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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

(Mark One)

[X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 29, 2003 or

[  ]  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 0-17869

COGNEX CORPORATION

(Exact name of registrant as specified in its charter)


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


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 |  | [X] |  | No |  | [  ]

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

|    |  |     |  |    |  |     
|--- |  | --- |  | -- |  | ----
|Yes |  | [X] |  | No |  | [  ]

As of July 27, 2003, there were 43,232,416 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                                      
|EX-31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|EX-31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER
|EX-32.1 CERTIFICATION TO SECTION 906 (CEO)      
|EX-32.2 CERTIFICATION TO SECT. 906 (CFO)        



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INDEX

|        |  |                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------
|PART I  |  | FINANCIAL INFORMATION                                                                                                
|Item 1. |  | Financial Statements                                                                                                 
|        |  | Consolidated Statements of Operations for the three-month and
six-month periods ended June 29, 2003 and June 30, 2002
|        |  | Consolidated Balance Sheets at June 29, 2003 and December 31, 2002                                                   
|        |  | Consolidated Statement of Stockholders Equity for the six-month
period ended June 29, 2003                          
|        |  | Consolidated Condensed Statements of Cash Flows for the six-month
periods ended June 29, 2003 and June 30, 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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PART I: FINANCIAL INFORMATION







ITEM 1: FINANCIAL STATEMENTS

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

|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|----------------------------------------------------------------- | ------- | - | ------------------ | ------ | ---------------- | - | -------- | ------ | -------- | - | ------ | ------ |  | - | ------- | ------ | -
|                                                                  |         |   | Three Months Ended |        | Six Months Ended
|                                                                  |         |   | June 29,           |        | June 30,         |   | June 29, |        | June 30,
|                                                                  |         |   | 2003               |        | 2002             |   | 2003     |        | 2002    
|                                                                  |         |   |                    |        |                  |   |          |        |         
|                                                                  |         |   | (unaudited)        |        | (unaudited)     
|Revenue                                                           |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |       
|                                                                  | Product |   | $                  | 31,391 |                  |   | $        | 22,406 |          |   | $      | 59,639 |  |   | $       | 39,662 |  
|                                                                  | Service |   |                    | 5,231  |                  |   |          | 4,265  |          |   |        | 9,871  |  |   |         | 8,789  |  
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|                                                                  |         |   | 36,622             |        |                  |   | 26,671   |        |          |   | 69,510 |        |  |   | 48,451  |       
|Cost of revenue                                                   |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |       
|                                                                  | Product |   |                    | 8,995  |                  |   |          | 6,282  |          |   |        | 17,865 |  |   |         | 12,111 |  
|                                                                  | Service |   |                    | 3,004  |                  |   |          | 2,946  |          |   |        | 5,850  |  |   |         | 5,682  |  
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|                                                                  |         |   | 11,999             |        |                  |   | 9,228    |        |          |   | 23,715 |        |  |   | 17,793  |       
|Gross margin                                                      |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |       
|                                                                  | Product |   |                    | 22,396 |                  |   |          | 16,124 |          |   |        | 41,774 |  |   |         | 27,551 |  
|                                                                  | Service |   |                    | 2,227  |                  |   |          | 1,319  |          |   |        | 4,021  |  |   |         | 3,107  |  
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|                                                                  |         |   | 24,623             |        |                  |   | 17,443   |        |          |   | 45,795 |        |  |   | 30,658  |       
|Research, development, and engineering expenses                   |         |   | 6,263              |        |                  |   | 6,498    |        |          |   | 12,246 |        |  |   | 12,850  |       
|Selling, general, and administrative expenses                     |         |   | 13,949             |        |                  |   | 14,704   |        |          |   | 27,193 |        |  |   | 27,422  |       
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|Operating income (loss)                                           |         |   | 4,411              |        |                  |   | (3,759   | )      |          |   | 6,356  |        |  |   | (9,614  | )     
|Foreign currency gain (loss)                                      |         |   | (1,164             | )      |                  |   | 471      |        |          |   | (1,791 | )      |  |   | 164     |       
|Investment and other income (loss)                                |         |   | 1,615              |        |                  |   | (3,963   | )      |          |   | 2,909  |        |  |   | (1,402  | )     
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|Income (loss) before provision (benefit) for income taxes         |         |   | 4,862              |        |                  |   | (7,251   | )      |          |   | 7,474  |        |  |   | (10,852 | )     
|Income tax provision (benefit)                                    |         |   | 1,556              |        |                  |   | (2,539   | )      |          |   | 2,375  |        |  |   | (3,620  | )     
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|Net income (loss)                                                 |         | $ | 3,306              |        |                  | $ | (4,712   | )      |          | $ | 5,099  |        |  | $ | (7,232  | )     
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|Net income (loss) per common and
common-equivalent share:         |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |       
|                                                                  | Basic   |   | $                  | .08    |                  |   | $        | (.11   | )        |   | $      | .12    |  |   | $       | (.16   | )
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|                                                                  | Diluted |   | $                  | .08    |                  |   | $        | (.11   | )        |   | $      | .12    |  |   | $       | (.16   | )
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|Weighted-average common and common-equivalent shares
outstanding: |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |       
|                                                                  | Basic   |   |                    | 42,749 |                  |   |          | 44,172 |          |   |        | 42,736 |  |   |         | 44,072 |  
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  
|                                                                  | Diluted |   |                    | 43,678 |                  |   |          | 44,172 |          |   |        | 43,640 |  |   |         | 44,072 |  
|                                                                  |         |   |                    |        |                  |   |          |        |          |   |        |        |  |   |         |        |  

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

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COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                     |                                                                                        |                                                                                             |         |             |         |              |         |         |         | 
|------------------------------------ | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                        |                                                                                             |         | June 29,    |         | December 31,
|                                     |                                                                                        |                                                                                             |         | 2003        |         | 2002        
|                                     |                                                                                        |                                                                                             |         |             |         |             
|                                     |                                                                                        |                                                                                             |         | (unaudited) |         |              |         |        
|ASSETS                               |                                                                                        |                                                                                             |         |             |         |              |         |        
|Current assets:                      |                                                                                        |                                                                                             |         |             |         |              |         |        
|                                     | Cash and cash equivalents                                                              |                                                                                             | $       | 51,442      |         |              | $       | 60,864  |        
|                                     | Short-term investments                                                                 |                                                                                             |         | 61,709      |         |              |         | 75,769  |        
|                                     | Accounts receivable, less reserves of
$2,261 and $2,207 in 2003 and 2002,
respectively |                                                                                             |         | 25,846      |         |              |         | 18,981  |        
|                                     | Inventories                                                                            |                                                                                             |         | 16,598      |         |              |         | 18,952  |        
|                                     | Deferred income taxes                                                                  |                                                                                             |         | 9,875       |         |              |         | 9,969   |        
|                                     | Prepaid expenses and other current assets                                              |                                                                                             |         | 11,319      |         |              |         | 9,256   |        
|                                     |                                                                                        |                                                                                             |         |             |         |              |         |         |        
|                                     |                                                                                        | Total current assets                                                                        |         |             | 176,789 |              |         |         | 193,791 | 
|Long-term investments                |                                                                                        |                                                                                             | 167,200 |             |         |              | 139,352 |        
|Property, plant, and equipment, net  |                                                                                        |                                                                                             | 25,862  |             |         |              | 27,405  |        
|Deferred income taxes                |                                                                                        |                                                                                             | 16,756  |             |         |              | 16,608  |        
|Intangible assets, net               |                                                                                        |                                                                                             | 5,780   |             |         |              | 919     |        
|Goodwill, net                        |                                                                                        |                                                                                             | 5,360   |             |         |              | 3,742   |        
|Other assets                         |                                                                                        |                                                                                             | 3,668   |             |         |              | 3,686   |        
|                                     |                                                                                        |                                                                                             |         |             |         |              |         |         |        
|                                     |                                                                                        | $                                                                                           | 401,415 |             |         | $            | 385,503 |        
|                                     |                                                                                        |                                                                                             |         |             |         |              |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                        |                                                                                             |         |             |         |              |         |        
|Current liabilities:                 |                                                                                        |                                                                                             |         |             |         |              |         |        
|                                     | Accounts payable                                                                       |                                                                                             | $       | 3,393       |         |              | $       | 3,496   |        
|                                     | Accrued expenses                                                                       |                                                                                             |         | 24,840      |         |              |         | 19,972  |        
|                                     | Customer deposits                                                                      |                                                                                             |         | 4,911       |         |              |         | 3,659   |        
|                                     | Deferred revenue                                                                       |                                                                                             |         | 6,088       |         |              |         | 3,856   |        
|                                     |                                                                                        |                                                                                             |         |             |         |              |         |         |        
|                                     |                                                                                        | Total current liabilities                                                                   |         |             | 39,232  |              |         |         | 30,983  | 
|Commitments (Notes 3, 7, 8, and 9)   |                                                                                        |                                                                                             |         |             |         |              |         |        
|Stockholders equity:                |                                                                                        |                                                                                             |         |             |         |              |         |        
|                                     | Common
stock, $.002 par value                                                         |                                                                                             |         |             |         |              |         |         |        
|                                     |                                                                                        | Authorized: 140,000 shares, issued: 47,210 and 46,877 shares in 2003
and 2002, respectively |         |             | 94      |              |         |         | 94      | 
|                                     | Additional paid-in capital                                                             |                                                                                             |         | 189,995     |         |              |         | 184,595 |        
|                                     | Treasury stock, at cost, 4,249 shares                                                  |                                                                                             |         | (72,306     | )       |              |         | (72,311 | )      
|                                     | Retained earnings                                                                      |                                                                                             |         | 253,109     |         |              |         | 248,010 |        
|                                     | Accumulated other comprehensive loss                                                   |                                                                                             |         | (8,709      | )       |              |         | (5,868  | )      
|                                     |                                                                                        |                                                                                             |         |             |         |              |         |         |        
|                                     |                                                                                        | Total stockholders equity                                                                  |         |             | 362,183 |              |         |         | 354,520 | 
|                                     |                                                                                        |                                                                                             |         |             |         |              |         |        
|                                     |                                                                                        | $                                                                                           | 401,415 |             |         | $            | 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)



|                                     |                                                                       |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         |  |       | 
|------------------------------------ | --------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------ | ------------ |  | ---------- | ------- | -------------- |  | ------ | ------- | ----- | -------- | -------- | ----- | - |  | - | ------- | - |  | - | ------- |  | ----- | 
|                                     |                                                                       |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         | 
|                                     |                                                                       |                                                                                                |        | Common Stock |  | Additional |         | Treasury Stock |  |       
|                                     |                                                                       |                                                                                                |        |              |  |            | Paid-in |                |  |        |         |       | Retained |         
|                                     |                                                                       |                                                                                                |        | Shares       |  | Par Value  |         | Capital        |  | Shares |         | Cost  |          | Earnings
|                                     |                                                                       |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |         
|Balance at December 31, 2002         |                                                                       |                                                                                                | 46,877 |              |  | $          | 94      |                |  | $      | 184,595 |       |          |          | 4,249 |   |  | $ | (72,311 | ) |  | $ | 248,010 | 
|                                     | Issuance of stock under stock option, stock
purchase, and other plans |                                                                                                |        | 333          |  |            |         |               |  |        |         | 4,488 |          |          |       |  |  |   |         | 5 |  |   |         |  |      
|                                     | Tax benefit from exercise of stock options                            |                                                                                                |        |              |  |            |         |                |  |        |         | 912   |          |          |       |   |  |   |         |   |  |   |         |  |      
|                                     | Comprehensive income:                                                 |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         |  |      
|                                     |                                                                       | Net income                                                                                     |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         |  | 5,099 | 
|                                     |                                                                       | Losses on foreign intercompany loans,
net of gains on cross currency swaps,
net of tax of $259 |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         |  |       | 
|                                     |                                                                       | Foreign currency translation adjustment                                                        |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         |  |       | 
|                                     |                                                                       |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         | 
|                                     |                                                                       | Comprehensive income                                                                           |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         |  |       | 
|                                     |                                                                       |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         | 
|Balance at June 29, 2003 (unaudited) |                                                                       |                                                                                                | 47,210 |              |  | $          | 94      |                |  | $      | 189,995 |       |          |          | 4,249 |   |  | $ | (72,306 | ) |  | $ | 253,109 | 
|                                     |                                                                       |                                                                                                |        |              |  |            |         |                |  |        |         |       |          |          |       |   |  |   |         |   |  |   |         | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                     |                                                                       |                                                                                                |        |               |        |               |  |               |        |       |         |       |        |  
|------------------------------------ | --------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------ | ------------- | ------ | ------------- |  | ------------- | ------ | ----- | ------- | ----- | ------ | -
|                                     |                                                                       |                                                                                                |        | Accumulated   |        |               |  |               |        |       |         |      
|                                     |                                                                       |                                                                                                |        | Other         |        |               |  |               |        | Total
|                                     |                                                                       |                                                                                                |        | Comprehensive |        | Comprehensive |  | Stockholders
|                                     |                                                                       |                                                                                                |        | Loss          |        | Income        |  | Equity       
|                                     |                                                                       |                                                                                                |        |               |        |               |  |              
|Balance at December 31, 2002         |                                                                       | $                                                                                              | (5,868 | )             |        |               |  |               |        | $     | 354,520 |      
|                                     | Issuance of stock under stock option, stock
purchase, and other plans |                                                                                                |        |               |        |               |  |               |        |       |         | 4,493 |       
|                                     | Tax benefit from exercise of stock options                            |                                                                                                |        |               |        |               |  |               |        |       |         | 912   |       
|                                     | Comprehensive income:                                                 |                                                                                                |        |               |        |               |  |               |        |       |         |       |       
|                                     |                                                                       | Net income                                                                                     |        |               |        |               |  | $             | 5,099  |       |         |       | 5,099  |  
|                                     |                                                                       | Losses on foreign intercompany loans,
net of gains on cross currency swaps,
net of tax of $259 |        |               | (440   | )             |  |               | (440   | )     |         |       | (440   | )
|                                     |                                                                       | Foreign currency translation adjustment                                                        |        |               | (2,401 | )             |  |               | (2,401 | )     |         |       | (2,401 | )
|                                     |                                                                       |                                                                                                |        |               |        |               |  |               |        |       |         |      
|                                     |                                                                       | Comprehensive income                                                                           |        |               |        |               |  | $             | 2,258  |       |         |       |        |  
|                                     |                                                                       |                                                                                                |        |               |        |               |  |               |        |       |         |      
|Balance at June 29, 2003 (unaudited) |                                                                       | $                                                                                              | (8,709 | )             |        |               |  |               |        | $     | 362,183 |      
|                                     |                                                                       |                                                                                                |        |               |        |               |  |               |        |       |         |      

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)

|                                                     |                                                                                          |                                                  |        |                  |        |          |        |         |        |  
|---------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | ---------------- | ------ | -------- | ------ | ------- | ------ | -
|                                                     |                                                                                          |                                                  |        | Six Months Ended
|                                                     |                                                                                          |                                                  |        | June 29,         |        | June 30,
|                                                     |                                                                                          |                                                  |        | 2003             |        | 2002    
|                                                     |                                                                                          |                                                  |        |                  |        |         
|                                                     |                                                                                          |                                                  |        | (unaudited)     
|Cash flows from operating activities:                |                                                                                          |                                                  |        |                  |        |          |        |        
|                                                     | Net income (loss)                                                                        |                                                  | $      | 5,099            |        |          | $      | (7,232  | )     
|                                                     | Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |                                                  |        |                  |        |          |        |         |       
|                                                     |                                                                                          | Depreciation and amortization                    |        |                  | 5,057  |          |        |         | 4,738  |  
|                                                     |                                                                                          | Tax benefit from exercise of stock options       |        |                  | 912    |          |        |         | 1,536  |  
|                                                     |                                                                                          | Loss on sale of equity securities                |        |                  |       |          |        |         | 6,184  |  
|                                                     |                                                                                          | Deferred income tax benefit (expense)            |        |                  | 233    |          |        |         | (1,591 | )
|                                                     |                                                                                          | Change in current assets and current liabilities |        |                  | (1,182 | )        |        |         | (1,755 | )
|                                                     |                                                                                          | Other                                            |        |                  | 530    |          |        |         | 535    |  
|                                                     |                                                                                          |                                                  |        |                  |        |          |        |         |       
|                                                     | Net cash provided by operating activities                                                |                                                  |        | 10,649           |        |          |        | 2,415   |       
|Cash flows from investing activities:                |                                                                                          |                                                  |        |                  |        |          |        |        
|                                                     | Purchase of investments                                                                  |                                                  |        | (104,313         | )      |          |        | (44,615 | )     
|                                                     | Maturity and sale of investments                                                         |                                                  |        | 88,237           |        |          |        | 46,594  |       
|                                                     | Purchase of property, plant, and equipment                                               |                                                  |        | (1,140           | )      |          |        | (1,331  | )     
|                                                     | Cash paid for business acquisitions                                                      |                                                  |        | (7,630           | )      |          |        | (349    | )     
|                                                     |                                                                                          |                                                  |        |                  |        |          |        |         |       
|                                                     | Net cash provided by (used in) investing activities                                      |                                                  |        | (24,846          | )      |          |        | 299     |       
|Cash flows from financing activities:                |                                                                                          |                                                  |        |                  |        |          |        |        
|                                                     | Issuance of stock under stock option, stock
purchase, and other plans                    |                                                  |        | 4,493            |        |          |        | 2,869   |       
|                                                     |                                                                                          |                                                  |        |                  |        |          |        |         |       
|                                                     | Net cash provided by financing activities                                                |                                                  |        | 4,493            |        |          |        | 2,869   |       
|Effect of foreign exchange rate changes on cash      |                                                                                          |                                                  | 282    |                  |        |          | (3,160 | )      
|                                                     |                                                                                          |                                                  |        |                  |        |          |        |         |       
|Net increase (decrease) in cash and cash equivalents |                                                                                          |                                                  | (9,422 | )                |        |          | 2,423  |        
|Cash and cash equivalents at beginning of period     |                                                                                          |                                                  | 60,864 |                  |        |          | 31,660 |        
|                                                     |                                                                                          |                                                  |        |                  |        |          |        |         |       
|Cash and cash equivalents at end of period           |                                                                                          | $                                                | 51,442 |                  |        | $        | 34,083 |        
|                                                     |                                                                                          |                                                  |        |                  |        |          |        |        

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

4



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##### Table of Contents






COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: Summary of Significant Accounting Policies

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 June 29, 2003, and the
results of its operations for the three-month and six-month periods ended June
29, 2003 and June 30, 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 and six-month periods ended June 29, 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 |        | Six Months Ended
|                                                                                                |  | June 29,           |        | June 30,         |  | June 29, | June 30,
|                                                                                                |  | 2003               |        | 2002             |  | 2003     |          | 2002
|                                                                                                |  |                    |        |                  |  |          |          |     
|Net income (loss), as reported                                                                  |  | $                  | 3,306  |                  |  | $        | (4,712   | )    |  | $ | 5,099  |   |  | $ | (7,232  | )
|Less: Total stock-based compensation costs
determined under fair value based method, net of
tax |  |                    | (3,859 | )                |  |          | (4,895   | )    |  |   | (7,008 | ) |  |   | (9,870  | )
|                                                                                                |  |                    |        |                  |  |          |          |      |  |   |        |   |  |   |         |  
|Net loss, pro forma                                                                             |  | $                  | (553   | )                |  | $        | (9,607   | )    |  | $ | (1,909 | ) |  | $ | (17,102 | )
|                                                                                                |  |                    |        |                  |  |          |          |      |  |   |        |   |  |   |         |  
|Basic net income (loss) per share, as
reported                                                  |  | $                  | .08    |                  |  | $        | (.11     | )    |  | $ | .12    |   |  | $ | (.16    | )
|Basic net loss per share, pro
forma                                                             |  | $                  | (.01   | )                |  | $        | (.22     | )    |  | $ | (.04   | ) |  | $ | (.39    | )
|Diluted net income (loss) per share, as
reported                                                |  | $                  | .08    |                  |  | $        | (.11     | )    |  | $ | .12    |   |  | $ | (.16    | )
|Diluted net loss per share, pro
forma                                                           |  | $                  | (.01   | )                |  | $        | (.22     | )    |  | $ | (.04   | ) |  | $ | (.39    | )

5



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##### Table of Contents



COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: Summary of Significant Accounting Policies (continued)

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:

|                         |  |                    |      |                  |  |          |     |          |  |  |      |   |  |  |     |  
|------------------------ |  | ------------------ | ---- | ---------------- |  | -------- | --- | -------- |  |  | ---- | - |  |  | --- | -
|                         |  | Three Months Ended |      | Six Months Ended
|                         |  | June 29,           |      | June 30,         |  | June 29, |     | June 30,
|                         |  | 2003               |      | 2002             |  | 2003     |     | 2002    
|                         |  |                    |      |                  |  |          |     |         
|Risk-free interest rate  |  |                    | 2.0  | %                |  |          | 3.6 | %        |  |  | 2.0  | % |  |  | 3.5 | %
|Expected life (in years) |  |                    | 2.8  |                  |  |          | 3.3 |          |  |  | 2.8  |   |  |  | 2.8 |  
|Expected volatility      |  |                    | 58   | %                |  |          | 60  | %        |  |  | 58   | % |  |  | 60  | %
|Expected dividends       |  |                    | 1.09 | %                |  |          |    |          |  |  | 1.09 | % |  |  |    |  

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 does not believe the adoption of
EITF Issue No. 00-21 will have a material impact on its consolidated financial
statements.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities, to expand
upon and strengthen existing accounting guidance that addresses when a company
should include in its financial statements the assets, liabilities, and
activities of another entity. Previously, a company generally has included
other entities in its consolidated financial statements only if it controlled
the entity through voting interests. Interpretation No. 46 changes that
guidance by requiring variable interest entities, as defined, to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entitys activities or is entitled to
receive a majority of the entitys residual returns. Interpretation No. 46
also requires disclosure about variable interest entities that a company is not
required to consolidate, but in which it has a significant variable interest.
The consolidation requirements of Interpretation No. 46 apply immediately to
variable interest entities created after January 31, 2003 and to older entities
in the first fiscal year or interim period beginning after June 15, 2003.
Certain of the disclosure requirements apply in all financial statements issued
after January 31, 2003, regardless of when the variable interest entity was
established. The Company does not believe the adoption of Interpretation No.
46 will have a material impact on its consolidated financial statements.

On May 15, 2003, the FASB issued Statement of Financial Accounting Standard
(SFAS) No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 establishes
standards for classifying and measuring as liabilities certain financial
instruments that embody obligations of the issuer and have characteristics of
both liabilities and equity. SFAS No. 150 represents a significant change in
practice in the accounting for a number of financial instruments, including
mandatorily redeemable equity instruments and certain equity derivatives that
frequently are used in connection with share repurchase programs. The
provisions of SFAS No. 150 are effective for public companies for all financial
instruments created or modified after May 31, 2003, and to other instruments at
the beginning of the first interim period beginning after June 15, 2003. The
Company does not believe the adoption of SFAS No. 150 will have a material
impact on its consolidated financial statements.

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##### Table of Contents



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)

|                                  |                                 |   |          |         |              |   |         |         | 
|--------------------------------- | ------------------------------- | - | -------- | ------- | ------------ | - | ------- | ------- | 
|                                  |                                 |   | June 29, |         | December 31,
|                                  |                                 |   | 2003     |         | 2002        
|                                  |                                 |   |          |         |             
|Cash                              |                                 | $ | 44,002   |         |              | $ | 58,424  |        
|Municipal
obligations             |                                 |   | 7,440    |         |              |   | 2,440   |        
|                                  |                                 |   |          |         |              |   |         |        
|                                  | Total cash and cash
equivalents |   |          | 51,442  |              |   |         | 60,864  | 
|                                  |                                 |   |          |         |              |   |         |        
|Municipal
obligations             |                                 |   | 61,709   |         |              |   | 75,769  |        
|                                  |                                 |   |          |         |              |   |         |        
|                                  | Total short-term
investments    |   |          | 61,709  |              |   |         | 75,769  | 
|                                  |                                 |   |          |         |              |   |         |        
|Municipal
obligations             |                                 |   | 157,775  |         |              |   | 131,425 |        
|Investment in limited
partnership |                                 |   | 9,425    |         |              |   | 7,927   |        
|                                  |                                 |   |          |         |              |   |         |        
|                                  | Total long-term
investments     |   |          | 167,200 |              |   |         | 139,352 | 
|                                  |                                 |   |          |         |              |   |         |        
|                                  |                                 | $ | 280,351  |         |              | $ | 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
$12,375,000 and $10,375,000 had been contributed as of June 29, 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 six-month period ended June 29, 2003, the Company recorded $502,000
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)

|                |  |          |        |              |  |   |        | 
|--------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                |  | June 29, |        | December 31,
|                |  | 2003     |        | 2002        
|                |  |          |        |             
|Raw materials   |  | $        | 9,913  |              |  | $ | 12,530 | 
|Work-in-process |  |          | 4,783  |              |  |   | 4,068  | 
|Finished goods  |  |          | 1,902  |              |  |   | 2,354  | 
|                |  |          |        |              |  |   |        | 
|                |  | $        | 16,598 |              |  | $ | 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.

7



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##### Table of Contents



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):

|                                                     |  |               |        |                        |  |          |        |   |  |   |       | 
|---------------------------------------------------- |  | ------------- | ------ | ---------------------- |  | -------- | ------ | - |  | - | ----- | 
|                                                     |  | Balance Sheet |        | Statement ofOperations
|                                                     |  |               |        |                       
|                                                     |  |               |        |                        |  | Accrued  |        |  
|                                                     |  | Inventories   |        | 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                          |  |               | (878   | )                      |  |          |       |   |  | $ | 878   | 
|Inventory sold to brokers                            |  |               | (438   | )                      |  |          |       |   |  |   |      | 
|Write-off and scrap of inventory                     |  |               | (474   | )                      |  |          |       |   |  |   |      | 
|                                                     |  |               |        |                        |  |          |        |   |  |   |       | 
|Reserve balance at June 29, 2003                     |  | $             | 10,426 |                        |  | $        | 1,400  |   |  |   |       | 
|                                                     |  |               |        |                        |  |          |        |   |  |   |       | 
|Benefits to cost of product revenue recorded in 2003 |  |               |        |                        |  |          |        |   |  | $ | 878   | 
|                                                     |  |               |        |                        |  |          |        |   |  |   |       | 

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 June 29, 2003.

NOTE 5: Intangible Assets

Amortized intangible assets consist of the following (in thousands):

|                  |                                      |   |          |       |              |   |          |       |     |   |       |       | 
|----------------- | ------------------------------------ | - | -------- | ----- | ------------ | - | -------- | ----- | --- | - | ----- | ----- | 
|                  |                                      |   | Gross    |       |              |   |          |       | Net
|                  |                                      |   | Carrying |       | Accumulated  |   | Carrying
|                  |                                      |   | Amount   |       | Amortization |   | Amount  
|                  |                                      |   |          |       |              |   |         
|June 29, 2003     |                                      |   |          |       |              |   |          |       |     |   |       |      
|                  | Customer contracts and relationships |   | $        | 4,625 |              |   | $        | 145   |     |   | $     | 4,480 | 
|                  | Complete technology                  |   |          | 5,177 |              |   |          | 4,017 |     |   |       | 1,160 | 
|                  | Patents                              |   |          | 103   |              |   |          | 5     |     |   |       | 98    | 
|                  | Non-compete agreements               |   |          | 839   |              |   |          | 797   |     |   |       | 42    | 
|                  |                                      |   |          |       |              |   |          |       |     |   |       |       | 
|                  |                                      | $ | 10,744   |       |              | $ | 4,964    |       |     | $ | 5,780 |      
|                  |                                      |   |          |       |              |   |          |       |     |   |       |       | 
|December 31, 2002 |                                      |   |          |       |              |   |          |       |     |   |       |      
|                  | Complete technology                  |   | $        | 4,708 |              |   | $        | 3,789 |     |   | $     | 919   | 
|                  | Non-compete agreements               |   |          | 793   |              |   |          | 793   |     |   |       |      | 
|                  |                                      |   |          |       |              |   |          |       |     |   |       |       | 
|                  |                                      | $ | 5,501    |       |              | $ | 4,582    |       |     | $ | 919   |      
|                  |                                      |   |          |       |              |   |          |       |     |   |       |       | 

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5: Intangible Assets (continued)

Aggregate amortization expense for the three-month and six-month periods ended
June 29, 2003 was $280,000 and $382,000, respectively, and $138,000 and
$277,000 for the same periods in 2002.

Estimated amortization expense for each of the five succeeding fiscal years and
thereafter is as follows (in thousands):

|           |       |        |       |       | 
|---------- | ----- | ------ | ----- | ----- | 
|Year       |       | Amount
|           |       |       
|           | 2003  |        | $     | 939   | 
|           | 2004  |        |       | 1,116 | 
|           | 2005  |        |       | 810   | 
|           | 2006  |        |       | 696   | 
|           | 2007  |        |       | 693   | 
|Thereafter |       |        | 1,908 |      
|           |       |        |       |      
|           | Total |        | $     | 6,162 | 
|           |       |        |       |      

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 six-month period
ended June 29, 2003 are as follows (in thousands):

|                               |  |      |       |      |  |              |       |  |  |   |       | 
|------------------------------ |  | ---- | ----- | ---- |  | ------------ | ----- |  |  | - | ----- | 
|                               |  | MVSD |       | SISD |  | Consolidated
|                               |  |      |       |      |  |             
|Balance at December 31, 2002   |  | $    | 1,488 |      |  | $            | 2,254 |  |  | $ | 3,742 | 
|Business acquisition (Note 12) |  |      | 1,353 |      |  |              |      |  |  |   | 1,353 | 
|Foreign exchange rate changes  |  |      | 66    |      |  |              | 199   |  |  |   | 265   | 
|                               |  |      |       |      |  |              |       |  |  |   |       | 
|Balance at June 29, 2003       |  | $    | 2,907 |      |  | $            | 2,453 |  |  | $ | 5,360 | 
|                               |  |      |       |      |  |              |       |  |  |   |       | 

The Company evaluates the possible impairment of goodwill annually each fourth
quarter, and whenever events or circumstances indicate that 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. No events or circumstances have occurred during
2003 that would indicate an impairment of goodwill.

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 during the period |  |   | 775   |  
|Provisions related to pre-existing warranties      |  |   | 550   |  
|Fulfillment of warranty obligations                |  |   | (839  | )
|Foreign exchange rate changes                      |  |   | 83    |  
|                                                   |  |   |       |  
|Balance at June 29, 2003                           |  | $ | 2,092 |  
|                                                   |  |   |       |  

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 June 29, 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 June 29, 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
policies. As a result of this coverage, and 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 June 29, 2003.

10



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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9: Bank Guarantees

On May 27, 2003, the Company
provided bank guarantees totaling 3,051,000,000 Yen (or approximately $25,494,000 based upon the exchange rate at June 29,
2003) to taxing authorities in Japan. The Tokyo Regional Taxation Bureau
(TRTB) has asserted that Cognex Corporation has a permanent establishment in
Japan that would require certain income, previously reported on U.S. tax
returns for the years ended December 31, 1997 through December 31, 2001, to be
subject instead to taxation in Japan. The Company disagrees with this position
and believes that this assertion is inconsistent with principles under the U.S.
 Japan income tax treaty. The Company has filed a notice of objection and
request for deferral of tax payment and intends to contest this assessment
vigorously, although no assurances can be made that the Company will prevail in
this matter. Until this matter is decided, the Company is required to provide
bank guarantees to collateralize these tax assessments. These guarantees
expire in approximately one year. Should the TRTB prevail in its assertion,
the income in question would be taxable in Japan and the Company would be
required to pay approximately $25,494,000 in taxes, interest, and penalties to
Japanese taxing authorities. The Company would then be entitled to recoup the
majority of this amount from taxing authorities in the U.S.

NOTE 10: Net Income (Loss) Per Share

Net income (loss) per share is calculated as follows:

|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |        |  
|---------------------------------------- | ---------------------------------------------------------------- | ---- | ------------------ | ------ | ---------------- | ---- | -------- | ------ | -------- | - | ----- | ------ |  | - | ------ | ------ | -
|                                         |                                                                  |      | Three Months Ended |        | Six Months Ended
|                                         |                                                                  |      | June 29,           |        | June 30,         |      | June 29, |        | June 30,
|(In thousands, except per share amounts) |                                                                  | 2003 |                    | 2002   |                  | 2003 |          | 2002  
|                                         |                                                                  |      |                    |        |                  |      |          |       
|Net income (loss)                        |                                                                  | $    | 3,306              |        |                  | $    | (4,712   | )      |          | $ | 5,099 |        |  | $ | (7,232 | )     
|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|Basic:                                   |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|                                         | Weighted-average common shares
outstanding                       |      |                    | 42,749 |                  |      |          | 44,172 |          |   |       | 42,736 |  |   |        | 44,072 |  
|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|                                         | Net income (loss) per common share                               |      | $                  | .08    |                  |      | $        | (.11   | )        |   | $     | .12    |  |   | $      | (.16   | )
|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|Diluted:                                 |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|                                         | Weighted-average common shares
outstanding                       |      |                    | 42,749 |                  |      |          | 44,172 |          |   |       | 42,736 |  |   |        | 44,072 |  
|                                         | Effect of dilutive stock options                                 |      |                    | 929    |                  |      |          |       |          |   |       | 904    |  |   |        |       |  
|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|                                         | Weighted-average common and
common-equivalent shares outstanding |      |                    | 43,678 |                  |      |          | 44,172 |          |   |       | 43,640 |  |   |        | 44,072 |  
|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       
|                                         | Net income (loss) per common and
common-equivalent share         |      | $                  | .08    |                  |      | $        | (.11   | )        |   | $     | .12    |  |   | $      | (.16   | )
|                                         |                                                                  |      |                    |        |                  |      |          |        |          |   |       |        |  |   |        |       

Stock options to purchase 4,617,831 and 4,612,832 shares of common stock were
outstanding for the three-month and six-month periods ended June 29, 2003,
respectively, and 4,011,987 and 3,221,247 for the same periods in 2002, 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 1,391,124 and 1,452,142 shares of common stock were not
included in the calculation of diluted net loss per share for the three-month
and six-month periods ended June 30, 2002, respectively, because they were
antidilutive.

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11: 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 |        |   |  |  
|                                 |                         |  | MVSD |        | SISD |  | Items |        | Consolidated
|                                 |                         |  |      |        |      |  |       |        |             
|Three Months Ended June 29, 2003 |                         |  |      |        |      |  |       |        |              |  |             |        |   |  |   |       
|                                 | Product revenue         |  | $    | 25,624 |      |  | $     | 5,767  |              |  | $           |       |   |  | $ | 31,391 |  
|                                 | Service revenue         |  |      | 3,559  |      |  |       | 1,672  |              |  |             |       |   |  |   | 5,231  |  
|                                 | Operating income        |  |      | 4,140  |      |  |       | 1,177  |              |  |             | (906   | ) |  |   | 4,411  |  
|Six Months Ended
June 29, 2003   |                         |  |      |        |      |  |       |        |              |  |             |        |   |  |   |       
|                                 | Product revenue         |  | $    | 49,152 |      |  | $     | 10,487 |              |  | $           |       |   |  | $ | 59,639 |  
|                                 | Service revenue         |  |      | 6,660  |      |  |       | 3,211  |              |  |             |       |   |  |   | 9,871  |  
|                                 | Operating income        |  |      | 7,188  |      |  |       | 1,691  |              |  |             | (2,523 | ) |  |   | 6,356  |  
|Three Months Ended
June 30, 2002 |                         |  |      |        |      |  |       |        |              |  |             |        |   |  |   |       
|                                 | Product revenue         |  | $    | 17,424 |      |  | $     | 4,982  |              |  | $           |       |   |  | $ | 22,406 |  
|                                 | Service revenue         |  |      | 2,912  |      |  |       | 1,353  |              |  |             |       |   |  |   | 4,265  |  
|                                 | Operating income (loss) |  |      | (2,503 | )    |  |       | 724    |              |  |             | (1,980 | ) |  |   | (3,759 | )
|Six Months Ended
June 30, 2002   |                         |  |      |        |      |  |       |        |              |  |             |        |   |  |   |       
|                                 | Product revenue         |  | $    | 31,415 |      |  | $     | 8,247  |              |  | $           |       |   |  | $ | 39,662 |  
|                                 | Service revenue         |  |      | 5,983  |      |  |       | 2,806  |              |  |             |       |   |  |   | 8,789  |  
|                                 | Operating income (loss) |  |      | (5,974 | )    |  |       | 622    |              |  |             | (4,262 | ) |  |   | (9,614 | )

Reconciling items include benefits 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 12: Acquisition of Siemens Dematic AG Wafer Identification Business

On March 31, 2003, the Company acquired the wafer identification business of
Siemens Dematic AG, a subsidiary of Siemens AG. Siemens Dematic is a leading
supplier of logistics and factory automation equipment and has been a 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
substantially all of the assets related to its wafer identification business.
This acquisition enhances the Companys position as a leading

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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12: Acquisition of Siemens
Dematic AG Wafer Identification Business (continued)

provider of wafer identification systems worldwide. The results of operations
of the acquired business have been included in the Companys consolidated
results of operations since the date of the acquisition. The historical
results of operations of the acquired business were not material compared to
the consolidated results of operations, and therefore, pro forma results are
not presented.

The purchase price consisted of 7,000,000 Euros in cash (or $7,630,000) paid on
March 31, 2003, with the potential for an additional cash payment in 2005 of up
to 1,700,000 Euros (or approximately $1,943,000 based upon the exchange rate at
June 29, 2003) depending upon the achievement of certain performance criteria.
The contingent consideration will be recorded as purchase price when paid and
will be allocated to goodwill. 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. The Company is in the process of reviewing the
actual March 31, 2003 balance sheet and the cash payment may be adjusted during
the third quarter of 2003 based upon the outcome of this review, with such
adjustment allocated to goodwill.

The purchase price was allocated as follows: $616,000 to inventories; $628,000
to receivables; $25,000 to accrued expenses; $4,469,000 to customer contracts
and relationships, to be amortized over eight years; $447,000 to complete
technology, to be amortized over five years; $98,000 to patents, to be
amortized over five years; $44,000 to non-compete agreements, to be amortized
over three years; and $1,353,000 to goodwill, assigned to the MVSD segment,
none of which is deductible for tax purposes.

NOTE 13: Subsequent Event

On August 5, 2003, the
Companys Board of Directors declared a quarterly cash dividend
of $0.06 per share. The dividend is payable on September 19,
2003 to all shareholders of record at the close of business on
August 29, 2003. Future dividends will be declared at the
discretion of the Board of Directors and will depend upon such
factors as the Board of Directors deems relevant. The Board of
Directors may modify the Companys dividend policy from time to time.

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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 and the uncertainty of the
timing and rate of recovery; (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; (13) changes in foreign exchange
rates; and (14) 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 Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2002. 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 three-month and six-month periods ended June 29, 2003 totaled
$36,622,000 and $69,510,000, respectively, compared to $26,671,000 and
$48,451,000 for the same periods in 2002, representing a 37% increase for the
three-month period and a 43% increase for the six-month period. Sales to
Original Equipment Manufacturers (OEM) customers, most of whom make capital
equipment used by manufacturers in the semiconductor and electronics
industries, increased $4,452,000, or 52%, from the three-month period in 2002
and $11,393,000, or 82%, from the six-month period in 2002. Sales to end-user
customers increased $5,499,000, or 30%, from the three-month period in 2002 and
$9,666,000, or 28%, from the six-month period in 2002, due to higher demand
from customers across a variety of industries. Sales to end-user customers
represented 65% and 64% of total revenue for the three-month and six-month
periods ended June 29, 2003 compared to 68% and 71% for the same periods in
2002. Geographically, the increase in revenue from the prior year was most
significant in Japan, where many of the Companys OEM customers are located.

Product revenue for the three-month and six-month periods ended June 29, 2003
totaled $31,391,000 and $59,639,000, respectively, compared to $22,406,000 and
$39,662,000 for the same periods in 2002, representing a 40% increase for the
three-month period and a 50% increase for the six-month period. The increase
in product revenue was primarily due to a higher volume of machine vision
systems sold to customers in the semiconductor, electronics, automotive, paper,
and other industries. Service revenue, which is derived from the sale of
maintenance and support, education, consulting, and installation
services, totaled $5,231,000 and $9,871,000 for the three-month and six-month
periods ended June 29, 2003, respectively, compared to $4,265,000 and
$8,789,000 for the same periods in 2002, representing a

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23% increase for the
three-month period and a 12% increase for the six-month period. Many of the
Companys products that were sold during 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% for the three-month and six-month periods ended June
29, 2003 compared to 16% and 18% for the same periods in 2002.

MVSD revenue for the three-month and six-month periods ended June 29, 2003
totaled $29,183,000 and $55,812,000, respectively, compared to $20,336,000 and
$37,398,000 for the same periods in 2002, representing a 44% increase for the
three-month period and a 49% increase for the six-month period. The increase
in MVSD revenue was primarily due to a higher volume of systems sold to
customers in the semiconductor, electronics, and automotive industries. SISD
revenue for the three-month and six-month periods ended June 29, 2003 totaled
$7,439,000 and $13,698,000, respectively, compared to $6,335,000 and
$11,053,000 for the same periods in 2002, representing a 17% increase for the
three-month period and a 24% increase for the six-month period. The increase
in SISD revenue was due principally to a higher volume of SmartView® systems
sold to customers in the paper and metals industries.

Gross Margin

Gross margin as a percentage of revenue was 67% and 66% for the three-month and
six-month periods ended June 29, 2003, respectively, compared to 65% and 63%
for the same periods in 2002. The 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. This
increase was partially offset by a lower amount of benefits recorded to Cost
of product revenue in 2003 from the sale of previously reserved inventory.
These benefits amounted to $569,000 and $878,000 for the three-month and
six-month periods ended June 29, 2003, respectively, compared to $1,000,000 for
the same periods in 2002.

Product gross margin as a percentage of revenue was 71% and 70% for the
three-month and six-month periods ended June 29, 2003, respectively, compared
to 72% and 69% for the same periods in 2002. The decrease in product margin
for the three-month period was primarily due to the decreased benefit from the
sale of previously reserved inventory, offset by the favorable absorption of
manufacturing overhead due to the increased sales volume and the shift in
product mix to higher-margin modular vision systems. For the six-month period,
the favorable impact of sales volume and revenue mix offset the decreased
benefit from the sale of previously reserved inventory, resulting in an
increase in the product margin. Service gross margin as a percentage of
revenue was 43% and 41% for the three-month and six-month periods ended June
29, 2003, respectively, compared to 31% and 35% for the same periods in 2002.
The increase in service margin was due principally to higher maintenance and
support revenue that is sold bundled with MVSD products, while costs were held
essentially flat.

MVSD gross margin as a percentage of revenue was 71% for the three-month period
ended June 29, 2003, which was consistent with the same period in 2002. MVSD
gross margin for the six-month period ended June 29, 2003 was 70%, compared to
69% for the same period in 2002. The increase in MVSD margin was primarily due
to the impact of the higher sales volume of modular vision systems, offset by
the decreased benefit from the sale of previously reserved inventory. SISD
gross margin as a percentage of revenue was 51% and 49% for the three-month and
six-month periods ended June 29, 2003, respectively, compared to 46% and 44%
for the same periods in 2002. The increase in SISD margin was due principally
to the impact of the higher sales volume of surface inspection systems.

Operating Expenses

Research, development, and engineering expenses (R,D,&E) for the three-month
and six-month periods ended June 29, 2003 were $6,263,000 and $12,246,000,
respectively, compared to $6,498,000 and $12,850,000 for the same periods in
2002, representing a 4% decrease for the three-month period and a 5% decrease
for the six-month period. MVSD R,D&E expenses for the three-month and
six-month periods ended June 29, 2003 decreased 6% and 7%, respectively, from
the same periods in 2002 primarily due to a workforce reduction in the third
quarter of 2002. SISD R,D&E expenses for the three-
month and six-month periods ended June 29, 2003 increased 24% and 18%,
respectively, from the same

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periods in 2002 principally due to an increase in
spending on software translation services and other activities related to the
SmartView® product line.

Selling, general, and administrative (S,G&A) expenses for the three-month and
six-month periods ended June 29, 2003 were $13,949,000 and $27,193,000,
respectively, compared to $14,704,000 and $27,422,000 for the same periods in
2002, representing a 5% decrease for the three-month period and a 1% decrease
for the six-month period. MVSD S,G&A expenses for the three-month and
six-month periods ended June 29, 2003 increased 5% from the same periods in
2002, while SISD S,G&A expenses increased 17% for the three-month period and
20% for the six-month period. 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. Corporate expenses that are not
allocated to a division decreased 51% for the three-month period and 35% for
the six-month period primarily due to lower legal costs associated with patent
infringement lawsuits initiated by the Company to protect its intellectual
property, as well as a $604,000 expense in the second quarter of 2002 related
to the acquisition of the web inspection business of Honeywell International
Inc.

Foreign Currency Gain (Loss)

During the three-month and six-month periods ended June 29, 2003, the Company
recorded foreign currency losses of $1,164,000 and $1,791,000, compared to
gains of $471,000 and $164,000 for the same periods in 2002. The increase in
foreign currency losses was primarily due to the revaluation and settlement of
accounts receivable denominated in currencies other than the subsidiarys
functional currency.

Investment and Other Income (Loss)

Investment and other income for the three-month and six-month periods ended
June 29, 2003 totaled $1,615,000 and $2,909,000, respectively, compared to
losses of $3,963,000 and $1,402,000 for the same periods in 2002. The increase
in investment and other income was primarily due to $6,184,000 in losses
recorded by the Company from the sale of equity securities in the second
quarter of 2002. Excluding these losses, investment and other income decreased
principally due to lower average interest rates on the Companys portfolio of
debt securities, as well as lower average investment balances as a result of
using $26,425,000 in cash to repurchase common stock during the third quarter
of 2002 and $7,630,000 in cash to acquire the wafer identification business of
Siemens Dematic AG on March 31, 2003.

Income Taxes

The Companys effective tax rate for the three-month and six-month periods
ended June 29, 2003 was a provision of 32% compared to benefits of 35% and 33%
for the same periods in 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 June 29, 2003, the Companys cash, cash equivalent, and investment balances
increased $4,366,000 to $280,351,000 from $275,985,000 at December 31, 2002.
The Company has established guidelines relative to credit ratings,
diversification, and maturities of its investments to maintain liquidity. The
Companys cash requirements during the six-month period ended June 29, 2003
were met with positive cash flow from operations, as well as the proceeds from
the issuance of stock under stock option, stock purchase, and other plans and
the maturity and sale of investments. Cash requirements consisted of operating
activities, capital expenditures, business acquisitions, and the purchase of
investments. Capital expenditures during the first half of 2003 totaled
$1,140,000 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

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$25,000,000, of which
$12,375,000 had been contributed as of June 29, 2003, including $2,000,000
during the first half 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 prior to 2002 or during the first
half 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 for 7,000,000 Euros in cash (or $7,630,000), with the
potential for an additional cash payment in 2005 of up to 1,700,000 Euros (or
approximately $1,943,000 based upon the exchange rate at June 29, 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. The Company is in
the process of reviewing the actual March 31, 2003 balance sheet and the cash
payment may be adjusted during the third quarter of 2003 based upon the outcome
of this review.

On August 5, 2003, the
Companys
Board of Directors declared a quarterly cash dividend of $0.06 per
share. The dividend is payable on September 19, 2003 to all
shareholders of record at the close of business on August 29,
2003. Future dividends will be declared at the discretion of the
Board of Directors and will depend upon such factors as the Board of
Directors deems relevant. The Board of Directors may modify the
Companys dividend policy from time to time.

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, dividend payouts, 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.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities, to expand
upon and strengthen existing accounting guidance that addresses when a company
should include in its financial statements the assets, liabilities, and
activities of another entity. Previously, a company generally has included
other entities in its consolidated financial statements only if it controlled
the entity through voting interests. Interpretation No. 46 changes that
guidance by requiring variable interest entities, as defined, to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entitys activities or is entitled to
receive a majority of the entitys residual returns. Interpretation No. 46
also requires disclosure about variable interest entities that a company is not
required to consolidate, but in which it has a significant variable interest.
The consolidation requirements of Interpretation No. 46 apply immediately to
variable interest entities created after January 31, 2003 and to older entities
in the first fiscal year or interim period beginning after June 15, 2003.
Certain of the disclosure requirements apply in all financial statements issued
after January 31, 2003, regardless of when the variable interest entity was
established. The Company does not believe the adoption of Interpretation No.
46 will have a material impact on its consolidated financial statements.

On May 15, 2003, the FASB issued Statement of Financial Accounting Standard
(SFAS) No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 establishes
standards for classifying and measuring as liabilities certain financial
instruments that embody obligations of the issuer and have characteristics of
both liabilities and equity. SFAS No. 150 represents a significant change in
practice in the accounting for a number of financial instruments, including
mandatorily redeemable equity instruments and certain equity derivatives that
frequently are used in connection with share repurchase programs. The
provisions of SFAS No. 150 are effective for
public companies for all financial instruments created or modified after May
31, 2003, and to other instruments at the beginning of the first interim period
beginning after June 15, 2003. The Company does

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not believe the adoption of
SFAS No. 150 will have a material impact on its consolidated financial
statements.




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,
the Company has evaluated, with the participation of management, including the
Chief Executive Officer and the Chief Financial Officer, the effectiveness of
its disclosure controls and procedures as of the end of the period covered by
this report. 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. From time to time, the Company reviews the
disclosure controls and procedures, 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. There was no change in the Companys internal
control over financial reporting that occurred during the quarter ended June
29, 2003 that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting.

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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 proceedings since December 31, 2002. In addition,
from time to time, 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | On April 24, 2003, a Special Meeting of the Stockholders of Cognex
Corporation held in lieu of the 2003 Annual Meeting, the
Stockholders elected Robert J. Shillman and Reuben Wasserman to
serve as Directors for a term of three years. Patrick Alias,
Jerald Fishman, Anthony Sun, and William Krivsky continued as
Directors after the meeting. The 39,778,439 shares represented at
the meeting voted as follows: The election of Robert J. Shillman
as Director, 38,875,788 votes for and 902,651 withheld; the
election of Reuben Wasserman as Director, 38,810,405 votes for and
968,034 withheld.






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






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



| | (a) |  | Exhibits                                                                                                                                        
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | 31.1  Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of
1934                  
|
| |     |  | 31.2  Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of
1934                  
|
| |     |  | 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 2002
|
| |     |  | 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

19



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##### Table of Contents





| | (b) |  | Reports on Form 8-K                                                                                                                                                                                                            
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On June 10, 2003, the Company filed a Current Report, dated
June 5, 2003, on Form 8-K regarding the dismissal of
PricewaterhouseCoopers LLP and the engagement of Ernst &
Young LLP as their principal independent accountants.
|
| |     |  | On April 14, 2003, the Company furnished a Current Report,
dated the same date, on Form 8-K regarding its earnings press
release for the fiscal quarter ended March 30, 2003.                                                  

20



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##### Table of Contents






SIGNATURES

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

|                      |  |  |  |                                                                                                                                                                
|--------------------- |  |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|DATE: August 12, 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)

21