UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 4, 2009 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from  to
 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)
  Yes þ
    
    No o
  Yes o
    
    No o
  Large accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o  Yes o
    
    No þ




---



##### 



INDEX
 PART I
    
    FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Financial Statements
    
    
    1Consolidated Statements of Operations for the three-month and
nine-month periods ended October 4, 2009 and September 28, 2008
    
    
    1Consolidated Balance Sheets as of October 4, 2009 and December 31,
2008
    
    
    2Consolidated Statement of Shareholders Equity for the nine-month
period ended October 4, 2009
    
    
    3Consolidated Condensed Statements of Cash Flows for the nine-month
periods ended October 4, 2009 and September 28, 2008
    
    
    4Notes to Consolidated Financial Statements (interim periods unaudited)
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    33PART II
    
    OTHER INFORMATION
    
    
    34Item 1.
    
    Legal Proceedings
    
    
    34Item 1A.
    
    Risk Factors
    
    
    34Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3.
    
    Defaults Upon Senior Securities
    
    
    35Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    35Item 5.
    
    Other Information
    
    
    35Item 6.
    
    Exhibits
    
    
    35Signatures
    
    
    36




---



##### 



PART I: FINANCIAL INFORMATION
 ITEM 1:
    
    FINANCIAL STATEMENTS
 COGNEX CORPORATION
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three-months Ended
    
    
    Nine-months EndedOctober 4,
    
    
    September 28,
    
    
    October 4,
    
    
    September 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)RevenueProduct
    
    $
    37,429
    
    
    $
    58,300
    
    
    $
    112,185
    
    
    $
    175,699Service
    
    
    3,749
    
    
    
    4,956
    
    
    
    12,248
    
    
    
    15,15941,178
    
    
    
    63,256
    
    
    
    124,433
    
    
    
    190,858Cost of revenueProduct
    
    
    9,589
    
    
    
    14,327
    
    
    
    31,893
    
    
    
    44,401Service
    
    
    2,449
    
    
    
    3,081
    
    
    
    8,585
    
    
    
    9,08712,038
    
    
    
    17,408
    
    
    
    40,478
    
    
    
    53,488Gross marginProduct
    
    
    27,840
    
    
    
    43,973
    
    
    
    80,292
    
    
    
    131,298Service
    
    
    1,300
    
    
    
    1,875
    
    
    
    3,663
    
    
    
    6,07229,140
    
    
    
    45,848
    
    
    
    83,955
    
    
    
    137,370Research, development, and engineering expenses
    
    
    6,756
    
    
    
    9,073
    
    
    
    23,295
    
    
    
    27,292Selling, general, and administrative expenses
    
    
    21,281
    
    
    
    28,788
    
    
    
    69,826
    
    
    
    83,362Restructuring charges (Note 14)
    
    
    223
    
    
    
    
    
    
    
    4,258
    
    
    
    Operating income (loss)
    
    
    880
    
    
    
    7,987
    
    
    
    (13,424
    )
    
    
    26,716Foreign currency gain (loss)
    
    
    1
    
    
    
    327
    
    
    
    (813
    )
    
    
    798Investment income
    
    
    419
    
    
    
    1,875
    
    
    
    1,875
    
    
    
    5,609Other income (expense)
    
    
    (158
    )
    
    
    (45
    )
    
    
    1,517
    
    
    
    339Income
(loss) from continuing operations before income tax expense
(benefit)
    
    
    1,142
    
    
    
    10,144
    
    
    
    (10,845
    )
    
    
    33,462Income tax expense (benefit) on continuing operations
    
    
    (3,359
    )
    
    
    (1,189
    )
    
    
    (5,517
    )
    
    
    4,777Income (loss) from continuing operations
    
    
    4,501
    
    
    
    11,333
    
    
    
    (5,328
    )
    
    
    28,685Loss from operations of discontinued business, net
of tax (Note 17)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,224
    )Net income (loss)
    
    $
    4,501
    
    
    $
    11,333
    
    
    $
    (5,328
    )
    
    $
    25,461Basic earnings (loss) per weighted-average
common and common-equivalent share:Income (loss) from continuing operations
    
    $
    0.11
    
    
    $
    0.27
    
    
    $
    (0.13
    )
    
    $
    0.68Loss from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.07
    )Net income (loss)
    
    $
    0.11
    
    
    $
    0.27
    
    
    $
    (0.13
    )
    
    $
    0.61Diluted earnings (loss) per weighted-average
common and common-equivalent share:Income (loss) from continuing operations
    
    $
    0.11
    
    
    $
    0.27
    
    
    $
    (0.13
    )
    
    $
    0.68Loss from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.08
    )Net income (loss)
    
    $
    0.11
    
    
    $
    0.27
    
    
    $
    (0.13
    )
    
    $
    0.60Weighted-average common and common-equivalent
shares outstanding:Basic
    
    
    39,662
    
    
    
    41,347
    
    
    
    39,658
    
    
    
    42,054Diluted
    
    
    39,666
    
    
    
    41,462
    
    
    
    39,658
    
    
    
    42,298Cash dividends per common share
    
    $
    0.050
    
    
    $
    0.150
    
    
    $
    0.250
    
    
    $
    0.320
  1




---



##### 



COGNEX CORPORATION
 CONSOLIDATED BALANCE SHEETS
 October 4
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    127,162
    
    
    $
    127,138Short-term investments
    
    
    55,527
    
    
    
    52,559Accounts receivable, less reserves of
$1,390 and $1,290 in 2009 and 2008,
respectively
    
    
    25,246
    
    
    
    30,510Inventories
    
    
    20,925
    
    
    
    25,063Deferred income taxes
    
    
    12,253
    
    
    
    10,231Prepaid expenses and other current assets
    
    
    13,013
    
    
    
    18,923Total current assets
    
    
    254,126
    
    
    
    264,424Long-term investments
    
    
    23,226
    
    
    
    41,389Property, plant, and equipment, net
    
    
    28,959
    
    
    
    27,764Deferred income taxes
    
    
    18,163
    
    
    
    17,673Intangible assets, net
    
    
    29,604
    
    
    
    31,278Goodwill
    
    
    82,739
    
    
    
    80,765Other assets
    
    
    10,080
    
    
    
    10,754$
    446,897
    
    
    $
    474,047LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,851
    
    
    $
    6,780Accrued expenses
    
    
    16,079
    
    
    
    21,855Accrued income taxes
    
    
    462
    
    
    
    2,986Deferred revenue and customer deposits
    
    
    10,858
    
    
    
    19,429Total current liabilities
    
    
    32,250
    
    
    
    51,050Reserve for income taxes
    
    
    6,327
    
    
    
    9,922Commitments and contingencies (Note 8)Shareholders equity:Common stock, $.002 par value Authorized: 140,000 shares, issued: 39,662
and 39,655 shares in 2009 and 2008,
respectively
    
    
    79
    
    
    
    79Additional paid-in capital
    
    
    77,981
    
    
    
    73,280Retained earnings
    
    
    329,983
    
    
    
    345,225Accumulated other comprehensive income (loss)
    
    
    277
    
    
    
    (5,509
    )Total shareholders equity
    
    
    408,320
    
    
    
    413,075$
    446,897
    
    
    $
    474,047
  2




---



##### 



COGNEX CORPORATION
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 Additional
    
    
    
    
    
    
    Accumulated 
OtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    Total ShareholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Income
    
    
    EquityBalance as of December 31, 2008
    
    
    39,655
    
    
    $
    79
    
    
    $
    73,280
    
    
    $
    345,225
    
    
    $
    (5,509
    )
    
    
    
    
    
    $
    413,075Issuance of common stock under
stock purchase plans
    
    
    7
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    5,088
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,088Excess tax benefit from stock
option exercises
    
    
    
    
    
    
    
    
    
    
    (467
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (467
    )Payment of dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,914
    )
    
    
    
    
    
    
    
    
    
    
    (9,914
    )Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,328
    )
    
    
    
    
    
    $
    (5,328
    )
    
    
    (5,328
    )Net unrealized loss on
available-for-sale investments,
net of tax of $53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    (91
    )
    
    
    (91
    )Foreign currency translation
adjustment, net of tax expense of
$364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,877
    
    
    $
    5,877
    
    
    
    5,877Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    458Balance as of October 4, 2009 (unaudited)
    
    
    39,662
    
    
    $
    79
    
    
    $
    77,981
    
    
    $
    329,983
    
    
    $
    277
    
    
    
    
    
    
    $
    408,320
  3




---



##### 



COGNEX CORPORATION
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 Nine-months EndedOctober 4
    
    
    September 28,2009
    
    
    2008(unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    (5,328
    )
    
    $
    25,461Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Impairment loss related to discontinued business (Note 17)
    
    
    
    
    
    
    2,987Intangible asset impairment charge (Note 6)
    
    
    1,000
    
    
    
    1,500Stock-based compensation expense
    
    
    5,088
    
    
    
    7,312Depreciation and amortization
    
    
    8,269
    
    
    
    8,784Provision for excess and obsolete inventory
    
    
    3,033
    
    
    
    1,772Tax effect of stock option exercises
    
    
    467
    
    
    
    (1,681
    )Deferred income tax
    
    
    (2,651
    )
    
    
    844Change in operating assets and liabilities
    
    
    (9,456
    )
    
    
    (8,236
    )Net cash provided by operating activities
    
    
    422
    
    
    
    38,743Cash flows from investing activities:Purchase of investments
    
    
    (24,045
    )
    
    
    (88,141
    )Maturity and sale of investments
    
    
    37,970
    
    
    
    139,535Purchase of property, plant, and equipment
    
    
    (4,512
    )
    
    
    (4,244
    )Cash paid for business acquisition (Note 18)
    
    
    (4,500
    )
    
    
    (1,000
    )Cash deposit related to discontinued business (Note 17)
    
    
    
    
    
    
    2,797Net cash provided by investing activities
    
    
    4,913
    
    
    
    48,947Cash flows from financing activities:Issuance of common stock under stock option/purchase plans
    
    
    80
    
    
    
    14,244Repurchase of common stock
    
    
    
    
    
    
    (68,418
    )Payment of dividends
    
    
    (9,914
    )
    
    
    (13,342
    )Tax effect of stock option exercises
    
    
    (467
    )
    
    
    1,681Net cash used in financing activities
    
    
    (10,301
    )
    
    
    (65,835
    )Effect of foreign exchange rate changes on cash
    
    
    4,990
    
    
    
    (905
    )Net increase in cash and cash equivalents
    
    
    24
    
    
    
    20,950Cash and cash equivalents at beginning of period
    
    
    127,138
    
    
    
    104,144Cash and cash equivalents at end of period
    
    $
    127,162
    
    
    $
    125,094
  4




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1: Summary of Significant Accounting Policies
     NOTE 2: New Pronouncements
 Accounting Standards Update (ASU) 2009-13, Multiple Deliverable Revenue Arrangements  a
consensus of the FASB Emerging Issues Task Force
  Accounting Standards Update (ASU) 2009-14, Certain Revenue Arrangements That Include Software
Elements  a consensus of the FASB Emerging Issues Task Force
  Accounting Standards Update (ASU) 2009-12, Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent)
  5




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 2: New Pronouncements (continued)
  NOTE 3: Fair Value Measurements
   NOTE 4: Cash, Cash Equivalents, and Investments
  October 4,
    
    
    December 31,2009
    
    
    2008Cash
    
    $
    127,162
    
    
    $
    124,339Cash equivalents
    
    
    
    
    
    
    2,799Cash and cash equivalents
    
    $
    127,162
    
    
    $
    127,138Municipal bonds
    
    
    55,527
    
    
    
    52,559Short-term investments
    
    $
    55,527
    
    
    $
    52,559Municipal bonds
    
    
    15,758
    
    
    
    33,921Limited partnership interest (accounted for using cost method)
    
    
    7,468
    
    
    
    7,468Long-term investments
    
    $
    23,226
    
    
    $
    41,389$
    205,915
    
    
    $
    221,086
  Significant OtherObservableInputs (Level 2)Municipal bond investments
    
    $
    71,285
  6




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 4: Cash, Cash Equivalents, and Investments (continued)
   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 October 4, 2009
    
    $
    
  NOTE 5: Inventories
  October 4,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    11,957
    
    
    $
    14,722Work-in-process
    
    
    1,356
    
    
    
    976Finished goods
    
    
    7,612
    
    
    
    9,365$
    20,925
    
    
    $
    25,063
 NOTE 6: Intangible Assets and Goodwill
  7




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 6: Intangible Assets and Goodwill (continued)
   SignificantUnobservableInputs (Level 3)
    
    
    Total
    
    
    Total LossSiemens Customer Relationships
    
    $
    300
    
    
    $
    300
    
    
    $
    (1,000
    )
    SignificantUnobservableInputs (Level 3)
    
    
    Total
    
    
    Total LossDVT OEM Customer Relationships
    
    $
    1,900
    
    
    $
    1,900
    
    
    $
    (1,500
    )
  8




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 6: Intangible Assets and Goodwill (continued)
    NOTE 7: Warranty Obligations
   Balance as of December 31, 2008
    
    $
    1,657Provisions for warranties issued during the period
    
    
    682Fulfillment of warranty obligations
    
    
    (1,101
    )Foreign exchange rate changes
    
    
    50Balance as of October 4, 2009
    
    $
    1,288
 NOTE 8: Contingencies
   9




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 8: Contingencies (continued)
    NOTE 9: Indemnification Provisions
    NOTE 10: Derivative Instruments
  10




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 10: 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
    
    1,007,250,000 Japanese YenU.S. Dollar/Euro
    
    2,980,000 U.S. Dollars
  Asset Derivatives
    
    Liability DerivativesBalance
    
    Fair Value
    
    Balance
    
    Fair ValueSheet
    
    October 4,
    
    December 31,
    
    Sheet
    
    October 4,
    
    December 31,Location
    
    2009
    
    2008
    
    Location
    
    2009
    
    2008Currency forward contracts
    
    Prepaid expenses and other current assets
    
    $
    83
    
    
    $
    207
    
    
    Accrued expenses
    
    $
    35
    
    
    $
    255
 11




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 10: Derivative Instruments (continued)
  Location of
    
    Amount of Gain (Loss)
    
    Location of
    
    Amount of Gain (Loss)Gain (Loss)
    
    Recognized in Income on
    
    Gain (Loss)
    
    Recognized in Income onRecognized
    
    Derivative
    
    Recognized
    
    Derivativein Income
    
    Three-months ended
    
    in Income
    
    Nine-months endedon
    
    October 4,
    
    September 28,
    
    on
    
    October 4,
    
    September 28,Derivative
    
    2009
    
    2008
    
    Derivative
    
    2009
    
    2008Currencyforward contracts
    
    Foreign currency gain (loss)
    
    $
    18
    
    
    $
    447
    
    
    Foreign currency gain (loss)
    
    $
    (254
    )
    
    $
    535
  Quoted Prices in ActiveMarkets for Identical Assets(Level 1)
    
    
    TotalCurrency forward contracts
    
    $
    48
    
    
    $
    48
  NOTE 11: Stock-Based Compensation Expense
    Weighted-AverageWeighted-
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateShares
    
    
    Exercise
    
    
    Term
    
    
    Intrinsic Value(in thousands)
    
    
    Price
    
    
    (in years)
    
    
    (in thousands)Outstanding at December 31, 2008
    
    
    11,406
    
    
    $
    25.10Granted
    
    
    63
    
    
    
    13.79Exercised
    
    
    (1
    )
    
    
    1.00Forfeited or Expired
    
    
    (1,311
    )
    
    
    25.48Outstanding at October 4, 2009
    
    
    10,157
    
    
    $
    24.98
    
    
    
    5.5
    
    
    $
    773Exercisable at October 4, 2009
    
    
    7,389
    
    
    $
    26.34
    
    
    
    4.6
    
    
    $
    695
 12




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 11: Stock-Based Compensation Expense (continued)
   Three-months Ended
    
    Nine-months EndedOctober 4,
    
    September 28,
    
    October 4,
    
    September 28,2009
    
    2008
    
    2009
    
    2008Risk-free rate
    
    
    3.2
    %
    
    
    3.8
    %
    
    
    3.2
    %
    
    
    3.9
    %Expected dividend yield
    
    
    1.5
    %
    
    
    1.3
    %
    
    
    1.5
    %
    
    
    1.7
    %Expected volatility
    
    
    43
    %
    
    
    42
    %
    
    
    43
    %
    
    
    42
    %Expected term (in years)
    
    
    5.4
    
    
    
    6.4
    
    
    
    4.6
    
    
    
    6.0
 Risk-free rate
  Expected dividend yield
  Expected volatility
  Expected term
    13




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 11: Stock-Based Compensation Expense (continued)
     Three-months Ended
    
    Nine-months EndedOctober 4,
    
    
    September 28,
    
    
    October 4,
    
    
    September 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Product cost of revenue
    
    $
    67
    
    
    $
    133
    
    
    $
    346
    
    
    $
    448Service cost of revenue
    
    
    41
    
    
    
    120
    
    
    
    155
    
    
    
    435Research, development, and engineering
    
    
    387
    
    
    
    732
    
    
    
    1,354
    
    
    
    2,325Selling, general, and administrative
    
    
    949
    
    
    
    1,931
    
    
    
    3,233
    
    
    
    4,104$
    1,444
    
    
    $
    2,916
    
    
    $
    5,088
    
    
    $
    7,312
    NOTE 12: Stock Repurchase Program
  14




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 13: Taxes
  Three-months Ended
    
    Nine-months EndedOctober 4,
    
    September 28,
    
    October 4,
    
    September 28,2009
    
    2008
    
    2009
    
    2008Income tax at federal statutory rate
    
    
    35
    %
    
    
    35
    %
    
    
    (35
    %)
    
    
    35
    %State income taxes, net of federal benefit
    
    
    1
    
    
    
    2
    
    
    
    (1
    )
    
    
    3Tax-exempt investment income
    
    
    3
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    (4
    )Foreign tax rate differential
    
    
    (20
    )
    
    
    (10
    )
    
    
    21
    
    
    
    (10
    )Tax credit
    
    
    1
    
    
    
    
    
    
    
    (2
    )
    
    
    Cumulative effect of rate change
    
    
    (19
    )
    
    
    3
    
    
    
    (2
    )
    
    
    1Discrete tax events
    
    
    (293
    )
    
    
    (40
    )
    
    
    (31
    )
    
    
    (12
    )Other
    
    
    (2
    )
    
    
    1
    
    
    
    2
    
    
    
    1Income tax provision (benefit)
    
    
    (294
    %)
    
    
    (12
    )%
    
    
    (51
    %)
    
    
    14
    %
      15




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 13: Taxes (continued)
     NOTE 14: Restructuring Charges
 November 2008
   16




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14: Restructuring Charges (continued)
 Incurred in
    
    
    Incurred in
    
    
    CumulativeTotal Amount
    
    
    the Three-
    
    
    the Nine-
    
    
    Amount IncurredExpected to be
    
    
    months Ended
    
    
    months Ended
    
    
    throughIncurred
    
    
    October 4, 2009
    
    
    October 4, 2009
    
    
    October 4, 2009One-time termination benefits
    
    $
    552
    
    
    $
    (40
    )
    
    $
    298
    
    
    $
    552Contract termination costs
    
    
    374
    
    
    
    
    
    
    
    374
    
    
    
    374Other associated costs
    
    
    324
    
    
    
    29
    
    
    
    286
    
    
    
    290$
    1,250
    
    
    $
    (11
    )
    
    $
    958
    
    
    $
    1,216
   One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    207
    
    
    $
    
    
    
    $
    
    
    
    $
    207Restructuring charges
    
    
    393
    
    
    
    374
    
    
    
    286
    
    
    
    1,053Cash payments
    
    
    (505
    )
    
    
    (268
    )
    
    
    (267
    )
    
    
    (1,040
    )Restructuring adjustments
    
    
    (95
    )
    
    
    
    
    
    
    
    
    
    
    (95
    )Balance as of October 4, 2009
    
    $
    
    
    
    $
    106
    
    
    $
    19
    
    
    $
    125
  April 2009
   17




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14: Restructuring Charges (continued)
 Incurred in
    
    
    Incurred inTotal Amount
    
    
    the Three-
    
    
    the Nine-Expected to be
    
    
    months Ended
    
    
    months EndedIncurred
    
    
    October 4, 2009
    
    
    October 4, 2009One-time termination benefits
    
    $
    2,830
    
    
    $
    37
    
    
    $
    2,830Contract termination costs
    
    
    167
    
    
    
    (16
    )
    
    
    167Other associated costs
    
    
    103
    
    
    
    13
    
    
    
    103$
    3,100
    
    
    $
    34
    
    
    $
    3,100
   One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,830
    
    
    
    183
    
    
    
    107
    
    
    
    3,120Cash payments
    
    
    (2,691
    )
    
    
    (167
    )
    
    
    (92
    )
    
    
    (2,950
    )Restructuring adjustments
    
    
    
    
    
    
    (16
    )
    
    
    (4
    )
    
    
    (20
    )Balance as of October 4, 2009
    
    $
    139
    
    
    $
    
    
    
    $
    11
    
    
    $
    150
  September 2009
   TotalAmount
    
    
    Incurred inExpected
    
    
    the Three-to be
    
    
    months EndedIncurred
    
    
    October 4, 2009One-time termination benefits
    
    $
    410
    
    
    $
    189Contract termination costs
    
    
    156
    
    
    
    Other associated costs
    
    
    110
    
    
    
    11$
    676
    
    
    $
    200
 18




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14: Restructuring Charges (continued)
   One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    189
    
    
    
    
    
    
    
    11
    
    
    
    200Cash payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of October 4, 2009
    
    $
    189
    
    
    $
    
    
    
    $
    11
    
    
    $
    200
 NOTE 15: Weighted-Average Shares
  Three-months Ended
    
    Nine-months EndedOctober 4,
    
    September 28,
    
    October 4,
    
    September 28,2009
    
    2008
    
    2009
    
    2008Basic weighted-average common
shares outstanding
    
    
    39,662
    
    
    
    41,347
    
    
    
    39,658
    
    
    
    42,054Effect of dilutive stock options
    
    
    4
    
    
    
    115
    
    
    
    
    
    
    
    244Diluted weighted-average common
and common-equivalent shares
outstanding
    
    
    39,666
    
    
    
    41,462
    
    
    
    39,658
    
    
    
    42,298
  NOTE 16: Segment Information
  19




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 16: Segment Information (continued)
   Three-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingOctober 4, 2009
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    31,575
    
    
    $
    5,854
    
    
    $
    
    
    
    $
    37,429Service revenue
    
    
    1,229
    
    
    
    2,520
    
    
    
    
    
    
    
    3,749Operating income
    
    
    4,250
    
    
    
    789
    
    
    
    (4,159
    )
    
    
    880
 Nine-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingOctober 4, 2009
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    95,195
    
    
    $
    16,990
    
    
    $
    
    
    
    $
    112,185Service revenue
    
    
    4,036
    
    
    
    8,212
    
    
    
    
    
    
    
    12,248Operating income (loss)
    
    
    (2,125
    )
    
    
    1,397
    
    
    
    (12,696
    )
    
    
    (13,424
    )
 Three-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingSeptember 28, 2008
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    50,143
    
    
    $
    8,157
    
    
    $
    
    
    
    $
    58,300Service revenue
    
    
    2,167
    
    
    
    2,789
    
    
    
    
    
    
    
    4,956Operating income
    
    
    12,519
    
    
    
    1,883
    
    
    
    (6,415
    )
    
    
    7,987
 Nine-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingSeptember 28, 2008
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    156,789
    
    
    $
    18,910
    
    
    $
    
    
    
    $
    175,699Service revenue
    
    
    7,443
    
    
    
    7,716
    
    
    
    
    
    
    
    15,159Operating income
    
    
    40,552
    
    
    
    3,205
    
    
    
    (17,041
    )
    
    
    26,716
  NOTE 17: Loss from Operations of a Discontinued Business
   20




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17: Loss from Operations of a Discontinued Business (continued)
   NOTE 18: Acquisition of Web Monitoring Business
    Weighted-AverageEstimated Fair
    
    
    Amortization PeriodValue
    
    
    (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
  21




---



##### 



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 18: Acquisition of Web Monitoring Product Line (continued)
  NOTE 19: Dividends
   22




---



##### 



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  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 discrete factory automation customers represented approximately
70% and 73% of total revenue for the three-month and nine-month periods in 2009,
respectively.
    
    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.
 23




---



##### 



Sales to semiconductor and electronics capital equipment manufacturers represented
approximately 10% and 7% of total revenue for the three-month and nine-month periods in
2009, respectively.
    
    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 on the surfaces of those
materials as they are being processed at high speeds. Surface inspection sales represented
approximately 20% of total revenue in both the three-month and nine-month periods in 2009.
   Results of Operations
 Revenue
  Discrete Factory Automation Market
  Semiconductor and Electronics Capital Equipment Market
  24




---



##### 



Surface Inspection Market
  Product Revenue
  Service Revenue
  Gross Margin
  MVSD Margin
  SISD Margin
  25




---



##### 



Product Margin
  Service Margin
  Operating Expenses
 Research, Development, and Engineering Expenses
     26




---



##### 



Selling, General, and Administrative Expenses
     Restructuring Charges
 November 2008
  27




---



##### 



Incurred in
    
    
    Incurred in
    
    
    CumulativeTotal Amount
    
    
    the Three-
    
    
    the Nine-
    
    
    Amount IncurredExpected to be
    
    
    months Ended
    
    
    months Ended
    
    
    throughIncurred
    
    
    October 4, 2009
    
    
    October 4, 2009
    
    
    October 4, 2009One-time termination benefits
    
    $
    552
    
    
    $
    (40
    )
    
    $
    298
    
    
    $
    552Contract termination costs
    
    
    374
    
    
    
    
    
    
    
    374
    
    
    
    374Other associated costs
    
    
    324
    
    
    
    29
    
    
    
    286
    
    
    
    290$
    1,250
    
    
    $
    (11
    )
    
    $
    958
    
    
    $
    1,216
   One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    207
    
    
    $
    
    
    
    $
    
    
    
    $
    207Restructuring charges
    
    
    393
    
    
    
    374
    
    
    
    286
    
    
    
    1,053Cash payments
    
    
    (505
    )
    
    
    (268
    )
    
    
    (267
    )
    
    
    (1,040
    )Restructuring adjustments
    
    
    (95
    )
    
    
    
    
    
    
    
    
    
    
    (95
    )Balance as of October 4, 2009
    
    $
    
    
    
    $
    106
    
    
    $
    19
    
    
    $
    125
  April 2009
  28




---



##### 



Incurred in
    
    
    Incurred inTotal Amount
    
    
    the Three-
    
    
    the Nine-Expected to be
    
    
    months Ended
    
    
    months EndedIncurred
    
    
    October 4, 2009
    
    
    October 4, 2009One-time termination benefits
    
    $
    2,830
    
    
    $
    37
    
    
    $
    2,830Contract termination costs
    
    
    167
    
    
    
    (16
    )
    
    
    167Other associated costs
    
    
    103
    
    
    
    13
    
    
    
    103$
    3,100
    
    
    $
    34
    
    
    $
    3,100
   One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,830
    
    
    
    183
    
    
    
    107
    
    
    
    3,120Cash payments
    
    
    (2,691
    )
    
    
    (167
    )
    
    
    (92
    )
    
    
    (2,950
    )Restructuring adjustments
    
    
    
    
    
    
    (16
    )
    
    
    (4
    )
    
    
    (20
    )Balance as of October 4, 2009
    
    $
    139
    
    
    $
    
    
    
    $
    11
    
    
    $
    150
  September 2009
   29




---



##### 



Total
    
    
    Incurred inAmount
    
    
    the Three-Expected to
    
    
    months Endedbe Incurred
    
    
    October 4, 2009One-time termination benefits
    
    $
    410
    
    
    $
    189Contract termination costs
    
    
    156
    
    
    
    Other associated costs
    
    
    110
    
    
    
    11$
    676
    
    
    $
    200
   One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    189
    
    
    
    
    
    
    
    11
    
    
    
    200Cash payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of October 4, 2009
    
    $
    189
    
    
    $
    
    
    
    $
    11
    
    
    $
    200
 Nonoperating Income (Expense)
    30




---



##### 



Income Tax Expense (Benefit) on Continuing Operations
     Liquidity and Capital Resources
     31




---



##### 



New Pronouncements
 Accounting Standards Update (ASU) 2009-13, Multiple Deliverable Revenue Arrangements  a
consensus of the FASB Emerging Issues Task Force
  Accounting Standards Update (ASU) 2009-14, Certain Revenue Arrangements That Include Software
Elements  a consensus of the FASB Emerging Issues Task Force
 32




---



##### 



Accounting Standards Update (ASU) 2009-12, Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent)
  ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4: CONTROLS AND PROCEDURES
  33




---



##### 



PART II: OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
     ITEM 1A. RISK FACTORS
 The Companys restructuring programs may result in disruption to our business and may
negatively impact our operating results.
   34




---



##### 



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number
    
    Approximateof Shares
    
    Dollar ValuePurchased as
    
    of Shares thatPart of
    
    May Yet BePublicly
    
    PurchasedTotal Number
    
    
    
    
    
    Announced
    
    Under theof Shares
    
    Average Price
    
    Plans or
    
    Plans orPurchased
    
    Paid per Share
    
    Programs (1)
    
    ProgramsJuly 6  August 2, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000August 3  August 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000August 31  October 4, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000
 
 (1)
    
    In April 2008, the Companys Board of Directors authorized the
repurchase of up to an additional $50,000,000 of the Companys common stock. ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5. OTHER INFORMATION
  ITEM 6. EXHIBITS
      
 *
    
    Filed herewith**
    
    Furnished herewith 35




---



##### 



SIGNATURES
  DATE:  November 2, 2009
    COGNEX CORPORATIONBy:
    /s/ Robert J. ShillmanRobert J. ShillmanChief Executive Officer, President, and Chairman
of the Board of Directors
(duly authorized officer, principal executive officer)By:
    /s/ Richard A. MorinRichard A. MorinExecutive Vice President of Finance and Administration,
Chief Financial Officer, and Treasurer
(duly authorized officer, principal financial and
accounting officer) 36