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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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 March 30, 2003 or
|           |  |                                                                                                                                         
|o          |  | Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from             to  

|                                                      
|------------------------------------------------------
|COGNEX CORPORATION                                    
|                                                      
|(Exact name of registrant as specified in its charter)

|                                |  |  |  |                    
|------------------------------- |  |  |  | -------------------
|Massachusetts                   |  |  |  | 04-2713778         
|                                |  |  |  |                    
|(State or other jurisdiction of |  |  |  | (I.R.S. Employer   
|incorporation or organization)  |  |  |  | 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)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

| |  |     |   |  |  |    |   | 
| |  | --- | - |  |  | -- | - | 
| |  | Yes | þ |  |  | No | o | 

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

| |  |     |   |  |  |    |   | 
| |  | --- | - |  |  | -- | - | 
| |  | Yes | þ |  |  | No | o | 

As of April 27, 2003, there were 42,731,106 shares of Common Stock, $.002
par value, of the registrant outstanding.



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TABLE OF CONTENTS



|                                  |                                                                                               |                                                 |  |  |  |  |  | 
|--------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION    
|                                  | ITEM 1: FINANCIAL STATEMENTS                                                                 
|                                  |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS          
|                                  |                                                                                               | CONSOLIDATED BALANCE SHEETS                    
|                                  |                                                                                               | CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY 
|                                  |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
|                                  |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|                                  | ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                  | ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                  | ITEM 4: CONTROLS AND PROCEDURES                                                              
|PART II: OTHER INFORMATION       
|                                  | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                  | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                                  | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                                  | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                  | ITEM 5. OTHER INFORMATION                                                                    
|                                  | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                       
|CERTIFICATION                    
|CERTIFICATION                    
|EX-99.1 SECTION 906 CERTIFICATION
|EX-99.2 SECTION 906 CERTIFICATION



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INDEX

|        |  |                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------
|PART I  |  | FINANCIAL INFORMATION                                                                                       
|Item 1. |  | Financial Statements                                                                                        
|        |  | Consolidated Statements of Operations for the three months ended
March 30, 2003 and March 31, 2002          
|        |  | Consolidated Balance Sheets at March 30, 2003 and December 31, 2002                                         
|        |  | Consolidated Statement of Stockholders Equity for the three
months ended March 30, 2003                    
|        |  | Consolidated Condensed Statements of Cash Flows for the three
months ended March 30, 2003 and March 31, 2002
|        |  | Notes to Consolidated Financial Statements                                                                  
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                       
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                  
|Item 4. |  | Controls and Procedures                                                                                     
|PART II |  | OTHER INFORMATION                                                                                           
|Item 1. |  | Legal Proceedings                                                                                           
|Item 2. |  | Changes in Securities and Use of Proceeds                                                                   
|Item 3. |  | Defaults Upon Senior Securities                                                                             
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                         
|Item 5. |  | Other Information                                                                                           
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                            
|        |  | Signatures                                                                                                  
|        |  | Certifications                                                                                              





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##### Table of Contents






PART I: FINANCIAL INFORMATION




ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION




CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

|                                                                  |         |         |        |                    |        |           |        |        |        |  
|----------------------------------------------------------------- | ------- | ------- | ------ | ------------------ | ------ | --------- | ------ | ------ | ------ | -
|                                                                  |         |         |        | Three Months Ended
|                                                                  |         |         |        |                   
|                                                                  |         |         |        | March 30,          |        | March 31,
|                                                                  |         |         |        | 2003               |        | 2002     
|                                                                  |         |         |        |                    |        |          
|                                                                  |         |         |        | (unaudited)       
|Revenue                                                           |         |         |        |                    |        |           |        |       
|                                                                  | Product |         | $      | 28,248             |        |           | $      | 17,256 |       
|                                                                  | Service |         |        | 4,640              |        |           |        | 4,524  |       
|                                                                  |         |         |        |                    |        |           |        |       
|                                                                  |         |         | 32,888 |                    |        |           | 21,780 |       
|Cost of revenue                                                   |         |         |        |                    |        |           |        |       
|                                                                  | Product |         |        | 8,870              |        |           |        | 5,829  |       
|                                                                  | Service |         |        | 2,846              |        |           |        | 2,736  |       
|                                                                  |         |         |        |                    |        |           |        |       
|                                                                  |         |         | 11,716 |                    |        |           | 8,565  |       
|Gross margin                                                      |         |         |        |                    |        |           |        |       
|                                                                  | Product |         |        | 19,378             |        |           |        | 11,427 |       
|                                                                  | Service |         |        | 1,794              |        |           |        | 1,788  |       
|                                                                  |         |         |        |                    |        |           |        |       
|                                                                  |         |         | 21,172 |                    |        |           | 13,215 |       
|Research, development, and engineering expenses                   |         |         | 5,983  |                    |        |           | 6,352  |       
|Selling, general, and administrative expenses                     |         |         | 13,871 |                    |        |           | 13,025 |       
|                                                                  |         |         |        |                    |        |           |        |       
|Operating income (loss)                                           |         |         | 1,318  |                    |        |           | (6,162 | )     
|Investment and other income                                       |         |         | 1,294  |                    |        |           | 2,561  |       
|                                                                  |         |         |        |                    |        |           |        |       
|Income (loss) before provision for income taxes                   |         |         | 2,612  |                    |        |           | (3,601 | )     
|Income tax provision (benefit)                                    |         |         | 819    |                    |        |           | (1,081 | )     
|                                                                  |         |         |        |                    |        |           |        |       
|Net income (loss)                                                 |         | $       | 1,793  |                    |        | $         | (2,520 | )     
|                                                                  |         |         |        |                    |        |           |        |       
|Net income (loss) per common and common-equivalent share:         |         |         |        |                    |        |           |        |       
|                                                                  |         | Basic   |        | $                  | 0.04   |           |        | $      | (0.06  | )
|                                                                  |         |         |        |                    |        |           |        |       
|                                                                  |         | Diluted |        | $                  | 0.04   |           |        | $      | (0.06  | )
|                                                                  |         |         |        |                    |        |           |        |       
|Weighted-average common and common-equivalent shares outstanding: |         |         |        |                    |        |           |        |       
|                                                                  |         | Basic   |        |                    | 42,666 |           |        |        | 43,971 |  
|                                                                  |         |         |        |                    |        |           |        |       
|                                                                  |         | Diluted |        |                    | 43,557 |           |        |        | 43,971 |  
|                                                                  |         |         |        |                    |        |           |        |       

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

1Table of ContentsCOGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                     |                                                                                                                             |                            |         |           |         |              |         |         |         | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                                                             |                            |         | March 30, |         | December 31,
|                                     |                                                                                                                             |                            |         | 2003      |         | 2002        
|                                     |                                                                                                                             |                            |         |           |         |             
|ASSETS                               |                                                                                                                             | (unaudited)                |         |           |         |             
|Current assets:                      |                                                                                                                             |                            |         |           |         |              |         |        
|                                     | Cash and cash equivalents                                                                                                   |                            | $       | 50,969    |         |              | $       | 60,864  |        
|                                     | Short-term investments                                                                                                      |                            |         | 68,451    |         |              |         | 75,769  |        
|                                     | Accounts receivable, less reserves of $2,010 and $2,207 in 2003
and 2002, respectively                                      |                            |         | 21,510    |         |              |         | 18,981  |        
|                                     | Inventories                                                                                                                 |                            |         | 17,517    |         |              |         | 18,952  |        
|                                     | Deferred income taxes                                                                                                       |                            |         | 9,966     |         |              |         | 9,969   |        
|                                     | Prepaid expenses and other current assets                                                                                   |                            |         | 7,970     |         |              |         | 9,256   |        
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        
|                                     |                                                                                                                             | Total current assets       |         |           | 176,383 |              |         |         | 193,791 | 
|Long-term investments                |                                                                                                                             |                            | 161,090 |           |         |              | 139,352 |        
|Property, plant, and equipment, net  |                                                                                                                             |                            | 26,556  |           |         |              | 27,405  |        
|Deferred income taxes                |                                                                                                                             |                            | 16,699  |           |         |              | 16,608  |        
|Intangible assets, net               |                                                                                                                             |                            | 817     |           |         |              | 919     |        
|Goodwill, net                        |                                                                                                                             |                            | 3,802   |           |         |              | 3,742   |        
|Other assets                         |                                                                                                                             |                            | 3,414   |           |         |              | 3,686   |        
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        
|                                     |                                                                                                                             | $                          | 388,761 |           |         | $            | 385,503 |        
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                             |                            |         |           |         |              |         |        
|Current liabilities:                 |                                                                                                                             |                            |         |           |         |              |         |        
|                                     | Accounts payable                                                                                                            |                            | $       | 2,866     |         |              | $       | 3,496   |        
|                                     | Accrued expenses                                                                                                            |                            |         | 21,163    |         |              |         | 19,972  |        
|                                     | Customer deposits                                                                                                           |                            |         | 3,733     |         |              |         | 3,659   |        
|                                     | Deferred revenue                                                                                                            |                            |         | 4,659     |         |              |         | 3,856   |        
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        
|                                     |                                                                                                                             | Total current liabilities  |         |           | 32,421  |              |         |         | 30,983  | 
|Commitments
(Notes 3, 7 and 8)       |                                                                                                                             |                            |         |           |         |              |         |        
|Stockholders equity:                |                                                                                                                             |                            |         |           |         |              |         |        
|                                     | Common stock, $.002 par value 
Authorized: 140,000 shares, issued: 46,969 and 46,877 shares
in 2003 and 2002, respectively |                            |         | 94        |         |              |         | 94      |        
|                                     | Additional paid-in capital                                                                                                  |                            |         | 186,051   |         |              |         | 184,595 |        
|                                     | Treasury stock, at cost, 4,249 shares                                                                                       |                            |         | (72,311   | )       |              |         | (72,311 | )      
|                                     | Retained earnings                                                                                                           |                            |         | 249,803   |         |              |         | 248,010 |        
|                                     | Accumulated other comprehensive loss                                                                                        |                            |         | (7,297    | )       |              |         | (5,868  | )      
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        
|                                     |                                                                                                                             | Total stockholders equity |         |           | 356,340 |              |         |         | 354,520 | 
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        
|                                     |                                                                                                                             | $                          | 388,761 |           |         | $            | 385,503 |        
|                                     |                                                                                                                             |                            |         |           |         |              |         |         |        

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

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COGNEX CORPORATION




CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In thousands)

|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         |       |       |  
|------------------------------------- | ------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------ | ------------ |  | ---------- | -- | -------------- |  | ------- | ------- | ----- |  | -------- | ----- | ---- |  | -------- | ------- | ------------- |  | ------------- | ------- | ------------- | ----- | - | ------ | ----------- | ---- | - |  | - | ----- | - | ------- | ----- | ----- | -
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        | Accumulated |      |   |  |   |       |   |         |      
|                                      |                                                   |                                                                                                      |        | Common Stock |  | Additional |    | Treasury Stock |  |         |         |       |  | Other    |       |      |  |          |         | Total        
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  | Paid-in |         |       |  |          |       |      |  | Retained |         | Comprehensive |  | Comprehensive |         | Stockholders'
|                                      |                                                   |                                                                                                      |        | Shares       |  | Par Value  |    | Capital        |  | Shares  |         | Cost  |  | Earnings |       | Loss |  | Income   |         | Equity       
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |              
|Balance at December 31, 2002          |                                                   |                                                                                                      | 46,877 |              |  | $          | 94 |                |  | $       | 184,595 |       |  |          | 4,249 |      |  | $        | (72,311 | )             |  | $             | 248,010 |               |       | $ | (5,868 | )           |      |   |  |   |       | $ | 354,520 |      
|                                      | Issuance of common stock under stock
option plans |                                                                                                      |        | 92           |  |            |    |               |  |         |         | 1,186 |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         | 1,186 |      
|                                      | Tax benefit from exercise of stock options        |                                                                                                      |        |              |  |            |    |                |  |         |         | 270   |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         | 270   |      
|                                      | Comprehensive income:                             |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         |       |      
|                                      |                                                   | Net income                                                                                           |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               | 1,793 |   |        |             |      |   |  | $ | 1,793 |   |         |       | 1,793 |  
|                                      |                                                   | Losses on foreign intercompany loans,
net of gains on forward exchange
contracts, net of tax of $418 |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             | (713 | ) |  |   | (713  | ) |         |       | (713  | )
|                                      |                                                   | Foreign currency translation adjustment                                                              |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             | (716 | ) |  |   | (716  | ) |         |       | (716  | )
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         |      
|                                      |                                                   | Comprehensive income                                                                                 |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  | $ | 364   |   |         |       |       |  
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         |      
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         |      
|Balance at March 30, 2003 (unaudited) |                                                   |                                                                                                      | 46,969 |              |  | $          | 94 |                |  | $       | 186,051 |       |  |          | 4,249 |      |  | $        | (72,311 | )             |  | $             | 249,803 |               |       | $ | (7,297 | )           |      |   |  |   |       | $ | 356,340 |      
|                                      |                                                   |                                                                                                      |        |              |  |            |    |                |  |         |         |       |  |          |       |      |  |          |         |               |  |               |         |               |       |   |        |             |      |   |  |   |       |   |         |      

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

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COGNEX CORPORATION




CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                 |                                                                                   |                                                  |        |                    |       |           |        |         |        |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | ------------------ | ----- | --------- | ------ | ------- | ------ | -
|                                                 |                                                                                   |                                                  |        | Three Months Ended
|                                                 |                                                                                   |                                                  |        |                   
|                                                 |                                                                                   |                                                  |        | March 30,          |       | March 31,
|                                                 |                                                                                   |                                                  |        | 2003               |       | 2002     
|                                                 |                                                                                   |                                                  |        |                    |       |          
|                                                 |                                                                                   |                                                  |        | (unaudited)       
|Cash flows from operating activities:            |                                                                                   |                                                  |        |                    |       |           |        |        
|                                                 | Net income (loss)                                                                 |                                                  | $      | 1,793              |       |           | $      | (2,520  | )     
|                                                 | Adjustments to reconcile net income (loss) to net cash from
operating activities: |                                                  |        |                    |       |           |        |         |       
|                                                 |                                                                                   | Depreciation and amortization                    |        |                    | 2,420 |           |        |         | 2,228  |  
|                                                 |                                                                                   | Tax benefit from exercise of stock options       |        |                    | 270   |           |        |         | 1,255  |  
|                                                 |                                                                                   | Change in current assets and current liabilities |        |                    | (289  | )         |        |         | (1,897 | )
|                                                 |                                                                                   | Other                                            |        |                    | 650   |           |        |         | (337   | )
|                                                 |                                                                                   |                                                  |        |                    |       |           |        |        
|                                                 | Net cash provided by (used in) operating activities                               |                                                  |        | 4,844              |       |           |        | (1,271  | )     
|Cash flows from investing activities:            |                                                                                   |                                                  |        |                    |       |           |        |        
|                                                 | Purchase of investments                                                           |                                                  |        | (53,194            | )     |           |        | (19,063 | )     
|                                                 | Maturity and sale of investments                                                  |                                                  |        | 37,554             |       |           |        | 18,714  |       
|                                                 | Purchase of property, plant, and equipment                                        |                                                  |        | (561               | )     |           |        | (642    | )     
|                                                 |                                                                                   |                                                  |        |                    |       |           |        |        
|                                                 | Net cash used in investing activities                                             |                                                  |        | (16,201            | )     |           |        | (991    | )     
|Cash flows from financing activities:            |                                                                                   |                                                  |        |                    |       |           |        |        
|                                                 | Issuance of common stock under stock option plans                                 |                                                  |        | 1,186              |       |           |        | 1,131   |       
|                                                 |                                                                                   |                                                  |        |                    |       |           |        |        
|                                                 | Net cash provided by financing activities                                         |                                                  |        | 1,186              |       |           |        | 1,131   |       
|Effect of exchange rate changes on cash          |                                                                                   |                                                  | 276    |                    |       |           | 590    |        
|                                                 |                                                                                   |                                                  |        |                    |       |           |        |        
|Net decrease in cash and cash equivalents        |                                                                                   |                                                  | (9,895 | )                  |       |           | (541   | )      
|Cash and cash equivalents at beginning of period |                                                                                   |                                                  | 60,864 |                    |       |           | 31,660 |        
|                                                 |                                                                                   |                                                  |        |                    |       |           |        |        
|Cash and cash equivalents at end of period       |                                                                                   | $                                                | 50,969 |                    |       | $         | 31,119 |        
|                                                 |                                                                                   |                                                  |        |                    |       |           |        |        

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

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: Summary of Significant Accounting Policies and Basis of Presentation

As permitted by the rules of the Securities and Exchange Commission applicable
to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain
all disclosures required by generally accepted accounting principles.
Reference should be made to the consolidated financial statements and related
notes included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2002.

In the opinion of the management of Cognex Corporation, the accompanying
consolidated unaudited financial statements contain all adjustments necessary
to present fairly the Companys financial position at March 30, 2003, and the
results of its operations for the three-month periods ended March 30, 2003 and
March 31, 2002, and changes in stockholders equity and cash flows for the
periods presented.

The results disclosed in the Consolidated Statements of Operations for the
three-month period ended March 30, 2003 are not necessarily indicative of the
results to be expected for the full year. Certain amounts reported in prior
periods have been reclassified to be consistent with the current period
presentation.

Stock-Based Compensation Plans

The Company recognizes compensation costs using the intrinsic value based
method described in Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees. Net income (loss) and net income (loss) per share
as reported in these consolidated financial statements and on a pro forma
basis, as if the fair value based method described in Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, had
been adopted, are as follows:

|                                                                                                |  |                    |        |                |  |   |        |  
|----------------------------------------------------------------------------------------------- |  | ------------------ | ------ | -------------- |  | - | ------ | -
|                                                                                                |  | Three Months Ended
|                                                                                                |  |                   
|                                                                                                |  | March 30, 2003     |        | March 31, 2002
|                                                                                                |  |                    |        |               
|Net income (loss), as reported                                                                  |  | $                  | 1,793  |                |  | $ | (2,520 | )
|Less: Total stock-based compensation costs
determined under fair value based method, net of tax |  |                    | (3,171 | )              |  |   | (5,095 | )
|                                                                                                |  |                    |        |                |  |   |        |  
|Net income (loss), pro forma                                                                    |  | $                  | (1,378 | )              |  | $ | (7,615 | )
|                                                                                                |  |                    |        |                |  |   |        |  
|Basic net income (loss) per share, as reported                                                  |  | $                  | 0.04   |                |  | $ | (0.06  | )
|Basic net income (loss) per share, pro forma                                                    |  | $                  | (0.03  | )              |  | $ | (0.17  | )
|Diluted net income (loss) per share, as reported                                                |  | $                  | 0.04   |                |  | $ | (0.06  | )
|Diluted net income (loss) per share, pro forma                                                  |  | $                  | (0.03  | )              |  | $ | (0.17  | )

For the purpose of providing pro forma disclosures, the fair values of stock
options granted were estimated using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants during the
quarter ended March 30, 2003 and March 31, 2002, respectively: a risk-free
interest rate of 2.0% and 3.5%; an expected life of 2.4 and 2.8 years; an
expected volatility of 59% and 60%; and no expected dividends.

NOTE 2: New Pronouncements

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, Accounting for Revenue Arrangements with Multiple
Deliverables. This issue addresses how revenue arrangements with multiple
deliverables should be divided into separate units of accounting and how the
arrangement consideration should be allocated to the identified separate
accounting units. EITF Issue No. 00-21 is effective for fiscal periods
beginning after June 15, 2003. The Company has not yet
determined the impact of adopting EITF Issue No. 00-21 on its consolidated financial
statements.

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: Cash, Cash Equivalents, and Investments

Cash, cash equivalents, and investments consist of the following:

|                      |                                   |                                 |         |                   |         |   |         |       |         | 
|--------------------- | --------------------------------- | ------------------------------- | ------- | ----------------- | ------- | - | ------- | ----- | ------- | 
|(In thousands)        |                                   | March 30, 2003                  |         | December 31, 2002
|                      |                                   |                                 |         |                  
|                      |                                   | (unaudited)                    
|Cash                  |                                   | $                               | 43,529  |                   |         | $ | 58,424  |      
|Municipal obligations |                                   |                                 | 7,440   |                   |         |   | 2,440   |      
|                      |                                   |                                 |         |                   |         |   |         |      
|                      |                                   | Total cash and cash equivalents |         |                   | 50,969  |   |         |       | 60,864  | 
|                      |                                   |                                 |         |                   |         |   |         |      
|Municipal obligations |                                   |                                 | 68,451  |                   |         |   | 75,769  |      
|                      |                                   |                                 |         |                   |         |   |         |      
|                      |                                   | Total short-term investments    |         |                   | 68,451  |   |         |       | 75,769  | 
|                      |                                   |                                 |         |                   |         |   |         |      
|Municipal obligations |                                   |                                 | 152,317 |                   |         |   | 131,425 |      
|                      | Investment in limited partnership |                                 |         | 8,773             |         |   |         | 7,927 |        
|                      |                                   |                                 |         |                   |         |   |         |      
|                      |                                   | Total long-term investments     |         |                   | 161,090 |   |         |       | 139,352 | 
|                      |                                   |                                 |         |                   |         |   |         |      
|                      |                                   | $                               | 280,510 |                   |         | $ | 275,985 |      
|                      |                                   |                                 |         |                   |         |   |         |      

On June 30, 2000, Cognex Corporation became a Limited Partner in Venrock
Associates III, L.P., a venture capital fund. A director of the Company is a
Managing General Partner of Venrock Associates. The Company has committed to a
total investment in the limited partnership of up to $25,000,000, of which
$11,625,000 and $10,375,000 had been contributed as of March 30, 2003 and
December 31, 2002, respectively. The commitment to contribute capital expires
on January 1, 2005, and the Company does not have the right to withdraw from
the partnership prior to December 31, 2010.

During the first quarter of 2003, the Company
recorded $404,000 in realized losses on the
funds investments and fund expenses that were not offset by investment gains.

NOTE 4: Inventories

Inventories consist of the following:

|                |  |             |        |              |  |   |        | 
|--------------- |  | ----------- | ------ | ------------ |  | - | ------ | 
|(In thousands)  |  | March 30,   |        | December 31,
|                |  | 2003        |        | 2002        
|                |  |             |        |             
|                |  | (unaudited) |        |              |  |  
|Raw materials   |  | $           | 10,885 |              |  | $ | 12,530 | 
|Work-in-process |  |             | 4,024  |              |  |   | 4,068  | 
|Finished goods  |  |             | 2,608  |              |  |   | 2,354  | 
|                |  |             |        |              |  |   |        | 
|                |  | $           | 17,517 |              |  | $ | 18,952 | 
|                |  |             |        |              |  |   |        | 

In the fourth quarter of 2001, the Company recorded a $16,300,000 charge in
Cost of product revenue on the Consolidated Statements of Operations for
excess inventories and purchase commitments resulting from an extended slowdown
in the semiconductor and electronics industries, as well as the expected
transition to newer Cognex hardware platforms by the Companys OEM customers.
A total of $12,500,000 of this charge represented reserves against existing
inventories and was accordingly included in Inventories on the Consolidated
Balance Sheet at December 31, 2001. The remaining $3,800,000 of the charge
represented commitments to purchase excess components and systems from various
suppliers and accordingly was included in Accrued Expenses on the
Consolidated Balance Sheet at December 31, 2001.

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4: Inventories (continued)

The following table summarizes the changes in the inventory-related reserves
established in the fourth quarter of 2001 (in thousands):

|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       |              |       | 
|-------------------------------------------- | ---------------------------------- | ---------------------------------------------------- | ------ | ------------- | ------ | ---------------- | ----- | -------- | ----- | - | ----- | ------------ | ----- | 
|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       | Statement of
|                                             |                                    |                                                      |        | Balance Sheet |        | Operations      
|                                             |                                    |                                                      |        |               |        |                 
|                                             |                                    |                                                      |        | Inventories   |        | Accrued Expenses |       | Benefits
|                                             |                                    |                                                      |        |               |        |                  |       |         
|Initial charge in the fourth quarter of 2001 |                                    | $                                                    | 12,500 |               |        | $                | 3,800 |          |       | $ |      |             
|Inventory sold to customers                  |                                    |                                                      | (1,790 | )             |        |                  |      |          |       |   | 1,790 |             
|                                             | Settlement of purchase commitments |                                                      |        | 1,506         |        |                  |       | (2,400   | )     |   |       | 894          |      
|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       |             
|                                             |                                    | Reserve balance at December 31, 2002                 |        |               | 12,216 |                  |       |          | 1,400 |   |       |              |       | 
|                                             |                                    | Benefits to cost of product revenue recorded in 2002 |        |               |        |                  |       |          |       |   |       | $            | 2,684 | 
|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       |             
|Inventory sold to customers                  |                                    |                                                      | (309   | )             |        |                  |      |          |       | $ | 309   |             
|Write-off and scrap of inventory             |                                    |                                                      | (419   | )             |        |                  |      |          |       |   |      |             
|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       |             
|                                             |                                    | Reserve balance at March 30, 2003                    |        | $             | 11,488 |                  |       | $        | 1,400 |   |       |              |       | 
|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       |             
|                                             |                                    | Benefits to cost of product revenue recorded in 2003 |        |               |        |                  |       |          |       |   |       | $            | 309   | 
|                                             |                                    |                                                      |        |               |        |                  |       |          |       |   |       |             

The Company is in the process of negotiating with vendors for the settlement of
the remaining purchase commitments, which may result in a recovery of a portion
of the remaining $1,400,000 accrued at March 30, 2003.

NOTE 5: Intangible Assets

Amortized intangible assets consist of complete technology with a gross
carrying amount of $4,708,000 and accumulated amortization of $3,891,000 and
$3,789,000 at March 30, 2003 and December 31, 2002, respectively.

Aggregate amortization expense for the three-month periods ended March 30, 2003
and March 31, 2002 was $102,000 and $139,000, respectively. Estimated
amortization expense for each of the three succeeding fiscal years is as
follows (in thousands):

|     |  |        |     | 
|---- |  | ------ | --- | 
|Year |  | Amount
|     |  |       
|2003 |  | $      | 409 | 
|2004 |  |        | 409 | 
|2005 |  |        | 101 | 
|     |  |        |     | 
|     |  | $      | 919 | 
|     |  |        |     | 

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6: Goodwill

The Company has two reporting units with goodwill, the Modular Vision Systems
Division (MVSD) and the Surface Inspection Systems Division (SISD), which are
also reportable segments.

The changes in the carrying amount of goodwill during the three-month period
ended March 30, 2003 are as follows (in thousands):

|                              |  |      |       |      |  |              |       |  |  |   |       | 
|----------------------------- |  | ---- | ----- | ---- |  | ------------ | ----- |  |  | - | ----- | 
|                              |  | MVSD |       | SISD |  | Consolidated
|                              |  |      |       |      |  |             
|Balance at December 31, 2002  |  | $    | 1,488 |      |  | $            | 2,254 |  |  | $ | 3,742 | 
|Foreign exchange rate changes |  |      |      |      |  |              | 60    |  |  |   | 60    | 
|                              |  |      |       |      |  |              |       |  |  |   |       | 
|Balance at March 30, 2003     |  | $    | 1,488 |      |  | $            | 2,314 |  |  | $ | 3,802 | 
|                              |  |      |       |      |  |              |       |  |  |   |       | 

The Company evaluates the possible impairment of goodwill annually each fourth
quarter, and whenever events or circumstances indicate the carrying value of
the goodwill may not be recoverable. In the fourth quarter of 2002, this
analysis resulted in a fair value of each reporting unit that exceeded its
carrying amount, and therefore, the goodwill in each reporting unit was
determined not to be impaired.

NOTE 7: Warranty Obligations

The Company warrants its hardware products to be free from defects in material
and workmanship for periods ranging from six months to two years from the time
of sale based upon the product being purchased and the terms of the customers
contract. Estimated warranty obligations are evaluated and recorded at the
time of sale based upon historical costs to fulfill warranty obligations.
Warranty obligations are included in Accrued expenses on the Consolidated
Balance Sheets.

The changes in the warranty obligation are as follows (in thousands):

|                                    |  |   |       |  
|----------------------------------- |  | - | ----- | -
|Balance at December 31, 2002        |  | $ | 1,523 |  
|Provisions for warranties issued    |  |   | 529   |  
|Fulfillment of warranty obligations |  |   | (375  | )
|Foreign exchange rate changes       |  |   | 25    |  
|                                    |  |   |       |  
|Balance at March 30, 2003           |  | $ | 1,702 |  
|                                    |  |   |       |  

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Note 8:  Indemnification Provisions

Except as limited by Massachusetts law, the by-laws of the Company require it
to indemnify certain current or former directors, officers, and employees of
the Company against expenses incurred by them in connection with each
proceeding in which he or she is involved as a result of serving or having
served in certain capacities. Indemnification is not available with respect to
a proceeding as to which it has been adjudicated that the person did not act in
good faith in the reasonable belief that the action was in the best interests
of the Company. The maximum potential amount of future payments the Company
could be required to make under these provisions is unlimited. The Company has
never incurred significant costs related to these indemnification provisions.
As a result, the Company believes the estimated fair value of these provisions
is minimal and has not recorded any related liabilities as of March 30, 2003.

The Company accepts standard limited indemnification provisions in the ordinary
course of business, whereby it indemnifies its customers for certain direct
damages incurred in connection with third-party patent or other intellectual
property infringement claims with respect to the use of the Companys products.
The term of these indemnification provisions generally coincides with the
customers use of the Companys products. The maximum potential amount of
future payments the Company could be required to make under these provisions is
always subject to fixed monetary limits. The Company has never incurred
significant costs to defend lawsuits or settle claims related to these
indemnification provisions. As a result, the Company believes the estimated
fair value of these provisions is minimal and has not recorded any related
liabilities as of March 30, 2003.

The Company also accepts limited indemnification provisions from time to time,
whereby it indemnifies customers for certain direct damages incurred in
connection with bodily injury and property damage arising from the installation
of the Companys products. The term of these indemnification provisions
generally coincides with the period of installation. The maximum potential
amount of future payments the Company could be required to make under these
provisions is limited and is recoverable under the Companys insurance
coverage. As a result of this coverage, in addition to the fact that the
Company has never incurred significant costs to defend lawsuits or settle
claims related to these indemnification provisions, the Company believes the
estimated fair value of these provisions is minimal and has not recorded any
related liabilities as of March 30, 2003.

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9: Net Income (Loss) Per Share

|                                                      |                                                                  |                    |             |                |  |   |        |        |  
|----------------------------------------------------- | ---------------------------------------------------------------- | ------------------ | ----------- | -------------- |  | - | ------ | ------ | -
|Net income (loss) per share is calculated as follows: |                                                                  | Three Months Ended
|(In thousands, except per share amounts)              |                                                                  | March 30, 2003     |             | March 31, 2002
|                                                      |                                                                  |                    |             |               
|                                                      |                                                                  |                    | (unaudited)
|Net income (loss)                                     |                                                                  | $                  | 1,793       |                |  | $ | (2,520 | )     
|                                                      |                                                                  |                    |             |                |  |   |        |       
|Basic:                                                |                                                                  |                    |             |                |  |   |        |       
|                                                      | Weighted-average common shares outstanding                       |                    |             | 42,666         |  |   |        | 43,971 |  
|                                                      |                                                                  |                    |             |                |  |   |        |       
|                                                      | Net income (loss) per common share                               |                    | $           | 0.04           |  |   | $      | (0.06  | )
|                                                      |                                                                  |                    |             |                |  |   |        |       
|Diluted:                                              |                                                                  |                    |             |                |  |   |        |       
|                                                      | Weighted-average common shares outstanding                       |                    |             | 42,666         |  |   |        | 43,971 |  
|                                                      | Effect of dilutive stock options                                 |                    |             | 891            |  |   |        |       |  
|                                                      |                                                                  |                    |             |                |  |   |        |       
|                                                      | Weighted-average common and common-equivalent
shares outstanding |                    |             | 43,557         |  |   |        | 43,971 |  
|                                                      |                                                                  |                    |             |                |  |   |        |       
|                                                      | Net income (loss) per common and
common-equivalent share         |                    | $           | 0.04           |  |   | $      | (0.06  | )
|                                                      |                                                                  |                    |             |                |  |   |        |       

Stock options to purchase 6,127,543 and 3,182,948 shares of common stock were
outstanding for the three-month periods ended March 30, 2003 and March 31,
2002, respectively, but were not included in the calculation of diluted net
income (loss) per share because the options exercise prices were greater than
the average market price of the Companys common stock during those periods.
Additionally, stock options to purchase 1,514,002 shares of common stock were
not included in the calculation of diluted net loss per share for the
three-month period ended March 31, 2002 because they were antidilutive.
Although these stock options were antidilutive in 2002, they may be dilutive in
future periods calculations.

NOTE 10: Segment Information

The Company has two reportable segments: the Modular Vision Systems Division
(MVSD) and the Surface Inspections Systems Division (SISD). MVSD designs,
develops, manufactures, and markets modular vision systems that are used to
control the manufacturing of discrete items by locating, identifying,
inspecting, and measuring them during the manufacturing process. SISD designs,
develops, manufactures, and markets surface inspection vision systems that are
used to inspect surfaces of materials that are processed in a continuous
fashion to ensure there are no flaws or defects in the surfaces. Segments are
determined based upon the way that management organizes its business for making
operating decisions and assessing performance. The Company evaluates segment
performance based upon income or loss from operations, excluding unusual items.

The following table summarizes information about the Companys segments (in
thousands):

|                                  |                         |      |   |        |   |       |   |              |   |             |   |        |   |  |   |        |  
|--------------------------------- | ----------------------- | ---- | - | ------ | - | ----- | - | ------------ | - | ----------- | - | ------ | - |  | - | ------ | -
|                                  |                         |      |   |        |   |       |   |              |   | Reconciling |   |        |   | 
|Three
Months Ended March 30, 2003 |                         | MVSD |   | SISD   |   | Items |   | Consolidated
|                                  |                         |      |   |        |   |       |   |             
|                                  | Product revenue         |      | $ | 23,528 |   |       | $ | 4,720        |   |             | $ |       |   |  | $ | 28,248 |  
|                                  | Service revenue         |      |   | 3,101  |   |       |   | 1,539        |   |             |   |       |   |  |   | 4,640  |  
|                                  | Operating income        |      |   | 3,048  |   |       |   | 514          |   |             |   | (2,244 | ) |  |   | 1,318  |  
|Three Months Ended
March 31, 2002 |                         |      |   |        |   |       |   |              |   |             |   |        |   |  |   |       
|                                  | Product revenue         |      | $ | 13,991 |   |       | $ | 3,265        |   |             | $ |       |   |  | $ | 17,256 |  
|                                  | Service revenue         |      |   | 3,071  |   |       |   | 1,453        |   |             |   |       |   |  |   | 4,524  |  
|                                  | Operating income (loss) |      |   | (3,471 | ) |       |   | (102         | ) |             |   | (2,589 | ) |  |   | (6,162 | )

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10: Segment Information (continued)

Reconciling items include the benefit from the sale of previously reserved
inventory, which relate to the MVSD segment and are not included in the
segments operating income (loss) for the purpose of making operating decisions
and assessing performance. Reconciling items also consist of unallocated
corporate expenses, which primarily include corporate headquarters costs and
patent infringement litigation. Asset information by segment is not produced
internally, and therefore, is not presented.

NOTE 11: Subsequent Event

On March 31, 2003, the Company acquired the wafer identification business of
Siemens Dematic AG, a subsidiary of Siemens AG. Siemens Dematic is the worlds
leading supplier of logistics and factory automation equipment and has been the
leading supplier of wafer identification systems to semiconductor manufacturers
in Europe. Under the terms of the agreement, the Company acquired the rights
to all of Siemens patented and unpatented wafer identification technology, as
well as the related assets of their wafer identification business.

The purchase price consisted of 7,000,000 Euros (or approximately $7,546,000)
paid on March 31, 2003, with the potential for an additional cash payment in
2005 of up to 1,700,000 Euros (or approximately $1,833,000 based upon the
exchange rate as of March 30, 2003) depending upon the achievement of certain
performance criteria. The March 31, 2003 cash payment of 7,000,000 Euros was
based upon an estimated balance sheet for the wafer identification business as
of March 31, 2003. Accordingly, the cash payment may be adjusted during the
second quarter of 2003 based upon the actual March 31, 2003 balance sheet.

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ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements made in this report, as well as oral statements made by the
Company from time to time, constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Readers can identify
these forward-looking statements by the Companys use of the words expects,
anticipates, estimates, believes, projects, intends, plans, will,
may, shall, and similar words and other statements of a similar sense.
These statements are based upon the Companys current expectations and
estimates as to prospective events and circumstances, which may or may not be
in the Companys control and as to which there can be no firm assurances given.
These forward-looking statements, like any other forward-looking statements,
involve known and unknown risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and
uncertainties include: (1) the effects of the general economic slowdown,
including the worldwide slowdown in capital spending; (2) the cyclicality of
the semiconductor and electronics industries; (3) the Companys continued
ability to achieve significant international revenue; (4) the loss of, or a
significant curtailment of purchases by, any one or more principal customers;
(5) the reliance upon certain sole source suppliers to manufacture or deliver
critical components for the Companys products; (6) the inability to design and
manufacture high-quality products; (7) the inability to attract or retain
skilled employees; (8) the inability to forecast customer demand accurately;
(9) the technological obsolescence of current products and the inability to
develop new products; (10) the inability to protect the Companys proprietary
technology and intellectual property; (11) the Companys involvement in
time-consuming and costly litigation; (12) the inability to respond to
competitive technology and pricing pressures; and (13) the inability to achieve
expected results from acquisitions. The foregoing list should not be construed
as exhaustive and the Company encourages readers to refer to the discussion of
risk factors included in Part I  Item 1 of the Annual Report on Form 10-K.
The Company cautions readers not to place undue reliance upon any such
forward-looking statements, which speak only as of the date made. The Company
disclaims any obligation to subsequently revise forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.

Results of Operations

Revenue

Revenue for the quarter ended March 30, 2003 increased 51% to $32,888,000 from
$21,780,000 for the quarter ended March 31, 2002. For the past several
quarters, the Companys results have been negatively impacted by a worldwide
slowdown in capital spending, primarily by manufacturers in the semiconductor
and electronics industries. The first quarter of 2002 represented the lowest
reported revenue during this downturn, and although revenue has increased from
this level, the Companys results continue to be negatively impacted by the
slowdown. Sales to Original Equipment Manufacturer (OEM) customers, most of
whom make capital equipment used by manufacturers in the semiconductor and
electronics industries, increased $6,941,000, or 126%, from the prior year.
Sales to end-user customers increased from the prior year by $4,167,000, or 26%
due to higher demand from customers across a variety of industries. Sales to
end-user customers represented 62% of total revenue in 2003 compared to 75% in
2002. Geographically, revenue increased from the prior year in all of the
Companys worldwide regions, but most significantly in Japan where many of the
Companys OEM customers are located.

Product revenue for the quarter ended March 30, 2003 increased 64% to
$28,248,000 from $17,256,000 for the quarter ended March 31, 2002. The
increase in product revenue was primarily due to a higher volume of machine
vision systems sold to customers in the semiconductor and electronics
industries. Service revenue, which is derived from the sale of maintenance and
support, education, consulting, and installation services, increased 3% to
$4,640,000 from $4,524,000. Many of the Companys products that were sold
during the first quarter of 2003 included bundled maintenance and support
programs for which a portion of the revenue will be recognized in future
quarters over the program period. As a result, service revenue did not
increase as dramatically as product revenue, and it decreased as a percentage
of total revenue to 14% in 2003 compared to 21% in 2002.

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MVSD revenue for the quarter ended March 30, 2003 increased 56% to $26,629,000
from $17,062,000 for the quarter ended March 31, 2002. The increase in MVSD
revenue was primarily due to a higher volume of systems sold to customers in
the semiconductor and electronics industries. SISD revenue increased 33% to
$6,259,000 from $4,718,000 due principally to a higher volume of SmartView®
systems sold to customers in surface inspection industries, such as the metals
and paper industries. SISD revenue represented 19% of total revenue in 2003
compared to 22% in 2002.

Gross Margin

Gross margin as a percentage of revenue was 64% for the quarter ended March 30,
2003 compared to 61% for the quarter ended March 31, 2002. The Company
recorded a benefit to Cost of product revenue from the sale of previously
reserved inventory amounting to $309,000 in the first quarter of 2003, which
accounted for one percentage point of the increase in gross margin. The
remaining two percentage point increase in gross margin was primarily due to
the impact of the higher sales volume, as well as a greater percentage of total
revenue from the sale of modular vision systems, which carry higher margins
than the sale of services and surface inspection systems.

Product gross margin as a percentage of revenue was 69% for the quarter ended
March 30, 2003 compared to 66% for the quarter ended March 31, 2002. The
increase in product margin was primarily due to the benefit from the sale of
previously reserved inventory, favorable absorption of manufacturing overhead
due to the increased sales volume, and the shift in product mix to
higher-margin modular vision systems. Service gross margin as a percentage of
revenue remained relatively consistent at 39% for the quarter ended March 30,
2003 compared to 40% for the quarter ended March 31, 2002.

MVSD gross margin as a percentage of revenue was 68% for the quarter ended
March 30, 2003 compared to 66% for the quarter ended March 31, 2002. The
increase in MVSD margin was primarily due to the benefit from the sale of
previously reserved inventory and the impact of the higher sales volume of
modular vision systems. SISD gross margin as a percentage of revenue was 47%
for the quarter ended March 30, 2003 compared to 41% for the quarter ended
March 31, 2002. The increase in SISD margin was due principally to the 33%
increase in revenue.

Operating Expenses

Research, development, and engineering (R,D&E) expenses for the quarter ended
March 30, 2003 decreased 6% to $5,983,000 from $6,352,000 for the quarter ended
March 31, 2002. MVSD R,D&E expenses decreased $440,000, or 8%, from the prior
year primarily due to a workforce reduction in the third quarter of 2002. SISD
R,D&E expenses increased $71,000, or 12%, from 2002 due principally to higher
software translation services.

Selling, general, and administrative (S,G&A) expenses for the quarter ended
March 30, 2003 increased 6% to $13,871,000 from $13,025,000 for the quarter
ended March 31, 2002. MVSD S,G&A expenses increased $549,000, or 6%, from the
prior year and SISD S,G&A expenses increased $333,000, or 23%, from 2002.
Corporate expenses that are not allocated to a division remained consistent
with the prior year. The increase in MVSD and SISD expenses was primarily due
to the unfavorable impact of foreign
exchange rate changes on the Companys international operations, as well as
higher marketing costs undertaken to increase sales opportunities.

Investment and Other Income

Investment and other income for the quarter ended March 30, 2003 decreased 49%
to $1,294,000 from $2,561,000 for the quarter ended March 31, 2002. This
decrease was due primarily to lower average interest rates on the Companys
investments in debt securities, as well as a lower average invested balance as
a result of using $26,425,000 in cash to repurchase common stock during the
third quarter of 2002.

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Income Taxes

The Companys effective tax rate for the quarter ended March 30, 2003 was a
provision of 31% compared to a benefit of 30% for the quarter ended March 31,
2002. The provision reflects the Companys significant tax-exempt investment
income and future reductions in taxes payable relating to net operating loss
carryforwards in various jurisdictions, offset by continued investments in the
Companys foreign operations and losses related to an investment in a limited
partnership, for which no tax benefit was provided.

Liquidity and Capital Resources

At March 30, 2003, the Companys cash, cash equivalent, and investment balances
increased $4,525,000 to $280,510,000 from $275,985,000 at December 31, 2002.
The Company has established guidelines relative to credit ratings,
diversification, and maturities of its investments that maintain liquidity.
The Companys cash requirements during the quarter ended March 30, 2003 were
met with positive cash flow from operations, as well as the proceeds from the
maturity and sale of investments and the issuance of common stock under stock
option plans. Cash requirements consisted of operating activities, capital
expenditures, and the purchase of investments. Capital expenditures during the
first quarter of 2003 totaled $561,000 and consisted principally of
expenditures for computer hardware and software.

On June 30, 2000, Cognex Corporation became a Limited Partner in Venrock
Associates III, L.P., a venture capital fund. The Company has committed to a
total investment in the limited partnership of up to $25,000,000, of which
$11,625,000 had been contributed as of March 30, 2003, including $1,250,000
during the first quarter of 2003. The commitment to contribute capital expires
on January 1, 2005, and the Company does not have the right to withdraw from
the partnership prior to December 31, 2010.

On December 12, 2000, the Companys Board of Directors authorized the
repurchase of up to $100,000,000 of the Companys common stock. During 2002, a
total of 1,768,452 shares were repurchased at a cost of $26,425,000. There
were no shares repurchased under this program during the first quarter of 2003.
The Company may repurchase additional shares under this program in future
periods depending upon a variety of factors, including the market value of the
Companys common stock and the average return on the Companys invested
balances.

On March 31, 2003, the Company acquired the wafer identification business of
Siemens Dematic AG, a subsidiary of Siemens AG. The purchase price consisted
of 7,000,000 Euros (or approximately $7,546,000) paid on March 31, 2003, with
the potential for an additional cash payment in 2005 of up to 1,700,000 Euros
(or approximately $1,833,000 based upon the exchange rate as of March 30, 2003)
depending upon the achievement of certain performance criteria. The March 31,
2003 cash payment of 7,000,000 Euros was based upon an estimated balance sheet
for the wafer identification business as of March 31, 2003. Accordingly, the
cash payment may be adjusted during the second quarter of 2003 based upon the
actual March 31, 2003 balance sheet.

The Company believes that its existing cash, cash equivalents, and investments
balances will be sufficient to meet its planned operating, investing, and
financing activities in 2003, which consist primarily of working capital and
capital expenditure requirements, as well as any strategic initiatives in 2003,
including its stock repurchase program and potential business or asset
acquisitions.

New Pronouncements

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, Accounting for Revenue Arrangements with Multiple
Deliverables. This issue addresses how revenue arrangements with multiple
deliverables should be divided into separate units of accounting and how the
arrangement consideration should be allocated to the identified separate
accounting units. EITF Issue No. 00-21 is effective for fiscal periods
beginning after June 15, 2003. The Company does not believe the adoption of
EITF Issue No. 00-21 will have a material impact on its consolidated financial
statements.

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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the Companys exposures to market risk
since December 31, 2002.




ITEM 4: CONTROLS AND PROCEDURES

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934,
within the 90-day period prior to the filing of this report and under the
supervision and with the participation of management, including the Chief
Executive Officer and the Chief Financial Officer, the Company has evaluated
the effectiveness of the design and operation of its disclosure controls and
procedures. Based on such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that such disclosure controls and procedures
are effective in ensuring that material information relating to the Company,
including its consolidated subsidiaries, is made known to the certifying
officers by others within the Company and its consolidated subsidiaries during
the period covered by this report. There were no significant changes in the
Companys internal controls for financial reporting or in other factors that
could significantly affect such internal controls subsequent to the date of
such evaluation. From time to time, the Company reviews the disclosure
controls and procedures, including its internal accounting controls, and may
from time to time make changes aimed at enhancing their effectiveness and to
ensure that the Companys systems evolve with its business.

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PART II: OTHER INFORMATION




|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM 1. |  | LEGAL PROCEEDINGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  | To the Companys knowledge, there are no pending legal proceedings,
other than as described in the section captioned Intellectual
Property, appearing in Item I of the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, which are
material to the Company, to which it is a party, or to which any of
its property is subject. There have been no material developments
in such legal proceeding since December 31, 2002. From time to
time, however, the Company may be subject to various claims and
lawsuits by competitors, customers, or other parties arising in the
ordinary course of business, including lawsuits charging patent
infringement. There can be no assurance as to the outcome of any of
this litigation.




|        |  |                                          
|------- |  | -----------------------------------------
|ITEM 2. |  | CHANGES IN SECURITIES AND USE OF PROCEEDS
|        |  |                                          
|        |  | None                                     




|        |  |                                
|------- |  | -------------------------------
|ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES
|        |  |                                
|        |  | None                           




|        |  |                                                    
|------- |  | ---------------------------------------------------
|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|        |  |                                                    
|        |  | None                                               




|        |  |                  
|------- |  | -----------------
|ITEM 5. |  | OTHER INFORMATION
|        |  |                  
|        |  | None             




|        |  |                                 
|------- |  | --------------------------------
|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K

| |  |     |  |                                                                                                                      
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Exhibits                                                                                                             
| |  |     |  |                                                                                                                      
| |  |     |  | 99.1  Certification pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| |  |     |  |                                                                                                                      
| |  |     |  | 99.2  Certification pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| |  |     |  |                                                                                                                      
| |  | (b) |  | Reports on Form 8-K                                                                                                  
| |  |     |  |                                                                                                                      
| |  |     |  | None                                                                                                                 

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SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

|                  |  |                                                                                                                                                                
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|DATE: May 9, 2003 |  | COGNEX CORPORATION                                                                                                                                             
|                  |  |                                                                                                                                                                
|                  |  | /s/ Robert J. Shillman                                                                                                                                         
|                  |  |                                                                                                                                                                
|                  |  | Robert J. Shillman
President, Chief Executive Officer, 
and Chairman of the Board of Directors
(duly authorized officer, principal executive officer)          
|                  |  |                                                                                                                                                                
|                  |  | /s/ Richard A. Morin                                                                                                                                           
|                  |  |                                                                                                                                                                
|                  |  | Richard A. Morin
Senior Vice President of Finance, Chief
Financial Officer, and Treasurer
(duly authorized officer, principal financial and accounting officer)

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CERTIFICATION

I, Robert J. Shillman, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Cognex Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations, and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing similar
functions):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize, and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

DATE: May 9, 2003

|                                                                                                                                                                             |  | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|/s/ Robert J. Shillman

Robert J. Shillman
President, Chief Executive Officer, and Chairman of the Board of Directors
(duly authorized officer, principal executive officer) |  | 

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CERTIFICATION

I, Richard A. Morin, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Cognex Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations, and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing similar
functions):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize, and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

DATE: May 9, 2003

|                                                                                                                                                                                      |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|/s/ Richard A. Morin

Richard A. Morin
Senior Vice President of Finance, Chief Financial Officer, and Treasurer
(duly authorized officer, principal financial and accounting officer) |  | 

19