##### Table of Contents





UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
 (Mark One)
 December 31, 2007
  
  Commission File Number 0-17869
  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 LLC      Yes X                         No
   Yes                          No X
   Yes X                         No
  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
  Aggregate market value of voting
    stock held by non-affiliates of the registrant
 as of July 1, 2007:
    $890,235,000
 $.002 par value common stock
    outstanding as of January 27, 2008: 43,375,292 shares




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##### 





COGNEX
    CORPORATION ANNUAL REPORT ONFORM 10-K
    FOR THE YEAR ENDED DECEMBER 31, 2007
    INDEX
   
 PART I


1ITEM 1.


BUSINESS


1ITEM 1A.


RISK FACTORS


8ITEM 1B.


UNRESOLVED STAFF COMMENTS


12ITEM 2.


PROPERTIES


12ITEM 3.


LEGAL PROCEEDINGS


13ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


13ITEM 4A.


EXECUTIVE OFFICERS AND OTHER MEMBERS OF THE
    MANAGEMENT TEAM OF THE REGISTRANT


14PART II


15ITEM 5.


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


15ITEM 6.


SELECTED FINANCIAL DATA


17ITEM 7.


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


18ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


33ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


35ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


72ITEM 9A.


CONTROLS AND PROCEDURES


72ITEM 9B


OTHER INFORMATION


73PART III


74ITEM 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


74ITEM 11.


EXECUTIVE COMPENSATION


74ITEM 12.


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


74ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


75ITEM 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


75PART IV


76ITEM 15.


EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


76EX-3A Restated Articles of OrganizationEX-3B By-Laws of the CompanyEX-10B Amendment to the Cognex Corporation 1993 Stock Option Non-Employee DirectorsEX-10D Amendment to the Cognex Corporation 1993 Stock Option PlanEX-10R Form of Letter Agreement (Robert J. Shillman)EX-10S Form of Letter Agreement (Richard A. Morin)EX-10T Form of Stock Option AgreementEX-10X Summary of Annual Bonus ProgramEX-10Y Summary of Director CompensationEX-21 SubsidiariesEX-23.1 Consent of Grant Thornton LLPEX-23.2 Consent of Ernst & Young LLPEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO




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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?
   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 shape 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
        Products
   3




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Vision
    Software
  ®
  Vision
    Systems
  ® ®
  Vision
    Sensors
  ®
  ID
    Products
  tm
  Industry-Specific
    Products
  Wafer
    Identification
  ®
  Wafer
    Pre-Alignment
  ® TM
  Consumer
    Packaging
  TM
 4




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Surface
    Inspection Systems
  ®
    Research,
    Development, and Engineering
      Manufacturing and
    Order Fulfillment
      Sales Channels
    and Support Services
   5




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Form 10-K.
      Intellectual
    Property
    ® ® ® ® ® TM
 6




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Compliance with
    Environmental Provisions
    Competition
      Backlog
    Employees
    Available
    Information
  www.cognex.com. Form 10-K, Form 10-Q, Form 8-K, www.sec.gov. Form 10-K.
 7




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##### Table of Contents



ITEM 1A. RISK
    FACTORS  Form 10-K.
    Unfavorable
    changes in economic conditions and capital spending 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,
    difficulties in staffing and managing foreign sales operations,
    business systems connectivity issues, and
    potentially adverse tax consequences.   8




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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.
    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 business
    could suffer if we lose the services of, or fail to attract, key
    personnel.
   9




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Form 10-K.
    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.
    Our failure to
    effectively manage product transitions or accurately forecast
    customer demand could result in excess or obsolete inventory and
    resulting charges.
   10




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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 defend 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.    Our company may
    be subject to costly litigation.
  Form 10-K.
  Increased
    competition may result in decreased demand or prices for our
    products and services.
  Form 10-K.
  Implementation of
    our acquisition strategy may not be successful, which could
    affect our ability to increase our revenue or
    profitability.
    
    the diversion of managements attention from other
    operational matters,
    the inability to realize expected synergies resulting from the
    acquisition, 11




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
    the failure to retain key customers or employees, and
    the impairment of acquired intangible assets resulting from
    technological obsolescence or lower-than-expected cash flows
    from the acquired assets.    Attractive
    acquisition opportunities may not be available to us.
    We may have
    additional tax liabilities.
    The trading price
    of our common stock may be volatile.
    
    fluctuations in our revenue and earnings,
    changes in the markets expectations for our growth,
    overall equity market conditions,
    conditions relating to the market for technology stocks,
    general economic conditions, and
    other factors unrelated to our operations.    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2:
    PROPERTIES   12




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ITEM 3:
    LEGAL
    PROCEEDINGS  and/or patent-in-suit,
    ITEM 4:
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   13




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

Age


TitleRobert J. Shillman


61


President, Chief Executive Officer, and Chairman of the Board of
    DirectorsEric Ceyrolle


54


Executive Vice President of Worldwide Sales and MarketingRichard A. Morin


58


Senior Vice President of Finance and Administration, Chief
    Financial Officer, and Treasurer       Name

Age


TitleMarkku Jaaskelainen


53


Senior Vice President and General Manager, SISDMarilyn Matz


54


Senior Vice President, Vision Software Business Unit ManagerE. John McGarry


51


Senior Vice President of Research and DevelopmentKris Nelson


60


Senior Vice President of Sales, AmericasWilliam Silver


53


Senior Vice President and Senior FellowJustin Testa


55


Senior Vice President, Group Business Unit Manager  14




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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


Fourth2007High

$
24.85


$
24.24


$
25.87


$
22.35Low


20.83



20.20



16.68



16.742006High

$
33.24


$
30.01


$
26.20


$
26.98Low


27.18



24.25



20.87



21.65      15




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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
  
  
  12/2002

12/2003

12/2004

12/2005

12/2006

12/2007Cognex Corporation


100.00



154.15



153.49



167.45



134.29



115.31NASDAQ Composite


100.00



149.75



164.64



168.60



187.83



205.22NASDAQ Stocks


100.00



169.44



150.71



146.33



156.77



175.30   (SIC
    3820-3829
    U.S. Companies) Lab Apparatus &
    Analytical,Optical, Measuring, and Controlling Instrument
 16




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ITEM 6: SELECTED
    FINANCIAL DATA  Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share amounts)Statement of Operations Data:Revenue

$
225,737


$
238,424


$
216,875


$
201,957


$
150,092Cost of revenue (1)


64,484



64,943



62,899



57,371



50,139Gross margin


161,253



173,481



153,976



144,586



99,953Research, development, and 
    engineering expenses (1)


34,335



32,607



27,640



27,063



24,719Selling, general, and administrative expenses (1)


99,819



96,678



82,332



70,674



55,724Operating income


27,099



44,196



44,004



46,849



19,510Nonoperating income


7,986



6,104



4,242



6,311



3,738Income before taxes


35,085



50,300



48,246



53,160



23,248Income tax expense


8,186



10,445



12,544



15,416



7,297Net income

$
26,899


$
39,855


$
35,702


$
37,744


$
15,951Basic net income per share

$
0.62


$
0.87


$
0.76


$
0.83


$
0.37Diluted net income per share

$
0.61


$
0.85


$
0.74


$
0.80


$
0.36Basic weighted-average common
    shares outstanding


43,725



45,559



46,709



45,480



43,173Diluted weighted-average common
    shares outstanding


44,063



46,648



47,935



47,358



44,466Cash dividends per common share

$
0.34


$
0.33


$
0.32


$
0.28


$
0.12(1) Amounts include stock-based 
    compensation expense, as follows:Cost of revenue

$
1,215


$
1,596


$
-


$
-


$
-Research, development, and
    engineering


3,239



3,627



-



-



-Selling, general, and administrative


7,261



8,401



-



-



-Total stock-based compensation
    expense

$
11,715


$
13,624


$
-


$
-


$
-   December 31,2007


2006


2005


2004


2003(In thousands)Balance Sheet Data:Working capital


263,806


$
266,647


$
268,612


$
242,460


$
150,311Total assets


539,546



528,651



564,562



533,308



432,533Long-term debt


-



-



-



-



-Shareholders equity


476,365



473,850



506,521



462,807



384,994  17




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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
      
    Semiconductor and electronics capital equipment manufacturers
    purchase Cognex machine 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. Although Cognex sells to original
    equipment manufacturers (OEMs) in a number of industries, these
    semiconductor and electronics OEMs have historically been large
    consumers of our products. Over the past several years, however,
    we have diversified our customer base beyond the semiconductor
    and electronics capital equipment sector. Demand from these
    capital 18




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equipment manufacturers is highly cyclical, with periods of
    investment followed by temporary downturns. At its revenue peak
    in 2000, sales to semiconductor and electronics capital
    equipment manufacturers represented approximately 61% of the
    Companys total revenue, compared to approximately 25% in
    2007.  
    Discrete manufacturers in the automotive, consumer electronics,
    food, beverage, healthcare, pharmaceutical, and aerospace
    industries use machine vision for a wide variety of applications
    in factory automation. These manufacturers purchase Cognex
    vision products and install them directly on their production
    lines or automation cells. We believe that long-term, sustained
    revenue growth will come from a broad base of factory automation
    customers. Accordingly, we have invested in developing new
    products and functionality that make vision easier to use and in
    building a worldwide sales and support infrastructure in order
    to access more of the potential market for machine vision. Sales
    to discrete factory automation customers represented
    approximately 62% of total revenue in 2007.
    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 and classify defects in
    the surfaces of those materials as they are being processed at
    high speeds. Surface inspection sales represented approximately
    13% of total revenue in 2007.      Year ended December 31,2007


2006


2005Revenue


100
%


100
%


100
%Cost of revenue


29



27



29Gross margin


71



73



71Research, development, and engineering expenses


15



13



13Selling, general, and administrative expenses


44



41



38Operating income


12



19



20Nonoperating income


4



2



2Income before taxes


16



21



22Income tax expense


4



4



6Net income


12
%


17
%


16
%   STOCK-BASED
    COMPENSATION
     19




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RESULTS OF
    OPERATIONS
  Year Ended
    December 31, 2007 Compared to Year Ended December 31,
    2006
  Correction of
    Prior-Period Misstatements Related to Unsubstantiated Orders in
    Japan
    Revenue
    Semiconductor and
    Electronics Capital Equipment Market
   20




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Discrete Factory
    Automation Market
    Surface
    Inspection Market
    Product
    Revenue
    Service
    Revenue
    Gross
    Margin
   21




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MVSD
    Margin
  start-up
  SISD
    Margin
    Product
    Margin
    Service
    Margin
    Operating
    Expenses
  Research,
    Development, and Engineering Expenses
     22




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Selling, General,
    and Administrative Expenses
        Nonoperating
    Income
      Income
    Taxes
  true-up
   23




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true-up
           24




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Year Ended
    December 31, 2006 Compared to Year Ended December 31,
    2005
  Revenue
    Semiconductor and
    Electronics Capital Equipment Market
    Discrete Factory
    Automation Market
    Surface
    Inspection Market
    Product
    Revenue
   25




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Service
    Revenue
    Gross
    Margin
    MVSD
    Margin
    SISD
    Margin
    Product
    Margin
    Service
    Margin
    Operating
    Expenses
  Research,
    Development, and Engineering Expenses
   26




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Selling, General,
    and Administrative Expenses
        Nonoperating
    Income
      Income
    Taxes
  true-up
  LIQUIDITY AND
    CAPITAL RESOURCES
   27




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VenrockLimited


InventoryPartnership


PurchaseYear Ended December
    31,

Interest


Commitments


Leases


Total2008

$
1,012


$
10,342


$
3,771


$
15,1252009


-



-



2,100



2,1002010


-



-



1,423



1,4232011


-



-



1,073



1,0732012


-



-



1,012



1,012Thereafter


-



-



2,009



2,009$
1,012


$
10,342


$
11,388


$
22,742      28




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Stock Repurchase
    Program
    Dividends
    Acquisitions
    Derivative
    Instruments
    OFF-BALANCE SHEET
    ARRANGEMENTS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
   29




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Revenue
    Recognition
      No. 97-2, SOP No. 98-9, SOP 97-2,
  Investments
       30




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Accounts
    Receivable
    Inventories
    Long-lived
    Assets
    Warranty
    Obligations
   31




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Contingencies
    Stock-Based
    Compensation
    Income
    Taxes
       32




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Derivative
    Instruments
      NEW
    PRONOUNCEMENTS
  FASB Statement No. 157, Fair Value
    Measurements
    FASB Statement No. 159, The Fair Value Option for
    Financial Assets and Financial Liabilities
    FASB Statement No. 141R, Business
    Combinations
    ITEM 7A:
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign Currency
    Risk
       33




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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


$155,089


$155,682


$156,276


$156,870


$157,464   Other Market
    Risks
       34




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##### 



ITEM 8:
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   INDEX TO
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   
  
 Consolidated Financial Statements:Report of Independent Accountants

36-37Consolidated Statements of Operations for the
    Years Ended December 31, 2007, 2006, and 2005

38Consolidated Balance Sheets as of
    December 31, 2007 and 2006

39Consolidated Statements of Shareholders
    Equity for the Years Ended December 31, 2007, 2006, and
    2005

40Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007, 2006, and 2005

41Notes to the Consolidated Financial Statements

42Selected Quarterly Financial Data (unaudited)

68Financial Statement Schedule:Report of Independent Accountants on the
    Financial Statement Schedule

69-70Schedule II  Valuation and
    Qualifying Accounts for the Years Ended December 31, 2007,
    2006, and 2005

71   35




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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:
              
    36




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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:
            
    37




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COGNEX
    CORPORATION - CONSOLIDATED STATEMENTS OF
    OPERATIONS  Year Ended December 31,2007


2006


2005(In thousands, except per share amounts)RevenueProduct

$
201,714


$
214,938


$
192,804Service


24,023



23,486



24,071225,737



238,424



216,875Cost of revenueProduct (1)


50,079



50,318



47,611Service (1)


14,405



14,625



15,28864,484



64,943



62,899Gross marginProduct


151,635



164,620



145,193Service


9,618



8,861



8,783161,253



173,481



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


34,335



32,607



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


99,819



96,678



82,332Operating income


27,099



44,196



44,004Foreign currency gain (loss)


279



(333
)


(888
)Investment and other income


7,707



6,437



5,130Income before income tax expense


35,085



50,300



48,246Income tax expense


8,186



10,445



12,544Net income

$
26,899


$
39,855


$
35,702Net income per common and common-equivalent share:Basic

$
0.62


$
0.87


$
0.76Diluted

$
0.61


$
0.85


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


43,725



45,559



46,709Diluted


44,063



46,648



47,935Cash dividends per common share

$
0.34


$
0.33


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

$
624


$
725


$
-Service cost of revenue


591



871



-Research, development, and engineering


3,239



3,627



-Selling, general, and administrative


7,261



8,401



-Total stock-based compensation expense

$
11,715


$
13,624


$
-    38




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COGNEX
    CORPORATION - CONSOLIDATED BALANCE SHEETS  December 31,2007


2006(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
104,144


$
87,361Short-term investments


113,179



128,319Accounts receivable, less reserves of $1,317 and $1,662 in 2007
    
    and 2006, respectively


38,923



40,055Inventories, net


27,459



30,583Deferred income taxes


7,504



8,636Prepaid expenses and other current assets


16,470



18,127Total current assets


307,679



313,081Long-term investments


50,565



50,540Property, plant, and equipment, net


26,680



26,028Deferred income taxes


19,750



9,002Intangible assets, net


39,724



44,988Goodwill


86,461



83,318Other assets


8,687



1,694$
539,546


$
528,651LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
7,245


$
6,463Accrued expenses


20,098



31,064Accrued income taxes


3,242



1,181Deferred revenue and customer deposits


13,288



7,726Total current liabilities


43,873



46,434Reserve for income taxes


19,308



8,367Commitments and contingencies (Notes 4, 9, 10, 11, and 18)Shareholders equity:Common stock, $.002 par value  
    Authorized: 140,000 shares, issued: 43,347 and
    44,403 shares
    in 2007 and 2006, respectively


87



89Additional paid-in capital


140,943



155,136Retained earnings


337,231



329,251Accumulated other comprehensive loss


(1,896
)


(10,626
)Total shareholders equity


476,365



473,850$
539,546


$
528,651    39




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##### Table of Contents






COGNEX
    CORPORATION-CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY  AccumulatedAdditional





Other





TotalCommon Stock


Paid-in


Retained


Comprehensive


Comprehensive


Shareholders(In thousands)

Shares


Par Value


Capital


Earnings


Loss


Income


EquityBalance at December 31, 2004


46,155


$
92


$
192,860


$
283,712


$
(13,857
)





$
462,807Issuance of common stock under stock
    option, stock purchase, and other plans


1,400



2



27,213



-



-



-



27,215Tax benefit from exercise of stock options


-



-



7,648



-



-



-



7,648Repurchase of common stock


(384
)


-



(11,690
)


-



-



-



(11,690
)Payment of dividends


-



-



-



(14,960
)


-



-



(14,960
)Comprehensive income:Net income


-



-



-



35,702



-


$
35,702



35,702Gains on long-term intercompany loans, net of losses on currency
    swaps, net of tax of $82


-



-



-



-



139



139



139Net unrealized loss on available-for- sale investments, net of
    tax of $31


-



-



-



-



(52
)


(52
)


(52
)Foreign currency translation adjustment


-



-



-



-



(288
)


(288
)


(288
)Comprehensive income





















$
35,501Balance at December 31, 2005


47,171


$
94


$
216,031


$
304,454


$
(14,058
)





$
506,521Issuance of common stock under stock option, stock purchase, and
    other plans


513



2



10,357



-



-



-



10,359Stock-based compensation expense


-



-



13,624



-



-



-



13,624Excess tax benefit from stock option exercises


-



-



1,413



-



-



-



1,413Repurchase of common stock


(3,281
)


(7
)


(86,289
)


-



-



-



(86,296
)Payment of dividends


-



-



-



(15,058
)


-



-



(15,058
)Comprehensive income:Net income


-



-



-



39,855



-


$
39,855



39,855Gains on long-term intercompany loans, net of losses on currency
    swaps, net of tax of $139


-



-



-



-



236



236



236Net unrealized gain on available-for-sale investments, net of
    tax of $330


-



-



-



-



562



562



562Foreign currency translation adjustment


-



-



-



-



2,634



2,634



2,634Comprehensive income





















$
43,287Balance at 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 (Note 15)














(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 at December 31, 2007


43,347


$
87


$
140,943


$
337,231


$
(1,896
)





$
476,365    40




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##### Table of Contents





COGNEX
    CORPORATION - CONSOLIDATED STATEMENTS OF CASH
    FLOWS  Year Ended December 31,2007


2006


2005(In thousands)Cash flows from operating activities:Net income.

$
26,899


$
39,855


$
35,702Adjustments to reconcile net income to net cash provided by
    operating activities:Stock-based compensation expense


11,715



13,624



-Depreciation of property, plant, and equipment


4,271



4,285



4,387Amortization of intangible assets


5,648



5,884



4,283Amortization of investments


1,439



1,498



2,755Provision for excess and obsolete inventory


4,672



1,076



1,531Reversal of accrued inventory purchase commitments


(1,400
)


-



-Excess tax benefit from stock option exercises


(241
)


(1,413
)


-Tax benefit from stock option exercises


-



-



7,648Deferred income tax benefit


(9,896
)


(45
)


(2,996
)Changes in operating assets and liabilities:Accounts receivable


3,198



4,216



(5,770
)Inventories


124



(11,254
)


(483
)Accrued expenses


(8,122
)


(3,662
)


(10,877
)Income taxes


8,554



(3,249
)


3,788Deferred revenue and customer deposits


5,458



87



(1,370
)Other


(3,846
)


(2,423
)


4,163Net cash provided by operating activities


48,473



48,479



42,761Cash flows from investing activities:Purchase of investments


(277,876
)


(481,086
)


(1,437,264
)Maturity and sale of investments


292,213



541,023



1,531,830Purchase of property, plant, and equipment


(4,635
)


(4,224
)


(3,819
)Cash paid for business acquisitions, net of cash acquired


(1,002
)


(3,188
)


(111,842
)Net cash provided by (used in) investing activities


8,700



52,525



(21,095
)Cash flows from financing activities:Issuance of common stock under stock option and stock purchase
    plans


6,819



10,359



27,215Repurchase of common stock


(32,663
)


(86,296
)


(11,690
)Payment of dividends


(14,898
)


(15,058
)


(14,960
)Excess tax benefit from stock option exercises


241



1,413



-Net cash provided by (used in) financing activities


(40,501
)


(89,582
)


565Effect of foreign exchange rate changes on cash


111



3,083



(3,645
)Net increase in cash and cash equivalents


16,783



14,505



18,586Cash and cash equivalents at beginning of year


87,361



72,856



54,270Cash and cash equivalents at end of year

$
104,144


$
87,361


$
72,856    41




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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
    Cash, Cash
    Equivalents, and Investments
       42




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Accounts
    Receivable
      Inventories
        Property, Plant,
    and Equipment
    Intangible
    Assets
   43




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Goodwill
    Warranty
    Obligations
    Contingencies
    Revenue
    Recognition
  No. 97-2, SOP No. 98-9, SOP 97-2,
     44




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)      Research and
    Development
    Advertising
    Costs
    Stock-Based
    Compensation
      Taxes
   45




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)          Net Income Per
    Share
    Comprehensive
    Income (Loss)
    Concentrations of
    Risk
     46




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)      Derivative
    Instruments
      NOTE 2:
    New
    Pronouncements  FASB Statement
    No. 157, Fair Value Measurements
    FASB Statement
    No. 159, The Fair Value Option for Financial Assets
    and Financial Liabilities
    FASB Statement
    No. 141R, Business Combinations
   47




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 3:
    Foreign Currency
    Risk Management        NOTE 4:
    Cash, Cash
    Equivalents, and Investments    December 31,2007


2006Cash

$
104,144


$
84,361Cash equivalents


-



3,000Cash and cash equivalents

$
104,144


$
87,361Municipal bonds


113,179



108,332Commercial paper


-



15,988Agency notes


-



3,999Short-term investments

$
113,179


$
128,319Municipal bonds


43,097



39,594Limited partnership interest (accounted for using cost method)


7,468



10,946Long-term investments

$
50,565


$
50,540$
267,888


$
266,220    48




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 4:
    Cash, Cash
    Equivalents, and Investments (continued)    Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


Fair ValueShort-term municipal bonds

$
113,030


$
149


$
-


$
113,179Long-term municipal bonds


42,848



251



(2
)


43,097$
155,878


$
400


$
(2
)

$
156,276         NOTE 5:
    Inventories    December 31,2007


2006Raw materials

$
13,070


$
16,746Work-in-process


1,336



1,630Finished goods


13,053



12,207$
27,459


$
30,583      49




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 5:
    Inventories
    (continued)    Balance at December 31, 2006

$
11,530Provisions for excess and obsolete inventory


4,672Inventory sold to customers


(495
)Inventory sold to brokers


(2,577
)Scrap of reserved inventory


(3,868
)Foreign exchange rate changes


852Balance at December 31, 2007

$
10,114     NOTE 6:
    Property, Plant,
    and Equipment    December 31,2007


2006Land

$
3,951


$
3,951Buildings


18,371



18,371Building improvements


6,918



5,769Leasehold improvements


2,706



2,240Computer hardware and software


24,101



24,374Manufacturing test equipment


9,276



7,537Furniture and fixtures


4,824



4,71070,147



66,952Less: accumulated depreciation


(43,467
)


(40,924
)$
26,680


$
26,028          50




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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


CarryingDecember 31,
    2007

Value


Amortization


ValueDistribution networks

$
38,060


$
8,763


$
29,297Customer contracts and relationships


13,743



5,885



7,858Completed technologies


3,794



1,672



2,122Other


1,250



803



447$
56,847


$
17,123


$
39,724December 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


$
44,988   fully-amortized
  Year ended December 31,

Amount2008

$
5,7122009


5,5242010


5,3952011


4,4512012


4,033Thereafter


14,609$
39,724   51




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 8:
    Goodwill      MVSD


SISD


ConsolidatedBalance 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


(298
)


-



(298
)Foreign currency exchange rate changes


365



292



657Balance at December 31, 2006

$
80,485


$
2,833


$
83,318IRS Settlement related to DVT acquisition


179



-



179AssistWare contingent payments (Note 18)


2,002



-



2,002Foreign currency exchange rate changes


662



300



962Balance at December 31, 2007

$
83,328


$
3,133


$
86,461    NOTE 9:
    Accrued
    Expenses    December 31,2007


2006Salaries, commissions, and payroll taxes

$
4,027


$
3,129Vacation


3,661



3,270Consumption taxes


3,028



2,561Warranty obligations


1,462



1,387Company bonuses


1,309



3,236AssistWare contingent payment (Note 18)


1,000



-Forward contracts and currency swaps (Note 3)


141



9,752Inventory purchase commitments (Note 5)


-



1,400Other


5,470



6,329$
20,098


$
31,064  52




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 9:
    Accrued Expenses
    (continued)    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

$
1,387Provisions for warranties issued during the period


2,164Fulfillment of warranty obligations


(2,176
)Foreign exchange rate changes


87Balance at December 31, 2007

$
1,462    NOTE 10:
    Commitments and
    Contingencies  Commitments
      Year Ended December 31,

Amount2008

$
3,7712009


2,1002010


1,4232011


1,0732012


1,012Thereafter


2,009$
11,388    53




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##### Table of Contents



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

Amount2008

$
1,0442009


8042010


5572011


5722012


572Thereafter


1,426$
4,975   Contingencies
  and/or patent-in-suit,
    NOTE 11:
    Indemnification
    Provisions     54




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 11:
    Indemnification
    Provisions (continued)      NOTE 12:
    Shareholders
    Equity  Preferred
    Stock
    Common
    Stock
    Stock Repurchase
    Program
    Stock Option
    Plans
    st st
   55




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 12:
    Shareholders
    Equity (continued)      Weighted-AverageWeighted-


Remaining


AggregateAverage


Contractual


IntrinsicShares


Exercise


Term


Value(in thousands)


Price


(in years)


(in thousands)Outstanding at December 31, 2006


11,324


$
25.90Granted at market value


1,468



21.61Exercised


(367
)


18.10Forfeited or Expired


(1,485
)


26.53Outstanding at December 31, 2007


10,940


$
25.50



6.0


$
6,314Exercisable at December 31, 2007


7,361


$
25.58



4.8


$
6,274   Employee Stock
    Purchase Plan
    st
  NOTE 13:
    Stock-Based
    Compensation   56




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 13:
    Stock-Based
    Compensation (continued)    Year Ended December 31,2007


2006


2005Risk-free rate


4.9
%


4.6
%


3.4
%Expected dividend yield


1.52
%


1.12
%


1.26
%Expected volatility


40
%


45
%


35
%Expected term (in years)


5.4



4.1



2.8   Risk-free
    rate
   Expected dividend
    yield
   Expected
    volatility
   Expected
    term
        57




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 13:
    Stock-Based
    Compensation (continued)        Year Ended December 31, 2005(in thousands,
    except per share amounts)Net income, as reported

$
35,702Less: Total stock-based compensation expense determined
    under fair value based method, net of tax


(9,355
)Net income, pro forma

$
26,347Basic net income per share, as reported

$
0.76Basic net income per share, pro forma

$
0.56Diluted net income per share, as reported

$
0.74Diluted net income per share, pro forma

$
0.55   NOTE 14:
    Employee Savings
    Plan    NOTE 15:
    Income
    Taxes   58




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)    Year Ended December 31,2007


2006


2005Current:Federal.

$
9,980


$
9,718


$
3,502State


1,315



240



507Foreign


5,381



5,674



3,27916,676



15,632



7,288Deferred:Federal


(7,768
)


(4,847
)


3,501State


(660
)


(101
)


438Foreign


(62
)


(239
)


1,317(8,490
)


(5,187
)


5,256$
8,186


$
10,445


$
12,544     Year Ended December 31,2007


2006


2005Income tax provision at federal statutory rate


35
%


35
%


35
%State income taxes, net of federal benefit


2



3



1Tax-exempt investment income


(6
)


(4
)


(3
)Foreign tax rate differential


(13
)


(11
)


(9
)Discrete tax events


4



(4
)


Other


1



2



2Provision for income taxes


23
%


21
%


26
%   true-up
  true-up
   59




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)           60




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)    Balance at December 31, 2006

$
8,367Cumulative effect upon adoption of FIN 48


4,021Balance at January 1, 2007


12,388Gross-up
    of FIN 48 liabilities


1,503Balance of gross FIN 48 liabilities at January 1,
    2007


13,891Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in prior periods


1,754Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in the current period


781Gross amounts of decreases in unrecognized tax benefits relating
    to settlements with taxing authorities


Gross amounts of decreases in unrecognized tax benefits as a
    result of the expiration of the applicable statute of limitations


(25
)Balance of gross FIN 48 liabilities at
    December 31, 2007

$
16,401    61




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)    December 31,2007


2006Current deferred tax assets:Inventory and revenue related

$
5,276


$
4,881Federal capital loss carryforward


671



1,237Bonus, commission, and other compensation


1,078



1,144Other


1,150



1,854Gross current deferred tax assets


8,175



9,116Valuation allowance


(671
)


(480
)Net current deferred tax assets

$
7,504


$
8,636Noncurrent deferred tax assets:Federal and state tax credit carryforwards

$
13,395


$
11,611Stock-based compensation expense


8,476



4,741Correlative tax relief and deferred interest related to
    FIN 48 liabilities


4,296



Acquired completed technologies and other intangible assets


2,989



3,364Depreciation


1,632



1,478Unrealized investment gains and losses


1,389



1,428Acquired in-process technology


682



800Other


897



77133,756



24,193Noncurrent deferred tax liabilities:Nondeductible intangible assets


(13,274
)


(14,990
)Other


(732
)


(201
)(14,006
)


(15,191
)Net noncurrent deferred tax assets

$
19,750


$
9,002       acquisition-related
 62




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)      U.S. Non-U.S. income
    NOTE 16:
    Net Income Per
    Share    Year Ended December 31,2007


2006


2005Net income

$
26,899


$
39,855


$
35,702Basic:Weighted-average common shares outstanding


43,725



45,559



46,709Net income per common share

$
0.62


$
0.87


$
0.76Diluted:Weighted-average common shares outstanding


43,725



45,559



46,709Effect of dilutive stock options


338



1,089



1,226Weighted-average common and common-
    equivalent shares outstanding


44,063



46,648



47,935Net income per common and common-equivalent share

$
0.61


$
0.85


$
0.74     NOTE 17:
    Segment and
    Geographic Information   63




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 17:
    Segment and
    Geographic Information (continued)      ReconcilingMVSD


SISD


Items


ConsolidatedYear Ended December 31, 2007Product revenue

$
182,809


$
18,905



-


$
201,714Service revenue


13,357



10,666



-



24,023Depreciation and amortization


9,404



252


$
263



9,919Goodwill and intangibles


123,052



3,133



-



126,185Operating income


48,699



1,927



(23,527
)


27,099Year 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


65,533



3,380



(24,717
)


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
)


44,004      64




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 17:
    Segment and
    Geographic Information (continued)    United States


Japan


Europe


Other


ConsolidatedYear Ended December 31, 2007Product revenue

$
68,541


$
47,535


$
65,835


$
19,803


$
201,714Service revenue


10,159



4,783



7,187



1,894



24,023Long-lived assets


134,887



1,894



24,600



171



161,552Year 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



157,436     NOTE 18:
    Acquisitions  Acquisition of
    AssistWare Technology,
    Inc.
       65




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 18:
    Acquisitions
    (continued)    Weighted-AverageEstimated

Amortization PeriodFair Value

(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     Acquisition of
    DVT Corporation
     66




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 18:
    Acquisitions
    (continued)    Weighted-AverageEstimated

Amortization PeriodFair Value

(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       Year Ended December 31, 2005(in thousands,
    except per share amount)Revenue

$
227,431Net income

$
35,266Net income per diluted share

$
0.74    NOTE 19:
    Dividends     67




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##### Table of Contents



COGNEX
    CORPORATION - SELECTED QUARTERLY FINANCIAL DATA
    (UNAUDITED)  Quarter EndedApril 1,


July 1,


September 30,


December 31,2007


2007


2007


2007(In thousands, except per share amounts)Revenue

$
50,929


$
54,742


$
54,745


$
65,321Gross margin


36,508



36,761
(1)


40,127



47,857Operating income


4,604



4,148



7,120



11,227Net income


4,635



3,827



7,343



11,094Basic net income per share


0.10



0.09



0.17



0.26Diluted net income per share


0.10



0.09



0.17



0.25Quarter EndedApril 2,


July 2,


October 1,


December 31,2006


2006


2006


2006(In thousands, except per share amounts)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



0.21    68




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##### Table of Contents



COGNEX
    CORPORATION - 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
   
    69




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##### Table of Contents



COGNEX
    CORPORATION - 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).
     
    70




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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:2007

$
1,662


$
34


$
-


$
(407
) (a)

$
28
(b)

$
1,3172006


2,370



200



-



(273
) (a)


(635
) (b)


1,6622005


2,596



-



-



(81
) (a)


(145
) (b)


2,370     71




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##### 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
        Registered Public
    Accounting Firms Report on Internal Control Over Financial
    Reporting
    Internal ControlIntegrated
    Framework
     72




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##### Table of Contents



Internal Control-Integrated Framework
    
     Changes in
    Internal Control Over Financial Reporting
    ITEM 9B:
    OTHER
    INFORMATION   73




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##### 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


10,754,433
    (1
)

$
25.58


2,003,281 (2
)Equity compensation plans not approved by shareholders


185,901 (3
)


21.20


7,110,000 (4
)10,940,334


$
25.50


9,113,281   (1)
    Includes shares to be issued upon exercise of outstanding
    options under the Companys 1991 Isys Controls, Inc.
    Long-Term Equity Incentive Plan, 1993 Stock Option Plan, 1993
    Stock Option Plan for Non-Employee Directors, 1998 Stock
    Incentive Plan, and 1998 Non-Employee Director Stock Option
    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 1998 Stock Incentive Plan and 1998
    Non-Employee Director Stock Option Plan. Includes
    240,944 shares available for future issuance under the
    ESPP. Excludes 2,300,000 shares that will become available
    for grant on February 27, 2008 when the 1998 Stock
    Incentive Plan expires and the 2007 Stock Option and Incentive
    Plan takes effect.(3)
    Includes shares to be issued upon the exercise of outstanding
    options under the Companys 2001 Interim General Stock
    Incentive Plan.(4)
    Includes shares remaining available for future issuance under
    the Companys 2001 General Stock Option Plan.   74




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##### Table of Contents



ITEM 13: CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE   ITEM 14: PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   75




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##### Table of Contents



PART IV ITEM 15: EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES    Form 10-K.
    Form 10-K.
      Form 10-K
 76




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##### Table of Contents



SIGNATURES
      By:
    /s/  Robert
    J. Shillman        Signature

Title

Date/s/  Robert
    J. ShillmanRobert
    J. Shillman

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

February 14, 2008/s/  Richard
    A. MorinRichard
    A. Morin

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

February 14, 2008/s/  Patrick
    AliasPatrick
    Alias

Director

February 14, 2008/s/  Jerald
    FishmanJerald
    Fishman

Director

February 14, 2008/s/  Theodor
    KrantzTheodor
    Krantz

Director

February 14, 2008/s/  Edward
    SmithEdward
    Smith

Director

February 14, 2008/s/  Anthony
    SunAnthony
    Sun

Director

February 14, 2008/s/  Reuben
    WassermanReuben
    Wasserman

Director

February 14, 2008  77




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##### Table of Contents



EXHIBIT INDEX
  EXHIBIT NUMBER2A


Agreement and Plan of Merger, dated May 9, 2005, by and
    among Cognex, Tango Acquisition Corp. and DVT Corporation
    (excluding schedules and exhibits which the registrant agrees to
    furnish supplementally to the Commission upon request)
    (incorporated by reference to Exhibit 2.1 of Cognexs
    Current Report on
    Form 8-K
    filed on May 11, 2005 [File
    No. 0-17869])3A


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 (Refiled herewith)3B


By-laws of the Company, as amended and restated through
    November 21, 2007 (Filed herewith)4


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])10A*


Cognex Corporation 1993 Stock Option Plan for Non-Employee
    Directors (incorporated by reference to Exhibit 4A to the
    Registration Statement on
    Form S-8
    [Registration
    No. 33-81150])10B*


Amendment to the Cognex Corporation 1993 Stock Option Plan for
    Non-Employee Directors (Refiled herewith)10C*


Cognex Corporation 1993 Stock Option Plan, as amended
    November 14, 1995 and February 25, 1996 (incorporated
    by reference to Exhibit 4A to the Registration Statement on
    Form S-8
    [Registration
    No. 333-04621])10D*


Amendment to the Cognex Corporation 1993 Stock Option Plan
    (Refiled herewith)10E*


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])10F*


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])10G*


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])10H*


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])10I*


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])10J*


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])10K*


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])10L*


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])10M*


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]) 78




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##### Table of Contents



EXHIBIT NUMBER10N*


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])10O*


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])10P*


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])10Q*


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])10R*


Form of Letter Agreement between Cognex Corporation and each of
    Robert J. Shillman, Patrick A. Alias, Jerald G. Fishman, Anthony
    Sun and Reuben Wasserman (Filed herewith)10S*


Form of Letter Agreement between Cognex Corporation and each of
    Richard A. Morin and Eric A. Ceyrolle (Filed herewith)10T*


Form of Stock Option Agreement (Non-Qualified) under 1998 Stock
    Incentive Plan (Filed herewith)10U*


Form of Stock Option Agreement (Non-Qualified) under 1998
    Non-Employee Director Stock Plan (incorporated by reference to
    Exhibit 10.2 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended October 3, 2004 [File
    No. 0-17869])10V*


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])10W*


Supplemental Retirement and Deferred Compensation Plan effective
    April 1, 1995 (incorporated by reference to
    Exhibit 10P of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2004 [File
    No. 0-17869])10X*


Summary of Annual Bonus Program (Filed herewith)10Y*


Summary of Director Compensation (Filed herewith)14


Code of Business Conduct and Ethics as amended March 12,
    2004 (incorporated by reference to Exhibit 14 of
    Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2004 [File
    No. 0-17869])21


Subsidiaries of the registrant (Filed herewith)23
.1

Consent of Grant Thornton LLP (Filed herewith)23
.2

Consent of Ernst & Young 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  79