taxes as of December 31, 2007

$
16,401Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in prior periods


2,466Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in the current period


541Gross amounts of decreases in unrecognized tax benefits as a
    result of tax positions taken in prior periods that are
    effectively settled


(3,442
)Gross amounts of decreases in unrecognized tax benefits relating
    to settlements with taxing authorities


(4,891
)Gross amounts of decreases in unrecognized tax benefits as a
    result of the expiration of the applicable statutes of
    limitations


(2,904
)Balance of reserve for income taxes as of December 31, 2008

$
8,171Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in prior periods


-Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in the current period


697Gross amounts of decreases in unrecognized tax benefits as a
    result of tax positions taken in prior periods that are
    effectively settled


-Gross amounts of decreases in unrecognized tax benefits relating
    to settlements with taxing authorities


(5
)Gross amounts of decreases in unrecognized tax benefits as a
    result of the expiration of the applicable statutes of
    limitations


(3,508
)Balance of reserve for income taxes as of December 31, 2009

$
5,355    71




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 16:
    Taxes
    (continued)     72




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 16:
    Taxes
    (continued)    December 31,2009


2008Current deferred tax assets:Inventory and revenue related

$
5,575


$
8,167Bonus, commission, and other compensation


1,128



1,373Other


990



691Gross current deferred tax assets


7,693



10,231Valuation allowance


-



-Net current deferred tax assets

$
7,693


$
10,231Noncurrent deferred tax assets:Federal and state tax credit carryforwards

$
10,709


$
9,356Stock-based compensation expense


7,064



11,435Acquired completed technologies and other intangible assets


2,241



2,626Depreciation


1,784



1,750Unrealized investment gains and losses


1,007



1,102Correlative tax relief and deferred interest related to reserves


976



1,733Acquired in-process technology


427



551Capital loss carryforward


373



373Other


1,027



1,107Gross noncurrent deferred tax assets


25,608



30,033Noncurrent deferred tax liabilities:Nondeductible intangible assets


(9,149
)


(10,712
)Other


(1,443
)


(1,275
)Gross noncurrent deferred tax liabilities


(10,592
)


(11,987
)Valuation allowance


(373
)


(373
)Net noncurrent deferred tax assets

$
14,643


$
17,673        73




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 16:
    Taxes
    (continued)      Non-U.S. income
      NOTE 17:
    Restructuring
    Charges  November
    2008
      Total Amount


Incurred in


Cumulative AmountExpected to


the Year Ended


Incurred throughbe Incurred


December 31, 2009


December 31, 2009One-time termination benefits

$
552


$
298


$
552Contract termination costs


372



372



372Other associated costs


310



306



310$
1,234


$
976


$
1,234  74




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 17:
    Restructuring
    Charges (continued)      One-time


Contract


OtherTermination


Termination


AssociatedBenefits


Costs


Costs


TotalBalance as of December 31, 2008

$
207


$
-


$
-


$
207Restructuring charges


393



374



306



1,073Cash payments


(505
)


(372
)


(294
)


(1,171
)Restructuring adjustments


(95
)


(2
)


-



(97
)Balance as of December 31, 2009

$
-


$
-


$
12


$
12     April
    2009
      Incurred inthe Year EndedDecember 31, 2009One-time termination benefits

$
2,775Contract termination costs


167Other associated costs


103$
3,045    75




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 17:
    Restructuring
    Charges (continued)      One-time


Contract


OtherTermination


Termination


AssociatedBenefits


Costs


Costs


TotalBalance as of December 31, 2008

$
-


$
-


$
-


$
-Restructuring charges


2,830



183



107



3,120Cash payments


(2,768
)


(167
)


(94
)


(3,029
)Restructuring adjustments


(55
)


(16
)


(4
)


(75
)Balance as of December 31, 2009

$
7


$
-


$
9


$
16     September
    2009
      Total Amount


Incurred inExpected to


the Year Endedbe Incurred


December 31, 2009One-time termination benefits

$
370


$
301Contract termination costs


153



153Other associated costs


94



51$
617


$
505    76




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 17:
    Restructuring
    Charges (continued)      One-time


Contract


OtherTermination


Termination


AssociatedBenefits


Costs


Costs


TotalBalance as of December 31, 2008

$
-


$
-


$
-


$
-Restructuring charges


301



153



51



505Cash payments


(188
)


-



(51
)


(239
)Restructuring adjustments


-



-



-



-Balance as of December 31, 2009

$
113


$
153


$
-


$
266   NOTE 18:
    Weighted Average
    Shares    Year Ended December 31,2009


2008


2007Basic weighted-average common shares outstanding


39,659



41,437



43,725Effect of dilutive stock options


-



117



338Diluted weighted-average common and common-equivalent
    shares outstanding


39,659



41,554



44,063     NOTE 19:
    Segment and
    Geographic Information   77




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 19:
    Segment and
    Geographic Information (continued)    ReconcilingMVSD

SISD

Items

ConsolidatedYear Ended December 31, 2009Product revenue

$
133,741


$
24,638



-


$
158,379Service revenue


5,542



11,806



-



17,348Depreciation and amortization


9,843



361


$
376



10,580Goodwill and intangibles


103,281



7,660



-



110,941Operating income (loss)


4,226



2,801



(19,695
)


(12,668
)Year Ended December 31, 2008Product revenue

$
197,211


$
26,032



-


$
223,243Service revenue


9,375



10,062



-



19,437Depreciation and amortization


12,234



247


$
394



12,875Goodwill and intangibles


109,045



2,998



-



112,043Operating income


42,366



4,078



(21,340
)


25,104Year Ended December 31, 2007Product revenue

$
182,755


$
18,905



-


$
201,660Service revenue


13,357



10,666



-



24,023Depreciation and amortization


9,310



252


$
357



9,919Goodwill and intangibles


117,374



3,133



-



120,507Operating income


49,736



1,927



(23,527
)


28,136         United States

Europe

Japan

Other

ConsolidatedYear Ended December 31, 2009Product revenue

$
53,803


$
54,559


$
30,674


$
19,343


$
158,379Service revenue


6,657



5,261



3,513



1,917



17,348Long-lived assets


127,317



19,617



2,037



268



149,239Year Ended December 31, 2008Product revenue

$
66,172


$
82,024


$
48,508


$
26,539


$
223,243Service revenue


7,469



6,468



4,328



1,172



19,437Long-lived assets


127,061



20,799



2,447



254



150,561Year Ended December 31, 2007Product revenue

$
68,487


$
65,835


$
47,535


$
19,803


$
201,660Service revenue


10,159



7,187



4,783



1,894



24,023Long-lived assets


134,776



18,999



1,894



171



155,830    78




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 20:
    Loss from
    Operations of a Discontinued Business      held-for-sale
  NOTE 21:
    Acquisition of
    Web Monitoring Business     79




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 21:
    Acquisition of
    Web Monitoring Business (continued)    Weighted-AverageEstimated


Amortization PeriodFair Value


(in years)Inventories

$
259Intangible assetsCompleted technology


670


7Customer relationships


1,950


9Trademark


140


8Non-compete agreements


230


5Goodwill


1,692Total assets acquired


4,941Total liabilities assumed


0Total purchase price

$
4,941       NOTE 22:
    Dividends   80




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##### Table of Contents



COGNEX
    CORPORATION - SELECTED QUARTERLY FINANCIAL DATA
    (UNAUDITED)  Quarter EndedApril 5,

July 5,

October 4,

December 31,2009

2009

2009

2009(In thousands, except per share amounts)Revenue

$
42,287


$
40,968


$
41,178


$
51,294Gross margin


28,823



25,992



29,140



35,385Operating income (loss)


(6,450
)


(7,854
)


880



756Net income (loss)


(3,410
)


(6,419
)


4,501



459Basic net income (loss) per share


(0.09
)


(0.16
)


0.11



0.01Diluted net income (loss) per share


(0.09
)


(0.16
)


0.11



0.01   Quarter EndedMarch 30,

June 29,

September 28,

December 31,2008

2008

2008

2008(In thousands, except per share amounts)Revenue

$
60,513


$
67,089


$
63,256


$
51,822Gross margin


43,458



48,064



45,848



36,883Operating income (loss)


8,003



10,726



7,987



(1,612
)Income from continuing operations


8,590



8,762



11,333



1,814Net income


8,475



5,653



11,333



1,814Basic income from continuing operations per share


0.20



0.21



0.27



0.05Diluted income from continuing operations per share


0.20



0.21



0.27



0.05Basic net income per share


0.20



0.13



0.27



0.05Diluted net income per share


0.20



0.13



0.27



0.05  81




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL
    STATEMENT SCHEDULE  To the Board of
    Directors and Shareholders of Cognex Corporation:
  Form 10-K Form 10-K
  
    82




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##### Table of Contents



COGNEX
    CORPORATION - SCHEDULE II - VALUATION
    AND QUALIFYING ACCOUNTS  AdditionsBalance at


Charged to


Charged








Balance atBeginning


Costs and


to Other








End ofDescription

of Period


Expenses


Accounts


Deductions


Other


Period(In thousands)Reserve for Uncollectible Accounts:2009

$
1,290


$
373


$
-


$
(258
) (a)

$
(47) (b)


$
1,3582008

$
1,317


$
153


$
-


$
(77
) (a)

$
(103) (b)


$
1,2902007

$
1,662


$
34


$
-


$
(407
) (a)

$
28 (b)


$
1,317   (a)
    
    Specific write-offs(b)
    
    Collections of previously written-off accounts and foreign
    exchange rate changes 83




---



##### Table of Contents



ITEM 9: CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   ITEM 9A: CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rules 13a-15 15d-15
  Managements
    Report on Internal Control over Financial Reporting
        Changes in
    Internal Control over Financial Reporting
   84




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    Internal Control 
    Integrated Framework
        Internal Control-Integrated Framework
    
    85




---



##### Table of Contents



ITEM 9B: OTHER
    INFORMATION   86




---



##### Table of Contents



PART III ITEM 10: DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K.
  www.cognex.com.
 ITEM 11: EXECUTIVE
    COMPENSATION   ITEM 12: SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS      Number of securitiesremaining available for futureNumber of securities to be





issuance under equityissued upon exercise of


Weighted-average exercise


compensation plansoutstanding options, warrants,


price of outstanding options,


(excluding securities reflectedPlan Category

and rights


warrants, and rights


in column (a))(a)


(b)


(c)Equity compensation plans approved by shareholders


4,641,875 (1
)

$
20.44



2,057,110 (2
)Equity compensation plans not approved by shareholders


186,053 (3
)


19.54



7,054,800 (4
)4,827,928


$
20.41



9,111,910   (1)
    Includes shares to be issued upon exercise of outstanding
    options under the Companys 1991 Isys Controls, Inc.
    Long-Term Equity Incentive Plan, 1998 Stock Incentive Plan, 1998
    Non-Employee Director Stock Option Plan, and 2007 Stock Option
    and Incentive Plan. Does not include purchase rights accruing
    under the Employee Stock Purchase Plan (ESPP) because the
    purchase price (and therefore the number of shares to be
    purchased) will not be determined until the end of the purchase
    period.(2)
    Includes shares remaining available for future issuance under
    the Companys 2007 Stock Option and Incentive Plan.
    Includes 240,237 shares available for future issuance under
    the ESPP.(3)
    Includes shares to be issued upon the exercise of outstanding
    options under the Companys 2001 Interim General Stock
    Incentive Plan and the 2001 General Stock Option Plan.(4)
    Includes shares remaining available for future issuance under
    the Companys 2001 General Stock Option Plan.   87




---



##### Table of Contents



ITEM 13: CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE   ITEM 14: PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   88




---



##### Table of Contents



PART IV ITEM 15: EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES    Form 10-K.
    Form 10-K.
      Form 10-K
 89




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Robert
    J. Shillman        Signature

Title

Date/s/  Robert
    J. ShillmanRobert
    J. Shillman

Chief Executive Officer and Chairman of the Board of Directors
    (principal executive officer)

February 11, 2010/s/  Richard
    A. MorinRichard
    A. Morin

Executive Vice President of Finance and Administration, Chief
    Financial Officer, and Treasurer
    (principal financial and accounting officer)

February 11, 2010/s/  Patrick
    AliasPatrick
    Alias

Director

February 11, 2010/s/  Jerald
    FishmanJerald
    Fishman

Director

February 11, 2010/s/  Theodor
    KrantzTheodor
    Krantz

Director

February 11, 2010/s/  Edward
    SmithEdward
    Smith

Director

February 11, 2010/s/  Anthony
    SunAnthony
    Sun

Director

February 11, 2010/s/  Reuben
    WassermanReuben
    Wasserman

Director

February 11, 2010  90




---



##### Table of Contents



EXHIBIT INDEX
  EXHIBIT NUMBER3A


Restated Articles of Organization of Cognex Corporation
    effective June 27, 1989, as amended April 30, 1991,
    April 21, 1992, April 25, 1995, April 23, 1996,
    and May 8, 2000 (incorporated by reference to
    Exhibit 3A of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])3B


Articles of Amendment to the Articles of Organization of Cognex
    Corporation establishing Series E Junior Participating
    Preferred Stock (incorporated by reference to Exhibit 3.1
    to Cognexs Registration Statement on
    Form 8-A
    filed on December 5, 2008 [File
    No. 1-34218])3C


By-laws of Cognex Corporation, as amended and restated through
    November 21, 2007 (incorporated by reference to
    Exhibit 3B of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])3D


Amendment to By-laws of Cognex Corporation, dated March 1,
    2008 (incorporated by reference to Exhibit 3.1 of
    Cognexs Current Report on
    Form 8-K
    filed on March 3, 2008 [File
    No. 0-17869])4A


Specimen Certificate for Shares of Common Stock (incorporated by
    reference to Exhibit 4 to the Registration Statement on
    Form S-1
    [Registration
    No. 33-29020])4B


Shareholder Rights Agreement, dated December 4, 2008,
    between Cognex Corporation and National City Bank (incorporated
    by reference to Exhibit 4.1 to Cognexs Registration
    Statement on
    Form 8-A
    filed on December 5, 2008
    [File No. 1-34218])10A*


1991 Isys Controls, Inc. Long-Term Equity Incentive Plan
    (incorporated by reference to Exhibit 4A to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-02151])10B*


Cognex Corporation 1998 Non-Employee Director Stock Option Plan
    (incorporated by reference to Exhibit 4.1 to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-60807])10C*


Amendment to Cognex Corporation 1998 Non-Employee Director Stock
    Option Plan, effective as of July 26, 2007 (incorporated by
    reference to Exhibit 10.1 of Cognexs Quarterly Report
    on
    Form 10-Q
    for the quarter ended September 30, 2007 [File
    No. 0-17869])10D*


Cognex Corporation 1998 Stock Incentive Plan (incorporated by
    reference to Exhibit 4.2 to the Registration Statement on
    Form S-8
    [Registration
    No. 333-60807])10E*


First Amendment to the Cognex Corporation 1998 Stock Incentive
    Plan (incorporated by reference to Exhibit 4.3 to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-60807])10F*


Second Amendment to the Cognex Corporation 1998 Stock Incentive
    Plan (incorporated by reference to Exhibit 10.3 of
    Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended July 2, 2006 [File
    No. 0-17869])10G*


Amendment to Cognex Corporation 1998 Stock Incentive Plan,
    effective as of July 26, 2007 (incorporated by reference to
    Exhibit 10.1 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 [File
    No. 0-17869])10H*


Cognex Corporation 2000 Employee Stock Purchase Plan
    (incorporated by reference to Exhibit 4 to the Registration
    Statement on
    Form S-8
    [Registration
    No. 333-44824])10I*


First Amendment to 2000 Employee Stock Purchase Plan
    (incorporated by reference to Exhibit 10.2 of Cognexs
    Quarterly Report on
    Form 10-Q
    for the quarter ended July 3, 2005 [File
    No. 0-17869]) 91




---



##### Table of Contents



EXHIBIT NUMBER10J*


Cognex Corporation 2001 Interim General Stock Incentive Plan
    (incorporated by reference to Exhibit 4.1 to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-68158])10K*


Cognex Corporation 2001 General Stock Option Plan (incorporated
    by reference to Exhibit 1 to the Registration Statement on
    Form S-8
    [Registration
    No. 333-100709])10L*


Amendment to Cognex Corporation 2001 General Stock Option Plan,
    effective as of July 26, 2007 (incorporated by reference to
    Exhibit 10.1 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 [File
    No. 0-17869])10M*


Cognex Corporation 2007 Stock Option and Incentive Plan
    (incorporated by reference to Exhibit 1 to the
    Companys Proxy Statement for the Special Meeting in lieu
    of the 2007 Annual Meeting of Shareholders, filed on
    March 14, 2007 [File
    No. 0-17869])10N*


Form of Letter Agreement between Cognex Corporation and each of
    Robert J. Shillman, Patrick A. Alias, Jerald G. Fishman, Anthony
    Sun and Reuben Wasserman (incorporated by reference to
    Exhibit 10R of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])10O*


Form of Letter Agreement between Cognex Corporation and Eric A.
    Ceyrolle (incorporated by reference to Exhibit 10S of
    Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])10P*


Form of Stock Option Agreement (Non-Qualified) under 1998 Stock
    Incentive Plan (incorporated by reference to Exhibit 10T of
    Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])10Q*


Form of Stock Option Agreement (Non-Qualified) under 1998
    Non-Employee Director Stock Plan (filed herewith)10R*


Separation Agreement by and between Cognex Corporation and James
    F. Hoffmaster (incorporated by reference to Exhibit 10.1 of
    Cognexs Current Report on
    Form 8-K/A,
    filed on April 12, 2007 [File
    No. 0-17869])10S*


Supplemental Retirement and Deferred Compensation Plan effective
    April 1, 1995 (filed herewith)10T*


Summary of Annual Bonus Program (filed herewith)10U*


Summary of Director Compensation (filed herewith)10V*


Form of Indemnification Agreement with each of the Directors of
    Cognex Corporation (incorporated by reference to
    Exhibit 10.1 of Cognexs Current Report on
    Form 8-K
    filed on March 3, 2008 [File
    No. 0-17869])10W*


Employment Agreement, dated June 17, 2008, by and between
    Cognex Corporation and Robert Willett (incorporated by reference
    to Exhibit 10.1 of Cognexs Current Report on
    Form 8-K
    filed on June 19, 2008 [File
    No. 0-17869])10X*


Amendment to Employment Agreement with Robert Willett, dated
    November 14, 2008 (incorporated by reference to
    Exhibit 10X of Cognexs Annual Report on
    Form 10-K
    filed on February 17, 2009 [File
    No. 1-34218])10Y*


Form of Stock Option Agreement under 2007 Stock Option and
    Incentive Plan (incorporated by reference to Exhibit 10.2
    of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended June 29, 2008 [File
    No. 0-17869])10Z*


Letter from the Company to Richard A. Morin regarding Stock
    Option Agreements (incorporated by reference to
    Exhibit 10.3 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended June 29, 2008 [File
    No. 0-17869])10AA*


Memorandum to Eric Ceyrolle regarding separation, dated
    April 24, 2009 (filed herewith)18
.1

Letter from Grant Thornton, LLP regarding change in Accounting
    Principles, dated October 29, 2009 (incorporated by
    reference to Exhibit 18.1 of Cognexs Quarterly Report
    on
    Form 10-Q
    for the quarter ended October 4, 2009 [File
    No. 1-34218]) 92




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##### Table of Contents



EXHIBIT NUMBER14


Code of Business Conduct and Ethics as amended March 12,
    2004 (filed herewith)21


Subsidiaries of the registrant (filed herewith)23
.1

Consent of Grant Thornton LLP (filed herewith)31
.1

Certification of Chief Executive Officer (filed herewith)31
.2

Certification of Chief Financial Officer (filed herewith)32
.1

Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002 (CEO) (furnished herewith)32
.2

Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002 (CFO) (furnished herewith)* Indicates management contract or compensatory plan or
    arrangement  93