##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended July 5, 2009 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from  to
 Commission
File Number 001-34218
 COGNEX CORPORATION
 
 (Exact name of registrant as specified in its charter)
 Massachusetts
    
    04-2713778(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
 
 (Address, including zip code, and telephone number, 
including area code, of principal executive offices)
  þ o
  o o
  Large accelerated filer þ
Accelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o  o þ




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##### 



INDEX
 PART I
    
    FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Financial Statements
    
    
    1Consolidated Statements of Operations for the three-month and
six-month periods ended July 5, 2009 and June 29, 2008
    
    
    1Consolidated Balance Sheets at July 5, 2009 and December 31, 2008
    
    
    2Consolidated Statement of Shareholders Equity for the six-month
period ended July 5, 2009
    
    
    3Consolidated Condensed Statements of Cash Flows for the six-month
periods ended July 5, 2009 and June 29, 2008
    
    
    4Notes to Consolidated Financial Statements (interim periods unaudited)
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II
    
    OTHER INFORMATION
    
    
    28Item 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    29Signatures
    
    
    30EX-31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934EX-31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934EX-32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002EX-32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
 COGNEX CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three-months Ended
    
    
    Six-months EndedJuly 5,
    
    
    June 29,
    
    
    July 5,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)RevenueProduct
    
    $
    36,628
    
    
    $
    62,456
    
    
    $
    74,756
    
    
    $
    117,399Service
    
    
    4,340
    
    
    
    4,633
    
    
    
    8,499
    
    
    
    10,20340,968
    
    
    
    67,089
    
    
    
    83,255
    
    
    
    127,602Cost of revenueProduct
    
    
    11,918
    
    
    
    16,082
    
    
    
    22,304
    
    
    
    30,074Service
    
    
    3,058
    
    
    
    2,943
    
    
    
    6,136
    
    
    
    6,00614,976
    
    
    
    19,025
    
    
    
    28,440
    
    
    
    36,080Gross marginProduct
    
    
    24,710
    
    
    
    46,374
    
    
    
    52,452
    
    
    
    87,325Service
    
    
    1,282
    
    
    
    1,690
    
    
    
    2,363
    
    
    
    4,19725,992
    
    
    
    48,064
    
    
    
    54,815
    
    
    
    91,522Research, development, and engineering expenses
    
    
    7,704
    
    
    
    9,290
    
    
    
    16,539
    
    
    
    18,219Selling, general, and administrative expenses
    
    
    22,404
    
    
    
    28,048
    
    
    
    48,545
    
    
    
    54,574Restructuring charges (Note 14)
    
    
    3,738
    
    
    
    
    
    
    
    4,035
    
    
    
    Operating income (loss)
    
    
    (7,854
    )
    
    
    10,726
    
    
    
    (14,304
    )
    
    
    18,729Foreign currency gain (loss)
    
    
    (422
    )
    
    
    (647
    )
    
    
    (814
    )
    
    
    471Investment income
    
    
    572
    
    
    
    1,757
    
    
    
    1,456
    
    
    
    3,734Other income (expense)
    
    
    (125
    )
    
    
    29
    
    
    
    1,675
    
    
    
    384Income (loss) from continuing operations before income tax expense
    
    
    (7,829
    )
    
    
    11,865
    
    
    
    (11,987
    )
    
    
    23,318Income tax expense (benefit) on continuing operations
    
    
    (1,410
    )
    
    
    3,103
    
    
    
    (2,158
    )
    
    
    5,966Income (loss) from continuing operations
    
    
    (6,419
    )
    
    
    8,762
    
    
    
    (9,829
    )
    
    
    17,352Loss from operations of discontinued business, net of tax (Note 17)
    
    
    
    
    
    
    (3,109
    )
    
    
    
    
    
    
    (3,224
    )Net income (loss)
    
    $
    (6,419
    )
    
    $
    5,653
    
    
    $
    (9,829
    )
    
    $
    14,128Basic earnings (loss) per weighted-average common and
common-equivalent share:Income (loss) from continuing operations
    
    $
    (0.16
    )
    
    $
    0.21
    
    
    $
    (0.25
    )
    
    $
    0.41Loss from discontinued operations
    
    $
    0.00
    
    
    $
    (0.08
    )
    
    $
    0.00
    
    
    $
    (0.08
    )Net income (loss)
    
    $
    (0.16
    )
    
    $
    0.13
    
    
    $
    (0.25
    )
    
    $
    0.33Diluted earnings (loss) per weighted-average common and
common-equivalent share:Income (loss) from continuing operations
    
    $
    (0.16
    )
    
    $
    0.21
    
    
    $
    (0.25
    )
    
    $
    0.41Loss from discontinued operations
    
    $
    0.00
    
    
    $
    (0.08
    )
    
    $
    0.00
    
    
    $
    (0.08
    )Net income (loss)
    
    $
    (0.16
    )
    
    $
    0.13
    
    
    $
    (0.25
    )
    
    $
    0.33Weighted-average common and common-equivalent shares outstanding:Basic
    
    
    39,656
    
    
    
    41,942
    
    
    
    39,656
    
    
    
    42,459Diluted
    
    
    39,656
    
    
    
    42,588
    
    
    
    39,656
    
    
    
    42,742Cash dividends per common share
    
    $
    0.050
    
    
    $
    0.085
    
    
    $
    0.200
    
    
    $
    0.170
  1




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##### Table of Contents



COGNEX CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 July 5,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    125,454
    
    
    $
    127,138Short-term investments
    
    
    54,594
    
    
    
    52,559Accounts receivable, less reserves of
$1,472 and $1,290 in 2009 and 2008,
respectively
    
    
    23,699
    
    
    
    30,510Inventories
    
    
    22,378
    
    
    
    25,063Deferred income taxes
    
    
    12,266
    
    
    
    10,231Prepaid expenses and other current assets
    
    
    13,379
    
    
    
    18,923Total current assets
    
    
    251,770
    
    
    
    264,424Long-term investments
    
    
    26,377
    
    
    
    41,389Property, plant, and equipment, net
    
    
    28,197
    
    
    
    27,764Deferred income taxes
    
    
    19,350
    
    
    
    17,673Intangible assets, net
    
    
    27,711
    
    
    
    31,278Goodwill
    
    
    80,839
    
    
    
    80,765Other assets
    
    
    10,108
    
    
    
    10,754$
    444,352
    
    
    $
    474,047LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,260
    
    
    $
    6,780Accrued expenses
    
    
    18,578
    
    
    
    21,855Accrued income taxes
    
    
    1,717
    
    
    
    2,986Deferred revenue and customer deposits
    
    
    12,132
    
    
    
    19,429Total current liabilities
    
    
    35,687
    
    
    
    51,050Reserve for income taxes
    
    
    10,219
    
    
    
    9,922Commitments and contingencies (Note 8)Shareholders equity:Common
stock, $.002 par value 
Authorized: 140,000 shares, issued: 39,662
and 39,655 shares in 2009 and 2008,
respectively
    
    
    79
    
    
    
    79Additional paid-in capital
    
    
    76,745
    
    
    
    73,280Retained earnings
    
    
    327,465
    
    
    
    345,225Accumulated other comprehensive loss
    
    
    (5,843
    )
    
    
    (5,509
    )Total shareholders equity
    
    
    398,446
    
    
    
    413,075$
    444,352
    
    
    $
    474,047
  2




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##### Table of Contents



COGNEX CORPORATION
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Loss
    
    
    EquityBalance as of December 31, 2008
    
    
    39,655
    
    
    $
    79
    
    
    $
    73,280
    
    
    $
    345,225
    
    
    $
    (5,509
    )
    
    
    
    
    
    $
    413,075Issuance of common stock under stock purchase plans
    
    
    7
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,644Excess tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )Payment of dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,931
    )
    
    
    
    
    
    
    
    
    
    
    (7,931
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,829
    )
    
    
    
    
    
    $
    (9,829
    )
    
    
    (9,829
    )Net unrealized loss on available-for-sale
investments, net of tax of $20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    (35
    )
    
    
    (35
    )Foreign currency translation adjustment, net
of tax expense of $109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    (299
    )
    
    
    (299
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,163
    )Balance as of July 5, 2009 (unaudited)
    
    
    39,662
    
    
    $
    79
    
    
    $
    76,745
    
    
    $
    327,465
    
    
    $
    (5,843
    )
    
    
    
    
    
    $
    398,446
  3




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COGNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 Six-months EndedJuly 5,
    
    
    June 29,2009
    
    
    2008(unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    (9,829
    )
    
    $
    14,128Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Impairment loss related to discontinued business (Note 17)
    
    
    
    
    
    
    2,987Intangible asset impairment charge (Note 6)
    
    
    1,000
    
    
    
    Stock-based compensation expense
    
    
    3,644
    
    
    
    4,396Depreciation and amortization
    
    
    5,622
    
    
    
    5,825Provision for excess and obsolete inventory
    
    
    2,489
    
    
    
    1,259Tax effect of stock option exercises
    
    
    259
    
    
    
    (1,640
    )Deferred income tax
    
    
    (3,777
    )
    
    
    (1,956
    )Change in operating assets and liabilities
    
    
    (2,754
    )
    
    
    2,996Net cash provided by (used in) operating activities
    
    
    (3,346
    )
    
    
    27,995Cash flows from investing activities:Purchase of investments
    
    
    (8,516
    )
    
    
    (60,776
    )Maturity and sale of investments
    
    
    20,694
    
    
    
    95,704Purchase of property, plant, and equipment
    
    
    (2,838
    )
    
    
    (3,507
    )Cash paid for business acquisition (Note 17)
    
    
    
    
    
    
    (1,000
    )Cash deposit related to discontinued business (Note 17)
    
    
    
    
    
    
    250Net cash provided by investing activities
    
    
    9,340
    
    
    
    30,671Cash flows from financing activities:Issuance of common stock under stock option/purchase plans
    
    
    80
    
    
    
    13,519Repurchase of common stock
    
    
    
    
    
    
    (45,620
    )Payment of dividends
    
    
    (7,931
    )
    
    
    (7,213
    )Tax effect of stock option exercises
    
    
    (259
    )
    
    
    1,640Net cash used in financing activities
    
    
    (8,110
    )
    
    
    (37,674
    )Effect of foreign exchange rate changes on cash
    
    
    432
    
    
    
    6,227Net increase (decrease) in cash and cash equivalents
    
    
    (1,684
    )
    
    
    27,219Cash and cash equivalents at beginning of period
    
    
    127,138
    
    
    
    104,144Cash and cash equivalents at end of period
    
    $
    125,454
    
    
    $
    131,363
  4




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1: Summary of Significant Accounting Policies
     NOTE 2: New Pronouncements
 FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162
  NOTE 3: Fair Value Measurements
   5




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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 4: Cash, Cash Equivalents, and Investments
  July 5,
    
    
    December 31,2009
    
    
    2008Cash
    
    $
    125,454
    
    
    $
    124,339Cash equivalents
    
    
    
    
    
    
    2,799Cash and cash equivalents
    
    $
    125,454
    
    
    $
    127,138Municipal bonds
    
    
    54,594
    
    
    
    52,559Short-term investments
    
    $
    54,594
    
    
    $
    52,559Municipal bonds
    
    
    18,909
    
    
    
    33,921Limited partnership interest (accounted for using cost method)
    
    
    7,468
    
    
    
    7,468Long-term investments
    
    $
    26,377
    
    
    $
    41,389$
    206,425
    
    
    $
    221,086
  Significant OtherObservableInputs (Level 2)Municipal bond investments
    
    $
    73,503
   Balance as of December 31, 2008
    
    $
    2,000Unrealized loss recorded in the first quarter of 2009
    
    
    (400
    )Reversal of unrealized loss due to sale of investments in the second quarter of 2009
    
    
    400Sale of investments in the second quarter of 2009
    
    
    (2,000
    )Balance as of July 5, 2009
    
    $
    
  6




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 4: Cash, Cash Equivalents, and Investments (continued)
  NOTE 5: Inventories
  July 5,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    12,469
    
    
    $
    14,722Work-in-process
    
    
    1,235
    
    
    
    976Finished goods
    
    
    8,674
    
    
    
    9,365$
    22,378
    
    
    $
    25,063
 NOTE 6: Intangible Assets and Goodwill
   SignificantUnobservableInputs (Level 3)
    
    
    Total
    
    
    Total LossSiemens Customer Relationships
    
    $
    300
    
    
    $
    300
    
    
    $
    (1,000
    )
  7




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 6: Intangible Assets and Goodwill (continued)
  NOTE 7: Warranty Obligations
   Balance as of December 31, 2008
    
    $
    1,657Provisions for warranties issued during the period
    
    
    484Fulfillment of warranty obligations
    
    
    (786
    )Foreign exchange rate changes
    
    
    19Balance as of July 5, 2009
    
    $
    1,374
 NOTE 8: Contingencies
    8




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##### Table of Contents



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




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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 10: Derivative Instruments (continued)
   
    
    transactional currency/functional currency exchange rate exposures from transactions
that are denominated in currencies other than the functional currency of the subsidiary
(for example, a Japanese Yen receivable on the Companys Irish subsidiarys books for which
the functional currency is the Euro), and
    
    functional currency/reporting currency exchange rate exposures from transactions that
are denominated in currencies other than the U.S. Dollar, which is the reporting currency
of the Company.
    Currency
    
    AmountJapanese Yen/Euro
    
    988,250,000 Japanese YenU.S. Dollar/Euro
    
    2,430,000 U.S. Dollars
  Asset Derivatives
    
    Liability DerivativesFair Value
    
    
    
    
    
    Fair ValueBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    July 5,
    
    December 31,
    
    Sheet
    
    July 5,
    
    December 31,Location
    
    2009
    
    2008
    
    Location
    
    2009
    
    2008Prepaid expensesand other current
    
    
    
    
    
    
    
    
    
    AccruedCurrency forward contracts
    
    assets
    
    $
    320
    
    
    $
    207
    
    
    expenses
    
    $
    0
    
    
    $
    255
  10




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 10: Derivative Instruments (continued)
 Location of
    
    Amount of Gain (Loss)
    
    Location of
    
    Amount of Gain (Loss)Gain (Loss)
    
    Recognized in Income on
    
    Gain (Loss)
    
    Recognized in Income onRecognized
    
    Derivative
    
    Recognized
    
    Derivativein Income
    
    Three-months ended
    
    in Income
    
    Six-months endedon
    
    July 5,
    
    June 29,
    
    on
    
    July 5,
    
    June 29,Derivative
    
    2009
    
    2008
    
    Derivative
    
    2009
    
    2008Foreign currency
    
    
    
    
    
    
    
    
    
    Foreign currencyCurrency forward contracts
    
    loss
    
    $
    (96
    )
    
    $
    (179
    )
    
    gain (loss)
    
    $
    (272
    )
    
    $
    88
  Quoted Prices inActive Markets forIdentical Assets(Level 1)
    
    
    TotalCurrency forward contracts
    
    $
    320
    
    
    $
    320
  NOTE 11: Stock-Based Compensation Expense
    Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    Value(in thousands)
    
    
    
    
    
    
    (in years)
    
    
    (in thousands)Outstanding at December 31, 2008
    
    
    11,406
    
    
    $
    25.10Granted
    
    
    53
    
    
    
    13.32Exercised
    
    
    (1
    )
    
    
    1.00Forfeited or Expired
    
    
    (877
    )
    
    
    25.96Outstanding at July 5, 2009
    
    
    10,581
    
    
    $
    25.01
    
    
    
    5.8
    
    
    $
    615Exercisable at July 5, 2009
    
    
    7,677
    
    
    $
    26.34
    
    
    
    4.8
    
    
    $
    588
  11




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 11: Stock-Based Compensation Expense (continued)
   Three-months Ended
    
    Six-months EndedJuly 5,
    
    June 29,
    
    July 5,
    
    June 29,2009
    
    2008
    
    2009
    
    2008Risk-free rate
    
    
    3.2
    %
    
    
    3.8
    %
    
    
    3.2
    %
    
    
    3.9
    %Expected dividend yield
    
    
    1.5
    %
    
    
    1.3
    %
    
    
    1.5
    %
    
    
    1.7
    %Expected volatility
    
    
    43
    %
    
    
    42
    %
    
    
    43
    %
    
    
    42
    %Expected term (in years)
    
    
    4.4
    
    
    
    6.5
    
    
    
    4.4
    
    
    
    6.0
 Risk-free rate
  Expected dividend yield
  Expected volatility
  Expected term
     12




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 11: Stock-Based Compensation Expense (continued)
      Three-months Ended
    
    
    Six-months EndedJuly 5,
    
    
    June 29,
    
    
    July 5,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008Product cost of revenue
    
    $
    90
    
    
    $
    145
    
    
    $
    279
    
    
    $
    315Service cost of revenue
    
    
    32
    
    
    
    127
    
    
    
    114
    
    
    
    315Research, development, and engineering
    
    
    391
    
    
    
    728
    
    
    
    967
    
    
    
    1,593Selling, general, and administrative
    
    
    1,276
    
    
    
    1,523
    
    
    
    2,284
    
    
    
    2,173$
    1,789
    
    
    $
    2,523
    
    
    $
    3,644
    
    
    $
    4,396
  NOTE 12: Stock Repurchase Program
  13




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 13: Taxes
  Three-months Ended
    
    Six-months EndedJuly 5,
    
    June 29,
    
    July 5,
    
    June 29,2009
    
    2008
    
    2009
    
    2008Income tax at federal statutory rate
    
    
    (35
    %)
    
    
    35
    %
    
    
    (35
    %)
    
    
    35
    %State income taxes, net of federal benefit
    
    
    (1
    )
    
    
    3
    
    
    
    (1
    )
    
    
    3Tax-exempt investment income
    
    
    (3
    )
    
    
    (4
    )
    
    
    (3
    )
    
    
    (4
    )Foreign tax rate differential
    
    
    20
    
    
    
    (11
    )
    
    
    20
    
    
    
    (11
    )Tax credit
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Cumulative effect of rate change
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    1Discrete tax events
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Other
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    1Income tax provision (benefit)
    
    
    (18
    %)
    
    
    26
    %
    
    
    (18
    %)
    
    
    26
    %
      14




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 13: Taxes (continued)
  NOTE 14: Restructuring Charges
 November 2008
   Incurred in
    
    
    Incurred in
    
    
    CumulativeTotal Amount
    
    
    the Three-
    
    
    the Six-
    
    
    Amount IncurredExpected to be
    
    
    months Ended
    
    
    months Ended
    
    
    throughIncurred
    
    
    July 5, 2009
    
    
    July 5, 2009
    
    
    July 5, 2009One-time termination benefits
    
    $
    615
    
    
    $
    128
    
    
    $
    338
    
    
    $
    592Contract termination costs
    
    
    374
    
    
    
    374
    
    
    
    374
    
    
    
    374Other associated costs
    
    
    311
    
    
    
    170
    
    
    
    257
    
    
    
    261$
    1,300
    
    
    $
    672
    
    
    $
    969
    
    
    $
    1,227
   15




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14: Restructuring Charges (continued)
 One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    207
    
    
    $
    
    
    
    $
    
    
    
    $
    207Restructuring charges
    
    
    388
    
    
    
    374
    
    
    
    257
    
    
    
    1,019Cash payments
    
    
    (400
    )
    
    
    (108
    )
    
    
    (216
    )
    
    
    (724
    )Restructuring adjustments
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Balance as of July 5, 2009
    
    $
    145
    
    
    $
    266
    
    
    $
    41
    
    
    $
    452
  April 2009
   Incurred in theTotal Amount
    
    
    Three-monthsExpected to be
    
    
    EndedIncurred
    
    
    July 5, 2009One-time termination benefits
    
    $
    2,827
    
    
    $
    2,793Contract termination costs
    
    
    183
    
    
    
    183Other associated costs
    
    
    90
    
    
    
    90$
    3,100
    
    
    $
    3,066
   16




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14: Restructuring Charges (continued)
 One-time
    
    
    Contract
    
    
    OtherTermination
    
    
    Termination
    
    
    AssociatedBenefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,793
    
    
    
    183
    
    
    
    90
    
    
    
    3,066Cash payments
    
    
    (1,770
    )
    
    
    (78
    )
    
    
    (47
    )
    
    
    (1,895
    )Restructuring adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of July 5, 2009
    
    $
    1,023
    
    
    $
    105
    
    
    $
    43
    
    
    $
    1,171
 NOTE 15: Weighted-Average Shares
  Three-months Ended
    
    Six-months EndedJuly 5,
    
    June 29,
    
    July 5,
    
    June 29,2009
    
    2008
    
    2009
    
    2008Basic weighted-average common
shares outstanding
    
    
    39,656
    
    
    
    41,942
    
    
    
    39,656
    
    
    
    42,459Effect of dilutive stock options
    
    
    
    
    
    
    646
    
    
    
    
    
    
    
    283Diluted weighted-average common
and common-equivalent shares
outstanding
    
    
    39,656
    
    
    
    42,588
    
    
    
    39,656
    
    
    
    42,742
  NOTE 16: Segment Information
    Three-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingJuly 5, 2009
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    29,863
    
    
    $
    6,765
    
    
    $
    
    
    
    $
    36,628Service revenue
    
    
    1,287
    
    
    
    3,053
    
    
    
    
    
    
    
    4,340Operating income (loss)
    
    
    (5,029
    )
    
    
    1,082
    
    
    
    (3,907
    )
    
    
    (7,854
    )
 17




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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 16: Segment Information (continued)
 Six-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingJuly 5, 2009
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    63,620
    
    
    $
    11,136
    
    
    $
    
    
    
    $
    74,756Service revenue
    
    
    2,807
    
    
    
    5,692
    
    
    
    
    
    
    
    8,499Operating income (loss)
    
    
    (6,375
    )
    
    
    608
    
    
    
    (8,537
    )
    
    
    (14,304
    )
 Three-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingJune 29, 2008
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    55,456
    
    
    $
    7,000
    
    
    $
    
    
    
    $
    62,456Service revenue
    
    
    2,222
    
    
    
    2,411
    
    
    
    
    
    
    
    4,633Operating income
    
    
    14,635
    
    
    
    1,355
    
    
    
    (5,264
    )
    
    
    10,726
 Six-months Ended
    
    
    
    
    
    
    
    
    
    ReconcilingJune 29, 2008
    
    MVSD
    
    SISD
    
    Items
    
    ConsolidatedProduct revenue
    
    $
    106,646
    
    
    $
    10,753
    
    
    $
    
    
    
    $
    117,399Service revenue
    
    
    5,276
    
    
    
    4,927
    
    
    
    
    
    
    
    10,203Operating income
    
    
    28,033
    
    
    
    1,322
    
    
    
    (10,626
    )
    
    
    18,729
  NOTE 17: Loss from Operations of a Discontinued Business
    18




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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 18: Dividends
   
 ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  Executive Overview
   
    
    Discrete factory automation customers purchase Cognex vision products and incorporate
them into their manufacturing processes. Virtually every manufacturer can achieve better
quality and manufacturing efficiency by using machine vision, and therefore, this segment
includes a broad base of customers across a variety of industries, including automotive,
consumer electronics, food and beverage, health and beauty, medical devices, packaging, and
pharmaceutical. Sales to discrete factory automation customers represented approximately
70% and 74% of total revenue for the three-month and six-month periods in 2009,
respectively.
    
    Semiconductor and electronics capital equipment manufacturers purchase Cognex vision
products and integrate them into the automation equipment that they manufacture and then
sell to their customers to either make semiconductor chips or assemble printed circuit
boards. Demand from these capital equipment manufacturers has historically been highly
cyclical, with periods of investment followed by downturn. This market has been in a
prolonged downturn since early 2006.
 19




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##### Table of Contents



Sales to semiconductor and electronics capital equipment manufacturers represented
approximately 6% of total revenue in both the three-month and six-month periods in 2009.
    
    Surface inspection customers are manufacturers of materials processed in a continuous
fashion, such as metals, paper, non-wovens, plastics, and glass. These customers need
sophisticated machine vision to detect and classify defects on the surfaces of those
materials as they are being processed at high speeds. Surface inspection sales represented
approximately 24% and 20% of total revenue for the three-month and six-month periods in
2009, respectively.
   Results of Operations
 Revenue
  Discrete Factory Automation Market
  Semiconductor and Electronics Capital Equipment Market
  20




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##### Table of Contents



Surface Inspection Market
  Product Revenue
  Service Revenue
  Gross Margin
  MVSD Margin
  21




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##### Table of Contents



SISD Margin
  Product Margin
  Service Margin
  Operating Expenses
 Research, Development, and Engineering Expenses
     Selling, General, and Administrative Expenses
  22




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##### Table of Contents



Restructuring Charges
 November 2008
   23




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##### Table of Contents



Total Amount
    
    
    Incurred in
    
    
    Incurred in
    
    
    Cumulative AmountExpected to be
    
    
    the Three-months
    
    
    the Six-months
    
    
    Incurred throughIncurred
    
    
    Ended July 5, 2009
    
    
    Ended July 5, 2009
    
    
    July 5, 2009One-time termination benefits
    
    $
    615
    
    
    $
    128
    
    
    $
    338
    
    
    $
    592Contract termination costs
    
    
    374
    
    
    
    374
    
    
    
    374
    
    
    
    374Other associated costs
    
    
    311
    
    
    
    170
    
    
    
    257
    
    
    
    261$
    1,300
    
    
    $
    672
    
    
    $
    969
    
    
    $
    1,227
   One-timeTermination
    
    
    Contract
    
    
    Other AssociatedBenefits
    
    
    Termination Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    207
    
    
    $
    
    
    
    $
    
    
    
    $
    207Restructuring charges
    
    
    388
    
    
    
    374
    
    
    
    257
    
    
    
    1,019Cash payments
    
    
    (400
    )
    
    
    (108
    )
    
    
    (216
    )
    
    
    (724
    )Restructuring adjustments
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Balance as of July 5, 2009
    
    $
    145
    
    
    $
    266
    
    
    $
    41
    
    
    $
    452
  April 2009
   24




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##### Table of Contents



Total Amount
    
    
    Incurred in theExpected to be
    
    
    Three-months EndedIncurred
    
    
    July 5, 2009One-time termination benefits
    
    $
    2,827
    
    
    $
    2,793Contract termination costs
    
    
    183
    
    
    
    183Other associated costs
    
    
    90
    
    
    
    90$
    3,100
    
    
    $
    3,066
   One-timeTermination
    
    
    Contract
    
    
    Other AssociatedBenefits
    
    
    Termination Costs
    
    
    Costs
    
    
    TotalBalance as of December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,793
    
    
    
    183
    
    
    
    90
    
    
    
    3,066Cash payments
    
    
    (1,770
    )
    
    
    (78
    )
    
    
    (47
    )
    
    
    (1,895
    )Restructuring adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of July 5, 2009
    
    $
    1,023
    
    
    $
    105
    
    
    $
    43
    
    
    $
    1,171
 Nonoperating Income (Expense)
    Income Tax Expense (Benefit) on Continuing Operations
  25




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Liquidity and Capital Resources
         26




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##### Table of Contents



New Pronouncements
 FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162
  
 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4: CONTROLS AND PROCEDURES
  27




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##### Table of Contents



PART II: OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
    
 ITEM 1A. RISK FACTORS
 The Companys restructuring programs may result in disruption to our business and may
negatively impact our operating results.
   28




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number of
    
    Approximate DollarShares Purchased as
    
    Value of SharesPart of Publicly
    
    that May Yet BeTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    Purchased Under theShares Purchased
    
    per Share
    
    Programs (1)
    
    Plans or ProgramsApril 6  May 3, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000May 4  May 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000June 1  July 5, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000,000
 
 (1)
    

    In April 2008, the Companys Board of Directors authorized the
repurchase of up to an additional $50,000,000 of the Companys common stock.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
      
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
     
 *
    
    Filed herewith**
    
    Furnished herewith 29




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##### Table of Contents



SIGNATURES
  DATE:  August 5, 2009
    COGNEX CORPORATIONBy:
    /s/ Robert J. ShillmanRobert J. ShillmanChief Executive Officer, President, and Chairman
of the Board of Directors
(duly authorized officer, principal executive officer)By:
    /s/ Richard A. MorinRichard A. MorinExecutive Vice President of Finance and Administration,
Chief Financial Officer, and Treasurer
(duly authorized officer, principal financial and accounting
officer) 30