COGNEX CORP

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 (GAAP). 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, 2023 for a full description of other significant accounting policies.

In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, adjustments related to losses and recoveries from the fire at the Company's primary contract manufacturer (Note 17), and financial statement reclassifications necessary to present fairly the Company’s financial position as of September 29, 2024, and the results of its operations for the three-month and nine-month periods ended September 29, 2024 and October 1, 2023, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.

The results disclosed in the Consolidated Statements of Operations for the three-month and nine-month periods ended September 29, 2024 are not necessarily indicative of the results to be expected for the full year.

NOTE 2: New Pronouncements

Accounting Standards Update (ASU) 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures"

The amendments in this ASU apply to all entities that are subject to Topic 740, Income Taxes. The amendments require public business entities to disclose specific categories in their rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. They also require all entities to disclose income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes and by individual jurisdictions in which income taxes paid, net of refunds received, are equal to or greater than five percent of total income taxes paid. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024. The amendments in this ASU should be applied on a prospective basis. Management does not expect ASU 2023-09 to have a material impact on the Company's financial statements and disclosures.

Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures"

The amendments in this ASU apply to all public entities, including public entities with a single reportable segment, that are required to report segment information in accordance with Topic 280, Segment Reporting. The amendments require public business entities to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the amendments require disclosure of significant segment expenses and other segment items, as well as incremental qualitative disclosures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments in the ASU should be applied on a retrospective basis. We did not early adopt ASU 2023-07. Management does not expect ASU 2023-07 to have a material impact on the Company's financial statements and disclosures.

NOTE 3: Fair Value Measurements

Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of September 29, 2024 (in thousands):

The Company’s money market instruments are reported at fair value based upon the daily market price for identical assets in active markets, and are therefore classified as Level 1.

The Company’s debt securities and forward contracts are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2. Management is responsible for estimating the fair value of these financial assets and liabilities, and in doing so, considers valuations provided by a large, third-party pricing service. For debt securities, this service maintains regular contact with market makers, brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data. They use this information to structure yield curves for various types of debt securities and arrive at the daily valuations. The Company's forward contracts are typically traded or executed in over-the-counter markets with a high degree of pricing transparency. The market participants are generally large commercial banks.

Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis

Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. The Company did not record impairment charges related to non-financial assets during the three-month or nine-month periods ended September 29, 2024 or October 1, 2023.

NOTE 4: Cash, Cash Equivalents, and Investments

Cash, cash equivalents, and investments consisted of the following (in thousands):

Corporate bonds consist of debt securities issued by both domestic and foreign companies; asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement; treasury notes consist of debt securities issued by the U.S. government; and sovereign bonds consist of direct debt issued by foreign governments. All of the Company's securities as of September 29, 2024 and December 31, 2023 were denominated in U.S. Dollars.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $4,749,000 and $3,169,000 as of September 29, 2024 and December 31, 2023, respectively.

The following table summarizes the Company’s available-for-sale investments as of September 29, 2024 (in thousands):

The following table summarizes the Company’s available-for-sale investments as of December 31, 2023 (in thousands):

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of September 29, 2024 (in thousands):

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of December 31, 2023 (in thousands):

Management monitors debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer. When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts of expected future cash flows. Based on this evaluation, no allowance for credit losses on debt securities was recorded as of September 29, 2024 or December 31, 2023. Management currently intends to hold these securities to full value recovery at maturity.

The following table summarizes the Company's gross realized gains and losses on the sale of debt securities for the three-month and nine-month periods ended September 29, 2024 and October 1, 2023 (in thousands):

Realized gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in shareholders’ equity as accumulated other comprehensive income (loss).

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of September 29, 2024 (in thousands):

NOTE 5: Inventories

Inventories consisted of the following (in thousands):

NOTE 6: Leases

The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations. All of these leases are classified as operating leases. Certain leases may contain options to extend or terminate the lease at the Company's sole discretion. As of September 29, 2024, there wereno options to terminate andtwenty options to extend that were accounted for in the determination of the lease term for the Company's outstanding leases. Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index. There were no restrictions or covenants for outstanding leases as of September 29, 2024.

The total operating lease expense for the three-month and nine-month periods ended September 29, 2024 was $3,610,000 and $10,647,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended September 29, 2024 were $3,516,000 and $10,130,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended September 29, 2024 was $52,000 and $191,000, respectively.

The total operating lease expense for the three-month and nine-month periods ended October 1, 2023 was $5,512,000 and $8,151,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended October 1, 2023 were $5,168,000 and $7,532,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended October 1, 2023 was $132,000 and $292,000, respectively.

Future operating lease cash payments are as follows (in thousands):

The discounted present value of the future lease cash payments resulted in a total lease liability of $77,181,000 and $78,601,000 as of September 29, 2024 and December 31, 2023, respectively. The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of September 29, 2024.

The Company leases a building in Singapore that serves as a distribution center for customers in Asia. The lease containstwo components: an 88,000 square-foot premises that had a commencement date in June of 2023 and a second 27,000 square-foot premises that does not commence until the fourth quarter of 2025. Accordingly, the second component of the lease has not yet been recorded on the Consolidated Balance Sheets, nor has it created any significant rights and obligations as of September 29, 2024. This second lease component has an original term ofeight years and the Company has the right and option to extend this term by an additional five years, commencing upon the expiration of the original term. Future payment obligations associated with this lease component total $13,992,000, none of which is payable in 2024 and which reflects the estimated extension period offive years. Future payment obligations related to this lease component are not included in the future operating lease cash payments table above.

The weighted-average discount rate was 5.8% and 5.7% for leases outstanding as of September 29, 2024 and December 31, 2023, respectively. The weighted-average remaining lease term was 10.0 and 10.5 years for the leases outstanding as of September 29, 2024 and December 31, 2023, respectively.

NOTE 7: Goodwill

The changes in the carrying value of goodwill were as follows (in thousands):

NOTE 8: Intangible Assets

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

As of September 29, 2024, estimated future amortization expense related to intangible assets was as follows (in thousands):

NOTE 9: Warranty Obligations

The Company records the estimated cost of fulfilling product warranties at the time of sale based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time of sale whenever specific events or changes in circumstances impacting product quality become known that would not have been taken into account using historical data. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers and third-party contract manufacturers, the Company’s warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. An adverse change in any of these factors may result in the need for additional warranty provisions. Warranty obligations are included in “Accrued expenses” on the Consolidated Balance Sheets.

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

NOTE 10: Commitments and Contingencies

As of September 29, 2024, the Company had outstanding purchase orders totaling $38,153,000 to procure inventory from various vendors. Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties. These purchase commitments relate primarily to expected sales in the next twelve months.

A significant portion of the Company's outstanding inventory purchase orders as of September 29, 2024, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products. The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by the contract manufacturer with the Company's preauthorization, when these components have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer. While the Company typically expects such purchased components to be used in future production of Cognex finished goods, these components are considered in the Company's reserve estimate for excess and obsolete inventory. Furthermore, the Company accrues for losses on commitments for the future purchase of non-cancelable and non-returnable components from this contract manufacturer at the time that circumstances, such as changes in demand, indicate that the value of the components may not be recoverable, the loss is probable, and management has the ability to reasonably estimate the amount of the loss.

Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations.

NOTE 11: Derivative Instruments

The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency forward contracts with maturities that do not exceed approximately three months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment.

Additionally, during the three-month period ended October 1, 2023, the Company entered into a foreign currency forward contract to exchange U.S. Dollars for ¥40,000,000,000 to hedge the purchase of Moritex Corporation (refer to Note 18 of the consolidated financial statements), which was paid in Japanese Yen. Upon the settlement of this contract, the Company recorded a foreign currency loss of $8,456,000, which was recorded in "Foreign currency gain (loss)" on the Consolidated Statements of Operations for the three-month period ended October 1, 2023.

The Company had the following outstanding forward contracts (in thousands):

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):

The following table presents the gross activity for all derivative assets and liabilities which were presented on a net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):

NOTE 12: Revenue Recognition

The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):

The following table summarizes disaggregated revenue information by revenue type (in thousands):

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $11,261,000 and $13,265,000 as of September 29, 2024 and December 31, 2023, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the allowance for credit losses activity for the nine-month period ended September 29, 2024 (in thousands):

The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended September 29, 2024 (in thousands):

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations for our contracts that have an original expected duration of less than one year. The remaining unsatisfied performance obligations for our contracts that have an original expected duration of more than one year, primarily related to extended warranties, are not material.

NOTE 13: Stock-Based Compensation Expense

Stock Plans

The Company’s stock-based awards that result in compensation expense consist of stock options, restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs"). In May 2023, the shareholders of the Company approved the Cognex Corporation 2023 Stock Option and Incentive Plan (the “2023 Plan”). The 2023 Plan permits awards of stock options (both incentive and non-qualified options), stock appreciation rights, RSUs, and PRSUs. Up to 8,100,000 shares of common stock (subject to adjustment in the event of stock splits and other similar events) may be issued pursuant to awards granted under the 2023 Plan. In connection with the approval of the 2023 Plan, no further awards will be made under the Cognex Corporation 2001 General Stock Option Plan, as amended and restated (the “2001 Plan”), and the Cognex Corporation 2007 Stock Option and Incentive Plan, as amended and restated (the “2007 Plan”). With the approval of the 2023 Plan, the 10,610,800 shares of common stock subject to awards granted under the 2001 Plan and the 2007 Plan that were outstanding as of May 3, 2023 may become eligible for issuance under the 2023 Plan if such awards are forfeited, cancelled or otherwise terminated (other than by exercise) (the “Carryover Shares”). As of September 29, 2024, forfeitures, cancellations, and other terminations from the 2001 Plan and the 2007 Plan have resulted in 889,329 Carryover Shares, raising the authorized total shares that may be issued under the 2023 Plan to 8,989,329.

As of September 29, 2024, the Company had 6,049,613 shares available for grant under its stock plans. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four orfive years based upon continuous service and expireten years from the grant date. RSUs generally vest upon three orfour years of continuous employment or incrementally over such three orfour-year periods. PRSUs generally vest upon three years of continuous employment and achievement of performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant date. Participants are not entitled to dividends on stock options, RSUs, or PRSUs.

Stock Options

The following table summarizes the Company’s stock option activity for the nine-month period ended September 29, 2024:

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.

The total cash received as a result of stock option exercises for the three-month and nine-month periods ended September 29, 2024 was $2,034,000 and $4,671,000, respectively, and for the three-month and nine-month periods ended October 1, 2023 was $889,000 and $11,006,000, respectively. In connection with these exercises, the tax expense realized by the Company for the three-month and nine-month periods ended September 29, 2024 was $559,000 and $2,631,000, respectively, and for the three-month and nine-month periods ended October 1, 2023 was $100,000 and $3,993,000, respectively.

The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:

Risk-free rate

The risk-free rate was based upon a treasury instrument whose term was consistent with the contractual term of the option.

Expected dividend yield

The current dividend yield was calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date.

Expected volatility

The expected volatility was based upon a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock.

Expected term

The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.

The weighted-average grant-date fair values of stock options granted during the three-month and nine-month periods ended September 29, 2024 were $14.75 and $14.89, respectively, and during the three-month and nine-month periods ended October 1, 2023 were $20.55 and $18.11, respectively.

The total intrinsic values of stock options exercised for the three-month and nine-month periods ended September 29, 2024 were $1,628,000 and $3,677,000, respectively, and for the three-month and nine-month periods ended October 1, 2023 were $557,000 and $6,119,000, respectively. The total fair values of stock options vested for the three-month and nine-month periods ended September 29, 2024 were $1,023,000 and $27,232,000, respectively, and for the three-month and nine-month periods ended October 1, 2023 were $962,000 and $33,035,000, respectively.

Restricted Stock Units (RSUs)

The following table summarizes the Company's RSUs activity for the nine-month period ended September 29, 2024:

The fair value of RSUs is determined based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends. The weighted-average grant-date fair values of RSUs granted during the three-month and nine-month periods ended September 29, 2024 were $36.40 and $38.90, respectively, and during the three-month and nine-month periods ended October 1, 2023 were $46.17 and $46.78, respectively. There were 33,000 and 408,000 RSUs that vested during the three-month and nine-month periods ended September 29, 2024, respectively, and 18,000 and 500,000 that vested during the three-month and nine-month periods ended October 1, 2023, respectively.

Tax obligations for vested RSUs are settled by withholding a portion of the shares prior to distribution to the shareholder. The total cash used by the Company to fund the tax payments for the three-month and nine-month periods ended September 29, 2024 was $369,000 and $4,876,000, respectively, and for the three-month and nine-month periods ended October 1, 2023 was $267,000 and $7,731,000, respectively. In connection with these vested RSUs, the tax expense realized by the Company for the three-month and nine-month periods ended September 29, 2024 was $452,000 and $7,319,000, respectively, and for the three-month and nine-month periods ended October 1, 2023 was $317,000 and $3,793,000, respectively.

Performance Restricted Stock Units (PRSUs)

The following table summarizes the Company's PRSUs activity for the nine-month period ended September 29, 2024:

The fair value of PRSUs is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the service and market conditions stipulated in the award grant. There were 0 and 55,000 PRSUs granted during the three-month and nine-month periods ended September 29, 2024, respectively, and 0 and 46,000 granted during the three-month and nine-month periods ended October 1, 2023, respectively. No PRSUs vested during the three-month and nine-month periods ended September 29, 2024 and October 1, 2023.

Stock-Based Compensation Expense

The Company stratifies its employee population into three groups: one consisting of the CEO, one consisting of senior management, and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 0% to all stock-based awards for the CEO,9% to all stock-based awards for senior management, and a rate of 13% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. This resulted in a decrease to compensation expense of $1,832,000 in 2024 and $234,000 in 2023.

As of September 29, 2024, total unrecognized compensation expense, net of estimated forfeitures, related to non-vested equity awards, including stock options, RSUs, and PRSUs, was $63,930,000, which is expected to be recognized over a weighted-average period of 1.7 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended September 29, 2024 were $13,101,000 and $2,287,000, respectively, and for the nine-month period ended September 29, 2024 were $39,367,000 and $6,059,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended October 1, 2023 were $12,365,000 and $1,971,000, respectively, and for the nine-month period ended October 1, 2023 were $41,518,000 and $6,053,000, respectively. No compensation expense was capitalized as of September 29, 2024 or December 31, 2023.

The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):

NOTE 14: Stock Repurchase Program

In March 2022, the Company's Board of Directors authorized the repurchase of $500,000,000 of the Company's common stock. Under this March 2022 program, in addition to repurchases made in other periods, the Company repurchased 1,157,000 shares at a total cost of $59,640,000 during the nine-month period ended October 1, 2023 and 555,000 shares at a total cost of $23,841,000 during the nine-month period ended September 29, 2024, leaving a remaining balance of $309,051,000 as of September 29, 2024. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

NOTE 15: Income Taxes

The Company's effective tax rate was 19% for the three-month and nine-month periods ended September 29, 2024, respectively, and 30% and 16% for the three-month and nine-month periods ended October 1, 2023, respectively.

The Company has defined its major tax jurisdictions as the United States, Ireland, China, Japan, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland,25% in China,34.6% in Japan, and 21% in Korea, compared to the U.S. federal statutory corporate tax rate of 21%. These foreign tax rate differences resulted in a favorable impact to the effective tax rate for both the three-month and nine-month periods ended September 29, 2024 and October 1, 2023.

The Company recorded a net discrete tax expense totaling $889,000 and $3,511,000 for the three-month and nine-month periods ended September 29, 2024, and a net discrete tax expense totaling $4,035,000 and $840,000 for the same periods in 2023.

Discrete tax items for the nine-month period ended September 29, 2024 included (1) an increase in tax expense of $1,645,000 related to stock-based compensation; (2) an increase in tax expense of $320,000 related to state tax matters; (3) an increase in tax expense of $1,270,000 for interest expense related to tax reserves; (4) a net decrease in tax expense of $854,000 related to return-to-provision adjustments; and (5) an increase in tax expense of $1,130,000 for other tax matters.

Discrete tax items for the nine-month period ended October 1, 2023 included (1) a net decrease in tax expense of $3,043,000 due primarily to the release of tax reserves on state tax credits and foreign audit settlements; (2) a decrease in tax expense of $2,198,000 for adjustments to certain deferred tax assets; (3) an increase in tax expense of $2,178,000 for an adjustment related to deferred state taxes due to a reduction in the Company's blended state rate; (4) a net increase in tax expense of $2,134,000 for return-to-provision adjustments; and (5) an increase in tax expense of $1,769,000 related to stock-based compensation.

The Company’s reserve for income taxes, including gross interest and penalties, was $28,858,000 as of September 29, 2024, of which $26,491,000 was classified as a non-current liability and $2,367,000 was classified as an offset to deferred tax assets. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period.

Within the United States, the tax years 2020 through 2023 remain open to examination by the IRS, and 2019 through 2023 remain open to examination by various state tax authorities. The tax years 2017 through 2023 remain open to examination by various international taxing authorities in other jurisdictions in which the Company operates.

In October 2021, more than 135 countries and jurisdictions agreed to participate in a "two-pillar" international tax approach developed by the Organisation for Economic Co-operation and Development (OECD), which includes establishing a global minimum corporate tax rate of 15%. The OECD published "Tax Challenges Arising from the Digitalisation of the Economy — Global Anti-Base Erosion Model Rules (Pillar Two)" in December 2021 and subsequently issued additional commentary and administrative guidance clarifying several aspects of the model rules. Since the model rules have been released, many countries have now enacted Pillar Two-related laws, some of which became effective January 1, 2024, and it is anticipated that more countries will follow suit throughout 2024. As of September 29, 2024, the Company does not expect Pillar Two taxes to have a significant impact on its 2024 financial statements.

NOTE 16: Weighted-Average Shares

Weighted-average shares were calculated as follows (in thousands):

Stock options to purchase 8,640,000 and 8,490,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended September 29, 2024, respectively, and 6,893,000 and 6,775,000 during the three-month and nine-month periods ended October 1, 2023, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive. No RSUs were excluded in the calculation of dilutive net income per share for the three-month and nine-month periods ended September 29, 2024 because they were anti-dilutive. RSUs totaling 3,000 and 1,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended October 1, 2023, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive. No PRSUs were excluded in the calculation of dilutive net income per share for the three-month and nine-month periods ended September 29, 2024 and October 1, 2023, respectively, as PRSUs were not anti-dilutive on a weighted-average basis.

NOTE 17: Loss (Recovery) from Fire

On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia, destroying a significant amount of Cognex inventories.

During the nine-month period ended October 1, 2023, the Company recorded recoveries related to the fire of $5,250,000, consisting of $2,500,000 during the three-month period ended July 2, 2023 for proceeds received from the Company's insurance carrier in relation to a business interruption claim and $2,750,000 during the three-month period ended October 1, 2023 for proceeds received as part of a financial settlement for lost inventory and other losses incurred as a result of the fire. These recovery amounts are presented in the caption “Loss (recovery) from fire” on the Consolidated Statements of Operations.

NOTE 18: Business Combinations

On October 18, 2023, the Company acquired all the outstanding shares of Moritex Corporation ("Moritex"), a global provider of premium optical components based in Japan, for an enterprise value of ¥40 billion Japanese Yen, or approximately $270 million U.S. Dollars based on the closing date foreign exchange rate.

The cash-free, debt-free enterprise value was adjusted by cash acquired, debt assumed, and final working capital balances to arrive at total consideration to be allocated to assets acquired and liabilities assumed of ¥44,376,245,000 ($296,138,000 based on the closing date foreign exchange rate), of which ¥44,227,414,000 ($295,144,000) was paid in cash on the closing date and ¥148,831,000 ($994,000) was paid during the three-month period ended March 31, 2024 as a purchase price adjustment based on the closing balance sheet.

NOTE 19: Subsequent Events

On October 30, 2024, the Company’s Board of Directors declared a cash dividend of $0.08 per share. The dividend is payable on November 29, 2024 to all shareholders of record as of the close of business on November 14, 2024.