10-Q 1 cgnx-20211003.htm 10-Q cgnx-20211003
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
(Mark One)
☒Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 3, 2021 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 001-34218
COGNEX CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2713778
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)

One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.002 per shareCGNXThe NASDAQ Stock Market LLC

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☒   No☐  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 Yes☒   No☐  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer☒  Accelerated filer☐
Non-accelerated filer☐  Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
 Yes☐   No☒  
As of October 3, 2021, there were 176,799,003 shares of Common Stock, $.002 par value per share, of the registrant outstanding.


INDEX
 
PART IFINANCIAL INFORMATION
Financial Statements (interim periods unaudited)

2

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
 (unaudited)(unaudited)
Revenue$284,848 $251,073 $793,033 $587,405 
Cost of revenue85,712 59,741 208,189 151,261 
Gross margin199,136 191,332 584,844 436,144 
Research, development, and engineering expenses34,476 30,240 99,883 96,583 
Selling, general, and administrative expenses77,113 64,206 226,380 193,497 
Restructuring charges (Note 16)— 251 — 15,049 
Intangible asset impairment charges (Note 8)— — — 19,571 
Operating income87,547 96,635 258,581 111,444 
Foreign currency gain (loss)(586)2,357 (2,233)(310)
Investment income1,748 2,490 5,025 11,010 
Other income (expense)(125)(173)(420)(153)
Income before income tax expense88,584 101,309 260,953 121,991 
Income tax expense9,684 13,803 34,607 15,150 
Net income$78,900 $87,506 $226,346 $106,841 
Net income per weighted-average common and common-equivalent share:
Basic$0.45 $0.50 $1.28 $0.62 
Diluted$0.44 $0.49 $1.26 $0.61 
Weighted-average common and common-equivalent shares outstanding:
Basic176,812 173,943 176,572 172,881 
Diluted180,342 177,138 180,109 176,038 
Cash dividends per common share$0.060 $0.055 $0.180 $0.165 












 
The accompanying notes are an integral part of these consolidated financial statements.
3

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
 
 Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
 (unaudited)(unaudited)
Net income$78,900 $87,506 $226,346 $106,841 
Other comprehensive income (loss), net of tax:
Available-for-sale investments:
Net unrealized gain (loss), net of tax of $(162) and $2,855 in the three-month periods and net of tax of $(808) and $1,067 in the nine-month periods, respectively
(521)(2,308)(2,617)6,282 
Reclassification of credit loss (recovery) on investments into current operations— — — 75 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations(19)(786)(87)(3,591)
Net change related to available-for-sale investments(540)(3,094)(2,704)2,766 
Foreign currency translation adjustments:
Foreign currency translation adjustments(2,136)2,098 (5,243)(3,364)
Net change related to foreign currency translation adjustments(2,136)2,098 (5,243)(3,364)
Other comprehensive income (loss), net of tax(2,676)(996)(7,947)(598)
Total comprehensive income$76,224 $86,510 $218,399 $106,243 
















The accompanying notes are an integral part of these consolidated financial statements.
4

COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
October 3, 2021December 31, 2020
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$203,479 $269,073 
Current investments, amortized cost of $188,349 and $102,258 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020
189,113 103,240 
Accounts receivable, allowance for credit losses of $792 and $831 in 2021 and 2020, respectively
129,784 125,696 
Unbilled revenue7,325 5,632 
Inventories81,170 60,830 
Prepaid expenses and other current assets61,196 37,220 
Total current assets672,067 601,691 
Non-current investments, amortized cost of $591,378 and $390,417 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020
592,794 395,125 
Property, plant, and equipment, net76,882 79,173 
Operating lease assets24,154 22,582 
Goodwill241,799 244,078 
Intangible assets, net12,782 15,555 
Deferred income taxes420,962 434,704 
Other assets7,363 7,794 
Total assets$2,048,803 $1,800,702 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$26,797 $16,270 
Accrued expenses80,337 77,264 
Accrued income taxes12,271 9,379 
Deferred revenue and customer deposits37,843 21,274 
Operating lease liabilities7,889 8,110 
Total current liabilities165,137 132,297 
Non-current operating lease liabilities18,922 18,120 
Deferred income taxes302,019 314,952 
Reserve for income taxes14,805 14,257 
Non-current accrued income taxes40,963 48,915 
Other liabilities13,996 9,959 
Total liabilities555,842 538,500 
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2021 and 2020, respectively, no shares issued and outstanding
— — 
Common stock, $.002 par value – Authorized: 300,000 shares in 2021 and 2020, respectively, issued and outstanding: 176,799 and 175,790 shares in 2021 and 2020, respectively
354 352 
Additional paid-in capital900,190 807,739 
Retained earnings634,165 487,912 
Accumulated other comprehensive loss, net of tax(41,748)(33,801)
Total shareholders’ equity1,492,961 1,262,202 
Total liabilities and shareholders' equity$2,048,803 $1,800,702 


The accompanying notes are an integral part of these consolidated financial statements.
5

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine-months Ended
October 3, 2021September 27, 2020
 (unaudited)
Cash flows from operating activities:
Net income$226,346 $106,841 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense33,353 32,076 
Depreciation of property, plant, and equipment12,641 16,467 
Loss on disposal of property, plant, and equipment4 1,654 
Amortization of intangible assets2,773 3,437 
Intangible asset impairment charges— 19,571 
Excess and obsolete inventory charges2,120 9,386 
Operating lease asset impairment charges— 2,534 
Amortization of discounts or premiums on investments3,316 765 
Realized gain on sale of investments(87)(3,591)
Credit loss on investments— 75 
Revaluation of contingent consideration— (114)
Change in deferred income taxes1,411 3,194 
Change in operating assets and liabilities:
Accounts receivable(4,295)(23,878)
Unbilled revenue(1,689)(10,606)
Inventories(22,534)(3,065)
Prepaid expenses and other current assets(24,607)(10,718)
Accounts payable10,576 3,587 
Accrued expenses4,416 17,028 
Accrued income taxes(4,936)(23,627)
Deferred revenue and customer deposits16,751 19,066 
Other3,297 (632)
Net cash provided by operating activities258,856 159,450 
Cash flows from investing activities:
Purchases of investments(607,458)(601,447)
Maturities and sales of investments317,174 567,245 
Purchases of property, plant, and equipment(10,689)(9,829)
Net cash provided by (used in) investing activities(300,973)(44,031)
Cash flows from financing activities:
Net proceeds from issuance of common stock under stock plans59,101 91,390 
Repurchase of common stock(48,294)(51,036)
Payment of dividends(31,800)(28,554)
Payment of contingent consideration— (1,039)
Net cash provided by (used in) financing activities(20,993)10,761 
Effect of foreign exchange rate changes on cash and cash equivalents(2,484)745 
Net change in cash and cash equivalents(65,594)126,925 
Cash and cash equivalents at beginning of period269,073 171,431 
Cash and cash equivalents at end of period$203,479 $298,356 






The accompanying notes are an integral part of these consolidated financial statements.
6

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
 SharesPar Value
Balance as of July 4, 2021176,707 $353 $874,883 $593,290 $(39,072)$1,429,454 
Net issuance of common stock under stock plans415 1 14,693 — — 14,694 
Repurchase of common stock(323)— — (27,417)— (27,417)
Stock-based compensation expense— — 10,614 — — 10,614 
Payment of dividends ($0.060 per common share)
— — — (10,608)— (10,608)
Net income— — — 78,900 — 78,900 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(162)
— — — — (521)(521)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (19)(19)
Foreign currency translation adjustment— — — — (2,136)(2,136)
Balance as of October 3, 2021 (unaudited)176,799 $354 $900,190 $634,165 $(41,748)$1,492,961 
 Common StockAdditional
Paid-in Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
 SharesPar Value
Balance as of June 28, 2020173,047 $346 $710,412 $702,597 $(36,877)$1,376,478 
Net issuance of common stock under stock plans1,586 3 43,152 — — 43,155 
Stock-based compensation expense— — 9,268 — — 9,268 
Payment of dividends ($0.055 per common share)
— — — (9,582)— (9,582)
Net income— — — 87,506 — 87,506 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $2,855
— — — — (2,308)(2,308)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (786)(786)
Foreign currency translation adjustment— — — — 2,098 2,098 
Balance as of September 27, 2020 (unaudited)174,633 $349 $762,832 $780,521 $(37,873)$1,505,829 










The accompanying notes are an integral part of these consolidated financial statements.
7

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2020175,790 $352 $807,739 $487,912 $(33,801)$1,262,202 
Net issuance of common stock under stock plans1,590 3 59,098 — — 59,101 
Repurchase of common stock(581)(1)— (48,293)— (48,294)
Stock-based compensation expense— — 33,353 — — 33,353 
Payment of dividends ($0.180 per common share)
— — — (31,800)— (31,800)
Net income— — — 226,346 — 226,346 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(808)
— — — — (2,617)(2,617)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (87)(87)
Foreign currency translation adjustment— — — — (5,243)(5,243)
Balance as of October 3, 2021 (unaudited)176,799 $354 $900,190 $634,165 $(41,748)$1,492,961 

 Common StockAdditional
Paid-in Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2019172,440 $345 $639,372 $753,268 $(37,275)$1,355,710 
Net issuance of common stock under stock plans3,408 6 91,384 — — 91,390 
Repurchase of common stock(1,215)(2)— (51,034)— (51,036)
Stock-based compensation expense— — 32,076 — — 32,076 
Payment of dividends ($0.165 per common share)
— — — (28,554)— (28,554)
Net income— — — 106,841 — 106,841 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $1,067
— — — — 6,282 6,282 
Reclassification of credit loss (recovery) on investments— — — — 75 75 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (3,591)(3,591)
Foreign currency translation adjustment— — — — (3,364)(3,364)
Balance as of September 27, 2020 (unaudited)174,633 $349 $762,832 $780,521 $(37,873)$1,505,829 








The accompanying notes are an integral part of these consolidated financial statements.
8

COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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, 2020 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, excess and obsolete inventory charges (Note 5), intangible asset impairment charges (Note 8), restructuring charges (Note 16) and financial statement reclassifications necessary to present fairly the Company’s financial position as of October 3, 2021, and the results of its operations for the three-month and nine-month periods ended October 3, 2021 and September 27, 2020, 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 October 3, 2021 are not necessarily indicative of the results to be expected for the full year.
NOTE 2: New Pronouncements
Accounting Standards Update (ASU) 2019-12, "Simplifying the Accounting for Income Taxes"
The amendments in this ASU eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. They also clarify and simplify other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 on January 1, 2021. Upon adoption, ASU 2019-12 did not have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs"
The amendments in this ASU clarify that for each reporting period, for callable debt with multiple call dates and call prices that may change at each call date, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess is amortized to the next call date. The Company adopted ASU 2020-08 on January 1, 2021. Upon adoption, ASU 2020-08 did not have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and (ASU) 2021-01, "Reference Rate Reform (Topic 848): Scope"
The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. Management does not expect ASU 2020-04 or ASU 2021-01 to have a material impact on the Company's consolidated financial statements and disclosures.

9

COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 October 3, 2021 (in thousands):
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable
Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Money market instruments$3,616 $— $— 
Corporate bonds— 555,992 — 
Treasury bills— 114,998 — 
Asset-backed securities— 83,896 — 
Agency bonds— 18,966 — 
Municipal bonds— 6,966 — 
Sovereign bonds— 1,089 — 
Economic hedge forward contracts— 129 — 
Liabilities:
Economic hedge forward contracts— 88 — 

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.
The Company's contingent consideration liabilities are reported at fair value based upon probability-adjusted present values of the consideration expected to be paid using significant inputs that are not observable in the market, and are therefore classified as Level 3. Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving certain revenue milestones. The fair values of these contingent consideration liabilities were calculated using discount rates consistent with the level of risk of achievement, and are remeasured each reporting period.

The fair value of the contingent consideration liability related to the Company's acquisition of GVi Ventures, Inc. in 2017 was written down to zero in 2019 resulting from a lower level of revenue in the Americas' automotive industry, and the balance remains at zero as of October 3, 2021. The undiscounted potential outcomes related to future contingent consideration range from $0 to $2,500,000 based upon certain revenue levels through April of 2022.

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 evaluates these long-lived assets for impairment whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value may not be recoverable. The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets for potential impairment as of May 26, 2020, which resulted in operating lease asset impairment charges of $2,534,000 (refer to Notes 6 and 16) that were
10

COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $19,571,000 (refer to Note 8) in the second quarter of 2020. These fair value measurements were based upon the present values of future cash flows using significant inputs that were not observable in the market, and were therefore classified as Level 3.
No triggering event occurred in the nine-month period ended October 3, 2021 that would indicate a potential impairment of long-lived assets. However, the Company continues to monitor global economic conditions, as events or changes in circumstances could result in an impairment of long-lived assets in a future period.

NOTE 4: Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following (in thousands):
October 3, 2021December 31, 2020
Cash$199,863 $266,609 
Money market instruments3,616 2,464 
Cash and cash equivalents203,479 269,073 
Treasury bills87,014 35,403 
Corporate bonds69,844 32,714 
Asset-backed securities23,133 25,160 
Municipal bonds6,320 1,303 
Agency bonds2,802 — 
Sovereign bonds— 8,660 
Current investments189,113 103,240 
Corporate bonds486,148 203,428 
Asset-backed securities60,763 67,058 
Treasury bills27,984 96,458 
Agency bonds16,164 19,006 
Sovereign bonds1,089 3,440 
Municipal bonds646 5,735 
Non-current investments592,794 395,125 
$985,386 $767,438 

Cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition. Cash equivalents consist primarily of government and institutional money market funds; treasury bills consist of debt securities issued by the U.S. government; 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; municipal bonds consist of debt securities issued by state and local government entities; agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government backing; and sovereign bonds consist of direct debt issued by foreign governments. All of the Company's securities as of October 3, 2021 and December 31, 2020 were denominated in U.S. Dollars.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $3,481,000 and $1,560,000 as of October 3, 2021 and December 31, 2020, respectively.
11

COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the Company’s available-for-sale investments as of October 3, 2021 (in thousands):
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Current:
Treasury bills$86,657 $357 $— $87,014 
Corporate bonds69,562 290 (8)69,844 
Asset-backed securities22,990 147 (4)23,133 
Municipal bonds6,340 3 (23)6,320 
Agency bonds2,800 2 — 2,802 
Non-current:
Corporate bonds485,290 1,631 (773)486,148 
Asset-backed securities60,418 346 (1)60,763 
Treasury bills27,821 163 — 27,984 
Agency bonds16,124 40 — 16,164 
Sovereign bonds1,090 — (1)1,089 
Municipal bonds635 11 — 646 
$779,727 $2,990 $(810)$781,907 
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 October 3, 2021 (in thousands):
 Unrealized Loss Position For: 
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueUnrealized
Losses		Fair ValueUnrealized
Losses		Fair ValueUnrealized
Losses
Corporate bonds$216,480 $(781)$— $— $216,480 $(781)
Municipal bonds3,917 (23)— — 3,917 (23)
Asset-backed securities3,732 (5)— — 3,732 (5)
Sovereign bonds1,089 (1)— — 1,089 (1)
$225,218 $(810)$— $— $225,218 $(810)
The Company's allowance for credit losses on debt securities was zero as of October 3, 2021 and December 31, 2020. There was no activity recorded in the allowance for credit losses during the three-month and nine-month periods ended October 3, 2021. The Company recorded no gross credit losses or gross credit recoveries for the three-month period ended September 27, 2020, and gross credit losses of $160,000 and gross credit recoveries of $85,000 for the nine-month period ended September 27, 2020.

The Company recorded gross realized gains on the sale of debt securities totaling $19,000 and $87,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and no gross realized losses on the sale of debt securities for the three-month and nine-month periods ended October 3, 2021. The Company recorded gross realized gains on the sale of debt securities totaling $787,000 and $3,613,000 for the three-month and nine-month periods ended September 27, 2020, respectively, and gross realized losses on the sale of debt securities totaling $1,000 and $22,000, respectively, for the three-month and nine-month periods ended September 27, 2020. These 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, are recorded in shareholders’ equity as accumulated other comprehensive loss.
12

COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents the effective maturity dates of the Company’s available-for-sale investments as of October 3, 2021 (in thousands):
<1 year1-2 Years2-3 Years3-4 Years4-5 YearsTotal
Corporate bonds$69,844 $192,354 $151,615 $94,993 $47,186 $555,992 
Treasury bills87,014 27,984 — — — 114,998 
Asset-backed securities23,133 41,115 6,217 13,431 — 83,896 
Agency bonds2,802 16,164 — — — 18,966 
Municipal bonds6,320 646 — — — 6,966 
Sovereign bonds— — — — 1,089 1,089 
$189,113 $278,263 $157,832 $108,424 $48,275 $781,907 

NOTE 5: Inventories
Inventories consisted of the following (in thousands):
October 3, 2021December 31, 2020
Raw materials$32,598 $26,800 
Work-in-process2,975