UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[√]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 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 1-4298
COHU, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
Incorporation or Organization)
12367 Crosthwaite Circle, Poway, California
(Address of principal executive offices)
95-1934119
(I.R.S. Employer Identification No.)
92064-6817
(Zip Code)
Title of Each Class
Common Stock, $1.00 par value
Registrant’s telephone number, including area code: (858) 848-8100
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
COHU
Name of Exchange on Which Registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act:
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 has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $1,654,000,000 based on the closing
stock price as reported by the Nasdaq Stock Market LLC as of June 25, 2021. Shares of common stock held by each officer and director and by
each person or group who owns 5% or more of the outstanding common stock have been excluded in that such persons or groups may be deemed
to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 10, 2022, the Registrant had 48,563,820 shares of its $1.00 par value common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Cohu, Inc.’s 2022 Annual Meeting of Stockholders to be held on May 4, 2022, and to be filed pursuant to
Regulation 14A within 120 days after registrant’s fiscal year ended December 25, 2021, are incorporated by reference into Part III of this Report.
COHU, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 25, 2021
TABLE OF CONTENTS
PART I
Page
Item 1. Business ................................................................................................................................................... 1
Item 1A. Risk Factors ............................................................................................................................................. 9
Item 1B. Unresolved Staff Comments ................................................................................................................. 26
Item 2.
Properties ............................................................................................................................................... 26
Item 3.
Legal Proceedings ................................................................................................................................. 26
Item 4. Mine Safety Disclosures ....................................................................................................................... 26
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ............................................................................................................. 27
Item 6. Reserved ................................................................................................................................................ 29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ............. 30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ............................................................ 42
Item 8. Financial Statements and Supplementary Data .................................................................................... 43
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............. 43
Item 9A. Controls and Procedures ....................................................................................................................... 43
Item 9B. Other Information ................................................................................................................................. 45
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections ............................................... 45
PART III
Item 10. Directors, Executive Officers and Corporate Governance .................................................................. 45
Item 11. Executive Compensation ...................................................................................................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters .............................................................................................................................. 45
Item 13. Certain Relationships and Related Transactions, and Director Independence .................................... 45
Item 14. Principal Accounting Fees and Services .............................................................................................. 45
PART IV
Item 15. Exhibits, Financial Statement Schedules.............................................................................................. 46
Item 16. Form 10-K Summary ............................................................................................................................ 86
Signatures ............................................................................................................................................................... 87
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Securities
Exchange Act of 1934 and the Securities Act of 1933, which are subject to known and unknown risks and
uncertainties. The forward-looking statements include statements concerning, among other things, our business
strategy (including the influence of anticipated trends and developments in our business and the markets in which
we operate), financial results, operating results, revenues, gross margin, operating expenses, products, projected
costs and capital expenditures, research and development programs, sales and marketing initiatives, acquisitions
and competition. In some cases, you can identify these statements by our use of forward-looking words, such as
“may,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”
“intend” and “continue,” the negative or plural of these words and other comparable terminology. Forward-
looking statements are based on information available to us as of the filing date of this Annual Report on Form
10-K and our current expectations about future events, which are inherently subject to change and involve known
and unknown risks and uncertainties. You should not place undue reliance on these forward-looking statements.
We have no obligation to update any of these statements, and we assume no obligation to do so. Actual events or
results may differ materially from those expressed or implied by these statements due to various factors,
including but not limited to the matters discussed below in the section entitled “Item 1A: Risk Factors,” and
elsewhere in this Annual Report on Form 10-K.
PART I
Item 1. Business.
Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electromechanical system
(“MEMS”) test modules, test contactors, thermal sub-systems and semiconductor automated test equipment used
by global semiconductor and electronics manufacturers and semiconductor test subcontractors. We offer a wide
range of products and services, and revenue from our capital equipment products is driven by the capital
expenditure budgets and spending patterns of our customers, who often delay or accelerate purchases in reaction
to variations in their business. The level of capital expenditures by these companies depends on the current and
anticipated market demand for semiconductor devices and the products that incorporate them. Our recurring
revenues are driven by an increase in the number of semiconductor devices that are tested and by the continuous
introduction of new products and technologies by our customers.
On June 24, 2021, we completed the sale of our PCB Test Equipment (“PCB Test”) business, which represented
our PCB Test reportable segment. As part of the transaction we also sold certain intellectual property held by our
Semiconductor Test & Inspection segment that is utilized by the PCB Test business. Our decision to sell this non-
core business resulted from management’s determination that that they were no longer a fit within our
organization. We evaluated the guidance in Accounting Standards Codification (“ASC”) 205-20, Presentation of
Financial Statements – Discontinued Operations, and determined that the divestment of our PCB Test business
does not represent a strategic shift as the divestiture will not have a major effect on Cohu’s operations and
financial results and, as a result, it is not presented as discontinued operations in any periods presented.
Unless otherwise noted, all amounts presented are from continuing operations.
We have determined that we have one reportable segment, Semiconductor Test and Inspection Equipment
(“Semiconductor Test & Inspection”). Prior to the sale of our PCB Test Group (“PTG”) on June 24, 2021, we
reported in two segments, Semiconductor Test & Inspection and PCB Test Equipment. Financial information on
our reportable segments for each of the last three years is included in Note 10, “Segment and Geographic
Information” in Part IV, Item 15(a) of this Form 10-K.
1
Sales by reportable segment, expressed as a percentage of total consolidated net sales, for the last three years
were as follows:
Semiconductor Test & Inspection
PCB Test
2021
97 %
3 %
100 %
2020
92 %
8 %
100 %
2019
93 %
7 %
100 %
Cohu, Inc. (“Cohu”, “we”, “our”, “us” and the “Company”) was incorporated under the laws of California in
1947, as Kalbfell Lab, Inc. and commenced active operations in the same year. Our name was changed to Kay
Lab in 1954. In 1957, Cohu was reincorporated under the laws of the State of Delaware as Cohu Electronics, Inc.
and in 1972 our name was changed to Cohu, Inc.
Our Products
We currently sell the following products:
Semiconductor Test. Semiconductor Automated Test Equipment (“ATE”) is used both for wafer level and device
package testing. Our semiconductor ATE solutions consist primarily of two platforms focused on the system on a
chip (“SoC”) device market. The Diamond series platform, which includes the flagship Diamondx test system,
offers high-density instrumentation for low-cost testing of microcontrollers, application specific standard products
(“ASSP”), power management, display drivers, sensors and other mixed signal devices. The PAx series of testers
is focused primarily on the RF Front End IC and Module market.
Semiconductor Handlers. Semiconductor test handlers are used in conjunction with semiconductor ATE to
automate the testing of packaged semiconductor devices. Our handlers support a variety of package sizes and
device types, including those used in automotive, mobile, industrial, computing applications, among others. We
offer a broad range of test handlers, including pick-and-place, turret, gravity, strip, MEMS and thermal sub-
systems, along with inspection handlers that perform automated optical inspection of semiconductor devices.
Interface Products. Our interface products are comprised of test contactors, probe heads and probe pins. Test
contactors serve as the interface between the test handler and the semiconductor device under test such as
digital semiconductor devices utilizing spring probe technology, power management and LED semiconductor
devices utilizing cantilever technology, and RF semiconductor devices based on contacts designed to operate at
high frequencies. Test contactors and probe heads are specific to individual semiconductor device designs,
need to be replaced frequently and increase in size with the number of devices tested in parallel. Interface
Products are included in our recurring revenues.
Data Analytics. Our data analytics product, DI-Core, is a comprehensive software suite used to optimize Cohu
equipment performance. DI-Core provides real-time online performance monitoring and process control to
improve utilization, manages preventative and predictive maintenance to improve overall equipment
efficiency, links semiconductor tester, handler and test contactor data for intelligence and extended device
tracking, and provides a knowledge database and unified reports for quickly identifying issues and retaining
historical performance data.
Spares and Kits. We provide consumable, non-consumable and spare items that are used to maintain, sustain
or otherwise enable customers’ equipment to meet its performance, availability and production requirements.
We also design and manufacture a wide range of device dedication kits that enable handlers to process
different semiconductor packages. Spares and Kits are included in our recurring revenues.
Services. Our worldwide service organization performs installations and necessary maintenance of systems
sold. We provide various parts and labor warranties on test and handling systems and instruments designed and
manufactured by us and warranties on certain components that have been purchased from other manufacturers
and incorporated into our test and handling systems. We also provide training on the maintenance and
operation of our systems as well as application, data management software and consulting services on our
products. Services are included in our recurring revenues.
2
Sales by Product Line
During the last three years, our consolidated net sales were distributed as follows:
Semiconductor test & inspection systems (including kits)
Recurring revenues (1)
PCB test systems
(1) Recurring revenues include interface products, spares, kits (not as part of system sales) and services
2021
61 %
37 %
2 %
2020
50 %
45 %
5 %
2019
51 %
44 %
5 %
Customers
Our customers include semiconductor integrated device manufacturers, fabless design houses, PCB manufacturers,
and test subcontractors throughout the world. Repeat sales to existing customers represent a significant portion of our
sales. During the last three years, customers of our Semiconductor Test & Inspection segment that comprised 10% or
greater of our consolidated net sales were as follows:
Analog Devices
Intel
* Less than 10% of consolidated net sales.
2021
14.1%
*
2020
*
*
2019
*
11.1%
The loss of, or a significant reduction in, orders by these or other significant customers, including reductions due to
market, economic or competitive conditions or the outsourcing of final integrated circuit test to subcontractors that
are not our customers would adversely affect our financial condition and results of operations.
On June 24, 2021, we completed the divestment of our PCB Test business. No customer of our PCB Test segment
exceeded 10% of consolidated net sales for the years ended December 25, 2021, December 26, 2020 or December
28, 2019.
Additional financial information on revenues from external customers by geographic area for each of the last
three years is included in Note 10, “Segment and Geographic Information” in Part IV, Item 15(a) of this Form 10-
K.
Sales and Marketing
We market our products worldwide through a combination of a direct sales force and independent sales
representatives. In geographic areas where we believe there is sufficient sales potential, we generally employ our
own personnel. Our United States (U.S.) sales offices are located in Poway and Milpitas, California, St. Paul,
Minnesota, Lincoln, Rhode Island and Norwood, Massachusetts. Our European sales offices are located in
Kolbermoor, Germany; Grenoble, France; Agrate, Italy and La Chaux-de-Fonds, Switzerland. We operate in Asia
with sales and service offices in Singapore, Malaysia, Thailand, Philippines, Taiwan, China, South Korea and
Japan.
Competition
The semiconductor equipment industry is intensely competitive and is characterized by rapid technological
change and demanding worldwide service requirements. Significant competitive factors include product
performance, price, reliability, lead-time, customer support and installed base of products. While we believe that
we are the leading worldwide supplier of semiconductor test handling equipment, we face substantial competition
in Japan and Taiwan which represent a significant percentage of the worldwide market. Test subcontractors in
Asia also purchase mostly from local Asian competitors. In the semiconductor test market, we face competition
from two dominant suppliers headquartered in the U.S. and Japan, both of which are substantially larger than
Cohu’s test business. While we are among the leading worldwide suppliers of test contactors, this market is
fragmented with a large number of global and local competitors. To remain competitive within the industries we
serve, we believe we will require significant financial resources to offer a broad range of products, maintain
localized customer support and service centers worldwide and to invest in research and development of new
products. Failure to introduce new products in a timely manner or the introduction by competitors of products
with actual or perceived advantages could result in a loss of competitive position and reduced sales of existing
products. No assurance can be given that we will continue to compete successfully throughout the world.
3
Backlog
Our backlog of unfilled orders for products, by segment at December 25, 2021 and December 26, 2020 was as
follows:
(in millions)
Semiconductor Test & Inspection
PCB Test
Total consolidated backlog
$
$
2021
2020
292.9
$
N/A
$
292.9
237.1
22.4
259.5
Backlog is generally expected to ship within the next twelve months. Our backlog at any point in time may not be
representative of actual sales in any future period due to the possibility of customer changes in delivery schedules,
cancellation of orders, potential delays in product shipments, and difficulties in obtaining parts from suppliers or
failure to satisfy customer acceptance requirements resulting in the inability to recognize revenue under accounting
requirements. Furthermore, many orders are subject to cancellation or rescheduling by the customer with limited or
no penalty. A reduction in backlog during any period could have a material adverse effect on our business,
financial condition and results of operations.
Manufacturing and Raw Materials
Our principal manufacturing operations are currently located in Malacca, Malaysia (handler operations and kits);
Laguna, Philippines (kits and test contactors); Lincoln, Rhode Island (connectors); and Osaka, Japan (probe pins).
We outsource the manufacturing of many of our semiconductor automated test equipment products to Jabil Circuit,
Inc.’s facility in Penang, Malaysia. Our contract manufacturing partner is responsible for significant material
procurement, assembly and testing. We continue to manage product design through pilot production for the
subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our
products. Our contract manufacturer is responsible for funding the capital expenses incurred in connection with the
manufacture of our products, except with regard to end-of-line testing equipment and other specific manufacturing
equipment utilized in assembling our products or sub-components which are financed and owned by Cohu.
Contracting with a global provider such as Jabil, gives us added flexibility to manufacture certain products closer
to target markets in Asia, potentially increasing responsiveness to customers while reducing costs and delivery
times.
Many of the components and subassemblies we utilize are standard products, although some items are made to our
specifications. Certain components are obtained or are available from a limited number of suppliers or may be sole
sourced. We seek to reduce our dependence on sole and limited source suppliers, however in some cases the
complete or partial loss of certain of these sources could have a material adverse effect on our operations while we
attempt to locate and qualify replacement suppliers.
Patents and Trademarks
Our technology is protected by various intellectual property laws including patent, license, trademark,
copyright and trade secret laws. In addition, we believe that, due to the rapid pace of technological change in
the semiconductor and electronic equipment industries, the successful manufacture and sale of our products
also depends upon our experience, technological know-how, manufacturing and marketing skills and speed of
response to sales opportunities. In the absence of patent protection, we would be vulnerable to competitors
who attempt to copy or imitate our products or processes. We believe our intellectual property has value and
we have in the past and will in the future take actions we deem appropriate to protect such property from
misappropriation. However, there can be no assurance such actions will provide meaningful protection from
competition. Protecting our intellectual property rights or defending against claims brought by other holders of
such rights, either directly against us or against customers we have agreed to indemnify, would likely be
expensive and time consuming and could have a material adverse effect on our operations.
Research and Development
Research and development activities are carried on in our various subsidiaries and are directed toward
development of new products and equipment, as well as enhancements to existing products and equipment. Our
total research and development expense was $92.0 million in 2021, $86.2 million in 2020 and $86.1 million in
2019.
We work closely with our customers to make improvements to our existing products and in the development of
new products. We expect to continue to invest heavily in research and development and must manage product
4
transitions successfully as introductions of new products could adversely impact sales.
Seasonality
Historically, the semiconductor industry has been seasonal with recurring periods of oversupply and excess
capacity, which often have had a significant effect on the semiconductor industry’s demand for capital
equipment, including equipment of the type we manufacture and market. We anticipate that the markets for
newer generations of semiconductors and semiconductor equipment will be subject to similar cycles. See the risk
factor entitled “The semiconductor industry we serve is seasonal, volatile and unpredictable, and increased
cyclicality could have an adverse impact on our sales and gross margin.”
Information About Our Executive Officers
The following sets forth the names, ages, positions and offices held by all executive officers of Cohu as of
February 10, 2022. Executive Officers serve at the discretion of the Board of Directors, until their successors are
appointed.
Name
Luis A. Müller
Jeffrey D. Jones
Christopher G. Bohrson
Thomas D. Kampfer
Ian P. Lawee
Age
Position
52 President and Chief Executive Officer
60 Vice President, Finance and Chief Financial Officer
62 Senior Vice President, Global Customer Group
58 Vice President, Corporate Development, General Counsel and Secretary
55 Senior Vice President and General Manager, Semiconductor Test Group
Dr. Müller has been the President and Chief Executive Officer of Cohu since December 28, 2014. His previous
roles at Cohu include serving as President of Cohu’s Semiconductor Equipment Group (“SEG”) from 2011 to
2014; Managing Director of Rasco GmbH (“Rasco”) from 2009 to 2010; Vice President of Delta Design’s High
Speed Handling Group from 2008 to 2010; and Director of Engineering at Delta Design from 2005 to 2008. Prior
to joining Cohu, Dr. Müller spent nine years at Teradyne Inc., where he held management positions in
engineering and business development. Dr. Müller also serves as a director for Celestica Inc., a solutions-based
company providing design, manufacturing and hardware platform and supply chain solutions.
Mr. Jones joined Cohu’s Delta Design subsidiary in July 2005 as Vice President Finance and Controller. In
November 2007, Mr. Jones was named Vice President, Finance and Chief Financial Officer of Cohu. Prior to
joining Delta Design, Mr. Jones, was Vice President and General Manager of the Systems Group at SBS
Technologies, Inc., a designer and manufacturer of embedded computer products. Prior to SBS Technologies,
Mr. Jones was an Audit Manager for Coopers & Lybrand (now PricewaterhouseCoopers).
Mr. Bohrson was appointed Senior Vice President, Global Customer Group on February 8, 2021. Previously,
Mr. Bohrson served as Sr. Vice President and General Manager, Test Handler Group beginning in October
2018 and was Vice President and General Manager for Digital Test Handlers from January 2017 until October
2018 and served as Vice President Sales and Service, Americas from May 2016 to January 2017. Prior to
joining Cohu, from 2007 through 2016, Mr. Bohrson held several executive positions at Bosch Automotive
Service Solutions/SPX lastly as Vice President and General Manager of the OEM Diagnostics and Information
Solutions group. Prior to that, Mr. Bohrson spent twenty years working in a variety of management and
technical roles at Teradyne, Inc.’s semiconductor and broadband test division in the U.S. and Asia.
Mr. Kampfer joined Cohu in May 2017 as Vice President Corporate Development, General Counsel and
Secretary. Mr. Kampfer previously served from June 2015 to May 2017 as Executive Vice President and Chief
Financial Officer of Multi-Fineline Electronix, Inc. Prior to that, Mr. Kampfer served from 2012 to 2015 as
President of CohuHD, formerly a division of Cohu, which was divested in 2014. Previously, Mr. Kampfer
spent eight years with Iomega Corporation, holding several executive positions, including President and Chief
Operating Officer and Vice President, General Counsel and Secretary. Earlier, Mr. Kampfer served in various
legal and business development executive roles with Proxima Corporation, and also held various positions in
manufacturing engineering and legal at IBM.
Mr. Lawee joined Cohu in May 2019 as Vice President and General Manager of Cohu’s Semiconductor Test
Group and subsequently promoted to Senior Vice President and General Manager on February 9, 2021. Mr.
Lawee has more than twenty-five years of experience in multiple management positions at both semiconductor
and test instrumentation companies. Between 2009 and 2019, he served in multiple General Manager and
Senior Director roles at Analog Devices, with responsibilities spanning Interface, Isolation and Precision
5
Converter semiconductor franchises, as well as Business Unit responsibility for semiconductors sold into the
Energy market. Prior to that, Mr. Lawee spent fifteen years working in a variety of product, marketing and
engineering management roles at Teradyne’s semiconductor test division.
Governmental Regulations
Our business activities are worldwide and are subject to various federal, state, local, and foreign laws and our
products and services are governed by a number of rules and regulations. Costs and accruals incurred to comply
with these governmental regulations are presently not material to our capital expenditures, results of operations
and competitive position. Although there is no assurance that existing or future government laws applicable to
our operations, services or products will not have a material adverse effect on our capital expenditures, results of
operations and competitive position, we do not currently anticipate material expenditures for government
regulations.
Environmental
Our products and operations are, or may in the future be, subject to various federal, state, local, and foreign laws
and regulations concerning the environment. Compliance with federal, state, local and international laws that
have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to
the protection of the environment and the prevention of climate change have not had a material effect and are not
expected to have a material effect upon our capital expenditures, results of operations or our competitive position.
However, future changes in regulations may require expenditures that could adversely impact earnings in future
years. We believe we are in compliance and are committed to maintaining compliance with all environmental
laws applicable to our operations, products and services, and to reducing our environmental impact across all
aspects of our business.
Global Trade
As a global company, the import and export of our products and services are subject to laws and regulations
including international treaties, U.S. export controls and sanctions laws, customs regulations, and local trade rules
around the world. We believe we are in compliance and are committed to maintaining compliance with all global
trade laws applicable to our operations, products and services.
Human Capital Management
Cohu is a global supplier of semiconductor test and inspection handlers, MEMS test modules, test contactors,
thermal sub-systems and semiconductor automated test equipment used by global semiconductor and electronics
manufacturers and semiconductor test subcontractors. We believe that the daily commitment and dedication of
our workforce in meeting our customers’ needs is one of the significant contributors to our success as an
organization. To ensure we maintain our position as a global leader in the semiconductor test and inspection
space, we are committed to providing a safe and positive work environment for our employees that emphasizes
learning and professional development, respect for individuals and ethical conduct, and that is facilitated by a
direct management-employee engagement model.
Diversity, Inclusion, and Non-discrimination
We welcome and value diversity ensuring that our work benefits from a broad range of viewpoints and
perspectives. We strive to maintain workplaces that are free from discrimination or harassment based on race,
color, religion, gender, gender identity or gender expression, national origin or ancestry, age, disability, veteran
status, military service, sexual orientation, genetic information, and any other protected category recognized
under applicable laws. We believe that a diverse workforce is critical to our success, and we continue to focus on
the hiring, retention and advancement of women and underrepresented populations. We are committed to
respecting and protecting the human rights of all our employees.
Employees
As of December 25, 2021, we had approximately 3,240 employees, including approximately 165 temporary
employees, in 24 countries. Approximately 21% of our employees are located in the Americas, 14% are located
in EMEA (Europe, the Middle East and Africa) and 65% are located in Asia Pacific. Our employee headcount
has fluctuated in the last five years primarily due to the volatile and unpredictable business conditions in the
semiconductor equipment industry and has also been impacted by acquisitions and divestitures.
Management Engagement Practices
We adhere to our core values and Code of Business Conduct and Ethics with a commitment to treating our
employees and all our partners with professionalism, dignity and respect. We pride ourselves at fostering an
6
innovative environment and collaborative work relationships. This includes respecting principles of freedom of
association and the right to engage in collective bargaining in accordance with applicable laws.
Our employees in the U.S. and most locations in Asia are not covered by collective bargaining agreements.
However, certain employees at our operation in Germany are represented by a works council and employees in
La Chaux-de-Fonds, Switzerland are members of the microtechnology and Swiss watch trade union. The
Collective Bargaining Agreement of “Metallurgie (ingenieurs et cadres)” is applicable to all employees of our
French subsidiary and certain employees in our China operation belong to local trade unions. We have not
experienced any work stoppages and consider relations with our employees to be good.
Health and Safety
The health and safety of our employees is of utmost important to us. Cohu works to protect the health and safety
of employees and our customers and intends to conduct all business activities in an environmentally and socially
responsible manner. We encourage and strive to have every employee actively champion those behaviors and the
attitudes necessary to prevent work-related injuries, illnesses, property damage, and adverse impact to the
environment. Our ultimate goal is to achieve a level of work-related injuries as close to zero as possible through
continuous investment in our safety programs. We provide protective equipment (e.g., eye protection, masks and
gloves) as required by applicable standards and as appropriate given employee job duties.
In response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our
employees, our subcontractors and our customers. These protocols include complying with physical distancing,
enhanced hygiene and other health and safety standards as required by federal, state and local government
agencies, and taking into consideration guidelines of the Centers for Disease Control and Prevention and other
public health authorities. In addition, we modified the way we conduct many aspects of our business to reduce the
number of in-person interactions. For example, we significantly expanded the use of virtual interactions in all
aspects of our business, including customer facing activities. Many of our administrative and operational
functions during this time have required modification as well, including segments of our workforce working
remotely.
Compensation and Benefits
Cohu is committed to providing market competitive compensation programs to attract, retain and motivate a high
performing workforce critical to our long-term success. As part of our compensation philosophy, we focus
Cohu’s workforce on our financial and other business goals to drive and motivate employee performance in key
areas through the administration of our management incentive plan, equity incentive plan, global profit-sharing
and other local bonus plans, as may be applicable to a given position. Cohu also complies with applicable wage,
work hours, overtime and benefits laws.
To foster a stronger sense of ownership and align the interests of our employees with shareholders, grants of
restricted stock units are provided to many of our employees on an annual basis and all eligible employees are
able to purchase shares of our common stock, at a 15% discount, through our Employee Stock Purchase Plan.
Furthermore, we offer comprehensive, locally relevant and innovative benefits to all eligible employees. In the
U.S, these include, among other benefits:
Comprehensive health and wellness insurance coverage is offered to employees working an average of 24
hours or more each week.
401(k) retirement plan with matching company contributions of up to 4% of eligible compensation.
Tuition reimbursement program.
Parental leave is provided to all new parents for birth, adoption or foster placement.
Paid Time Off Programs covering time away from work due to employee and family illness, holidays,
vacation, civic duties, etc.
Outside of the U.S., we have provided other innovative benefits to help address market-specific needs, such as
supplemental medical coverage or reimbursements, paid time off programs, wellness and development events and
programs, transportation subsidies, etc.
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Succession Planning
We perform succession planning annually to ensure that we develop and sustain a strong bench of talent capable
of performing at the highest levels. Not only is talent identified, but potential paths of development are discussed
to ensure that employees have an opportunity to build their skills and are well-prepared for future roles. The
strength of our succession planning process is evident through our long history of promoting our leaders from
within the organization, including 65% of our current executive leadership team.
Available Information
Our web site address is www.cohu.com. We make available free of charge, on or through our web site, our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to those reports, as soon as reasonably practicable after such material is electronically filed with the Securities
and Exchange Commission. Our Code of Business Conduct and Ethics and other documents related to our
corporate governance are also posted on our web site at https://cohu.gcs-web.com/corporate-
governance/documents-charters. When required by the rules of the Nasdaq Stock Market, LLC (“Nasdaq”), or the
Securities and Exchange Commission (“SEC”), we will disclose any future amendment to, or waiver of, any
provision of the code of conduct for our chief executive officer and principal financial officer or any member or
members of our board of directors on our website within four business days following the date of such
amendment or waiver. Information contained on our web site is not deemed part of this report.
8
Item 1A. Risk Factors.
In addition to the other information in this Annual Report on Form 10-K, you should carefully consider the risk
factors discussed in this Annual Report on Form 10-K in evaluating Cohu and our business (the “risk factors”).
Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any
adverse impacts on the global business and economic environment as a result. If any of the identified risks actually
occur, our business, financial condition and results of operations could be materially adversely affected, the
trading price of our common stock could decline, and you may lose all or part of your investment in our common
stock. The risks and uncertainties described in this Annual Report on Form 10-K are not the only ones we face.
Additional risks that we currently do not know about, or that we currently deem to be immaterial, may also impair
our business operations or the trading price of our common stock.
Risk Factors Summary
Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that
make an investment in our securities speculative or risky, all of which are more fully described below. This
summary should be read in conjunction with the full “Risk Factors” described below and should not be relied upon
as a complete summary of the material risks facing our business.
Risks Relating to the COVID-19 Pandemic
The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect,
our business, financial condition and results of operations.
The COVID-19 pandemic has impacted, and is expected to continue to negatively impact, the operations
of our key suppliers, customers and other business partners.
Risks Relating to Our Business Operations and Industry
We are making investments in new products and product enhancements, which may adversely affect our
operating results; these investments may not be commercially successful.
We have manufacturing operations in Asia. Any failure to effectively manage multiple manufacturing
sites and to secure raw materials meeting our quality, cost and other requirements, or failures by our
suppliers to perform, could harm our sales, service levels and reputation.
A failure to perform or unexpected downtime experienced by our sole contract manufacturer for certain
semiconductor automated test equipment could adversely impact our operations.
Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner
could adversely impact our operations.
We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and
packaging materials, components and subassemblies, labor and distribution costs, which may impact our
financial condition or results of operations.
The semiconductor industry we serve is seasonal, volatile and unpredictable, and increased cyclicality
could have an adverse impact on our sales and gross margin.
The semiconductor equipment industry is intensely competitive.
Semiconductor equipment is subject to rapid technological change, product introductions and transitions
which may result in inventory write-offs, and our new product development involves numerous risks and
uncertainties.
The seasonal nature of the semiconductor equipment industry places enormous demands on our
employees, operations and infrastructure.
A limited number of customers account for a substantial percentage of our net sales.
A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are
subject to economic and political instability and we compete against a number of Asia-based test
contactor, test handler and automated test equipment suppliers.
9
Risks Associated with Operating a Global Business
We are exposed to the risks of operating in certain foreign locations from where Cohu manufactures
certain products, and supports our sales and services to the global semiconductor industry.
Increasingly restrictive trade and export regulations may materially harm and limit Cohu’s business and
ability to sell its products.
Risks Relating to our Indebtedness, Financing and Future Access to Capital
The remaining indebtedness in connection with our financing of the Xcerra acquisition may have an
adverse impact on Cohu’s liquidity, limit Cohu’s flexibility in responding to other business opportunities
and increase Cohu’s vulnerability to adverse economic and industry conditions; the Tax Cuts and Jobs
Act severely limits the deductibility of interest expense.
Risks Relating to Acquisitions and Other Strategic Transactions
We are exposed to other risks associated with additional potential acquisitions, investments and
divestitures such as integration difficulties, disruption to our core business, dilution of stockholder value,
and diversion of management attention.
Risks Relating to Owning Our Stock
Our financial and operating results may vary and fall below analysts’ estimates, or credit rating agencies
may change their ratings on Cohu, any of which may cause the price of our common stock to decline or
make it difficult to obtain other financing.
We have experienced significant volatility in our stock price.
Risks Relating to Regulatory Matters
There may be changes in, and uncertainty with respect to, legislation, regulation and governmental
policy in the United States.
Risks Relating to Cybersecurity, Intellectual Property and Litigation
Our business and operations could suffer in the event of cybersecurity breaches within our operational
systems or products.
For a more complete discussion of the material risks facing our business, see below.
Risks Relating to the COVID-19 Pandemic
The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our
business, financial condition and results of operations.
The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our
business, financial condition and results of operations. As the COVID-19 virus has spread rapidly and globally,
from March 2020 and continuing to the present, with subsequent variants emerging, authorities have
implemented numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines,
shelter in place orders, vaccine mandates, and shutdowns, including at various times in all of the jurisdictions
where we operate. These measures have adversely impacted, and are continuing to adversely impact, our
workforce and operations, the operations of our customers, and those of our respective vendors and suppliers. We
have significant operations in the U.S., Germany, Switzerland, Malaysia, Japan and the Philippines, and each of
these countries has been significantly affected, and remain affected, by the COVID-19 outbreak. During the
COVID-19 pandemic, it has been common for restrictions to be implemented, relaxed and then implemented
again with little or no notice, which adversely impacts our ability to accurately predict our future revenue and
budget future expenses and is disruptive to our operations.
Although we believe that Cohu qualifies as an “essential business” in the jurisdictions in which we operate, our
business has been, and is continuing to be, adversely impacted by evolving and extended public health
requirements around the world; government-mandated facility shutdowns; import/export, shipping and logistics
disruptions and delays; other supply chain and distribution constraints or delays; rapid changes to business,
political or regulatory conditions affecting the semiconductor equipment industry and the overall global
economy; availability of employees, increased sick time and lost employee productivity; risks associated with, at
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times, temporarily housing employees in our Malaysia and Philippines factories; remote working IT and
increased cybersecurity risks; increased internal control risks over financial reporting as key finance staff work
remotely; delayed product development programs; customers’ canceling, pushing out orders or refusal to accept
product deliveries; delayed collection of receivables; other actions of our customers, suppliers and competitors
which may be sudden and inconsistent with our expectations; higher shipping, trucking and logistics costs; higher
component costs; manufacturing capacity limitations; additional credit rating agency downgrades could occur
which would increase our cost of raising capital; and potential additional impairment of goodwill or other
intangible assets or inventory write-downs due to lower product demand may become necessary. Any of the
foregoing COVID-19 driven impacts may have a material adverse effect on our financial condition and results of
operations, and may also have the effect of increasing the likelihood and/or magnitude of other risks described in
these risk factors. With each successive COVID-19 surge, we believe the risks of material adverse business
disruption increase. We continuously monitor and react to the pandemic but cannot predict its future course or
impacts.
The COVID-19 pandemic has impacted, and is expected to continue to negatively impact, the operations of our
key suppliers, customers, and other business partners.
The extent to which the COVID-19 pandemic may impact the operations of our critical suppliers, business partners
and customers could result in disruptions to our global supply chains. We may obtain certain components and
materials used in our products from a limited group of suppliers, and in some cases alternative sources for certain
components are not readily available. We have had certain suppliers temporarily suspend operations during the
COVID-19 pandemic and have been able to work around such disruptions; however, we may not be successful in
addressing future disruptions. The COVID-19 pandemic may heighten the risks posed by our dependence upon
sole or limited source suppliers to the extent that the pandemic could disrupt the operations of one or more of these
suppliers, potentially impacting our suppliers’ ability to maintain manufacturing operations at existing levels, and
resulting in our inability to adequately obtain key components or materials, causing delayed deliveries or
unsatisfactory component quality for our customers as we look to engage and qualify alternative suppliers (see risk
factor entitled “Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective
manner could adversely impact our operations”).
Risks Relating to Our Business Operations and Industry
We are making investments in new products and product enhancements, which may adversely affect our
operating results; these investments may not be commercially successful.
Given the highly competitive and rapidly evolving technology environment in which we operate, we believe it is
important to develop new and enhanced product offerings to meet strategic opportunities as they evolve. This
includes developing products that we believe are necessary to meet the future needs of the marketplace and to
enter new markets. We are currently significantly investing in new product development programs relating to test
contactors, test handlers and automated test equipment. For example, in fiscal 2021, we incurred $92.0 million in
research and development expenses. We expect to continue to make investments and we may, at any time, based
on product need or marketplace demand, decide to significantly increase our product development expenditures
in these or other products. The cost of investments in new product offerings and product enhancements can have
a negative impact on our operating results. We have in the past made material investments in new product
platforms that for various reasons, such as technical challenges or lack of customer adoption, have not generated
the expected sales or return. There can be no assurance that other new products we develop will be accepted in
the marketplace or generate material revenues for us.
We have manufacturing operations in Asia. Any failure to effectively manage multiple manufacturing sites
and to secure raw materials meeting our quality, cost and other requirements, or failures by our suppliers to
perform, could harm our sales, service levels and reputation.
A substantial majority of our products are manufactured in Asia. Our reliance on overseas manufacturers exposes
us to significant risks including complex management, foreign currency, legal, tax and economic risks, which we
may not be able to address quickly and adequately. In addition, it is time consuming and costly to qualify overseas
supplier relationships. If we should fail to effectively manage overseas manufacturing operations or logistics, or if
one or more of them should experience delays, disruptions or quality control problems, or if we had to change or
add additional manufacturing sites, our ability to ship products to our customers could be delayed. Also, the
addition of overseas manufacturing locations increases the demands on our administrative and operations
infrastructure and the complexity of our supply chain management and logistics. Our overseas sites are more
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susceptible to impacts from natural disasters, health epidemics and geopolitical instability (see risk factors entitled
“The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our
business, financial condition and results of operations” and “The occurrence of natural disasters, health
epidemics, corruption and geopolitical instability caused by terrorist attacks and other threats may adversely
impact our operations and sales”). If our overseas manufacturing locations are unable to meet our manufacturing
requirements in a timely manner, our ability to ship products and to realize the related revenues when anticipated
could be materially affected.
Our suppliers are subject to the fluctuations in general economic cycles, and global economic conditions may
impact their ability to operate their businesses. They may also be impacted by possible import, export, tariff and
other trade barriers, increasing costs of raw materials, labor and distribution, resulting in demands for less attractive
contract terms or an inability for them to meet our requirements or conduct their own businesses. Additionally,
consolidation in our supply chain due to mergers and acquisitions may reduce the number of suppliers or change
our relationships with them. The performance and financial condition of a supplier may cause us to alter our
business terms or to cease doing business with a particular supplier, or change our sourcing practices generally,
which could in turn adversely affect our own business and financial condition. Failure to effectively manage our
manufacturing and our relationships with our suppliers could have a material adverse effect on our business and
results of operations.
A failure to perform or unexpected downtime experienced by our sole contract manufacturer for certain
semiconductor test systems could adversely impact our operations.
We depend upon Jabil Manufacturing Co, (“Jabil”) to manufacture most of our semiconductor test systems from
its facility located in Malaysia. In the event that Jabil was unable to meet Cohu’s current delivery schedule for
semiconductor test systems, or if Jabil experienced unexpected downtime, we may not be able to sell, or have
significant delays, in fulfilling our customer orders. If we experienced significant delays or disruptions with Jabil, it
would take us significant time to ramp up a new manufacturer for our semiconductor test products, either in-house
or with another contract manufacturer.
Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could
adversely impact our operations.
We use numerous vendors to supply parts, components and subassemblies for the manufacture of our products. It
is not always possible to maintain multiple qualified suppliers for all of our parts, components and subassemblies.
As a result, many key parts may be available only from a single supplier (“sole source”) or a limited number of
suppliers. In addition, suppliers may significantly raise prices or cease manufacturing certain components (with or
without advance notice to us) that are difficult to replace without significant reengineering of our products. On
occasion, we have experienced problems in obtaining adequate and reliable quantities of various parts and
components from certain key or sole source suppliers. For example, at the beginning of 2022, we are
experiencing supply constraints and delays in accessing certain specialty semiconductors necessary for the
production of test instruments for our semiconductor ATE products. If we cannot quickly resolve these
constraints, our revenue and overall gross margin will be adversely impacted beginning in first quarter 2022.
More broadly, our results of operations may be materially and adversely impacted if we do not receive sufficient
parts to meet our requirements in a timely and cost-effective manner.
We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and
packaging materials, components and subassemblies, labor and distribution costs, which may impact our
financial condition or results of operations.
As a global manufacturer, we rely on raw materials, packaging materials, direct labor, energy, a large network of
suppliers, distribution resources and transportation providers. In 2021 and the early part of 2022, the costs of raw
materials, packaging materials, labor, energy, components and subassemblies, transportation and other inputs
necessary for the production and distribution of our products have increased. Since the onset of the COVID-19
pandemic, we have seen a dramatic increase in freight and shipping costs. The foregoing price fluctuations are
driven by factors beyond our control. Although we are unable to predict the longer-term impacts, we expect the
pressures of input cost inflation to continue into 2022. Attempts to offset these cost pressures, such as through
product price increases, or attempting to reduce operating costs elsewhere, may not be successful. Higher product
prices may result in reductions in sales volume. Customers may be less willing to pay a price differential for our
products and may purchase lower-priced competitive offerings or may delay some purchases altogether. To the
extent that price increases are not otherwise offset, and/or if they result in decreases in sales volume, our business,
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financial condition or operating results may be adversely affected.
The semiconductor industry we serve is seasonal, volatile and unpredictable, and increased cyclicality could
have an adverse impact on our sales and gross margin.
Visibility into our markets is limited. The semiconductor equipment business is highly dependent on the overall
strength of the semiconductor industry. Historically, the semiconductor industry has been seasonal with recurring
periods of oversupply and excess capacity, which often have had a significant effect on the semiconductor
industry’s demand for capital equipment, including equipment of the type we manufacture and market. We
anticipate that the markets for newer generations of semiconductors and semiconductor equipment will also be
subject to similar cycles and severe downturns. Any significant reductions in capital equipment investment by
semiconductor integrated device manufacturers and test subcontractors will materially and adversely affect our
business, financial position, including the level of product sales and overall gross margin, and results of
operations. In addition, the seasonal, volatile and unpredictable nature of semiconductor equipment demand has
in the past and may in the future expose us to significant excess and obsolete and lower of cost or net realizable
value inventory write-offs and reserve requirements. In 2021, 2020 and 2019, we recorded pre-tax inventory-
related charges of approximately $7.1 million, $6.0 million, and $4.1 million, respectively, primarily as a result of
changes in customer forecasts. We saw weakness in market conditions in 2019, followed by COVID-19 driven
uncertainties in 2020, then a significant market recovery beginning in third quarter 2020. Abrupt, unexpected and
severe demand changes have occurred in the past and are expected to reoccur in the future within our industry.
Since the onset of the COVID-19 pandemic, in particular, we have seen demand fluctuations in our test handler
group (“THG”) and semiconductor test group (“STG”) businesses. Our recent sales, in particular during the
second and third quarters of 2021, became more weighted toward THG and less toward STG products, which had
a material negative impact on our gross margins. Although the company continues to take actions to reduce
expenses and improve overall operational efficiency, such actions may not be sufficient to fully offset any gross
margin impacts. We cannot predict when and to what extent sales among our businesses may normalize or
change in the future, or when and to what extent gross margins may improve in the future.
The semiconductor equipment industry is intensely competitive.
The industries we serve are intensely competitive, and we face substantial competition from numerous companies
throughout the world. The test handler industry, while relatively small in terms of worldwide market size
compared to other segments of the semiconductor equipment industry, has several participants resulting in intense
competitive pricing pressures. Future competition may include companies that do not currently supply test
handlers. In addition, there are emerging companies that provide or may provide innovative technology
incorporated in products that may compete successfully against our products. We expect our competitors to
continue to improve the design and performance of their current products and introduce new products with
improved performance capabilities. Our failure to introduce new products in a timely manner, the introduction by
our competitors of products with perceived or actual advantages, or disputes over rights to use certain intellectual
property or technology could result in a loss of our competitive position and reduced sales of, or margins on our
existing products. Intense competition has adversely impacted our product average selling prices and gross
margins on certain products. If we are unable to reduce the cost of our existing products and successfully
introduce new lower cost products, then we expect that these competitive conditions would negatively impact our
gross margin and operating results in the foreseeable future.
We have increased investments in our test contactor business and targeted significant growth opportunities.
However, the test contactor market is fragmented, with many entrenched regional players, and subject to
intense price competition and high localized customer support requirements. We believe that customer support
and responsiveness and an ability to consistently meet tight deadlines is critical to our success. If we are unable
to continue to reduce the cost of our test contactor products, while also meeting customer support requirements
and deadlines, then we expect that these competitive conditions would negatively impact our test contactor
operating results and impede us from achieving our test contactor sales goals.
In addition, with the Xcerra acquisition, Cohu entered the automated test equipment (“ATE”) market. Our
ability to increase ATE sales will depend, in part, on our ability to win new customers. Semiconductor and
electronics manufacturers typically select a particular vendor’s product for testing new generations of a device
and make substantial investments to develop related test program applications and interfaces. Once a
manufacturer has selected an ATE vendor for a new generation of a device, that manufacturer is more likely to
purchase systems from that vendor for that generation of the device, and, possibly, subsequent generations of
13
that device as well. Cohu has a niche position and relatively low share in the ATE market, which is primarily
driven by two larger companies with significantly more resources to invest into the ATE market. Therefore,
the opportunities to obtain orders from new customers or existing customers may be limited, which may impair
our ability to grow our ATE revenue. We also believe that our niche position results in greater sales cyclicality
versus larger more diversified ATE vendors and Cohu experienced such adverse cyclicality in 2021. These
factors may materially and adversely affect our current and future target markets and our ability to compete
successfully in those markets.
Semiconductor equipment is subject to rapid technological change, product introductions and transitions which
may result in inventory write-offs, and our new product development involves numerous risks and uncertainties.
Semiconductor equipment and processes are subject to rapid technological change. We believe that our future
success will depend in part on our ability to enhance existing products and develop new products with improved
performance capabilities. We expect to continue to invest heavily in research and development and must manage
product transitions successfully, as introductions of new products, including the products obtained in our
acquisitions, may adversely impact sales and/or margins of existing products. In addition, the introduction of new
products by us or by our competitors, the concentration of our revenues in a limited number of large customers,
the migration to new semiconductor testing methodologies and the custom nature of our inventory parts increases
the risk that our established products and related inventory may become obsolete, resulting in significant excess
and obsolete inventory exposure. This exposure resulted in charges to operations during each of the years in the
three-year period ended December 25, 2021. Future inventory write-offs and increased inventory reserve
requirements could have a material adverse impact on our results of operations and financial condition.
The design, development, commercial introduction and manufacture of new semiconductor equipment is an
inherently complex process that involves a number of risks and uncertainties. These risks include potential
problems in meeting customer acceptance and performance requirements, integration of the equipment with other
suppliers’ equipment and the customers’ manufacturing processes, transitioning from product development to
volume manufacturing and the ability of the equipment to satisfy the semiconductor industry’s constantly
evolving needs and achieve commercial acceptance at prices that produce satisfactory profit margins. The design
and development of new semiconductor equipment is heavily influenced by changes in integrated circuit
assembly, test and final manufacturing processes and integrated circuit package design changes. We believe that
the rate of change in such processes and integrated circuit packages is accelerating. As a result of these changes
and other factors, assessing the market potential and commercial viability of test handling, ATE, MEMS, system-
level and burn-in test equipment and test contactors is extremely difficult and subject to a great deal of risk. In
addition, not all integrated circuit manufacturers employ the same manufacturing processes. Differences in such
processes make it difficult to design standard test products that can achieve broad market acceptance. As a result,
we might not accurately assess the semiconductor industry’s future equipment requirements and fail to design and
develop products that meet such requirements and achieve market acceptance. Failure to accurately assess
customer requirements and market trends for new semiconductor test products may have a material adverse
impact on our operations, financial condition and results of operations.
The transition from product development to the manufacture of new semiconductor equipment is a difficult
process and delays in product introductions and problems in manufacturing such equipment are common. We
have in the past and may in the future experience difficulties in manufacturing and volume production of our
new equipment. In addition, as is common with semiconductor equipment, after sale support and warranty
costs have typically been significantly higher with new products than with our established products. Future
technologies, processes and product developments may render our current or future product offerings obsolete
and we might not be able to develop, introduce and successfully manufacture new products or make
enhancements to our existing products in a timely manner to satisfy customer requirements or achieve market
acceptance. Furthermore, we might not realize acceptable profit margins on such products.
The seasonal nature of the semiconductor equipment industry places enormous demands on our employees,
operations and infrastructure.
The semiconductor equipment industry is characterized by dramatic and sometimes rapid changes in demand
for its products. These are generally dictated by introduction of new consumer products, launch of new model
vehicles, implementation of new communications infrastructure, or in response to an increase in industrial
equipment and machinery that utilizes semiconductors. A number of other factors including changes in
integrated circuit design and packaging may affect demand for our products. Sudden changes in demand for
14
semiconductor equipment commonly occur, and have a significant impact on our operations, and such changes
in demand (up or down) are difficult to predict and proactively plan for. We have in the past and may in the
future experience difficulties, particularly in manufacturing, and with training and recruiting large numbers of
additions to our workforce. The volatility in headcount and business levels, combined with the seasonal nature
of the semiconductor industry, may require that we invest substantial amounts in new operational and financial
systems, procedures and controls. We may not be able to timely or successfully adjust our systems, facilities
and production capacity to meet our customers’ changing requirements. Any inability to meet such
requirements will have an adverse impact on our business, financial position and results of operations. Sudden
demand changes in business conditions, positive or negative, are common in our industry but the timing of
such changes is very difficult to predict.
A limited number of customers account for a substantial percentage of our net sales.
A small number of customers have been responsible for a significant portion of our net sales. For fiscal year 2021,
net revenue from our ten largest customers represented 57% of our total net revenue. During the past five years, the
percentage of our sales derived from these significant customers has varied greatly. Such variations are due to
changes in the customers’ business, consolidation within the semiconductor industry and their purchase of products
from our competitors. It is common in the semiconductor equipment industry for customers to purchase products
from more than one equipment supplier, increasing the risk that our competitive position with a specific customer
may deteriorate. No assurance can be given that we will continue to maintain our competitive position with these
or other significant customers. Also, consolidation in the semiconductor industry may reduce our customer base
and could adversely affect the market for our products, which could cause a decline in our revenues. With
consolidation, the number of actual and potential customers for our products has decreased in recent years.
Consolidation may lead to relatively fewer opportunities to sell our products if we are not chosen as a supplier by
any given prospective customer, and may lead to increased pricing pressures from customers that have greater
volume purchasing power.
We expect the percentage of our revenues derived from significant customers will vary greatly in future periods.
The loss of, or a significant reduction in, orders by these or other significant customers as a result of competitive
products, market conditions including end market demand for our customers’ products, outsourcing final
semiconductor test to test subcontractors that are not our customers or other factors, would have a material adverse
impact on our business, financial condition and results of operations. Furthermore, the concentration of our
revenues in a limited number of large customers is likely to cause significant fluctuations in our future annual and
quarterly operating results.
A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are subject
to economic and political instability and we compete against a number of Asia-based test contactor, test
handler and automated test equipment suppliers.
The majority of our export sales are made to destinations in Asia. Political or economic instability, particularly in
Asia, may adversely impact the demand for capital equipment, including equipment of the type we manufacture
and market (see risk factor “Global economic and political conditions, including trade tariffs and export
restrictions, have impacted our business and may continue to have an impact on our business and financial
condition”). In addition, we face intense competition from a number of Asian suppliers that have certain
advantages over United States (U.S.) suppliers, including us. These advantages include, among other things,
proximity to customers, lower cost structures, a willingness to compete solely on price, favorable tariffs and other
government preferences, and affiliation with significantly larger organizations. In addition, changes in the amount
or price of semiconductors produced in Asia could impact the profitability or capital equipment spending
programs of our foreign and domestic customers.
If we cannot continue to develop, manufacture, market and support products and services that meet
customer requirements for innovation and quality, our revenue and gross margin may suffer.
The process of developing new high technology products and services and enhancing existing products and
services is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and
emerging technological trends accurately could significantly harm our sales and results of operations. Our
customers’ selection processes typically are lengthy and can require us to incur significant sales, service and
engineering resources, and to provide the customer evaluation systems for several months at no charge, in pursuit
of a single customer opportunity. We may not win the competitive selection process and may never generate any
revenue despite incurring such expenditures. The delays inherent in these lengthy sales cycles increase the risk that
15
a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales.
In addition, in the course of conducting our business, we must adequately address quality issues associated with
our products and services, including defects in our engineering, design and manufacturing processes, as well as
defects in third-party components included in our products. To address quality issues, we work extensively with
our customers and suppliers and engage in product testing to determine the cause of quality problems and
appropriate solutions. Finding solutions to quality issues can be expensive and may result in additional warranty,
replacement and other costs. In addition, if any of our products contain defects or have reliability, quality or safety
issues, we may need to conduct a product recall which could result in significant repair or replacement costs and
substantial delays in product shipments and may damage our reputation, which could make it more difficult to sell
our products. Any of these occurrences could have a material adverse effect on our business, results of operations
or financial condition. In addition, quality issues can impair our relationships with new or existing customers and
adversely affect our reputation, which could lead to a material adverse effect on our operating results.
The loss of key personnel could adversely impact our business.
Certain key personnel are critical to our business. Our future operating results depend substantially upon the
continued service of our key personnel, many of whom are not bound by employment or non-competition
agreements. Our future operating results also depend in significant part upon our ability to attract and retain
qualified management, manufacturing, technical, engineering, marketing, sales and support personnel.
Competition for qualified personnel, particularly those with technical skills, is intense, and we cannot ensure
success in attracting or retaining qualified personnel. In addition, the cost of living in the San Diego and Bay
Area, California; Boston, Massachusetts; St. Paul, Minnesota; Lincoln, Rhode Island; Kolbermoor, Germany; La
Chaux-de-Fonds, Switzerland and Osaka, Japan areas, where the majority of our engineering personnel are
located, is high and we have had difficulty in recruiting prospective employees from other locations. There may
be only a limited number of persons with the requisite skills and relevant industry experience to serve in these
positions and it may become increasingly difficult for us to hire personnel over time. More recently, the COVID-
19 pandemic has increased the risks that our executives and other key employees may be suddenly unable to
perform their duties due to health or other personal responsibilities. Our business, financial condition and results
of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any
key employee to perform in his or her current position, or by our inability to attract and retain skilled employees.
Risks Associated with Operating a Global Business
We are exposed to the risks of operating in certain foreign locations where Cohu manufactures certain
products and supports our sales and services to the global semiconductor industry.
We are a global corporation with offices and subsidiaries in certain foreign locations to manufacture our products
and support our sales and services to the global semiconductor industry. As such, we face risks in doing business
globally. For example, while our corporate headquarters are located in California, additional key engineering,
sales, and administrative personnel are located in China, Germany, Japan, Malaysia, Philippines, Singapore,
Switzerland, Taiwan and elsewhere in the U.S., and our manufacturing operations are primarily located in
Germany, Japan, Malaysia, Philippines and the U.S. Certain aspects inherent in transacting business
internationally could negatively impact our operating results, including:
costs and difficulties in staffing and managing international operations;
legislative or regulatory requirements and potential changes in, or interpretations of, requirements in the
United States and in the countries in which we manufacture or sell our products;
trade restrictions, including treaty changes, sanctions and the suspension of export licenses;
compliance with and changes in import/export tariffs and regulations;
complex labor laws and privacy regulations;
difficulties in adequately supervising employees widely distributed around the world (including due to
implementing remote work arrangements in response to the COVID-19 pandemic);
difficulties in enforcing contractual and intellectual property rights;
longer payment cycles and receivable collections;
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health epidemics, such as the COVID-19 pandemic;
local and global political and economic conditions, including ongoing uncertainty surrounding the
COVID-19 pandemic and its implications;
natural disasters and other climate risks and geopolitical instability;
varied environmental laws and regulations at each of our principal locations;
complex tax laws and potentially adverse tax consequences, including restrictions on repatriating earnings
and the threat of “double taxation;” and
fluctuations in foreign currency exchange rates against the U.S. Dollar, which can affect demand for our
products and increase our costs.
Additionally, managing geographically dispersed operations presents difficult challenges associated with
organizational alignment and infrastructure, communications and information technology, inventory control,
customer relationship management, terrorist threats and related security matters and cultural diversities. If we are
unsuccessful in managing such operations effectively, our business and results of operations will be adversely
affected.
We continue to monitor global privacy laws and legislation to determine its impact on our business. We do not sell
to consumers nor process individual credit card information, but do maintain certain personally identifiable
information on our employees. Such employee information may be subject to the EU General Data Protection
Regulation and the recently effective California Consumer Protection Act. We believe that we have implemented
reasonable procedures and internal controls in compliance with these laws, but should such actions be insufficient,
we may be subject to regulatory investigations, fines and legal costs. If one or more of these risks occurs, it could
require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our
financial results will suffer.
Geopolitical instability in locations critical to Cohu and its customers’ business, manufacturing, and
engineering operations may adversely impact our operations and sales.
An increase in geopolitical tensions in Asia, particularly in the Taiwan Strait, could disrupt existing
semiconductor chip manufacturing and increase the prospect of an interruption to the semiconductor chip supply
across the world. A setback to the current state of relative peace and stability in the region could compromise
existing semiconductor chip production and have downstream implications for our company. The world’s largest
semiconductor chip manufacturer is located in Taiwan and is a top supplier for many U.S. companies, many of
which are part of the company’s customer base. Further, recent geopolitical tensions between Ukraine and Russia
could adversely impact the supply chain in this region, particularly with respect to critical materials and metals,
such as palladium which is used in our interface products as well as in semiconductors. Any interruption to
semiconductor chip supply and its related impact to the company’s customers, or any disruption in our supply
chain, could result in an adverse impact to our financial results.
Global economic and political conditions, including trade tariffs and exchange rates, have impacted our
business and may continue to have an impact on our business and financial conditions that we currently cannot
predict.
In fiscal year 2021, 91% of our revenue was from products shipped to customer locations outside the United
States. We also purchase a significant portion of components and subassemblies from suppliers outside the United
States. Additionally, a significant portion of our facilities are located outside the United States, including China,
Germany, France, Italy, Japan, Malaysia, Philippines, Singapore, Switzerland and Taiwan. Given our extensive
global operations, we are subject to immediate impacts from any changing tariff or export regulations (see risk
factor entitled “Increasingly restrictive trade and export regulations may materially harm Cohu’s business and
ability to sell its products without limitations”).
It remains our plan to continue our international growth. We have business operations within the jurisdictions
listed above, and while we report our financial results in U.S. dollars, we incur certain costs in other currencies.
As a result, the company holds exposure to fluctuations in currency exchange rates, and significant fluctuations in
exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings,
despite actions we take to minimize those currency exposures. Additionally, engaging in foreign currency
contracts to minimize such currency exposure could result in additional costs and risks that could adversely affect
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our financial condition and results of operations.
The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks
and other threats may adversely impact our operations and sales.
Our corporate headquarters is located in San Diego, California, our Asian sales and service headquarters are
located in Singapore and Taiwan, and the majority of our sales are made to destinations in Asia. In addition, we
have Asia-based manufacturing plants in Malaysia, Philippines and Japan. These regions are known for being
vulnerable to natural disasters and other risks, such as earthquakes, tsunamis, fires and floods, volcanic eruptions,
and geopolitical risks, which at times have disrupted the local economies. For example, a significant earthquake
or tsunami could materially affect operating results. Although we believe that we carry reasonable and
appropriate business insurance, we may not be insured for certain losses and business interruptions of this kind,
or for geopolitical or terrorism impacts, and presently have very limited redundant, multiple site capacity in the
event of a disaster. In the event of such disaster, our business would materially suffer.
Our business could also be adversely affected by the effects of a widespread outbreak of contagious diseases, and
has been and is continuing to be adversely affected by the COVID-19 global pandemic (see risk factor entitled
“The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our
business, financial condition and results of operations”).
Our business could be materially and adversely affected by climate change and related matters.
We analyze climate change risks in two separate categories: transition risks and physical risks. Transition risks are
those risks relating to the transition of the global economy to a focus on more climate-friendly technologies. This
transition could have adverse financial impacts on us in several ways. For instance, more stringent environmental
policies or regulations could lead to increased expenses relating to green-house gas emissions or other emissions
that could increase our operating costs. Enhanced emissions-reporting or shifting technology could require us to
write off or impair assets or retire existing assets early. Increased environmental mandates could also increase our
exposure to litigation. We could be required to incur increased costs and significant capital investment to transition
to lower emissions technologies. In addition, overall market shifts could increase costs of our raw materials and
cause unexpected shifts in energy costs. Focus on sustainability has increased, and the company or its industry
could be stigmatized as not friendly to the environment, which could adversely affect our reputation and our
business, including due to difficulties in employee hiring and retention and our ability to access capital. Any of
these matters could materially and adversely affect our business, financial condition or results of operations.
Physical risks from climate change that could affect our business include acute weather events such as floods,
tornadoes or other severe weather and ongoing changes such as rising temperatures or extreme variability in
weather patterns. These events could lead to increased capital costs from damage to our facilities, increased
insurance premiums or reduced revenue from decreased production capacity based on supply chain interruptions.
Any of these events could have a material adverse effect on our business, financial condition or results of
operations (see risk factor entitled “The occurrence of natural disasters, health epidemics, and geopolitical
instability caused by terrorist attacks and other threats may adversely impact our operations and sales”).
Increasingly restrictive trade and export regulations may materially harm and limit Cohu’s business and ability
to sell its products.
There have been significant changes in U.S. export regulations relating to China since 2019. Such changes
included restrictions on exports to certain China-domiciled entities including Huawei and broader definitions and
restrictions on “military end users” and “uses.” Despite an ongoing material adverse impact on direct and indirect
Huawei sales, we have not seen any overall material impact to our business from the foregoing restrictions.
However, we believe that these collective export restrictions and the ongoing unpredictability of U.S.-China trade
relations have encouraged China-based companies to actively seek to obtain a greater supply of similar or
substitute products from our foreign competitors that are not subject to these restrictions, thereby decreasing our
long-term competitiveness as a supplier to China-based companies. Recent history indicates that the U.S.
government may impose other new export restrictions, or tariffs, and have done so within the past year as the U.S.
Department of Commerce Bureau of Industry and Security has included additional China-based entities to its
restricted entities list. Such ongoing restrictions with little or no prior notice will impact our ability (or our
customers’ ability) to sell and ship products to China-based companies and any such additional restrictions may
have an adverse effect on our business, results of operations, or financial condition.
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Risks Relating to our Indebtedness, Financing and Future Access to Capital
The remaining indebtedness in connection with our financing of the Xcerra acquisition may have an adverse
impact on Cohu’s liquidity, limit Cohu’s flexibility in responding to other business opportunities and increase
Cohu’s vulnerability to adverse economic and industry conditions; the Tax Cuts and Jobs Act severely limits
the deductibility of interest expense.
In connection with the Xcerra acquisition in 2018, Cohu entered into a term loan facility, with an aggregate
principal amount of $350.0 million (the “Debt Financing” or “Credit Agreement”). The remaining indebtedness
of approximately $103 million may reduce Cohu’s liquidity and cause Cohu to place more reliance on cash
generated from operations to pay principal and interest on Cohu’s debt, thereby reducing the availability of
Cohu’s cash flow for working capital and capital expenditure needs or to pursue other potential strategic plans.
The Federal Reserve has signaled its intention to raise interest rates in 2022, and with a variable interest rate on
its remaining indebtedness, Cohu would incur an increase in interest expenses. In addition, our indebtedness may
make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby
making it more difficult for us to satisfy our obligations. In 2021, Cohu continued to take steps to reduce
outstanding principal under its Debt Financing; however, Cohu gives no assurance as to if, when or how much
any subsequent voluntary principal reductions may be. If we fail to make required debt payments, or if we fail to
comply with financial or other covenants in our Credit Agreement, we would be in default under the agreement.
Furthermore, the Tax Cuts and Jobs Act (“Tax Act”) limits the deductibility of interest expense in a given year to
30% of adjusted taxable income, as defined; the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act
temporarily increased this limitation to 50% for 2019 and 2020. This resulted in the inability of Cohu to utilize a
substantial portion of its interest expense deductions in 2018 and 2019. We were able to fully deduct the interest
expense in 2020 plus the disallowed amounts carried over from 2018 and 2019, however, the Tax Acts may
continue to impact our ability to utilize future deductions.
Our Credit Agreement contains various representations and negative covenants that limit, subject to certain
exceptions and baskets, our ability and/or our subsidiaries’ ability to, among other things:
incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;
issue redeemable stock and preferred stock;
pay cash dividends or make distributions on capital stock, repurchase, redeem or make payments on capital
stock;
enter into rate, commodity, equity or currency swap, hedging or other similar transactions;
make loans, investments or acquisitions;
enter into agreements that restrict distributions from our subsidiaries;
create or permit restrictions on the ability of our subsidiaries to pay dividends or make other distributions
to us or to guarantee our debt, limit our or any of our subsidiaries’ ability to create liens, or that require the
grant of a lien to secure an obligation if a lien is granted to secure another obligation;
sell assets and capital stock of our subsidiaries;
enter into certain transactions with affiliates;
sell, transfer, license, lease or dispose of our or our subsidiaries’ assets; and
dissolve, liquidate, consolidate or merge with or into, or sell substantially all the assets of us and our
subsidiaries, taken as a whole, to, another person.
The restrictions contained in our Credit Agreement could adversely affect our ability to:
finance our operations;
make needed capital expenditures;
make strategic acquisitions or investments or enter into alliances;
withstand a future downturn in our business or the economy in general;
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engage in business activities, including future opportunities, that may be in our interest; and
plan for or react to market conditions or otherwise execute our business strategies.
A breach of any of these negative covenants could result in a default under the Credit Agreement. Further,
additional indebtedness that we incur in the future may subject us to further covenants. Our failure to comply
with these covenants could result in a default under the agreements governing the relevant indebtedness. The
lender may accelerate the payment terms of the Credit Agreement upon the occurrence of certain events of
default set forth therein, which include: the failure of Cohu to make timely payments of amounts due under the
Credit Agreement, the failure of Cohu to adhere to the representations and covenants set forth in the Credit
Agreement, the failure to provide notice of any event that causes a material adverse effect or to provide other
required notices, upon the event that related collateral agreements become ineffective, upon the event that certain
legal judgments are entered against Cohu, the insolvency of Cohu, or upon the change of control of Cohu. Any
event that could require us to repay debt prior to its due date could have a material adverse impact on our
financial condition and results of operations.
Our ability to comply with covenants contained in such debt agreements may be affected by events beyond our
control, including prevailing economic, financial and industry conditions. Even if we are able to comply with all
of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could
adversely affect our business by, among other things, limiting our ability to take advantage of financings,
mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us. In addition, our
obligations under the Credit Agreement are secured, on a first-priority basis, and such security interests could be
enforced in the event of default by the collateral agent for the Credit Agreement.
Due to the nature of our business, we need continued access to capital, which if not available to us or if not
available on favorable terms, could harm our ability to operate or expand our business.
Our business requires capital to finance accounts receivable and product inventory that is not financed by trade
creditors when our business is expanding. If cash from available sources is insufficient or cash is used for
unanticipated needs, we may require additional capital sooner than anticipated.
We believe that our existing sources of liquidity, including cash resources and cash provided by operating
activities will provide sufficient resources to meet our working capital and cash requirements for at least the next
twelve months; however, a material adverse impact on our business from unforeseen events or a desire to reduce
our outstanding indebtedness could result in a need to raise additional capital. Alternatively, we could decide to
raise capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we
pursue additional acquisitions. In the event we are required, or elect, to raise additional funds, we may be unable
to do so on favorable terms, or at all, and may incur expenses in raising the additional funds and increase our
interest rate exposure, and any future indebtedness could adversely affect our operating results and severely limit
our ability to plan for, or react to, changes in our business or industry. Further, under our Credit Agreement, we
are limited by financial and other negative covenants in our credit arrangements, including limitations on our
borrowing of additional funds and issuing dividends. If we cannot raise funds on acceptable terms, we may not be
able to take advantage of future opportunities or respond to competitive pressures or unanticipated requirements.
Any inability to raise additional capital when required could have an adverse effect on our business and operating
results.
Risks Relating to Acquisitions and Other Strategic Transactions
Because a significant portion of Cohu’s total assets are represented by goodwill, which is subject to mandatory
impairment evaluation, and other intangibles, Cohu could be required to write off some or all of this goodwill
and other intangibles, which may adversely affect the combined company’s financial condition and results of
operations.
Cohu accounted for the acquisition of Xcerra using the purchase method of accounting. A portion of the purchase
price for this business was allocated to identifiable tangible and intangible assets and assumed liabilities based on
estimated fair values at the date of consummation of the merger. 32% of Cohu’s total assets is comprised of
goodwill and other intangibles, of which approximately $219.8 million is allocated to goodwill. In accordance
with ASC 350, Intangibles - Goodwill and Other, goodwill and certain other intangible assets with indefinite
useful lives are not amortized but are reviewed at least annually for impairment, or more frequently if there are
indications of impairment. Significant declines in the price of Cohu’s common stock could increase the risk of an
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impairment. All other intangible assets are subject to periodic amortization. Cohu evaluates the remaining useful
lives of other intangible assets each quarter to determine whether events and circumstances warrant a revision to
the remaining period of amortization. If we are unable to realize the anticipated benefits of the Xcerra acquisition,
when Cohu performs future impairment tests, it is possible that the carrying value of goodwill or other intangible
assets could exceed their implied fair value and therefore would require adjustment. Such adjustment would
result in a charge to operating income in that period. For example, in 2020 and 2021, Cohu recorded impairment
charges of approximately $11.2 million and $0.1 million, respectively, to adjust in-process research and
development (“IPR&D”) assets obtained in the acquisition of Xcerra to their current fair value. There can be no
assurance that there will not be further adjustments for impairment in future periods.
We are exposed to other risks associated with additional potential acquisitions, investments and divestitures
such as integration difficulties, disruption to our core business, dilution of stockholder value, and diversion of
management attention.
As part of our business strategy, we will continue to regularly evaluate investments in, or acquisitions of,
complementary businesses, joint ventures, services and technologies, and we expect that periodically we will
continue to make such investments and acquisitions in the future. Acquisitions and investments involve numerous
risks, including, but not limited to:
acquisitions may underperform and we may not achieve any forecasted growth, benefits or synergies;
difficulties entering potentially new markets or manufacturing in new geographies where Cohu has no or
limited direct prior experience;
difficulties and increased costs in connection with integration of the personnel, operations, technologies
and products of acquired businesses;
increasing the scope, geographic diversity and complexity of our business;
the cost and risk of having to potentially develop new and unfamiliar sales channels for acquired
businesses;
diversion of management’s attention from other operational matters;
product manufacturing disruptions and delays as we potentially consolidate certain manufacturing sites;
difficulties and significant costs in integrating the systems and processes of two companies with complex
operations including multiple manufacturing sites;
the potential loss of key employees, customers or suppliers of Cohu or acquired businesses;
lack of synergy, or the inability to realize expected synergies, resulting from the acquisition;
potential unknown liabilities associated with the acquired businesses;
failure to commercialize purchased technology;
the impairment of acquired intangible assets and goodwill that could result in significant charges to
operating results in future periods; and
challenges caused by distance, language and cultural differences.
We may decide to finance future acquisitions and investments through a combination of borrowings, proceeds
from equity or debt offerings and the use of cash, cash equivalents and short-term investments. If we finance
acquisitions or investments by issuing equity-linked (such as convertible debt) or equity securities, our existing
stockholders may be diluted which would likely affect the market price of our stock. Mergers, acquisitions and
investments are inherently risky and the inability to effectively manage these risks could materially and adversely
affect our business, financial condition and results of operations.
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Risks Relating to Owning Our Stock
Our financial and operating results may vary and fall below analysts’ estimates, or credit rating agencies may
change their ratings on Cohu, any of which may cause the price of our common stock to decline or make it
difficult to obtain other financing.
Our operating results may fluctuate from quarter to quarter due to a variety of factors including, but not limited
to:
seasonal, volatile and unpredictable nature of the semiconductor equipment industry;
timing and amount of orders from customers and shipments to customers;
customer decisions to cancel orders or push out deliveries;
inability to recognize revenue due to accounting requirements;
inventory write-downs;
unexpected expenses or cost overruns in the introduction and support of products;
inability to deliver solutions as expected by our customers;
intangible and deferred tax asset write-downs; and
general economic and market conditions, including the global COVID-19 pandemic.
Due to these factors or other unanticipated events, quarter-to-quarter comparisons of our operating results may
not be reliable indicators of our future performance. In addition, from time-to-time our quarterly financial results
may fall below the expectations of the securities and industry analysts who publish reports on our company or of
investors in general. This could cause the market price of our stock to decline, perhaps significantly.
In addition, as a result of the Term Loan Credit Facility, we maintain credit ratings with Moody’s Investors
Service, Inc. (“Moody’s”) and S&P Global Ratings (“S&P”). Any downgrades of Cohu’s credit ratings or rating
outlooks, if and when they were to occur, may materially and adversely affect the market price of our equity and
the availability, cost or interest rate of other credit or financing. Cohu’s current credit ratings are considered non-
investment grade and make it more costly (as compared to investment grade borrowers) for Cohu or its
subsidiaries to borrow money or enter into new credit facilities and to raise certain other types of capital and/or
complete additional financings.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to
accurately report our financial results, and current and potential stockholders may lose confidence in our
financial reporting.
We are required by the Securities and Exchange Commission to establish and maintain adequate internal
control over financial reporting that provides reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements in accordance with generally accepted accounting
principles. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls
and to disclose any changes and material weaknesses in those internal controls. Although we believe that we
have adequate internal controls in place at this time, we cannot be certain that, with significantly greater global
complexity, we will be able to maintain adequate internal control over our financial reporting in future periods.
Any failure to maintain such internal controls could adversely impact our ability to report our financial results
on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete
understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required
by the Securities and Exchange Commission and Nasdaq Global Select Market, we could face severe
consequences from those authorities. In either case, there could result a material adverse effect on our business.
Inferior internal controls could also cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our stock.
We have experienced significant volatility in our stock price.
A variety of factors may cause the price of our stock to be volatile. The stock market in general, and the market
for shares of high-technology companies in particular, including ours, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of affected companies. During the
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three-year period ended December 25, 2021, the price of our common stock has ranged from $51.86 to $8.89.
The price of our stock may be more volatile than the stock of other companies due to, among other factors, the
unpredictable, volatile and seasonal nature of the semiconductor industry, our significant customer
concentration, intense competition in the test contactor, test handler, automated test equipment industry, our
limited backlog, our debt levels, and our relatively low daily stock trading volume. The market price of our
common stock is likely to continue to fluctuate significantly in the future, including fluctuations related and
unrelated to our performance.
We may underperform relative to our expectations.
Our business and financial performance are subject to certain risks and uncertainties, as described in these risk
factors. We may not achieve our forecasted growth rates, levels of revenue, earnings, or operating efficiency that
we expect and may incur losses in the business at any time. Any underperformance from our expectations or
forecasts could have a material adverse effect on our financial condition, results of operations, and cause abrupt,
significant stock price declines. Also, perceived company underperformance could attract shareholder activism
and such activities could interfere with our ability to execute our business plans, be costly and time-consuming,
disrupt our operations, divert the attention of management or result in other short-term focused corporate actions,
any of which could have an adverse effect on our business or stock price.
The issuance of shares of our common stock in connection with any future offerings of securities by us, will
dilute our shareholders’ ownership interest in the company.
We may seek additional financing in the future to meet our capital needs, to repay outstanding indebtedness
under our existing Credit Agreement or to meet our strategic initiatives or operating activities. We have in the
past issued common stock as acquisition consideration and for general corporate purposes. For example, most
recently, in March 2021, we issued 5,692,500 additional shares of our common stock in an underwritten follow-
on public offering, an increase of 13.4% of outstanding shares of common stock. We may determine to utilize
common stock as acquisition consideration, issue convertible debt, or pursue another follow-on equity offering to
raise capital for debt reduction or for other general corporate purposes, at any time in the future. Any issuances of
additional shares of our common stock would dilute shareholders’ ownership interest in our company, and
shareholders would have a proportionately reduced ownership and voting interest in our company as a result of
equity issuance. If we raise additional funds by issuing debt, we may be subject to limitations on our operations
due to restrictive covenants. Additionally, our ability to make scheduled payments or refinance our obligations
will depend on our operating and financial performance, which in turn is subject to prevailing economic
conditions and financial, business and other factors beyond our control.
Provisions of our certificate of incorporation and bylaws and Delaware law may make a takeover of Cohu
more difficult.
There are provisions in our basic corporate documents and under Delaware law that could discourage, delay or
prevent a change in control, even if a change in control may be regarded as beneficial to some or all of our
stockholders.
Cohu’s stock repurchase program may not have an impact that is fully reflected in the current stock valuation.
Effective November 2, 2021, a $70 million share repurchase program was authorized by our Board of Directors.
The stock repurchase program was authorized to potentially offset dilution from equity issuances under Cohu’s
equity incentive plans and because the Board believes that, for reasons unrelated to the company’s performance,
the trading price of Cohu’s common stock from time to time may not be reflective of the true value of the
company. Any repurchases have been and may be made in the future using our existing cash resources. The
company gives no assurances as to when, how much and for what duration stock repurchases may be made.
However, stock repurchases may adversely affect the company if the economy turns downward, due to the
existing COVID-19 pandemic or for other reasons, as it could leave the company limited in its ability to obtain
cash necessary for ongoing operations or potential acquisition targets. Further, as stock may be repurchased,
given the volatility of our stock price, we may repurchase stock at prices which, in hindsight, are materially
higher than the subsequent price of our stock.
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Risks Relating to Regulatory Matters
There may be changes in, and uncertainty with respect to, legislation, regulation and governmental policy in
the United States.
Specific legislative and regulatory proposals that could have a material impact on us include, but are not limited
to, infrastructure renewal programs, modifications to international trade policy, increased duties, tariffs or other
export restrictions, public company reporting requirements, climate change and environmental regulation,
corporate tax legislation, new employment and privacy laws, and antitrust enforcement.
Unanticipated changes in our tax provisions, enactment of new tax laws, or exposure to additional income tax
liabilities could affect our profitability.
We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Our tax liabilities are
affected by, among other things, the amounts our affiliated entities charge each other for intercompany
transactions. Our German subsidiaries income tax returns for 2015 to 2017, and our Philippines subsidiary
income tax return for 2017 are currently under routine examination by tax authorities in their respective countries.
During 2021, we were notified by the taxing authority in Malaysia of its intent to perform an audit for 2014 to
2019 for one of our Malaysian subsidiaries. We may be subject to ongoing tax examinations in various
jurisdictions. Tax authorities may disagree with our intercompany charges or other matters and assess additional
taxes. While we regularly assess the likely outcomes of these examinations to determine the appropriateness of
our tax provision, tax audits are inherently uncertain, and an unfavorable outcome could occur. An unanticipated,
unfavorable outcome in any specific period could harm our operating results for that period or future periods. The
financial cost and management attention and time devoted to defending income tax positions may divert
resources from our business operations, which could harm our business and profitability. Tax examinations may
also impact the timing and/or amount of our refund claims. In addition, our effective tax rate in the future could
be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in
the valuation of our deferred tax assets and liabilities, changes in tax laws and the discovery of new information
in the course of our tax return preparation process. In particular, the carrying value of our deferred tax assets and
the utilization of our net operating loss and credit carryforwards are dependent on our ability to generate future
taxable income in the U.S. and other countries. Furthermore, these carryforwards may be subject to annual
limitations as a result of changes in Cohu’s ownership. As a result of the acquisition of Xcerra, a greater than
50% cumulative ownership change in Xcerra triggered a significant limitation in the utilization of their net
operating loss and research credit carryforwards. Cohu’s ability to use the acquired Xcerra U.S. net operating loss
and credit carryforwards is subject to annual limitations as defined in sections 382 and 383 of the Internal
Revenue Code.
Compliance with regulations may impact sales to foreign customers and impose costs.
Certain products and services that we offer require compliance with U.S. and other foreign country export and
other regulations. Compliance with complex U.S. and other foreign country laws and regulations that apply to our
international sales activities increases our cost of doing business in international jurisdictions and could expose us
or our employees to fines and penalties. These laws and regulations include import and export requirements, the
U.S. State Department International Traffic in Arms Regulations (“ITAR”) and U.S. and other foreign country
laws such as the Foreign Corrupt Practices Act (“FCPA”), and local laws prohibiting corrupt payments to
governmental officials. Violations of these laws and regulations could result in fines, criminal sanctions against
us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.
Although we have implemented policies and procedures designed to ensure compliance with these laws, there can
be no assurances that our employees, contractors or agents will not violate our policies, or that our policies will be
effective in preventing all potential violations. Any such violations could include prohibitions on our ability to
offer our products and services to one or more countries, and could also materially damage our reputation, our
brand, our international expansion efforts, our ability to attract and retain employees, our business and our
operating results. Further, defending against claims of violations of these laws and regulations, even if we are
successful, could be time-consuming, result in costly litigation, divert management’s attention and resources and
cause us to incur significant expenses.
In addition to government regulations regarding sale and export, we are subject to other regulations regarding
our products. For example, the U.S. Securities and Exchange Commission has adopted disclosure rules for
companies that use conflict minerals in their products, with substantial supply chain verification requirements
if the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining
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countries. These rules and verification requirements impose additional costs on us and on our suppliers and
may limit the sources or increase the cost of materials used in our products. Further, if we are unable to certify
that our products are conflict free, we may face challenges with our customers that could place us at a
competitive disadvantage, and our reputation may be harmed.
Any failure to comply with environmental laws and regulations could subject us to significant fines and
liabilities, and new laws and regulations (such as involving climate change) or changes in regulatory
interpretation or enforcement could make compliance more difficult and costly.
We are subject to various U.S. federal, state and local, and foreign governmental laws and regulations relating to
the protection of the environment, including those governing the discharge of pollutants into the air and water, the
management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and the
maintenance of a safe workplace. We could incur substantial costs, including cleanup costs, civil or criminal fines
or sanctions and third-party claims for property damage or personal injury, as a result of violations of or liabilities
under environmental laws and regulations or non-compliance with the environmental permits required at our
facilities. In addition, new regulations or shareholder or other public expectations for reductions in greenhouse gas
emissions could result in increased energy, transportation and raw material costs, and may require us to make
additional investments in facilities and equipment. As a result, the effects of climate change could have a long-term
adverse impact on our business and results of operations.
Risks Relating to Cybersecurity, Intellectual Property and Litigation
Our business and operations could suffer in the event of cybersecurity breaches within our operational
systems or products.
Attempts by others to gain unauthorized access to information technology systems are becoming more
sophisticated and are sometimes successful. These attempts, which might be related to industrial or other
espionage, include covertly introducing malware to our computers and networks and impersonating authorized
users, among others. We seek to detect and investigate all cybersecurity incidents and to prevent their recurrence,
but in some cases, we might be unaware of an incident or its magnitude and effects. We have been impacted by
immaterial “phishing” schemes and we are continuing our efforts to train employees on such risks but may still
incur damages from such schemes in the future. We believe that extensive employee telework practices,
implemented in response to the COVID-19 pandemic, have increased our cybersecurity risks. The theft,
unauthorized use or publication of our intellectual property and/or confidential business information could harm
our competitive position, reduce the value of our investment in research and development and other strategic
initiatives or otherwise adversely affect our business. To the extent that any security breach results in inappropriate
disclosure of our customers’ or licensees’ confidential information, we may incur liability as a result. Any future
attacks, similar to the “SolarWinds” hack that occurred in 2020, which may disrupt our IT systems, or those of our
suppliers, could impact our sales, financial results and stock price. In response to these risks, we expect to continue
to devote additional resources to the security of our information technology systems.
Third parties may violate our proprietary rights and we may incur litigation costs to protect our proprietary
rights.
We rely on patent, copyright, trademark and trade secret laws to establish and maintain proprietary rights in our
technology and products. Any of our proprietary rights may expire due to patent life, or be challenged, invalidated
or circumvented. We are also subject to the theft and misappropriation of our intellectual property by others,
including incidents relating to former employees. Additionally, instances where we identify third parties potentially
infringing on our proprietary rights may require our further investigation that could be time-consuming and costly.
We believe that our company is taking reasonable actions to protect and continuously improve our security,
through strengthened IT infrastructure and internal controls, but if these actions are not successful our business
could be adversely affected.
Other parties may claim that we are infringing upon their intellectual property rights, and we could suffer
litigation or licensing costs, and be prohibited from selling our products.
We may receive notice from third parties regarding patent or copyright claims of potential infringement by our
company. Any such claims, with or without merit, could be time-consuming to defend, result in costly litigation,
divert management’s attention and resources, and cause us to incur significant expenses. In the event of a
successful claim of infringement against us, it may be costly for us to obtain licensing rights, or we may fail to
obtain licensing rights or have an inability to license the infringed technology. Additionally, we may not be able to
25
timely acquire or develop similar non-infringing technology, which may require us to change our products or
processes. In each of these instances, our business, financial condition and results of operations could be adversely
affected.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Certain information concerning our principal properties at December 25, 2021, is set forth below:
Major
Location
Activities
Poway, California
1, 2, 3, 4, 5
Kolbermoor, Germany
2, 3, 4, 5
2, 3, 4, 5
Malacca, Malaysia
Calamba City, Laguna, Philippines 2, 3, 4, 5
La Chaux-de-Fonds, Switzerland
Osaka, Japan
Singapore
Milpitas, California
Norwood, Massachusetts
Lincoln, Rhode Island
St. Paul, Minnesota
2, 4, 5
2, 3, 4, 5
2, 4, 5
2, 4, 5
2, 4, 5
2, 3, 4, 5
2, 3, 4, 5
Reportable
Segment
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Semiconductor Test & Inspection
Ownership
Approx.
Sq. Ft.
147,000 Leased
83,000 Owned
96,000 Leased
52,000 Leased
33,000 Leased
67,000 Owned
20,000 Leased
31,000 Leased
56,000 Leased
22,000 Leased
17,000 Leased
Major activities have been separated into the following categories: 1. Corporate Administration/Principal
Executive Offices and Global Headquarters, 2. Sales, Service and Customer Support, 3. Manufacturing, 4.
Engineering and Product Development, and 5. Marketing, Finance and General Administration
In addition to the locations listed above, we lease other properties primarily for manufacturing, sales, service,
engineering, and general administration in various locations. We believe our facilities are suitable for their
respective uses and are adequate for our present needs.
Item 3. Legal Proceedings.
See Note 12, “Commitments and Contingencies” in Part IV, Item 15(a) of this Form 10-K for information
regarding legal proceedings.
Item 4. Mine Safety Disclosures.
Not applicable.
26
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
(a) Market Information
Cohu, Inc. stock is traded on the Nasdaq Global Select Market under the symbol “COHU”.
Holders
At February 10, 2022, Cohu had 578 stockholders of record. The actual number of stockholders is greater than
this number of record holders and includes stockholders who are beneficial owners but whose shares are held in
street name by brokers and other nominees. This number of holders of record also does not include stockholders
whose shares may be held in trust by other entities.
Dividends
Cash dividends, per share, declared in 2021 and 2020 were as follows:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2021
Fiscal 2020
$
$
$
$
$
- $
- $
- $
- $
- $
0.06
-
-
-
0.06
We are proactively managing cash flow and Cohu’s Board of Directors authorized suspending our quarterly cash
dividend indefinitely, as of May 5, 2020. The dividend suspension has resulted in approximately $10 million of
annualized cash savings, which we are utilizing to deleverage and strengthen our balance sheet. Future
reinstatement of our dividend policy may be affected by, among other items, our views on potential future capital
requirements, including those related to debt service requirements, research and development, investments and
acquisitions, legal risks and stock repurchases.
Recent Sales of Unregistered Securities
During 2021, we did not issue any securities that were not registered under the Securities Act of 1933, as
amended.
Issuer Purchases of Equity Securities
On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase
program. This share repurchase program was effective as of November 2, 2021 and has no expiration date, and
the timing of share repurchases and the number of shares of common stock to be repurchased will depend upon
prevailing market conditions and other factors. Repurchases under this program will be made using our existing
cash resources and may be commenced or suspended from time-to-time at our discretion without prior notice.
Repurchases may be made in the open market, through 10b5-1 programs, or in privately negotiated transactions
at prevailing market rates in accordance with federal securities laws. All such repurchased shares and related
costs are held as treasury stock and accounted for at trade date using the cost method. The total number of shares
of common stock we purchased during the fiscal year ended December 25, 2021 was 206,572 shares.
27
Share repurchase activity during the fourth quarter of 2021 was as follows:
Total
Number of
Shares
Purchased
(In Thousands except price per share)
Weighted
Average
Price Paid Purchase
Per Share(1) Cost(2)
Total
Total Number of Maximum $
Shares Purchased Value of Shares
as Part of Publicly That May Yet Be
Purchased Under
The Programs(3)
Announced
Programs(3)
Oct 24 - Nov 20, 2021
Nov 21 - Dec 25, 2021
187 $
20 $
207 $
35.62 $
33.75 $
35.44 $
6,649
675
7,324
187 $
20 $
207
63,351
62,676
(1) The weighted average price paid per share of common stock does not include the cost of commissions.
(2) The total purchase cost includes the cost of commissions.
(3) On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase program.
This share repurchase program is effective as of November 2, 2021 and has no expiration date, and the timing of
share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market
conditions and other factors. Repurchases under this program will be made using our existing cash resources and
may be commenced or suspended from time-to-time at our discretion without prior notice. Repurchases may be
made in the open market, through 10b5-1 programs, or in privately negotiated transactions at prevailing market rates
in accordance with federal securities laws. All such repurchased shares and related costs are held as treasury stock
and accounted for at trade date using the cost method.
Equity Compensation Plan Information
The information required by this Item regarding equity compensation plans is incorporated by reference to the
information set forth in Part III, Item 12 of this Annual Report on Form 10-K.
Comparative Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting
material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act except to the
extent that Cohu specifically incorporates it by reference into a document filed under the Securities Act or the
Exchange Act.
The graph below compares the cumulative total stockholder return on the common stock of Cohu for the last five
fiscal years with the cumulative total return on custom Peer Group Indexes and a Nasdaq Global Select Market
Index over the same period (assuming the investment of $100 in Cohu’s common stock, Peer Group Index and
Nasdaq Global Select Market Index on December 31, 2016, and reinvestment of all dividends). The custom Peer
Group Index is comprised of the peer group companies associated with our executive compensation plan. This
peer group is revised annually to reflect acquisitions and to include equivalent companies in the semiconductor
equipment market to ensure a sufficiently large number of companies in the peer group composition to enable a
meaningful comparison of our stock performance. In 2021, the custom Peer Group Index was comprised of
Advanced Energy Industries, Inc., Axcelis Technologies, Inc., Azenta, Inc. (formerly Brooks Automation, Inc.),
CMC Materials, Inc. (formerly Cabot Microelectronics Corp), Cirrus Logic, Inc., Entegris, Inc., FormFactor, Inc.,
Kulicke and Soffa Industries, Inc., Novanta, Inc., OSI Systems, Inc., Onto Innovation, Inc., Photronics, Inc.,
Synaptics, Inc., Ultra Clean Holdings, Inc., and Veeco Instruments, Inc. In selecting our 2021 peer group the
Compensation Committee of our Board of Directors considered competitive market data and an analysis prepared
by Compensia and identified companies headquartered in the U.S. in the semiconductor capital equipment and
electronic capital equipment and instrumentation sectors that were comparable to us on the basis of revenue, our
market capitalization, and that had similar scope of operations.
28
Cohu, Inc.
NASDAQ Index
Russell 2000
Peer Group
Item 6. Reserved.
2016
2017
2018
2019
2020
2021
$
$
$
$
100 $
100 $
100 $
100 $
160 $
130 $
115 $
122 $
116 $
126 $
102 $
106 $
167 $
172 $
128 $
183 $
291 $
250 $
154 $
251 $
285
305
176
371
We have adopted the amendments to Items 301 and 302 of Regulation S-K contained in SEC Release No. 33-
10890. As a result, the disclosure previously provided in Part II, Item 6 is no longer required. There were no
retrospective changes to the Consolidated Statements of Operations for any quarters in the two most recent fiscal
years that would require disclosure under Item 302, as amended.
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electromechanical system
(MEMS) test modules, test contactors and thermal subsystems, and semiconductor automated test equipment
used by global semiconductor and electronics manufacturers and test subcontractors. We offer a wide range of
products and services and our revenue from capital equipment products is driven by the capital expenditure
budgets and spending patterns of our customers, who often abruptly delay or accelerate purchases in reaction
to variations in their business. The level of capital expenditures by these companies depends on the current and
anticipated market demand for semiconductor devices and the products that incorporate them. Our consumable
products are driven by the number of semiconductor devices that are tested and by the continuous introduction
of new products and new technologies by our customers. As a result, our consumable products provide a more
stable recurring source of revenue and generally do not have the same degree of cyclicality as our capital
equipment products.
For the year ended December 25, 2021, our net sales increased 39.5% year-over-year to $887.2 million. In 2020,
the global semiconductor market was affected by U.S. and China trade tensions which impacted many of our
customers’ ability to supply product to certain end users resulting in customer test cell utilization below levels
that have historically triggered the need for additional capacity. Net sales during the first half of 2020 were also
negatively impacted by the rapid and global spread of COVID-19 which led to supply disruptions impacting our
ability to ship product. During the second half of 2020, we began seeing strong demand for our products and that
strength has continued through 2021. During 2021 our net sales were favorably impacted by robust automotive
demand, driven by xEV and ADAS technologies, strength in industrial markets, and continued mobility
expansion with 5G proliferation. Demand for equipment testing 5G, Wi-Fi 6 and Ultra-Wideband devices, data
centers, personal computers and automotive semiconductor and sensors were at near record levels. Based on
improved business conditions, during 2021 we took actions to reduce outstanding principal under our Term Loan
Credit Facility associated with the financing of the Xcerra acquisition in October 2018. During the first quarter of
2021, using a portion of the proceeds from our underwritten follow-on public offering, we prepaid $100 million
of the term loan and on June 30, 2021, utilizing a portion of the gross proceeds from the sale of the PCB Test
business, we made an additional $100 million prepayment of the term loan.
Our long-term market drivers and market strategy remain intact and we are encouraged by demand across our
main market segments, and customer traction with our new products. We remain optimistic about the long-
term prospects for our business due to the increasing ubiquity of semiconductors, the future rollout of 5G
networks, increasing semiconductor complexity, increasing quality demands from semiconductor customers,
increasing test intensity and continued proliferation of electronics in a variety of products across the
automotive, mobility, industrial and consumer markets.
Application of Critical Accounting Estimates and Policies
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We base our estimates on historical experience, forecasts and on various other
assumptions that are believed to be reasonable under the circumstances; however actual results may differ from
those estimates under different assumptions or conditions. The methods, estimates and judgments we use in
applying our accounting policies have a significant impact on the results we report in our financial statements.
Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the
need to make estimates of matters that are inherently uncertain. Our critical accounting estimates that we believe
are the most important to investors’ understanding of our financial results and condition and require complex
management judgment include:
revenue recognition, including the deferral of revenue on sales to customers, which impacts our results of
operations;
estimation of valuation allowances and accrued liabilities, specifically inventory reserves, which impact
gross margin or operating expenses;
the recognition and measurement of current and deferred income tax assets and liabilities, unrecognized tax
30
benefits, the valuation allowance on deferred tax assets and accounting for the impact of the change to U.S.
tax law as described herein, which impact our tax provision;
the assessment of recoverability of long-lived and indefinite-lived assets including goodwill and other
intangible assets, which primarily impacts gross margin or operating expenses if we are required to record
impairments of assets or accelerate their depreciation; and
the valuation and recognition of share-based compensation, which impacts gross margin, research and
development expense, and selling, general and administrative expense.
Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other
policies that we consider key accounting policies; however, these policies typically do not require us to make
estimates or judgments that are difficult or subjective.
Revenue Recognition: Our net sales are derived from the sale of products and services and are adjusted for
estimated returns and allowances, which historically have been insignificant. We recognize revenue when the
obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer
of control of our systems, non-system products or the completion of services. In circumstances where control is
not transferred until destination or acceptance, we defer revenue recognition until such events occur. Revenue for
established products that have previously satisfied a customer’s acceptance requirements is generally recognized
upon shipment. In cases where a prior history of customer acceptance cannot be demonstrated or from sales
where customer payment dates are not determinable and in the case of new products, revenue and cost of sales
are deferred until customer acceptance has been received. Our post-shipment obligations typically include
installation and standard warranties. The estimated fair value of installation related revenue is recognized in the
period the installation is performed. Service revenue is recognized over time as the transfer of control is
completed for the related contract or upon completion of the services if they are short-term in nature. Spares,
contactor and kit revenue is generally recognized upon shipment. Certain of our equipment sales have multiple
performance obligations. These arrangements involve the delivery or performance of multiple performance
obligations, and transfer of control of performance obligations may occur at different points in time or over
different periods of time. For arrangements containing multiple performance obligations, the revenue relating to
the undelivered performance obligation is deferred using the relative standalone selling price method utilizing
estimated sales prices until satisfaction of the deferred performance obligation. Unsatisfied performance
obligations primarily represent contracts for products with future delivery dates. At December 25, 2021, and
December 26, 2020, we had $7.7 million and $8.3 million of revenue expected to be recognized in the future
related to performance obligations that are unsatisfied (or partially unsatisfied) with expected durations of over
one year, respectively. As allowed under ASC 606, we have opted to not disclose unsatisfied performance
obligations for contracts with original expected durations of less than one year. We generally sell our equipment
with a product warranty. The product warranty provides assurance to customers that delivered products are as
specified in the contract (an “assurance-type warranty”). Therefore, we account for such product warranties under
ASC 460, Guarantees (“ASC 460”), and not as a separate performance obligation. The transaction price reflects
our expectations about the consideration we will be entitled to receive from the customer and may include fixed
or variable amounts. Fixed consideration primarily includes sales to customers that are known as of the end of the
reporting period. Variable consideration includes sales in which the amount of consideration that we will receive
is unknown as of the end of a reporting period. Such consideration primarily includes sales made to certain
customers with cumulative tier volume discounts offered. Variable consideration arrangements are rare; however,
when they occur, we estimate variable consideration as the expected value to which we expect to be entitled.
Included in the transaction price estimate are amounts in which it is probable that a significant reversal of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
subsequently resolved. The estimate is based on information available for projected future sales. Variable
consideration that does not meet revenue recognition criteria is deferred. Accounts receivable represents our
unconditional right to receive consideration from our customer. Payments terms do not exceed one year from the
invoice date and therefore do not include a significant financing component. To date, there have been no material
impairment losses on accounts receivable. There were no material contract assets recorded on the consolidated
balance sheet in any of the periods presented. On shipments where sales are not recognized, gross profit is
generally recorded as deferred profit in our consolidated balance sheet representing the difference between the
receivable recorded and the inventory shipped.
Accounts Receivable: We maintain an allowance for credit losses for estimated losses resulting from the
inability of our customers to make required payments. If the financial condition of our customers deteriorates,
resulting in an impairment of their ability to make payments, additional allowances may be required. Our
31
customers include semiconductor manufacturers and semiconductor test subcontractors throughout many areas
of the world. While we believe that our allowance for credit losses is adequate and represents our best estimate
of future losses we will continue to monitor customer liquidity and other economic conditions, including the
impact of the COVID-19 pandemic, which may result in changes to our estimates.
Inventory: The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory
that is not of saleable quality. The determination of obsolete or excess inventory requires us to estimate the future
demand for our products. The demand forecast is a direct input in the development of our short-term
manufacturing plans. We record valuation reserves on our inventory for estimated excess and obsolete inventory
and lower of cost or net realizable value concerns equal to the difference between the cost of inventory and the
estimated realizable value based upon assumptions about future product demand, market conditions and product
selling prices. If future product demand, market conditions or product selling prices are less than those projected
by management or if continued modifications to products are required to meet specifications or other customer
requirements, increases to inventory reserves may be required which would have a negative impact on our gross
margin.
Income Taxes: We estimate our liability for income taxes based on the various jurisdictions where we conduct
business. This requires us to estimate our (i) current taxes; (ii) temporary differences that result from differing
treatment of certain items for tax and accounting purposes and (iii) unrecognized tax benefits. Temporary
differences result in deferred tax assets and liabilities that are reflected in the consolidated balance sheet. The
deferred tax assets are reduced by a valuation allowance if, based upon all available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized. Establishing, reducing or increasing a
valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the
statement of operations. We must make significant judgments to determine the provision for income taxes,
deferred tax assets and liabilities, unrecognized tax benefits and any valuation allowance to be recorded against
deferred tax assets. Our gross deferred tax asset balance as of December 25, 2021, was approximately
$103.3 million, with a valuation allowance of approximately $76.3 million.
The CARES Act, enacted on March 27, 2020, was incorporated in 2020. See Note 9, “Income Taxes”, included
in Part IV, Item 15(a) of this Form 10-K, which is incorporated herein by reference.
Segment Information: We applied the provisions of ASC Topic 280, Segment Reporting, (“ASC 280”), which
sets forth a management approach to segment reporting and establishes requirements to report selected
segment information quarterly and to report annually entity-wide disclosures about products, major customers
and the geographies in which the entity holds material assets and reports revenue. An operating segment is
defined as a component that engages in business activities whose operating results are reviewed by the chief
operating decision maker and for which discrete financial information is available. We have determined that
our three identified operating segments are: Test Handler Group (THG), Semiconductor Tester Group (STG)
and Interface Solutions Group (ISG). Our THG, STG and ISG operating segments qualify for aggregation
under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products
and services provided. As a result, we report in one segment, Semiconductor Test and Inspection Equipment
(“Semiconductor Test & Inspection”). Prior to the sale of our PCB Test Group (PTG) on June 24, 2021, we
reported in two segments, Semiconductor Test & Inspection and PCB Test Equipment (“PCB Test”).
Goodwill and Indefinite-Lived Intangibles, Other Intangible Assets and Long-lived Assets: We evaluate
goodwill and other indefinite-lived intangible assets, which are solely comprised of in-process research and
development (“IPR&D”), for impairment annually and when an event occurs or circumstances change that
indicate that the carrying value may not be recoverable. We test goodwill for impairment by first comparing the
book value of net assets to the fair value of the reporting unit or asset, in the case of in-process research and
development. If the fair value is determined to be less than the book value, a second step is performed to compute
the amount of impairment as the difference between the fair value of the reporting unit and it’s carrying value of
goodwill. We estimated the fair values of our reporting units primarily using the income approach valuation
methodology that includes the discounted cash flow method, taking into consideration the market approach and
certain market multiples as a validation of the values derived using the discounted cash flow methodology.
Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based
primarily on customer forecasts, industry trade organization data and general economic conditions. Fair value
determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.
We conduct our annual impairment test as of October 1st of each year, and have determined there was no
32
impairment as of October 1, 2021, as we determined that the estimated fair values of our reporting units exceeded
their carrying values on that date. Other events and changes in circumstances may also require goodwill to be
tested for impairment between annual measurement dates. As of December 25, 2021, we do not believe that
circumstances have occurred that indicate impairment of our goodwill is more-likely-than-not. In the event we
determine that an interim goodwill impairment review is required in a future period, the review may result in an
impairment charge, which would have a negative impact on our results of operations.
During the first quarter of 2020, the volatility in Cohu’s stock price, the global economic downturn and business
interruptions associated with the COVID-19 pandemic led us to determine that there was a triggering event
related to goodwill within all of our identified reporting units and our indefinite-lived intangible assets. We
performed an interim assessment as of March 28, 2020 and determined that the fair values of our identified
reporting units all exceeded their carrying values and we concluded there was no impairment of goodwill within
our reporting units. Anticipated delays in customer adoption of certain new products under development as a
result of the COVID-19 pandemic, changes to future project roadmaps and an increase in the discount rate used in
the developing our interim fair value estimate resulted in a $3.9 million impairment to IPR&D recorded during
the first quarter as the carrying value exceeded fair value. During the third quarter of 2020, we became aware of
additional delays in customer adoption of the same new products under development leading us to re-evaluate the
fair value of these projects and we determined that the carrying value exceeded the fair value and, as a result, we
recorded a $7.3 million impairment to IPR&D. For the twelve months ended December 26, 2020 total
impairments recorded to IPR&D projects was $11.2 million. During the fourth quarter of 2021 we completed and
transferred to developed technology our last remaining in-process technology project which was reviewed for
impairment as part of this process. Due to a change in forecasted results an impairment charge of $0.1 million
was recorded.
Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the observable market value of an asset, a
significant change in the extent or manner in which an asset is used, or any other significant adverse change that
would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived
assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its
undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference
between the carrying amount and estimated fair value.
Warranty: We provide for the estimated costs of product warranties in the period sales are recognized. Our
warranty obligation estimates are affected by historical product shipment levels, product performance and
material and labor costs incurred in correcting product performance problems. Should product performance,
material usage or labor repair costs differ from our estimates, revisions to the estimated warranty liability would
be required.
Contingencies: We are subject to certain contingencies that arise in the ordinary course of our businesses which
require us to assess the likelihood that future events will confirm the existence of a loss or an impairment of an
asset. If a loss or asset impairment is probable and the amount of the loss or impairment is reasonably estimable,
we accrue a charge to operations in the period such conditions become known.
Share-based Compensation: Share-based compensation expense related to restricted stock unit awards is
calculated based on the market price of our common stock on the grant date, reduced by the present value of
dividends expected to be paid on our common stock prior to vesting of the restricted stock unit. Share-based
compensation on performance stock units with market-based goals is calculated using a Monte Carlo
simulation model on the date of the grant. Share-based compensation expense related to stock options is
recorded based on the fair value of the award on its grant date, which we estimate using the Black-Scholes
valuation model.
Our estimate of share-based compensation expense requires a number of complex and subjective assumptions and
the assumptions used in calculating the fair value of share-based awards represent our best estimates, but these
estimates involve inherent uncertainties and the application of management judgment. Although we believe the
assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could
materially impact our reported financial results.
Recent Accounting Pronouncements: For a description of accounting changes and recent accounting
pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated
33
financial statements, see Note 1, “Recent Accounting Pronouncements” in Part IV, Item 15(a) of this Form 10-K.
RESULTS OF OPERATIONS
Recent Transactions Impacting Results of Operations
On June 24, 2021, we completed the sale of our PCB Test business. Due to the timing of the divestment of this
business our results for 2021 include our PCB Test business for the six months ended June 24, 2021, whereas the
periods ended December 26, 2020 and December 28, 2019 include this business for the full twelve months.
Previously, management determined that the fixtures services business, that was acquired as part of Xcerra, did
not align with Cohu’s long-term strategic plan and management divested this business in February 2020. The
assets of our fixtures business were considered “held for sale” as of December 26, 2020 and the operating results
of our fixtures business are presented as “discontinued operations” for the periods ended December 25, 2021,
December 26, 2020 and December 28, 2019. Unless otherwise indicated, the discussion below covers the
comparative results from continuing operations.
The following table summarizes certain operating data as a percentage of net sales:
Net sales
Cost of sales
Gross margin
Research and development
Selling, general and administrative
Amortization of purchased intangible assets
Gain on sale of PCB Test business
Restructuring charges
Impairment charges
Gain on sale of facilities
Income (loss) from operations
2021
100.0 %
(56.4)
43.6
(10.4)
(14.3)
(4.0)
8.0
(0.2)
(0.0)
-
22.7 %
2020
100.0 %
(57.3)
42.7
(13.5)
(20.3)
(6.1)
-
(1.2)
(1.8)
0.7
0.5 %
2019
100.0 %
(60.6)
39.4
(14.8)
(24.5)
(6.8)
-
(2.3)
-
-
(9.0)%
Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7 in our 2020 Annual Report on Form 10-K, filed with the SEC on February 26, 2021, for
comparative discussion of our fiscal years ended December 26, 2020 and December 28, 2019.
2021 Compared to 2020
Net Sales
Cohu’s consolidated net sales increased 39.5% from $636.0 million in 2020 to $887.2 million in 2021. In 2020,
the global semiconductor market was impacted by U.S. and China trade tensions which impacted our customers’
ability to supply product to certain end users. During the first half of 2020 our net sales were also negatively
impacted by the rapid and global spread of COVID-19 which led to supply disruptions impacting our ability to
ship product. While our total sales for fiscal year 2020 were negatively impacted by the global economic
downturn caused by the COVID-19 pandemic, we began seeing strong demand for our products in the second
half of 2020 and that strength has continued through 2021. During 2021 our net sales were favorably impacted by
robust automotive demand, driven by xEV and ADAS technologies, strength in industrial markets, and continued
mobility expansion with 5G proliferation. Demand for equipment testing 5G, Wi-Fi 6 and Ultra-Wideband
devices, data centers, personal computers and automotive semiconductor and sensors were at near record levels.
Gross Margin (exclusive of amortization of acquisition-related intangible assets described below)
Gross margin consists of net sales less cost of sales (excluding the impact of amortization of developed
technology and backlog). Cost of sales consists primarily of the materials, assembly and test labor and
overhead from operations. Our gross margin can fluctuate due to a number of factors, including, but not
limited to, the mix of products sold, product support costs, increases to inventory reserves, the sale of
previously reserved inventory and business volume which impacts the utilization of our manufacturing
capacity. Our gross margin, as a percentage of net sales, increased to 43.6% in 2021 from 42.7% in 2020.
Increased business volume in 2021 allowed us to better leverage our fixed costs helping to improve our gross
margin over 2020. Other items impacting our gross margin in 2021 and 2020 are discussed below.
We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage
34
forecasts. During 2021, we recorded net charges to cost of sales of approximately $7.1 million, for excess and
obsolete inventory. In 2020, net charges to cost of sales for excess and obsolete inventory were $6.0 million
and we recorded $3.7 million of inventory related charges related to the decision to end manufacturing of
certain of Xcerra’s semiconductor test handler products. End manufacturing inventory charges related to
semiconductor test handler products in 2021 were not significant.
We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are adequate
to cover known exposures at December 25, 2021. Reductions in customer forecasts, continued modifications to
products, our failure to meet specifications or other customer requirements may result in additional charges to
operations that could negatively impact our gross margin in future periods.
Research and Development Expense (“R&D Expense”)
R&D expense consists primarily of salaries and related costs of employees engaged in ongoing research,
product design and development activities, costs of engineering materials and supplies and professional
consulting expenses. Our future operating results depend, to a considerable extent, on our ability to maintain a
competitive advantage in the products we provide, and historically we have maintained our commitment to
investing in R&D in order to be able to continue to offer new products to our customers. R&D expense in 2021
was $92.0 million, or 10.4% of net sales, compared to $86.2 million, or 13.5% of net sales in 2020. Increased
R&D spending in 2021 was driven by higher labor and material costs associated with product development and
the discontinuation of cost control measures implemented in the prior year. During 2020, decreased travel and the
implementation of temporary salary reductions and other cost control measures allowed us to control our costs in
response to the economic uncertainty caused by the COVID-19 pandemic.
Selling, General and Administrative Expense (“SG&A Expense”)
SG&A expense consists primarily of salaries and benefit costs of employees, commission expense for
independent sales representatives, product promotion and costs of professional services. SG&A expense as a
percentage of net sales decreased to 14.3% in 2021, from 20.3% in 2020, decreasing from $129.2 million in 2020
to $127.0 million in 2021. SG&A expense in 2021 was lower as a result of sale of our PCB Test business on June
24, 2021. Our results for 2021 only include the results of our PCB Test business through that date which resulted
in approximately $3.1 million in less expense in 2021. This reduction was offset, in part, by the discontinuation of
cost control measures implemented in the prior year. During 2020, decreased travel and the implementation of
temporary salary reductions and other cost control measures allowed us to control our costs in response to the
economic uncertainty caused by the COVID-19 pandemic.
Amortization of Purchased Intangible Assets
Amortization of purchased intangibles is the process of expensing the cost of an intangible asset acquired
through a business combination over the projected life of the asset. Amortization of acquisition-related
intangible assets was $35.4 million and $38.7 million for 2021 and 2020, respectively. The decrease in expense
recorded during 2021 was a result of fluctuations in exchange rates and the sale of PCB Test business on June
24, 2021 as remaining purchased intangible assets that were being amortized were written-off as part of the
sale.
Gain on sale of PCB Test Business
On June 24, 2021, we completed the divestment of our PCB Test business which resulted in a gain of
$70.8 million in 2021. As part of the transaction we also sold certain intellectual property held by our
Semiconductor Test & Inspection segment that is utilized by the PCB Test business. Our decision to sell this non-
core business resulted from management’s determination that that they were no longer a fit within our
organization.
Restructuring Charges
Subsequent to the merger with Xcerra in the fourth quarter 2018, we began a strategic restructuring program
designed to reposition our organization and improve our cost structure as part of our targeted integration plan
regarding Xcerra. In connection with the integration plan, we recorded restructuring charges, exclusive of the
inventory related charges described above, totaling $1.8 million and $7.6 million in 2021 and 2020, respectively.
See Note 4, “Restructuring Charges” in Part IV, Item 15(a) of this Form 10-K for additional information with
respect to restructuring charges.
35
Impairment Charges
During 2020, the volatility in Cohu’s stock price and the global economic downturn and business interruptions
associated with the COVID-19 pandemic led us to determine that there were triggering events related to our
indefinite-lived intangible assets. We performed interim impairment assessments during both the first and third
quarters of 2020 and anticipated delays in customer adoption of certain new products under development as a
result of the COVID-19 pandemic, changes to future project roadmap and an increase in the discount rate used
in developing our interim fair value estimate led us to conclude that the carrying value of these assets exceeded
their fair value. For the twelve months ended December 26, 2020, total impairments recorded to IPR&D
projects was $11.2 million. During the fourth quarter of 2021 we completed and transferred to developed
technology our last remaining in-process technology project which we tested for impairment as part of this
process. A change in forecasted results of this project led to an impairment charge of $0.1 million being
recorded in the fourth quarter of 2021.
Gain on sale of facilities
As part of our previously announced Xcerra integration plan we implemented certain facility consolidation
actions. During 2020 we completed the sales of our facilities located in Rosenheim, Germany and Penang,
Malaysia resulting in a gain of $4.5 million.
Interest Expense and Income
Interest expense was $6.4 million in 2021 compared to $13.8 million in 2020. The year-over-year decrease in our
interest expense resulted from a significant decrease in the outstanding balance of our Term Loan Credit Facility
and lower LIBOR rates.
Interest income was $0.2 million in both 2021 and 2020.
Foreign Transaction Gain (Loss) and Other
We have operations in foreign countries and conduct business in the local currency in these countries. Starting
in the fourth quarter of 2020, we began entering into foreign currency forward contracts to hedge against future
movements in foreign exchange rates that affect certain U.S. Dollar denominated assets and liabilities at our
subsidiaries whose functional currency is the local currency. During 2021, the U.S. Dollar strengthened against
the Swiss Franc, Euro and Japanese Yen resulting in foreign currency gains of $0.4 million, net of $3.4 million
of losses generated by our foreign currency forward contracts. In 2020, the U.S. Dollar weakened significantly
against the Swiss Franc and Euro, resulting in the recognition of $3.2 million in foreign currency losses, net of
$0.8 million of gains generated by our foreign currency forward contracts.
See Note 7 “Derivative Financial Instruments” in Part IV, Item 15(a) of this Form 10-K for additional
information with respect to our foreign currency forward contracts.
Income Taxes
The income tax provision expressed as a percentage of pre-tax income or loss in 2021 and 2020 was 13.0% and
(5.1)%, respectively. The income tax provision for the years ended December 25, 2021, and December 26, 2020
differs from the U.S. federal statutory rate primarily due to realization of federal tax credits, tax exempt gains,
stock-based compensation windfall, changes in the valuation allowance on our deferred tax assets, foreign
income taxed at different rates, offset by GILTI, deemed dividend and other factors.
Companies are required to assess whether a valuation allowance should be recorded against their deferred tax
assets (“DTAs”) based on the consideration of all available evidence, using a “more likely than not” realization
standard. The four sources of taxable income that must be considered in determining whether DTAs will be
realized are, (1) future reversals of existing taxable temporary differences (i.e. offset of gross deferred tax assets
against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under
the tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences
and carryforwards.
In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be
objectively verified. We have evaluated our DTAs at each reporting period, including an assessment of our
cumulative income or loss over the prior three-year period and future periods, to determine if a valuation
allowance was required. A significant negative factor in our assessment was Cohu’s three-year cumulative U.S.
loss history at the end of various fiscal periods including 2021.
36
As a result of our cumulative, three-year U.S. GAAP pretax loss and excluding the one-time gain on the sale of
PTG from our U.S. continuing operations at the end of 2021, we were unable to conclude that it was “more likely
than not” that our U.S. DTAs would be realized. We will evaluate the realizability of our DTAs at the end of each
quarterly reporting period in 2022 and should circumstances change it is possible an additional valuation
allowance will be recorded or the remaining valuation allowance, or a portion thereof, will be reversed in a future
period.
Our valuation allowance on our DTAs at December 25, 2021, and December 26, 2020, was approximately
$76.3 million and $86.1 million, respectively. The remaining gross DTAs for which a valuation allowance was
not recorded are realizable primarily through future reversals of existing taxable temporary differences and to a
lesser extent future taxable income in certain jurisdictions exclusive of reversing temporary differences and
carryforwards.
As the realization of DTAs is determined by tax jurisdiction, the deferred tax liabilities recorded by our non-U.S.
subsidiaries were not a source of taxable income in assessing the realization of our DTAs in the U.S.
For a full reconciliation of our effective tax rate to the U.S. federal statutory rate and further explanation of our
provision for income taxes, see Note 9, “Income Taxes”, included in Part IV, Item 15(a) of this Form 10-K,
which is incorporated herein by reference.
Income (Loss) from Continuing Operations and Net Income (Loss)
As a result of the factors set forth above, our income from continuing operations and net income was
$167.3 million in 2021. Both our loss from continuing operations and net loss, which includes the results of our
discontinued operations and a small gain recognized on the disposal of the segment, was $13.8 million in 2020.
LIQUIDITY AND CAPITAL RESOURCES
Our business is dependent on capital expenditures by semiconductor manufacturers and test subcontractors that
are, in turn, dependent on the current and anticipated market demand for semiconductors. The seasonal and
volatile nature of demand for semiconductor equipment, our primary industry, makes estimates of future
revenues, results of operations and net cash flows difficult.
Our primary historical source of liquidity and capital resources has been cash flow generated by operations and
we manage our business to maximize operating cash flows as our primary source of liquidity. We use cash to
fund growth in our operating assets and to fund new products and product enhancements primarily through
research and development. As of December 25, 2021, $189.4 million or 49.9% of our cash, cash equivalents and
short-term investments was held by our foreign subsidiaries. If these funds are needed for our operations in the
U.S., we may be required to accrue and pay foreign withholding taxes if we repatriate these funds. Except for
working capital requirements in certain jurisdictions, we provide for all withholding and other residual taxes
related to unremitted earnings of our foreign subsidiaries.
At December 25, 2021, our total indebtedness, net of discount and deferred financing costs, was
$117.8 million, which included $101.6 million outstanding under the Term Loan Credit Facility, $3.1 million
outstanding under Kita’s term loans, $10.0 million outstanding under Cohu GmbH’s construction loans, and
$3.1 million outstanding under Kita’s lines of credit.
In March 2021, we closed an underwritten follow-on public offering totaling 5,692,500 shares of our common
stock at $41.00 per share, raising net proceeds of approximately $223.1 million, after deducting underwriting
discounts and commissions and offering expenses. We used $100.0 million of the net proceeds of this offering to
repay outstanding principal on our Term Loan Credit Facility and we intend to use the rest for general corporate
purposes, including to fund future growth initiatives. On June 30, 2021, we prepaid an additional $100.0 million
of our Term Loan Credit Facility utilizing a portion of the net proceeds from the sale of our PCB Test business. In
the fourth quarter of 2021, we repurchased 206,572 shares of our outstanding common stock for $7.3 million to
be held as treasury stock.
We believe that our sources of liquidity will be sufficient to satisfy our anticipated cash requirements through
at least the next 12 months. Our liquidity could be negatively affected by a decrease in demand for our
products. In addition, we may make acquisitions or increase our capital expenditures and may need to raise
additional capital through debt or equity financing to provide for greater flexibility to fund these activities.
Additional financing may not be available or not available on terms favorable to us. A discussion of cash flows
for the year ended December 28, 2019 has been omitted from this Annual Report on Form 10-K, but may be
37
found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended
December 26, 2020, filed with the SEC on February 26, 2021, which discussion is incorporated herein by
reference and which is available free of charge on the SEC’s website at www.sec.gov.
Liquidity
Working Capital: The following summarizes our cash, cash equivalents, short-term investments and working
capital at December 25, 2021 and December 26, 2020:
(in thousands)
Cash, cash equivalents and short-term investments
Working capital
2021
$ 379,905
$ 558,334
2020
$ 170,027
$ 310,593
Increase
$ 209,878
$ 247,741
Percentage
Change
123.4 %
79.8 %
Cash Flows
Operating Activities: Cash provided by operating activities consists of our net income adjusted for non-cash
expenses and changes in operating assets and liabilities. These adjustments include impairment charges,
depreciation expense on property, plant and equipment, share-based compensation expense, amortization of
intangible assets, deferred income taxes, amortization of cloud-based software implementation costs, loss on
extinguishment of debt, interest capitalized associated with cloud computing implementation, amortization of
debt discounts and issuance costs and gains from the sale of our PCB Test business and property, plant and
equipment. Our net cash flows provided by operating activities in 2021 totaled $97.7 million compared to
$49.7 million in 2020. Cash provided by operating activities in the current year was a result of an increase in
current year net sales and net income as compared to a net loss in the prior year. Cash provided by operating
activities was also impacted by changes in current assets and liabilities which included increases in accounts
receivable, inventory and accounts payable. Net sales in the fourth quarter of 2021 and the timing of the resulting
cash conversion cycle drove the $59.1 million increase in accounts receivable. The $35.9 million increase in
inventory was driven by purchases from suppliers made in the fourth quarter to fulfill anticipated future
shipments of products and increased business activities, and the timing of payments to our suppliers resulted in
the $17.3 million increase in accounts payable. Deferred profit increased $4.7 million as a result of deferrals
made in accordance with our revenue recognition policy. Cash provided by operating activities was also impacted
by increases in income taxes payable of $3.4 million a result of higher income tax to be paid in certain
jurisdictions as a result of the increase in current year profitability, and advance payments from customers
decreased $4.1 million as a result of product shipments during the current year.
Investing Activities: Investing cash flows consist primarily of cash used for capital expenditures in support of our
business, purchases of investments, business acquisitions and proceeds from investment maturities, asset
disposals and business divestitures. Our net cash provided by investing activities in 2021 totaled $39.9 million.
Net cash proceeds from the sale of our PCB Test business on June 24, 2021, were $120.9 million. The decision to
sell our PCB Test business resulted from Cohu management’s determination that this industry segment was not a
fit within our organization and we could utilize the proceeds from the sale business to reduce outstanding debt
and invest in growth opportunities in-line with our core business strategy. During 2020 we generated cash
totaling $17.0 million from the sale of land, buildings, and fixed assets as part of facility consolidation program
and $3.0 million from the sale of our fixtures services business. In 2021 we used $204.7 million in cash for
purchases of short-term investments and generated $135.5 million from sales and maturities. We invest our
excess cash, in an attempt to seek the highest available return while preserving capital, in short-term investments
since excess cash may be required for a business-related purpose. Additions to property, plant and equipment in
2021 were $12.0 million and were made to support the operating and development activities of our
Semiconductor Test & Inspection segment. In 2020 we used $18.7 million for additions to property, plant and
equipment and $19.7 million for purchases of short-term investments.
Financing Activities: Financing cash flows consist primarily of net proceeds from the issuance of common stock
from an underwritten public offering and under our stock option and employee stock purchase plans and
repayments of debt, net of new borrowings. In fiscal 2021, our cash provided by financing activities totaled
$6.7 million. In March 2021, we closed an underwritten public offering totaling 5,692,500 shares of our common
stock at $41.00 per share, raising net proceeds of approximately $223.1 million, after deducting underwriting
discounts and commissions and offering expenses. We used $100.0 million of the net proceeds of this offering to
repay outstanding principal on our Term Loan Credit Facility and we intend to use the rest for general corporate
38
purposes, including to fund future growth initiatives. Utilizing a portion of the gross proceeds from the sale of the
PCB Test business, we made an additional $100.0 million prepayment of the Term Loan Credit Facility.
Repayments of short-term borrowings and long-term debt during 2021 totaled $206.1 million and included a
$200.0 million prepayment of our Term Loan Credit Facility using proceeds from our underwritten public
offering and the sale of our PCB Test business to deleverage our balance sheet as discussed above. We received
proceeds under a revolving line of credit and construction loan totaling $1.4 million in 2021 and $5.9 million in
2020. Proceeds from the construction loan are being used to expand our facility in Kolbermoor, Germany,
enabling us to consolidate the German operations of our Semiconductor Test & Inspection segment. Proceeds
from the revolving line of credit are being used to increase the manufacturing capacity of our Semiconductor Test
& Inspection segment facility located in Osaka, Japan. The amount and timing of funds received under these
facilities is based on the current needs of these expansion plans. We made payments totaling $7.3 million in the
fourth quarter of 2021 for shares of our common stock repurchased under our share repurchase program to be
held as treasury stock. We issue restricted stock units, stock options and maintain an employee stock purchase
plan as components of our overall employee compensation. In 2021, cash used to settle the minimum statutory
tax withholding requirements on behalf of our employees upon vesting of restricted and performance stock
awards, net of proceeds from shares issued under our employee stock purchase plan and from the exercise of
employee stock options was $4.4 million. Net proceeds from the issuance of our common stock under our equity
incentive and employee stock purchase plans, totaled $2.1 million during 2020. The increase in cash used to settle
tax withholding requirements between 2021 and 2020 is directly correlated to the increase in Cohu’s stock price
at the end of March year over year when the majority of awards vest.
Share Repurchase Program
On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase
program. This share repurchase program was effective as of November 2, 2021, and has no expiration date, and
the timing of share repurchases and the number of shares of common stock to be repurchased will depend upon
prevailing market conditions and other factors. Repurchases under this program will be made using our existing
cash resources and may be commenced or suspended from time-to-time at our discretion without prior notice.
Repurchases may be made in the open market, through 10b5-1 programs, or in privately negotiated transactions
at prevailing market rates in accordance with federal securities laws. For the year ended December 25, 2021, we
repurchased 206,572 shares of our common stock for $7.3 million to be held as treasury stock. As of December
25, 2021, we may purchase up to $62.7 million of shares of our common stock under our share repurchase
program.
Capital Resources
We have access to credit facilitates and other borrowings provided by financial institutions to finance
acquisitions, capital expenditures and our operations if needed. A summary of our borrowings and available
credit is as follows.
Credit Agreement
On October 1, 2018, we entered into a Credit Agreement providing for a $350.0 million Term Loan Credit
Facility and borrowed the full amount to finance a portion of the Xcerra acquisition. Loans under the Term Loan
Credit Facility amortize in equal quarterly installments of 0.25% of the original principal amount, with the
balance payable at maturity. All outstanding principal and interest in respect of the Term Loan Credit Facility
must be repaid on or before October 1, 2025. The loans under the Term Loan Credit Facility bear interest, at
Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of 3.00%. At December 25, 2021, the
outstanding loan balance, net of discount and deferred financing costs, was $101.6 million and $10.1 million of
the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.
At December 26, 2020, the outstanding loan balance, net of discount and deferred financing costs, was
$301.1 million and $2.4 million of the outstanding balance is presented as current installments of long-term debt
in our consolidated balance sheets. As of December 25, 2021, the fair value of the debt was $102.7 million. The
measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of December
25, 2021 and is considered a Level 2 fair value measurement.
Under the terms of the Credit Agreement, the lender may accelerate the payment terms upon the occurrence of
certain events of default set forth therein, which include: the failure of Cohu to make timely payments of amounts
due under the Credit Agreement, the failure of Cohu to adhere to the representations and covenants set forth in
the Credit Agreement, the failure to provide notice of any event that causes a material adverse effect or to provide
39
other required notices, upon the event that related collateral agreements become ineffective, upon the event that
certain legal judgments are entered against Cohu, the insolvency of Cohu, or upon the change of control of Cohu.
As of December 25, 2021, we believe no such events of default have occurred.
During 2021, we prepaid $200.0 million in principal of our Term Loan Credit Facility for $200.0 million in cash.
We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $3.4 million reflected in
other expense, net, in our consolidated statement of operations and a corresponding $3.4 million reduction in debt
discounts and deferred financing costs in our consolidated balance sheets. During 2020, we repurchased
$36.4 million in principal of our Term Loan Credit Facility for $35.4 million in cash. We accounted for the
repurchase as a debt extinguishment, which resulted in a gain of $0.3 million reflected in other expense, net, in
our consolidated statement of operations, as well as a $0.7 million reduction in debt discounts and deferred
financing costs in our consolidated balance sheets. Approximately $103.1 million in principal of the Term Loan
Credit Facility remains outstanding as of December 25, 2021.
Kita Term Loans
As a result of our acquisition of Kita, we assumed term loans from a series of Japanese financial institutions
primarily related to the expansion of Kita’s facility in Osaka, Japan. The loans are collateralized by the facility
and land, carry interest rates ranging from 0.05% to 0.43%, and expire at various dates through 2034. At
December 25, 2021, the outstanding loan balance was $3.1 million and $0.2 million of the outstanding balance is
presented as current installments of long-term debt in our consolidated balance sheets. At December 26, 2020, the
outstanding loan balance was $3.6 million and $0.3 million of the outstanding balance is presented as current
installments of long-term debt in our consolidated balance sheets. The term loans are denominated in Japanese
Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.
Construction Loans
In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series of
construction loans (“Loan Facilities”) with a German financial institution providing it with total borrowings of up
to €10.1 million. The Loan Facilities are being utilized to finance the expansion of our facility in Kolbermoor,
Germany and are secured by the land and the existing building on the site. The Loan Facilities bear interest at
agreed upon rates based on the facility amounts as discussed below.
The first facility totaling €3.4 million has been fully drawn and is payable over 10 years at a fixed annual interest
rate of 0.8%. Principal and interest payments are due each quarter over the duration of the facility ending in
September 2029. The second facility totaling €5.2 million has been fully drawn and is payable over 15 years at an
annual interest rate of 1.05%, which is fixed until April 2027. Principal and interest payments are due each month
over the duration of the facility ending in January 2034. The third facility totaling €1.5 million, of which
€0.9 million is drawn, is payable over 10 years at an annual interest rate of 1.2%. Principal and interest payments
are due each month over the duration of the facility ending in May 2030.
At December 25, 2021, total outstanding borrowings under the Loan Facilities was $10.0 million with
$1.0 million of the total outstanding balance being presented as current installments of long-term debt in our
consolidated balance sheets. At December 26, 2020, total outstanding borrowings under the Loan Facilities was
$9.9 million with $0.4 million of the total outstanding balance being presented as current installments of long-
term debt in our consolidated balance sheets. The loans are denominated in Euros and, as a result, amounts
disclosed herein will fluctuate because of changes in currency exchange rates. The fair value of the debt
approximates the carrying value at December 25, 2021.
Lines of Credit
As a result of our acquisition of Kita, we assumed a series of revolving credit facilities with various financial
institutions in Japan. The credit facilities renew monthly and provide Kita with access to working capital totaling
up to 960 million Japanese Yen of which 350 million Japanese Yen is drawn. At December 25, 2021, total
borrowings outstanding under the revolving lines of credit were $3.1 million. As these credit facility agreements
renew monthly, they have been included in short-term borrowings in our consolidated balance sheets.
The revolving lines of credit are denominated in Japanese Yen and, as a result, amounts disclosed herein will
fluctuate because of changes in currency exchange rates.
Our wholly owned subsidiary in Switzerland has one available line of credit which provides it with borrowings of
up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees. At December 25, 2021
40
and December 26, 2020, no amounts were outstanding under this line of credit.
We also have a letter of credit facility (“LC Facility”) under which Bank of America, N.A., has agreed to
administer the issuance of letters of credit on our behalf. The LC Facility requires us to maintain deposits of cash
or other approved investments in amounts that approximate our outstanding letters of credit and contains
customary restrictive covenants. In addition, our wholly owned subsidiary, Xcerra, has arrangements with various
financial institutions for the issuance of letters of credit and bank guarantees. As of December 25, 2021,
$0.3 million was outstanding under standby letters of credit and bank guarantees.
We expect that we will continue to make capital expenditures to support our business and we anticipate that
present working capital will be sufficient to meet our operating requirements for at least the next twelve months.
Contractual Obligations
The following table summarizes our significant contractual obligations at December 25, 2021, and the effect such
obligations are expected to have on our liquidity and cash flows in future periods. Amounts excluded include our
liability for unrecognized tax benefits that totaled approximately $33.4 million at December 25, 2021. We are
currently unable to provide a reasonably reliable estimate of the amount or period(s) the cash settlement of this
liability may occur.
$
2022
Total
34,021 $
234
(in thousands)
Operating leases (1)
Finance leases
Bank term loans
principal and interest
Revolving credit facilities
Total contractual obligations $
(1) Excludes an insignificant amount of short-term lease obligations.
132,344
3,059
169,658 $
16,058
3,059
25,628 $
6,341 $
170
Fiscal year-end
2023-2024 2025-2026 Thereafter
10,495 $
51
17,670
-
28,216 $
7,529 $
13
9,656
-
91,467
-
99,009 $
7,149
-
16,805
The table above does not include pension, post-retirement benefit and warranty obligations because it is not
certain when these liabilities will be funded. For additional information regarding our pension and post-
retirement benefits obligations see Note 6, “Employee Benefit Plans” and for more information on our
contractual obligations, see Note 13, “Guarantees” in Part IV, Item 15(a) of this Form 10-K.
Commitments to contract manufacturers and suppliers. From time-to-time, we enter into commitments with
our vendors and outsourcing partners to purchase inventory at fixed prices or in guaranteed quantities. We are not
able to determine the aggregate amount of such purchase orders that represent contractual obligations, as
purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders
are based on our current manufacturing needs and are fulfilled by our vendors within relatively short time
horizons. We typically do not have significant agreements for the purchase of raw materials or other goods
specifying minimum quantities or set prices that exceed our expected requirements for the next three months.
Off-Balance Sheet Arrangements. During the ordinary course of business, we provide standby letters of credit
instruments to certain parties as required. As of December 25, 2021, $0.3 million was outstanding under standby
letters of credit.
41
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Investment and Interest Rate Risk.
At December 25, 2021, our investment portfolio included short-term, fixed-income investment securities with
a fair value of approximately $89.7 million, and we did not hold or issue financial instruments for trading
purposes. These securities are subject to interest rate risk and will likely decline in value if interest rates
increase. Our future investment income may fall short of expectations due to changes in interest rates or we
may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in
interest rates. As we classify our short-term securities as available-for-sale, no gains or losses are recognized
due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are
determined to be other-than-temporary. Due to the relatively short duration of our investment portfolio, an
immediate ten percent change in interest rates would have no material impact on our financial condition or
results of operations.
We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors
such as the length of time and extent to which fair value has been below cost basis, the financial condition of the
issuer and our ability and intent to hold the investment for a period of time sufficient for anticipated recovery of
market value. As of December 25, 2021, the cost and fair value of investments with loss positions were
approximately $57.0 million. We evaluated the nature of these investments, credit worthiness of the issuer and
the duration of these impairments and concluded that these losses were temporary and we have the ability and
intent to hold these investments to maturity.
Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated
financial statements. However, the fair value of our debt will generally fluctuate with movements of interest rates,
increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. As of
December 25, 2021, we have approximately $103.1 million of long-term debt due under a Term Loan Credit
Facility that is subject to quarterly interest payments that are based on either a base rate plus a margin of up to
2.0% per annum, or the London Interbank Offered Rate (LIBOR) plus a margin of up to 3.0% per annum. The
selection of the interest rate formula is at our discretion. The interest rate otherwise payable under the Term Loan
Credit Facility will be subject to increase by 2.0% per annum during the continuance of a payment default and
may be subject to increase by 2.0% per annum with respect to the overdue principal amount of any loans
outstanding and overdue interest payments and other overdue fees and amounts. At December 25, 2021, the
interest rate in effect on these borrowings was 3.09%.
In July 2017, the UK’s Financial Conduct Authority, which regulates the LIBOR, announced that it intends to
phase out LIBOR by the end of 2021. After 2021, it is unclear whether banks will continue to provide LIBOR
submissions to the administrator of LIBOR, and no consensus currently exists as to what benchmark rate or rates
may become accepted alternatives to LIBOR. In the United States, efforts to identify a set of alternative U.S.
dollar reference interest rates include proposals by the Alternative Reference Rates Committee that has been
convened by the Federal Reserve Board and the Federal Reserve Bank of New York. We cannot currently predict
the effect of the discontinuation of, or other changes to, LIBOR or any establishment of alternative reference rates
in the United States, the European Union or elsewhere in the global capital markets. The uncertainty regarding
the future of LIBOR, as well as the transition from LIBOR to any alternative reference rate or rates, could have
adverse impacts on floating rate obligations, loans, deposits, derivatives and other financial instruments that
currently use LIBOR as a benchmark rate. Our Term Loan Credit Facility constitutes our most significant
exposure to this transition and there is no guarantee that a shift from LIBOR to a new reference rate will not result
in increases to our borrowing costs.
Foreign Currency Exchange Risk.
We have operations in several foreign countries and conduct business in the local currency in these countries.
As a result, we have risk associated with currency fluctuations as the value of foreign currencies fluctuate
against the U.S. dollar, in particular the Swiss Franc, Euro, Malaysian Ringgit, Chinese Yuan, Philippine Peso
and Japanese Yen. These fluctuations can impact our reported earnings.
During the fourth quarter of 2020, we began entering into foreign currency forward contracts with a financial
institution to hedge against future movements in foreign exchange rates that affect certain existing U.S. Dollar
denominated assets and liabilities at our subsidiaries whose functional currency is the local currency. Under this
program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or
losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with foreign
42
currency transaction gains or losses.
Fluctuations in currency exchange rates also impact the U.S. Dollar amount of our net investment in foreign
operations. The assets and liabilities of our foreign subsidiaries are translated into U.S. Dollars at the exchange
rates in effect at the fiscal year-end balance sheet date. Income and expense accounts are translated at an
average exchange rate during the year which approximates the rates in effect at the transaction dates. The
resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other
comprehensive loss. As a result of fluctuations in certain foreign currency exchange rates in relation to the
U.S. Dollar as of December 25, 2021 compared to December 26, 2020, our stockholders’ equity decreased by
$23.0 million as a result of the foreign currency translation.
Based upon the current levels of net foreign assets, a hypothetical 10% devaluation of the U.S. dollar as
compared to these currencies as of December 25, 2021 would result in an approximate $31.1 million positive
translation adjustment recorded in other comprehensive income within stockholders’ equity. Conversely, a
hypothetical 10% appreciation of the U.S. dollar as compared to these currencies as of December 25, 2021
would result in an approximate $31.1 million negative translation adjustment recorded in other comprehensive
income within stockholders’ equity.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item is included in Part IV, Item 15(a).
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures - Under the supervision and
with the participation of our management, including our principal executive officer and principal financial officer,
we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-
15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Based on this evaluation, our principal executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of December 25, 2021, the end of the period covered by this
annual report.
Changes in Internal Control over Financial Reporting - There was no change in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months
ended December 25, 2021, that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting - Our management is
responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based on the framework in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework). Based on our evaluation under the framework in Internal Control - Integrated Framework,
our management concluded that our internal control over financial reporting was effective as of December 25,
2021.
Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial
statements included in this Annual Report on Form 10-K, has also audited the effectiveness of our internal control
over financial reporting as of December 25, 2021, as stated in their report which is included herein.
43
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cohu, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Cohu, Inc.’s internal control over financial reporting as of December 25, 2021, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cohu, Inc. (the Company) maintained,
in all material respects, effective internal control over financial reporting as of December 25, 2021, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 25, 2021 and December 26, 2020,
and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash
flows for each of the three years in the period ended December 25, 2021, and the related notes and the financial
statement schedule listed in the Index at Item 15(a) and our report dated February 18, 2022, expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
San Diego, California
February 18, 2022
44
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information under the heading “Executive Officers of the Registrant” in Part I, Item 1 of this Form 10-K is
incorporated by reference in this section. The other information required by this item is hereby incorporated by
reference to Cohu’s definitive proxy statement, which will be filed with the Securities and Exchange Commission
(SEC) within 120 days after the close of fiscal 2021.
Code of Business Conduct and Code of Ethics
Cohu has adopted a code of business conduct and ethics for directors, officers and employees. The code is
available on the Investor Relations section of our website at www.cohu.com. We intend to make all required
disclosures concerning any amendments to, or waivers from, our code of ethics on our website, within four
business days of such amendment or waiver.
Corporate Governance Guidelines and Certain Committee Charters
Cohu has adopted Corporate Governance Guidelines as well as charters for its Audit, Compensation and
Nominating and Governance Committees. These documents are available on the Investor Relations section of our
website at www.cohu.com.
The information on our website is not incorporated by reference in or considered to be a part of this Annual
Report on Form 10-K.
Item 11. Executive Compensation.
Information regarding Executive Compensation is hereby incorporated by reference to Cohu’s definitive proxy
statement, which will be filed with the SEC within 120 days after the close of fiscal 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Information regarding Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be
filed with the SEC within 120 days after the close of fiscal 2021.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding Certain Relationships and Related Transactions, and Director Independence is hereby
incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days
after the close of fiscal 2021.
Item 14. Principal Accounting Fees and Services.
Information regarding the Principal Accounting Fees and Services is hereby incorporated by reference to Cohu’s
definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2021.
45
Item 15. Exhibits, Financial Statement Schedules.
PART IV
(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form
10-K.
(1) Financial Statements
The following consolidated financial statements of Cohu, Inc., including the report thereon of Ernst
& Young LLP, are included in this Annual Report on Form 10-K beginning on page 47:
Description
Form 10-K
Page Number
Consolidated Balance Sheets at
December 25, 2021 and December 26, 2020 ......................................................................... 47
Consolidated Statements of Operations for each of the three
years in the period ended December 25, 2021 ........................................................................ 48
Consolidated Statements of Comprehensive Income (Loss) for each of the three
years in the period ended December 25, 2021 ........................................................................ 49
Consolidated Statements of Stockholders’ Equity for each of
the three years in the period ended December 25, 2021 ........................................................ 50
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 25, 2021 ........................................................................ 51
Notes to Consolidated Financial Statements ............................................................................. 52
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) ........................ 81
(2) Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts .................................................................... 88
All other financial statement schedules have been omitted because the required information is not
applicable or not present in amounts sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial statements or the notes thereto.
(3) Exhibits
The exhibits listed under Item 15(b) hereof are filed with, or incorporated by reference into, this
Annual Report on Form 10-K.
46
COHU, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Other assets
Operating lease right of use assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings
Current installments of long-term debt
Accounts payable
Customer advances
Accrued compensation and benefits
Accrued warranty
Deferred profit
Income taxes payable
Other accrued liabilities
Total current liabilities
Other accrued liabilities
Noncurrent income tax liabilities
Accrued retirement benefits
Deferred income taxes
Long-term debt
Long-term lease liabilities
Stockholders' equity:
Preferred stock, $1 par value; 1,000 shares authorized, none issued
Common stock, $1 par value; 60,000 shares authorized, 48,756
shares issued and outstanding in 2021 and 42,190 shares in 2020
Paid-in capital
Treasury stock, at cost; 207 shares in 2021 and 0 shares in 2020
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
December 25,
2021
December 26,
2020
$
$
290,201
89,704
192,873
161,053
16,194
768
750,793
149,358
20,669
151,919
142,500
18,773
1,827
485,046
63,957
219,791
177,320
22,123
25,060
$ 1,259,044
66,916
252,304
233,685
23,192
29,203
$ 1,090,346
$
$
3,059
11,338
85,230
7,300
39,835
6,614
13,208
6,873
19,002
192,459
8,588
6,138
18,037
25,887
103,393
22,040
5,314
3,075
67,923
14,410
34,862
6,066
8,671
3,857
30,275
174,453
8,900
6,888
21,663
28,816
311,551
25,787
-
-
48,756
674,777
(7,324)
193,555
(27,262)
882,502
$ 1,259,044
42,190
448,194
-
26,230
(4,326)
512,288
$ 1,090,346
The accompanying notes are an integral part of these statements.
47
COHU, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
December 25,
2021
Years ended
December 26,
2020
December 28,
2019
$
887,214
$
636,007
$
583,329
Net sales
Cost and expenses:
Cost of sales (1)
Research and development
Selling, general and administrative
Amortization of purchased intangible assets
Gain on sale of PCB Test business (2)
Restructuring charges (Note 4)
Impairment charges
Gain on sale of facilities
Income (loss) from operations
Other (expense) income:
Interest expense
Interest income
Foreign transaction gain (loss)
Gain (loss) on extinguishment of debt
500,253
91,963
126,958
35,414
(70,815)
1,823
100
-
685,696
201,518
(6,413)
239
411
(3,411)
Income (loss) from continuing operations before taxes
Income tax provision (benefit)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss)
Net income attributable to noncontrolling interest
Net income (loss) attributable to Cohu
$
$
192,344
25,019
167,325
-
167,325
-
167,325
$
$
Income (loss) per share:
Basic:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income attributable to noncontrolling interest
Net income (loss) attributable to Cohu
Diluted:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income attributable to noncontrolling interest
Net income (loss) attributable to Cohu
$
$
$
$
3.53
-
-
3.53
$
$
3.45
-
-
3.45
$
$
364,225
86,151
129,248
38,746
-
7,623
11,249
(4,495)
632,747
3,260
(13,759)
224
(3,170)
268
(13,177)
666
(13,843)
42
(13,801) $
-
(13,801) $
(0.33) $
0.00
-
(0.33) $
(0.33) $
0.00
-
(0.33) $
353,500
86,147
142,936
39,590
-
13,484
-
-
635,657
(52,328)
(20,556)
764
43
-
(72,077)
(3,082)
(68,995)
(697)
(69,692)
8
(69,700)
(1.68)
(0.01)
0.00
(1.69)
(1.68)
(0.01)
0.00
(1.69)
Weighted average shares used in computing
income (loss) per share:
Basic
Diluted
47,409
48,460
41,854
41,854
41,159
41,159
(1) Excludes amortization of $27,508, $29,510, and $30,126 for the years ended December 25, 2021, December 26, 2020, and December
28, 2019, respectively.
(2) On June 24, 2021 we completed the divestment of our PCB Test business. The divestment of this business did not qualify for
presentation as discontinued operations and the results of the PCB Test business are included in continuing operations for all periods
presented. See Note 14, “Business Divestitures and Discontinued Operations” for additional information on this transaction and financial
statement presentation.
The accompanying notes are an integral part of these statements.
48
Years ended
December 25, December 26, December 28,
2020
2019
2021
167,325 $
-
167,325
(13,801) $
-
(13,801)
(69,692)
8
(69,700)
(7,522)
(628)
-
-
(8,150)
(4)
(8,146)
(77,842)
4
(77,846)
COHU, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
$
Net income (loss)
Net income attributable to noncontrolling interest
Net income (loss) attributable to Cohu
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Change in unrealized gain/loss on investments
Reclassification due to sale of PCB Test business
Other comprehensive income (loss), net of tax
Other comprehensive loss attributable to noncontrolling interest
Other comprehensive income (loss) attributable to Cohu
(22,956)
2,602
(67)
(2,515)
(22,936)
-
(22,936)
27,321
2,383
-
-
29,704
-
29,704
Comprehensive income (loss)
Comprehensive income attributable to noncontrolling interest
Comprehensive income (loss) attributable to Cohu
144,389
-
15,903
-
$
144,389 $
15,903 $
The accompanying notes are an integral part of these statements.
49
COHU, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except par value and per share amounts)
Common
stock
$1 par value
$
40,763
-
-
Paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
Stock
Noncontrolling
Interest
Total
$ 419,690 $ 111,670 $
10,352
(69,692)
-
-
(25,880) $
-
-
- $
-
-
Balance at December 29, 2018
Cumulative effect of accounting change (a)
Net loss
Changes in cumulative translation
adjustment
Adjustments related to postretirement
benefits, net of tax
Cash dividends - $0.24 per share
Exercise of stock options
Shares issued under ESPP
Shares issued for restricted stock units
vested
Repurchase and retirement of stock
Noncontrolling interest
Share-based compensation expense
Divestiture of interest in consolidated entity
Balance at December 28, 2019
Net loss
Changes in cumulative translation
adjustment
Adjustments related to postretirement
benefits, net of tax
Cash dividends - $0.06 per share
Exercise of stock options
Shares issued under ESPP
Shares issued for restricted stock units
vested
Repurchase and retirement of stock
Share-based compensation expense
Balance at December 26, 2020
Common stock repurchases
Net income
Changes in cumulative translation
adjustment
Adjustments related to postretirement
benefits, net of tax
Changes in unrealized gains and losses on
investments, net of tax
Exercise of stock options
Shares issued under ESPP
Shares issued for restricted stock units
vested
Repurchase and retirement of stock
Impact of sale of PCB Test business
Share-based compensation expense
Sale of common stock, net of issuance costs
Balance at December 25, 2021
$
-
-
-
42
187
599
(196)
-
-
-
41,395
-
-
-
-
101
243
660
(209)
-
42,190
-
-
-
-
-
250
161
-
-
(7,522)
-
-
367
2,159
(599)
(2,575)
-
14,148
-
433,190
-
-
(9,866)
-
-
-
-
53
-
-
42,517
(13,801)
(628)
-
-
-
-
-
-
-
-
(34,030)
-
-
-
27,321
-
-
1,001
3,026
(660)
(2,597)
14,234
448,194
-
-
-
-
-
2,260
3,403
-
(2,486)
-
-
-
-
-
26,230
-
167,325
-
-
-
-
-
2,383
-
-
-
-
-
-
(4,326)
-
-
(22,956)
2,602
(67)
-
-
-
-
(2,515)
-
-
(27,262) $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,324)
-
-
-
-
-
-
-
-
-
-
-
(7,324) $
704
(242)
-
-
5,693
48,756
(704)
(10,222)
-
14,420
217,426
-
-
-
-
-
$ 674,777 $ 193,555 $
(299) $ 545,944
10,352
(69,692)
-
-
(4)
(7,526)
-
-
-
-
-
-
(53)
-
356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(628)
(9,866)
409
2,346
-
(2,771)
-
14,148
356
483,072
(13,801)
27,321
2,383
(2,486)
1,102
3,269
-
(2,806)
14,234
512,288
(7,324)
167,325
(22,956)
2,602
-
(67)
2,510
3,564
-
-
(10,464)
-
(2,515)
-
14,420
-
-
223,119
- $ 882,502
(a) Cumulative effect of accounting change relates to our adoption of ASU 2016-02.
The accompanying notes are an integral part of these statements.
50
COHU, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income (loss) attributable to Cohu
Net income from noncontrolling interest
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
(Gain) loss on business divestitures
Interest capitalized associated with cloud computing implementation
Gain on divestiture of consolidated entity
(Gain) loss on extinguishment of debt
Impairment charges related to indefinite lived intangibles
Depreciation and amortization
Share-based compensation expense including restructuring charges
Amortization of inventory step-up and inventory related charges
Amortization of debt discounts and issuance costs
Accrued retiree benefits
Deferred income taxes
Changes in other assets
Amortization of cloud-based software implementation costs
(Gain) loss from sale of property, plant and equipment
Changes in other accrued liabilities
Changes in current assets and liabilities, excluding
effects from divestitures:
Customer advances
Accounts receivable
Inventories
Accrued compensation, warranty and other liabilities
Accounts payable
Deferred profit
Other current assets
Income taxes payable
Operating lease right-of-use assets
Current and long-term operating lease liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Net cash received from sale of land, facility and assets
Purchases of short-term investments
Sales and maturities of short-term investments
Cash received from disposition of business, net of cash paid
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Cash dividends paid
Proceeds from revolving line of credit and construction loans
Repayments of long-term debt
Net issuance (repurchases) of stock, including awards settled in cash
Acquisition of treasury stock
Proceeds received from issuance of common stock, net of fees
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash held by discontinued operations (Note 14)
Cash and cash equivalents at end of year from continuing operations
Supplemental disclosure of cash flow information:
Cash paid for income taxes
Cash paid for interest
Property, plant and equipment purchases included in accounts payable
Inventory capitalized as capital assets
Years ended
December 25, December 26,
2021
2020
December 28,
2019
$
167,325 $
(13,801) $
-
-
(69,700)
8
(70,815)
(91)
-
3,411
100
48,568
13,792
6,523
643
(500)
953
(1,652)
1,644
1
(416)
(4,090)
(59,123)
(35,864)
225
17,316
4,732
1,709
3,444
6,746
(6,852)
97,729
(12,000)
157
(204,699)
135,549
120,886
39,893
-
1,376
(206,069)
(4,390)
(7,324)
223,119
6,712
(3,491)
140,843
149,358
290,201
-
(35)
(124)
-
(268)
11,249
52,746
14,234
3,731
1,177
1,675
(5,305)
285
1,191
(4,170)
91
2,188
(20,210)
(14,982)
4,678
15,058
871
1,150
(2,089)
6,831
(6,437)
49,734
(18,660)
17,025
(19,703)
-
2,975
(18,363)
(4,971)
5,878
(41,056)
2,077
-
-
(38,072)
129
(6,572)
155,930
149,358
-
$
$
$
$
$
290,201 $
149,358 $
22,717 $
6,253 $
624 $
1,635 $
5,772 $
16,324 $
1,063 $
1,050 $
1,138
(168)
(149)
-
-
58,871
14,148
8,347
1,110
1,017
(5,385)
(3,044)
-
173
5,348
11,548
21,150
26
(9,405)
(3,122)
997
(5,996)
(10,719)
7,159
(6,083)
17,269
(18,000)
1,767
(315)
-
-
(16,548)
(9,827)
5,477
(3,817)
(16)
-
-
(8,183)
(1,529)
(8,991)
164,921
155,930
(736)
155,194
14,942
14,846
1,601
300
The accompanying notes are an integral part of these statements.
51
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation – Cohu, Inc. (“Cohu”, “we”, “our”, “us” and the “Company”), through our wholly
owned subsidiaries, is a provider of semiconductor test equipment and services. Our consolidated financial
statements include the accounts of Cohu and our wholly owned subsidiaries and variable interest entities
(“VIEs”) for which we are the primary beneficiary. All intercompany balances and transactions have been
eliminated in consolidation. We evaluate the need to consolidate affiliates based on standards set forth in
ASC Topic 810, Consolidation (“ASC 810”).
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ from these
estimates.
Our fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. Our current
fiscal year, which ended on December 25, 2021, consisted of 52 weeks. Our fiscal years ended on December
26, 2020, and December 28, 2019, each consisted of 52 weeks.
Certain prior year balances within property, plant and equipment disclosures have been reclassified to
conform to the current year’s presentation. Such reclassifications did not affect the consolidated financial
statements as previously reported.
Principles of Consolidation for Variable Interest Entities – We follow ASC Topic 810-10-15 guidance
with respect to accounting for VIEs. On December 28, 2019, we divested our entire 20% interest in ALBS
Solutions Sdn Bhd (“ALBS”), our only VIE. As a result of the divestment, we no longer had a controlling
interest in ALBS and stopped consolidating ALBS as of that date. Divestment of our ownership in ALBS
resulted in a gain of $0.1 million which is included in restructuring charges for the year ended December 28,
2019.
Business Divestitures and Discontinued Operations – On June 24, 2021, we completed the sale of our
PCB Test business, which represented our PCB Test segment. As part of the transaction we also sold certain
intellectual property held by our Semiconductor Test & Inspection segment that is utilized by the PCB Test
business. In February 2020, we divested our fixtures services business. Our decision to sell these non-core
businesses and assets resulted from management’s determination that that they were not a fit within the core
business of our organization which is delivering leading-edge solutions for the manufacturing of
semiconductors through back-end semiconductor equipment and services. Unless otherwise indicated, all
amounts herein relate to continuing operations. For financial statement purposes, only the results of
operations of our fixtures services business have been segregated from those of continuing operations and
have been presented in our consolidated financial statements as discontinued operations for all periods
presented. See Note 14, “Business Divestitures and Discontinued Operations” for additional information.
Unless otherwise indicated, all amounts herein relate to continuing operations.
Income (Loss) Per Share – Basic income (loss) per common share is computed by dividing net income (loss)
by the weighted-average number of common shares outstanding during the reporting period. Diluted income
(loss) per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock
options, vesting of outstanding restricted stock and performance stock units and issuance of stock under our
employee stock purchase plan using the treasury stock method. In loss periods, potentially dilutive securities
are excluded from the per share computations due to their anti-dilutive effect. For purposes of computing
diluted income (loss) per share, stock options with exercise prices that exceed the average fair market value of
our common stock for the period are excluded. For the years ended December 25, 2021, December 26, 2020
and December 28, 2019, approximately 180,000, 113,000 and 422,000 shares, respectively, of our common
stock were excluded from the computation.
52
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reconciles the denominators used in computing basic and diluted income (loss) per share:
2019
41,159
-
41,159
(in thousands)
Weighted average common shares outstanding
Effect of dilutive stock options and restricted stock units
2021
47,409
1,051
48,460
2020
41,854
-
41,854
For the years ended December 26, 2020, and December 28, 2019, Cohu has utilized the “control number”
concept in the computation of diluted earnings per share to determine whether potential common stock
instruments are dilutive. The control number used is income from continuing operations. The control number
concept requires that the same number of potentially dilutive securities applied in computing diluted earnings
per share from continuing operations be applied to all other categories of income or loss, regardless of their
anti-dilutive effect on such categories.
Cash, Cash Equivalents and Short-term Investments – Highly liquid investments with insignificant
interest rate risk and original maturities of three months or less are classified as cash and cash equivalents.
Investments with maturities greater than three months are classified as short-term investments. All of our
short-term investments in debt securities are classified as available-for-sale and are reported at fair value,
with any unrealized gains and losses, net of tax, recorded in the statement of comprehensive income (loss).
We manage our cash equivalents and short-term investments as a single portfolio of highly marketable
securities. We have the ability and intent, if necessary, to liquidate any of our investments in order to meet
the liquidity needs of our current operations during the next 12 months. Accordingly, investments with
contractual maturities greater than one year have been classified as current assets in the accompanying
consolidated balance sheets.
Fair Value of Financial Instruments – The carrying amounts of our financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value
due to the short maturities of these financial instruments.
Concentration of Credit Risk – Financial instruments that potentially subject us to significant credit risk
consist principally of cash equivalents, short-term investments and trade accounts receivable. We invest in a
variety of financial instruments and, by policy, limit the amount of credit exposure with any one issuer.
Our trade accounts receivable are presented net of an allowance for credit losses, which is determined in
accordance with the guidance provided by ASC Topic 326, Financial Instruments-Credit Losses (“ASC
326”). Our customers include semiconductor manufacturers and semiconductor test subcontractors
throughout many areas of the world. While we believe that our allowance for credit losses is adequate and
represents our best estimate at December 25, 2021, we will continue to monitor customer liquidity and other
economic conditions, including the impact of the COVID-19 pandemic, which may result in changes to our
estimates regarding expected credit losses.
Inventories – Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net
realizable value. Cost includes labor, material and overhead costs. Determining the net realizable value of
inventories involves numerous estimates and judgments including projecting average selling prices and sales
volumes for future periods and costs to complete and dispose of inventory. As a result of these analyses, we
record a charge to cost of sales in advance of the period when the inventory is sold when estimated market
values are below our costs. Charges to cost of sales for excess and obsolete inventories totaled $7.1 million in
2021. Included in this amount are inventory charges related to the decision to end manufacturing of certain
of our semiconductor test handler products associated with the integration of Xcerra which were not
significant in 2021. Charges to cost of sales for excess and obsolete inventories totaled $8.1 million in 2020
and included $2.1 million of inventory charges related to the decision to end manufacturing of certain of
our semiconductor test handler products associated with the integration of Xcerra. Charges to cost of sales
for excess and obsolete inventories totaled $4.8 million in 2019 and included $0.7 million of inventory
charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler
products.
53
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories by category were as follows (in thousands):
Raw materials and purchased parts
Work in process
Finished goods
Total inventories
December 25, December 26,
2021
2020
$
$
92,798 $
40,732
27,523
161,053 $
83,755
44,315
14,430
142,500
Gain on Sale of Facilities – As part of our previously announced Xcerra integration plan we implemented
certain facility consolidation actions. See Note 4, “Restructuring Charges” for additional information on this
program. During 2020, we completed the sales of our facilities located in Rosenheim, Germany and Penang,
Malaysia which resulted in a gain of $4.5 million.
Property, Plant and Equipment – Depreciation and amortization of property, plant and equipment, both
owned and under financing lease, is calculated principally on the straight-line method based on estimated
useful lives of thirty to forty years for buildings, five to fifteen years for building improvements, three to ten
years for machinery, equipment and software and the lease life for financing leases. Land is not depreciated.
Property, plant and equipment, at cost, consisted of the following (in thousands):
Land and land improvements
Buildings and building improvements
Machinery and equipment
Less accumulated depreciation and amortization
Property, plant and equipment, net
December 25, December 26,
2021
2020
$
$
7,703 $
31,711
95,542
134,956
(70,999)
63,957 $
8,141
34,439
88,960
131,540
(64,624)
66,916
Depreciation expense was $13.2 million in 2021, $14.0 million in 2020 and $19.3 million in 2019. The
decrease in depreciation expense recognized in 2021 and 2020 compared to 2019 was a result of assets
becoming fully depreciated and facility sales.
Cloud Computing Implementation Costs – We have capitalized certain costs associated with the
implementation of our new cloud-based Enterprise Resource Planning (“ERP”) system in accordance with
ASC Topic 350, Intangibles—Goodwill and Other, (“ASC 350”). Capitalized costs include only external
direct costs of materials and services consumed in developing the system and interest costs incurred, when
material, while developing the system.
Total unamortized capitalized cloud computing implementation costs totaled $13.5 million at both
December 25, 2021 and December 26, 2020. These amounts are recorded within other assets in our
consolidated balance sheets and the consistency year-over-year was due to new costs capitalized in 2021,
being on pace with increased amortization as development was completed. Implementation costs are
amortized using the straight-line method over seven years and we recorded $1.6 million and $1.2 million
in amortization expense during the years ended December 25, 2021 and December 26, 2020, respectively.
Segment Information – We applied the provisions of ASC Topic 280, Segment Reporting, (“ASC 280”),
which sets forth a management approach to segment reporting and establishes requirements to report selected
segment information quarterly and to report annually entity-wide disclosures about products, major
customers and the geographies in which the entity holds material assets and reports revenue. An operating
segment is defined as a component that engages in business activities whose operating results are reviewed
by the chief operating decision maker and for which discrete financial information is available. We have
determined that our three identified operating segments are: Test Handler Group (THG), Semiconductor
Tester Group (STG) and Interface Solutions Group (ISG). Our THG, STG and ISG operating segments
qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics,
and the nature of products and services provided. As a result, we report in one segment, Semiconductor Test
and Inspection Equipment (“Semiconductor Test & Inspection”). Prior to the sale of our PCB Test Group
(PTG) on June 24, 2021, we reported in two segments, Semiconductor Test & Inspection and PCB Test
54
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equipment (“PCB Test”).
Goodwill, Purchased Intangible Assets and Other Long-lived Assets – We evaluate goodwill and other
indefinite-lived intangible assets, which are solely comprised of in-process research and development
(“IPR&D”), for impairment annually and when an event occurs or circumstances change that indicate that
the carrying value may not be recoverable. We test goodwill for impairment by first comparing the book
value of net assets to the fair value of the reporting unit or, in the case of in-process research and
development, to the fair value of the asset. If the fair value is determined to be less than the book value, a
second step is performed to compute the amount of impairment as the difference between the fair value of the
reporting unit and its carrying value, not to exceed the carrying value of goodwill. We estimated the fair
values of our reporting units primarily using the income approach valuation methodology that includes the
discounted cash flow method, taking into consideration the market approach and certain market multiples as
a validation of the values derived using the discounted cash flow methodology. Forecasts of future cash
flows are based on our best estimate of future net sales and operating expenses, based primarily on customer
forecasts, industry trade organization data and general economic conditions. Fair value determinations
require considerable judgment and are sensitive to changes in underlying assumptions and factors.
We conduct our annual impairment test as of October 1st of each year, and have determined there was no
impairment as of October 1, 2021, as we determined that the estimated fair values of our reporting units
exceeded their carrying values on that date. Other events and changes in circumstances may also require
goodwill to be tested for impairment between annual measurement dates. As of December 25, 2021, we do
not believe that circumstances have occurred that indicate impairment of our goodwill is more-likely-than-
not. In the event we determine that an interim goodwill impairment review is required, in a future period, the
review may result in an impairment charge, which would have a negative impact on our results of operations.
Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the observable market value of an asset,
a significant change in the extent or manner in which an asset is used, or any other significant adverse change
that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-
lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its
undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the
difference between the carrying amount and estimated fair value.
Product Warranty – Product warranty costs are accrued in the period sales are recognized. Our products are
generally sold with standard warranty periods, which differ by product, ranging from 12 to 36 months. Parts
and labor are typically covered under the terms of the warranty agreement. Our warranty expense accruals
are based on historical and estimated costs by product and configuration. From time-to-time we offer
customers extended warranties beyond the standard warranty period. In those situations, the revenue relating
to the extended warranty is deferred at its estimated fair value and recognized on a straight-line basis over the
contract period. Costs associated with our extended warranty contracts are expensed as incurred.
Income Taxes – We assess our income tax positions and record tax benefits for all years subject to
examination based upon management’s evaluation of the facts, circumstances and information available at
the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be
sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of
being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant
information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be
sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated
interest and penalties have also been recognized and recorded, net of federal and state tax benefits, in income
tax expense.
We recognized deferred tax assets and liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are established for those jurisdictions when necessary to
55
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reduce deferred tax assets to the amounts that are more likely than not to be realized in the future.
Contingencies and Litigation – We assess the probability of adverse judgments in connection with current
and threatened litigation. We would accrue the cost of an adverse judgment if, in our estimation, the adverse
outcome is probable, and we can reasonably estimate the ultimate cost.
Leases – We determine if a contract contains a lease at inception. Operating leases are included in operating
lease right of use (“ROU”) assets, current other accrued liabilities, and long-term lease liabilities on our
consolidated balance sheets. Finance leases are included in property, plant and equipment, other current
accrued liabilities, and long-term lease liabilities on our consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the
future minimum lease payments over the lease term at the adoption date or the commencement date for
leases entered into after the adoption date. As most of our leases do not provide an implicit rate, we use our
incremental borrowing rates for the remaining lease terms based on the information available at the adoption
date or commencement date in determining the present value of future payments.
The operating lease ROU asset also includes any lease payments made, lease incentives, favorable and
unfavorable lease terms recognized in business acquisitions and excludes initial direct costs incurred and
variable lease payments. Variable lease payments include estimated payments that are subject to
reconciliations throughout the lease term, increases or decreases in the contractual rent payments, as a result
of changes in indices or interest rates and tax payments that are based on prevailing rates. Our lease terms
may include renewal options to extend the lease when it is reasonably certain that we will exercise those
options. In addition, we include purchase option amounts in our calculations when it is reasonably certain
that we will exercise those options. Rent expense for minimum payments under operating leases is
recognized on a straight-line basis over the term.
Leases with an initial term of 12 months or less are not recorded on the balance sheet but recognized in our
consolidated statements of operations on a straight-line basis over the lease term. We account for lease and
non-lease components as a single lease component and include both in our calculation of the ROU assets and
lease liabilities.
We sublease certain leased assets to third parties, mainly as a result of unused space in our facilities. None of
our subleases contain extension options. Variable lease payments in our subleases include tax payments that
are based on prevailing rates. We account for lease and non-lease components as a single lease component.
Revenue Recognition – Our net sales are derived from the sale of products and services and are adjusted for
estimated returns and allowances, which historically have been insignificant. We recognize revenue when the
obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the
transfer of control of our systems, non-system products or the completion of services. In circumstances
where control is not transferred until destination or acceptance, we defer revenue recognition until such
events occur.
Revenue for established products that have previously satisfied a customer’s acceptance requirements is
generally recognized upon shipment. In cases where a prior history of customer acceptance cannot be
demonstrated or from sales where customer payment dates are not determinable and in the case of new
products, revenue and cost of sales are deferred until customer acceptance has been received. Our post-
shipment obligations typically include installation and standard warranties. The estimated fair value of
installation related revenue is recognized in the period the installation is performed. Service revenue is
recognized over time as we transfer control to our customer for the related contract or upon completion of the
services if they are short-term in nature. Spares, contactor and kit revenue is generally recognized upon
shipment.
Certain of our equipment sales have multiple performance obligations. These arrangements involve the
delivery or performance of multiple performance obligations, and transfer of control of performance
obligations may occur at different points in time or over different periods of time. For arrangements
containing multiple performance obligations, the revenue relating to the undelivered performance obligation
is deferred using the relative standalone selling price method utilizing estimated sales prices until satisfaction
of the deferred performance obligation.
56
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. At
December 25, 2021 and December 26, 2020, we had $7.7 million and $8.3 million of revenue expected to be
recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) for
contracts with original expected durations of over one year, respectively. As allowed under ASC 606, we
have opted to not disclose unsatisfied performance obligations for contracts with original expected
durations of less than one year.
We generally sell our equipment with a product warranty. The product warranty provides assurance to
customers that delivered products are as specified in the contract (an “assurance-type warranty”). Therefore,
we account for such product warranties under ASC 460, Guarantees (“ASC 460”), and not as a separate
performance obligation.
The transaction price reflects our expectations about the consideration we will be entitled to receive from the
customer and may include fixed or variable amounts. Fixed consideration primarily includes sales to
customers that are known as of the end of the reporting period. Variable consideration includes sales in
which the amount of consideration that we will receive is unknown as of the end of a reporting period.
Variable consideration arrangements are rare; however, when they occur, we estimate variable consideration
as the expected value to which we expect to be entitled. Included in the transaction price estimate are
amounts in which it is probable that a significant reversal of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved. Variable
consideration that does not meet revenue recognition criteria is deferred.
Our contracts are typically less than one year in duration and we have elected to use the practical expedient
available in ASC 606 to expense cost to obtain contracts as they are incurred because they would be
amortized over less than one year.
Accounts receivable represents our unconditional right to receive consideration from our customers.
Payments terms do not exceed one year from the invoice date and therefore do not include a significant
financing component. To date, there have been no material impairment losses on accounts receivable. There
were no material contract assets recorded on the consolidated balance sheet in any of the periods presented.
On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our
consolidated balance sheet representing the difference between the receivable recorded and the inventory
shipped. In certain instances where customer payments are received prior to product shipment, the
customer’s payments are recorded as customer advances. At December 25, 2021, we had deferred revenue
totaling approximately $21.9 million, current deferred profit of $13.2 million and deferred profit expected
to be recognized after one year included in noncurrent other accrued liabilities of $6.1 million. At
December 26, 2020, we had deferred revenue totaling approximately $17.1 million, current deferred profit
of $8.7 million and deferred profit expected to be recognized after one year included in noncurrent other
accrued liabilities of $6.7 million.
Disaggregated net sales by segment are as follows:
(in thousands)
Systems-Semiconductor Test & Inspection
Non-systems-Semiconductor Test & Inspection
Systems-PCB Test
Non-systems-PCB Test
Net sales
$
$
2021
2020
2019
541,589
318,865
17,831
8,929
887,214
$
$
317,821
267,419
33,293
17,474
636,007
$
$
299,473
241,405
25,928
16,523
583,329
Advertising Costs – Advertising costs are expensed as incurred and were not material for all periods
presented.
Restructuring Costs – We record restructuring activities including costs for one-time termination benefits in
accordance with ASC Topic 420 (“ASC 420”), Exit or Disposal Cost Obligations. The timing of recognition
for severance costs accounted for under ASC 420 depends on whether employees are required to render
service until they are terminated in order to receive the termination benefits. If employees are required to
render service until they are terminated in order to receive the termination benefits, a liability is recognized
ratably over the future service period. Otherwise, a liability is recognized when management has committed
57
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to a restructuring plan and has communicated those actions to employees. Employee termination benefits
covered by existing benefit arrangements are recorded in accordance with ASC Topic 712, Nonretirement
Postemployment Benefits. These costs are recognized when management has committed to a restructuring
plan and the severance costs are probable and estimable.
Debt Issuance Costs – We capitalize costs related to the issuance of debt. Debt issuance costs directly
related to our Term Loan Credit Facility are presented within noncurrent liabilities as a reduction of long-
term debt in our consolidated balance sheets. The amortization of such costs is recognized as interest expense
using the effective interest method over the term of the respective debt issue. Amortization related to deferred
debt issuance costs and original discount costs was $0.6 million, $1.2 million and $1.1 million for the years
ended December 25, 2021, December 26, 2020 and December 28, 2019, respectively.
Share-based Compensation – We measure and recognize all share-based compensation under the fair value
method. Our estimate of share-based compensation expense requires a number of complex and subjective
assumptions including our stock price volatility, employee exercise patterns (expected life of the options) and
related tax effects. The assumptions used in calculating the fair value of share-based awards represent our
best estimates, but these estimates involve inherent uncertainties and the application of management
judgment. Although we believe the assumptions and estimates we have made are reasonable and appropriate,
changes in assumptions could materially impact our reported financial results.
Foreign Remeasurement and Currency Translation – Assets and liabilities of our wholly owned foreign
subsidiaries that use the U.S. Dollar as their functional currency are re-measured using exchange rates in
effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and
equipment, which are re-measured using historical exchange rates. Revenues and costs are re-measured using
average exchange rates for the period, except for costs related to those balance sheet items that are re-
measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized
as incurred. During the year ended December 25, 2021, in our consolidated statement of operations we
recognized foreign exchange gains totaling $0.4 million. During the years ended December 26, 2020 and
December 28, 2019, we recognized a foreign exchange loss of $3.2 million and an insignificant gain,
respectively.
Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a
result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue
and expenses are translated using the average exchange rate for the period. Cumulative translation
adjustments resulting from the translation of the financial statements are included as a separate component of
stockholders’ equity.
Foreign Exchange Derivative Contracts – We operate and sell our products in various global markets. As a
result, we are exposed to changes in foreign currency exchange rates. During the fourth quarter of 2020, we
began entering into foreign currency forward contracts with a financial institution to hedge against future
movements in foreign exchange rates that affect certain existing U.S. Dollar denominated assets and
liabilities at our subsidiaries whose functional currency is the local currency. Under this program, our
strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on
the foreign currency forward contracts in order to mitigate the risks and volatility associated with foreign
currency transaction gains or losses. Additional information related to our foreign exchange derivative
contracts is included in Note 7, “Derivative Financial Instruments”.
Accumulated Other Comprehensive Loss – Our accumulated other comprehensive loss totaled
approximately $27.3 million at December 25, 2021, and $4.3 million at December 26, 2020, and was
attributed to, net of income taxes where applicable, foreign currency adjustments resulting from the
translation of certain accounts into U.S. Dollars and adjustments to accumulated postretirement benefit
obligations. The U.S. Dollar strengthened relative to certain foreign currencies in countries where we have
operations as of December 25, 2021, compared to December 26, 2020 and consequently, our accumulated
other comprehensive loss increased by $23.0 million. In the previous year, the U.S. Dollar weakened relative
to certain foreign currencies in countries where we have operations and, as a result, our accumulated other
comprehensive loss decreased by $27.3 million. Reclassification adjustments from accumulated other
comprehensive loss during 2021 and 2020 were not significant. Additional information related to
accumulated other comprehensive loss, on an after-tax basis is included in Note 15, “Accumulated Other
Comprehensive Income (Loss)”.
58
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements – All accounting pronouncements adopted during the
current year were not material.
Recently Issued Accounting Pronouncements – In March 2020, the FASB issued Accounting Standards
Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying
generally accepted accounting principles to contracts, hedging relationships and other transactions affected
by reference rate reform. Our Term Loan Credit Facility bears interest at fluctuating interest rates based on
LIBOR. If LIBOR ceases to exist, we may need to renegotiate our loan and we cannot predict what
alternative index would be negotiated with our lenders. ASU 2020-04 was effective upon issuance and may
be applied prospectively to contract modifications made on or before December 31, 2022. We do not expect
the adoption of this guidance to have a material impact on our consolidated financial statements.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or
not applicable.
2. Goodwill and Purchased Intangible Assets
Changes in the carrying value of our goodwill during the years ended December 25, 2021, and December 26,
2020, were as follows (in thousands):
Semiconductor Test &
Inspection
PCB Test
Total Goodwill
Balance December 28, 2019
Impact of currency exchange
Balance December 26, 2020
Sale of PCB Test Business (1)
Impact of currency exchange
$
218,775 $
11,949
230,724
-
(10,933)
219,791 $
19,894 $
1,686
21,580
(21,899)
319
- $
238,669
13,635
252,304
(21,899)
(10,614)
219,791
Balance December 25, 2021
(1) On June 24, 2021, we completed the sale of our PCB Test business. See Note 14, “Business Divestitures and Discontinued
$
Operations” for additional information.
Purchased intangible assets, subject to amortization, are as follows (in thousands):
December 25, 2021
December 26, 2020
Remaining
Gross Carrying Accumulated Useful Life
Amortization
Amount
Developed technology
Customer relationships
Trade names
Covenant not-to-compete
$
$
229,131 $
65,916
20,877
308
316,232 $
104,855
26,189
7,714
154
138,912
(years)
4.5
7.4
7.3
5.0
$
Amount
Gross Carrying Accumulated
Amortization
83,246
22,751
6,279
136
112,412
239,250 $
74,933
23,756
340
338,279 $
$
The table above excludes $7.8 million of in-process technology in 2020, which has an indefinite life and is
subject to impairment or future amortization as developed technology when the projects are completed.
During 2021 all remaining in-process technology was completed and transferred to developed technology
and began being amortized. Changes in the carrying values of purchased intangible assets presented above
are a result of the impact of fluctuation in currency exchange rates and the sale of our PCB Test business.
We evaluate goodwill and other indefinite-lived intangible assets for impairment annually and when an event
occurs, or circumstances change that indicate that the carrying value may not be recoverable. We completed
our required annual goodwill and indefinite-lived intangible impairment testing as of October 1, 2021, the
first day of our fourth quarter and concluded there were no impairments of goodwill within our reporting
units or our indefinite-lived intangible assets at that time. Other events and changes in circumstances may
also require goodwill and our indefinite-lived intangible assets to be tested for impairment between annual
measurement dates.
During the first quarter of 2020, the volatility in Cohu’s stock price, the global economic downturn and
business interruptions associated with the COVID-19 pandemic led us to determine that there was a
59
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
triggering event related to goodwill and our indefinite-lived intangible assets. We performed an interim
assessment as of March 28, 2020 and concluded there was no impairment of goodwill within our reporting
units. Anticipated delays in customer adoption of certain new products under development as a result of the
COVID-19 pandemic, changes to future project roadmaps and an increase in the discount rate used in
developing our interim fair value estimate resulted in a $3.9 million impairment to IPR&D as the carrying
value exceeded fair value. During the third quarter of 2020, we became aware of additional delays in
customer adoption of these new products under development leading us to re-evaluate the fair value of these
projects and we determined that the carrying value exceeded the fair value and, as a result, we recorded an
additional $7.3 million impairment to IPR&D. For the twelve months ended December 26, 2020 total
impairments recorded to IPR&D projects was $11.2 million. As noted above, during the fourth quarter of
2021 we completed and transferred to developed technology our last remaining in-process technology project
which was reviewed for impairment as part of this process. Due to a change in forecasted results an
impairment charge of $0.1 million was recorded.
Amortization expense related to purchased intangible assets was approximately $35.4 million in 2021,
$38.7 million in 2020 and $39.6 million in 2019. As of December 25, 2021, we expect amortization expense
in future periods to be as follows: 2022 - $34.8 million; 2023 - $34.8 million; 2024 - $34.8 million; 2025 -
$26.1 million 2026 - $19.3 million; and thereafter $27.4 million.
3. Borrowings and Credit Agreements
The following table is a summary of our borrowings as of December 25, 2021 and December 26, 2020:
(in thousands)
Bank term loan under credit agreement
Bank term loans-Kita
Construction loan-Cohu GmbH
Lines of credit
Total debt
Less: financing fees and discount
Less: current portion
Total long-term debt
$
$
Fiscal year ended
December 25, 2021
December 26, 2020
103,130
3,070
10,045
3,059
119,304
(1,514)
(14,397)
103,393
$
$
306,630
3,662
9,902
5,314
325,508
(5,568)
(8,389)
311,551
The debt principal payments, excluding financing lease obligations, for the next five years and thereafter are
as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
Credit Agreement
$
$
14,795
4,751
4,757
86,892
1,268
6,841
119,304
On October 1, 2018, we entered into a Credit Agreement providing for a $350.0 million Term Loan Credit
Facility and borrowed the full amount to finance a portion of the Xcerra acquisition. Loans under the Term
Loan Credit Facility amortize in equal quarterly installments of 0.25% of the original principal amount, with
the balance payable at maturity. All outstanding principal and interest in respect of the Term Loan Credit
Facility must be repaid on or before October 1, 2025. The loans under the Term Loan Credit Facility bear
interest, at Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of 3.00%. At December 25,
2021, the outstanding loan balance, net of discount and deferred financing costs, was $101.6 million and
$10.1 million of the outstanding balance is presented as current installments of long-term debt in our
consolidated balance sheets. At December 26, 2020, the outstanding loan balance, net of discount and
deferred financing costs, was $301.1 million and $2.4 million of the outstanding balance is presented as
current installments of long-term debt in our consolidated balance sheets. As of December 25, 2021, the fair
60
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
value of the debt was $102.7 million. The measurement of the fair value of debt is based on the average of
the bid and ask trading quotes as of December 25, 2021 and is considered a Level 2 fair value measurement.
Under the terms of the Credit Agreement, the lender may accelerate the payment terms upon the occurrence
of certain events of default set forth therein, which include: the failure of Cohu to make timely payments of
amounts due under the Credit Agreement, the failure of Cohu to adhere to the representations and covenants
set forth in the Credit Agreement, the failure to provide notice of any event that causes a material adverse
effect or to provide other required notices, upon the event that related collateral agreements become
ineffective, upon the event that certain legal judgments are entered against Cohu, the insolvency of Cohu, or
upon the change of control of Cohu. As of December 25, 2021, we believe no such events of default have
occurred.
During 2021 we prepaid $200.0 million in principal of our Term Loan Credit Facility for $200.0 million in
cash. We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $3.4 million
reflected in other expense, net, in our consolidated statement of operations and a corresponding $3.4 million
reduction in debt discounts and deferred financing costs in our consolidated balance sheets. During 2020 we
repurchased $36.4 million in principal of our Term Loan Credit Facility for $35.4 million in cash. We
accounted for the repurchase as a debt extinguishment, which resulted in a gain of $0.3 million reflected in
other expense, net, in our consolidated statement of operations, as well as a $0.7 million reduction in debt
discounts and deferred financing costs in our consolidated balance sheets. Approximately $103.1 million in
principal of the Term Loan Credit Facility remains outstanding as of December 25, 2021.
Kita Term Loans
We have a series of term loans with Japanese financial institutions primarily related to the expansion of our
facility in Osaka, Japan. The loans are collateralized by the facility and land, carry interest rates ranging from
0.05% to 0.43%, and expire at various dates through 2034. At December 25, 2021, the outstanding loan
balance was $3.1 million and $0.2 million of the outstanding balance is presented as current installments of
long-term debt in our consolidated balance sheets. At December 26, 2020, the outstanding loan balance was
$3.6 million and $0.3 million of the outstanding balance is presented as current installments of long-term
debt in our consolidated balance sheets. The fair value of the debt approximates the carrying value at
December 25, 2021.
The term loans are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate
because of changes in currency exchange rates.
Construction Loans
In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series
of construction loans (“Loan Facilities”) with a German financial institution providing it with total
borrowings of up to €10.1 million. The Loan Facilities are being utilized to finance the expansion of our
facility in Kolbermoor, Germany and are secured by the land and the existing building on the site. The Loan
Facilities bear interest at agreed upon rates based on the facility amounts as discussed below.
The first facility totaling €3.4 million has been fully drawn and is payable over 10 years at a fixed annual
interest rate of 0.8%. Principal and interest payments are due each quarter over the duration of the facility
ending in September 2029. The second facility totaling €5.2 million has been fully drawn and is payable over
15 years at an annual interest rate of 1.05%, which is fixed until April 2027. Principal and interest payments
are due each month over the duration of the facility ending in January 2034. The third facility totaling
€1.5 million, of which €0.9 million is drawn, is payable over 10 years at an annual interest rate of 1.2%.
Principal and interest payments are due each month over the duration of the facility ending in May 2030.
At December 25, 2021, total outstanding borrowings under the Loan Facilities was $10.0 million with
$1.0 million of the total outstanding balance being presented as current installments of long-term debt in our
consolidated balance sheets. At December 26, 2020, total outstanding borrowings under the Loan Facilities
was $9.9 million with $0.4 million of the total outstanding balance being presented as current installments of
long-term debt in our consolidated balance sheets. The loans are denominated in Euros and, as a result,
amounts disclosed herein will fluctuate because of changes in currency exchange rates. The fair value of the
debt approximates the carrying value at December 25, 2021.
61
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lines of Credit
As a result of our acquisition of Kita, we assumed a series of revolving credit facilities with various financial
institutions in Japan. The credit facilities renew monthly and provide Kita with access to working capital
totaling up to 960 million Japanese Yen of which 350 million Japanese Yen is drawn. At December 25, 2021,
total borrowings outstanding under the revolving lines of credit were $3.1 million. As these credit facility
agreements renew monthly, they have been included in short-term borrowings in our consolidated balance
sheets.
The revolving lines of credit are denominated in Japanese Yen and, as a result, amounts disclosed herein
will fluctuate because of changes in currency exchange rates.
Our wholly owned subsidiary in Switzerland has one available line of credit which provides borrowings of
up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees. At December 25,
2021, and December 26, 2020, no amounts were outstanding under this line of credit.
4. Restructuring Charges
Subsequent to the acquisition of Xcerra, during the fourth quarter of 2018, we began a strategic restructuring
program designed to reposition our organization and improve our cost structure as part of our targeted
integration plan regarding the recently acquired Xcerra (“Integration Program”). As part of the Integration
Program we consolidated our global handler and contactor manufacturing operations and closed our
manufacturing operations in Penang, Malaysia and Fontana, California in 2019.
In 2019, we began the Integration Program of our German operations and entered a social plan with the
German labor organization representing certain of the employees of our wholly owned subsidiary, Multitest
elektronische Systeme GmbH. During the fourth quarter of 2020 we implemented a voluntary program and
termination agreements with certain employees of our wholly owned subsidiary, Cohu GmbH. These
programs collectively reduced headcount, enabled us to consolidate the facilities of our multiple operations
located near Kolbermoor and Rosenheim, Germany, as well as transitioned certain manufacturing to other
lower cost regions. The facility consolidations and reduction in force programs were implemented as part of
a comprehensive review of our operations and are intended to streamline and reduce our operating cost
structure and capitalize on acquisition synergies.
As a result of the activities described above, we recognized total pretax charges of $1.3 million, $11.4 million
and $16.2 million for the years ended December 25, 2021, December 26, 2020 and December 28, 2019,
respectively, that are within the scope of ASC 420, Exit or Disposal Cost Obligations (“ASC 420”).
All costs of the Integration Program were, and are expected to be, incurred by our Semiconductor Test &
Inspection segment.
Charges related to the Integration Program for the years ended December 25, 2021, December 26, 2020 and
December 28, 2019, were as follows (in thousands):
(in thousands)
Employee severance costs
Inventory related charges (adjustments)
Other restructuring costs
Total
$
$
2021
2020
2019
1,161 $
(558)
662
1,265 $
6,485 $
3,731
1,138
11,354 $
12,170
2,729
1,314
16,213
Costs associated with restructuring activities are presented in our consolidated statements of operations as
restructuring charges, except for certain costs associated with inventory charges related to the decision to
end manufacturing of certain of Xcerra’s semiconductor test handler products, which are classified within
cost of sales. Other restructuring costs include expenses for professional fees associated with employee
severance, impairments of fixed assets and facility closure costs.
62
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity within the restructuring related accounts for the Integration
Program during the years ended December 25, 2021 and December 26, 2020 (in thousands):
Employee
Severance
Other Exit Costs
Total
Balance, December 28, 2019
Costs accrued
Amounts paid or charged
Impact of currency exchange
Balance, December 26, 2020
Costs accrued
Amounts paid or charged
Impact of currency exchange
Balance, December 25, 2021
$
$
1,236
6,485
(2,055)
160
5,826
1,161
(6,545)
(94)
348 $
-
1,138
(1,138)
-
-
662
(662)
-
- $
1,236
7,623
(3,193)
160
5,826
1,823
(7,207)
(94)
348
At December 25, 2021, our total accrual for restructuring related items is reflected within current liabilities
in our consolidated balance sheets as these amounts are expected to be paid out in 2022. The estimated
costs associated with the employee severance and facility consolidation actions will be paid predominantly in
cash. All amounts accrued related to inventory will remain in our consolidated balance sheet until it is
scrapped.
5. Financial Instruments Measured at Fair Value
Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment
grade securities. We do not hold investment securities for trading purposes. All short-term investments in
debt securities are classified as available-for-sale and recorded at fair value. Investment securities are
exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and
attempt to mitigate exposure by making high-quality investments and through investment diversification.
Gains and losses on investments are calculated using the specific-identification method and are recognized
during the period in which the investment is sold or when an investment experiences an other-than-
temporary decline in value. Factors that could indicate an impairment exists include, but are not limited to
earnings performance, changes in credit rating or adverse changes in the regulatory or economic
environment of the asset. Gross realized gains and losses on sales of short-term investments are included
in interest income. Realized gains and losses for the periods presented were not significant.
Investments that we have classified as short-term, by security type, are as follows (in thousands):
Corporate debt securities (2)
U.S. treasury securities
Bank certificates of deposit
Foreign government security
Amortized
Cost
$
$
84,060 $
3,953
800
925
89,738 $
At December 25, 2021
Gross
Gross
Unrealized
Unrealized
Losses (1)
Gains
Estimated
Fair
Value
$
2
-
-
-
2 $
$
31
5
-
-
36 $
84,031
3,948
800
925
89,704
63
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Corporate debt securities (2)
U.S. treasury securities
Government-sponsored
enterprise securities
Bank certificates of deposit
Foreign government security
Amortized
Cost
$
$
14,943 $
2,012
1,998
750
965
20,668 $
At December 26, 2020
Gross
Gross
Unrealized
Unrealized
Losses (1)
Gains
Estimated
Fair
Value
$
2
-
-
-
-
2 $
$
1
-
-
-
-
1 $
14,944
2,012
1,998
750
965
20,669
(1) As of December 25, 2021, the cost and fair value of investments with loss positions were approximately $57.0 million. We
evaluated the nature of these investments, credit worthiness of the issuer and the duration of these impairments to
determine if an other-than-temporary decline in fair value had occurred and concluded that these losses were temporary
and we have the ability and intent to hold these investments to maturity. As of December 26, 2020, the cost and fair value
of investments with loss positions were approximately $8.7 million.
(2) Corporate debt securities include investments in financial and other corporate institutions. No single issuer represents a
significant portion of the total corporate debt securities portfolio.
Effective maturities of short-term investments at December 25, 2021, were as follows:
(in thousands)
Due in one year or less
Due after one year through three years
Amortized
Cost
Estimated
Fair Value
83,408
6,296
89,704
83,429 $
6,309
89,738 $
$
$
Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs
such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or
no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use
quoted market prices to determine the fair value of our investments, and they are included in Level 1. When
quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent
trading activity and other relevant information.
The following table summarizes, by major security type, our financial instruments that are measured at fair
value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
Cash
Money market funds
Foreign government security
Corporate debt securities
U.S. treasury securities
Bank certificates of deposit
Fair value measurements at December 25, 2021 using:
Level 1
Level 2
Level 3
fair value
Total estimated
$
195,297 $
-
-
-
-
-
$
195,297 $
- $
92,400
925
86,535
3,948
800
184,608 $
- $
-
-
-
-
-
- $
195,297
92,400
925
86,535
3,948
800
379,905
64
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair value measurements at December 26, 2020 using:
Level 1
Level 2
Level 3
fair value
Total estimated
Cash
Money market funds
Corporate debt securities
U.S. treasury securities
Government-sponsored
enterprise securities
Foreign government security
Bank certificates of deposit
$
128,874 $
- $
-
-
-
-
-
-
$
128,874 $
19,734
15,694
2,012
1,998
965
750
41,153 $
- $
-
-
-
-
-
-
- $
128,874
19,734
15,694
2,012
1,998
965
750
170,027
6. Employee Benefit Plans
Defined Contribution Retirement Plans – Cohu and Xcerra each maintained defined contribution 401(k)
retirement savings plans covering all their respective salaried and hourly U.S. employees. At the beginning of
2020 the legacy Xcerra plan was merged into Cohu’s. Participation is voluntary and participants’
contributions are based on their eligible compensation. Participants in the Cohu plan receive matching
contributions of 50% up to 8% of salary contributed, subject to various statutory limits. In 2021, 2020 and
2019 we made matching contributions to the plan of $2.4 million, $2.3 million and $2.0 million, respectively.
Defined Benefit Retirement Plans – Some of our employees located in Europe and Asia participate in
defined benefit retirement plans. Our largest defined benefit retirement plan is the Ismeca Europe
Semiconductor BVG Pension Plan which covers our employees in Switzerland (“the Swiss Plan”) and the
following discussion relates solely to the Swiss Plan.
Net periodic benefit cost of the Swiss Plan was as follows:
(in thousands)
Service cost
Interest cost
Expected return on assets
Settlements
Net periodic costs
2021
2020
2019
1,223 $
61
(128)
72
1,228 $
1,310 $
67
(200)
292
1,469 $
920
267
(168)
-
1,019
$
$
65
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the projected benefit obligation, the fair value of plan assets, the funded status
and the liability we have recorded in our consolidated balance sheets related to the Swiss Plan:
(in thousands)
Change in projected benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain
Participant contributions
Benefits paid
Plan change
Settlements
Foreign currency exchange adjustment
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Return on assets, net of actuarial loss
Employer contributions
Participant contributions
Benefits paid
Settlements
Foreign currency exchange adjustment
Fair value of plan assets at end of year
Net liability at end of year
2021
2020
(31,039)
(1,223)
(61)
1,179
(1,780)
436
1,076
1,653
994
(28,765)
18,756
207
878
1,780
(436)
(1,653)
(613)
18,919
(9,846)
$
$
(32,241)
(1,310)
(67)
1,916
(1,136)
419
944
3,446
(3,010)
(31,039)
18,705
129
886
1,136
(419)
(3,446)
1,765
18,756
(12,283)
$
$
At December 25, 2021 and December 26, 2020, the Swiss Plan’s net liability is included in noncurrent
accrued retirement benefits. Amounts recognized in accumulated other comprehensive loss net of tax related
to the Swiss Plan consisted of an unrecognized net actuarial gain totaling $0.9 million at December 25, 2021,
and net actuarial loss of $1.3 million at December 26, 2020.
Actuarial gains of $1.2 million and $1.9 million for the years ended December 25, 2021 and December 26,
2020 respectively were primarily due to plan experience.
Weighted-average actuarial assumptions used to determine the projected benefit obligation under the Swiss
Plan are as follows:
Discount rate
Compensation increase
2021
0.2%
1.5%
2020
0.2%
1.1%
Weighted-average assumptions used to determine net periodic benefit cost of the Swiss Plan are as follows:
Discount rate
Rate of return on assets
Compensation increase
2021
0.2%
0.7%
1.1%
2020
0.2%
1.0%
1.1%
2019
0.9%
0.9%
1.8%
During 2022 employer and employee contributions to the Swiss Plan are expected to total $0.9 million.
Estimated benefit payments are expected to be as follows: 2022 - $0.9 million; 2023 - $1.5 million; 2024 -
$1.3 million; 2025 - $1.1 million; 2026 - $1.2 million; and $6.4 million thereafter through 2031.
As is customary with Swiss pension plans, the assets of the plan are invested in a collective fund with
multiple employers. We have no investment authority over the assets of the plan that are held and invested by
a Swiss insurance company. Investment holdings are made with respect to Swiss laws and target allocations
for plan assets are 57% debt securities and cash, 21% real estate investments, 12% alternative investments
and 10% equity securities. The valuation of the collective fund assets as a whole is a Level 3 measurement;
however, the individual investments of the fund are generally Level 1 (equity securities), Level 2 (fixed
income) and Level 3 (real estate and alternative) investments. We determine the fair value of the plan assets
based on information provided by the collective fund, through review of the collective fund’s annual
66
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
financial statements. See Note 5, “Financial Instruments Measured at Fair Value” for additional information
on the three-tier fair value hierarchy.
We maintain other defined benefit plans for employees located outside the U.S. for which the majority of the
obligations and net periodic benefit cost were determined to be immaterial for all periods presented.
Retiree Medical Benefits – We provide post-retirement health benefits to certain executives and directors
under a noncontributory plan. The net periodic benefit cost was insignificant in 2021 and $0.1 million in
2020, and 2019. We fund benefits as costs are incurred and as a result there are no plan assets.
The weighted average discount rate used in determining the accumulated post-retirement benefit obligation
was 2.5% in 2021, 2.1% in 2020 and 3.0% in 2019. The annual rates of increase of the cost of health benefits
was assumed to be 6.6% in 2022. This rate was then assumed to decrease 0.28% per year to 4.4% in 2030
and remain level thereafter.
Contributions to the post-retirement health benefit plan are expected to total $0.1 million in 2022. Estimated
benefit payments are expected to be as follows: 2022 - $0.1 million; 2023 - $0.1 million; 2024 - $0.1 million;
2025 - $0.1 million; 2026 - $0.1 million and $0.6 million thereafter through 2031.
The following table sets forth the post-retirement benefit obligation, funded status and the liability we have
recorded in our consolidated balance sheets:
(in thousands)
Accumulated benefit obligation at beginning of year
Interest cost
Actuarial gain
Benefits paid
Accumulated benefit obligation at end of year
Plan assets at end of year
Funded status
2021
2020
$
$
(2,398)
(49)
241
109
(2,097)
-
(2,097)
$
$
(2,571)
(75)
134
114
(2,398)
-
(2,398)
Deferred Compensation – The Cohu, Inc. Deferred Compensation Plan allows certain of our officers to
defer a portion of their current compensation. We have purchased life insurance policies on the
participants with Cohu as the named beneficiary. Participant contributions, distributions and investment
earnings and losses are accumulated in a separate account for each participant. At December 25, 2021, the
payroll liability to participants, included in accrued compensation and benefits in the consolidated balance
sheet, was approximately $1.6 million and the cash surrender value of the related life insurance policies
included in other current assets was approximately $1.8 million. At December 26, 2020, the liability totaled
$1.8 million and the corresponding assets were $1.8 million.
Employee Stock Purchase Plan – The Cohu, Inc. 1997 Employee Stock Purchase Plan (“the Plan”)
provides for the issuance of a maximum of 2,650,000 shares of our common stock. Under the Plan,
eligible employees may purchase shares of common stock through payroll deductions. The price paid for
the common stock is equal to 85% of the fair market value of our common stock on specified dates.
During the last three years we issued shares under the Plan as follows: 2021 - 161,351; 2020 - 242,633 and
2019 - 187,273. At December 25, 2021, there were 507,353 shares reserved for issuance under the Plan.
Stock Options – At December 25, 2021, a total of 1,375,536 shares were available for future equity grants
under the Cohu, Inc. 2005 Equity Incentive Plan (“the 2005 Plan”). Under the 2005 Plan stock options may
be granted to employees, consultants and outside directors to purchase a fixed number of shares of our
common stock at prices not less than 100% of the fair market value at the date of grant. Options generally
vest and become exercisable after one year or in four annual increments beginning one year after the grant
date and expire ten years from the grant date. We have historically issued new shares of Cohu common
stock upon share option exercise.
67
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2021, 2020 and 2019 no stock options were granted and the activity under our share-based
compensation plans was as follows:
(in thousands, except per share data)
Outstanding and exercisable,
beginning of year
Exercised
Outstanding and exercisable,
end of year
2021
Wt. Avg.
Ex. Price
Shares
2020
Wt. Avg.
Ex. Price
2019
Wt. Avg.
Ex. Price
Shares
Shares
262 $
(250) $
10.01
10.03
363 $
(101) $
10.27
10.95
405 $
(42) $
10.22
9.82
12 $
9.44
262 $
10.01
363 $
10.27
The aggregate intrinsic value of options exercised was $8.4 million in 2021, $1.3 million in 2020, and
$0.2 million in 2019. At December 25, 2021, the aggregate intrinsic value of options outstanding, vested and
expected to vest and exercisable was $0.4 million.
Information about stock options outstanding at December 25, 2021 is as follows (options in thousands):
Options Outstanding
Approximate
Wt. Avg.
Remaining
Outstanding Life (Years)
12
Number
1.3 $
Wt. Avg.
Ex. Price
9.44
Options Exercisable
Number
Wt. Avg.
Exercisable Ex. Price
9.44
12
$
Exercise Price
$
9.44
Restricted Stock Units – Under our equity incentive plans, restricted stock units (“RSUs”) may be granted
to employees, consultants and outside directors. Restricted stock units vest over a one-year, two-year or a
four-year period from the date of grant. Prior to vesting, restricted stock units do not have dividend
equivalent rights, do not have voting rights and the shares underlying the restricted stock units are not
considered issued and outstanding. New shares of our common stock will be issued on the date the
restricted stock units vest net of the statutory tax withholding requirements to be paid by us on behalf of
our employees. As a result, the actual number of shares issued will be fewer than the actual number of
RSUs outstanding at December 25, 2021.
Restricted stock unit activity under our share-based compensation plans was as follows:
(in thousands, except per share data)
Outstanding, beginning of year
Granted
Released
Cancelled
Outstanding, end of year
2021
Wt. Avg.
Fair Value
15.16
41.66
16.23
18.96
21.16
Units
1,414 $
270 $
(579) $
(47) $
1,058 $
2020
2019
Units
Wt. Avg.
Fair Value
17.05
14.02
17.48
17.59
15.16
1,328 $
779 $
(621) $
(72) $
1,414 $
Wt. Avg.
Units Fair Value
19.48
14.32
19.08
17.60
17.05
1,265 $
694 $
(563) $
(68) $
1,328 $
Equity-Based Performance Stock Units – We grant performance stock units (“PSUs”) to certain senior
executives as a part of our long-term equity compensation program. The number of shares of common stock
that will ultimately be issued to settle PSUs granted ranges from 25% to 200% of the number granted and is
determined based on certain performance criteria over a three-year measurement period. The performance
criteria for the PSUs are based on a combination of our annualized Total Shareholder Return (“TSR”) for the
performance period and the relative performance of our TSR compared with the annualized TSR of certain peer
companies for the performance period. PSUs granted vest 100% on the third anniversary of their grant,
assuming achievement of the applicable performance criteria.
We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant.
Compensation expense is recognized over the requisite service period. New shares of our common stock will
be issued on the date the PSUs vest net of the minimum statutory tax withholding requirements to be paid by us
on behalf of our employees.
68
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSU activity under our share-based compensation plans was as follows:
2021
2020
2019
(in thousands, except per share data)
Outstanding, beginning of year
Granted
Released
Cancelled
Outstanding, end of year
Units
Wt. Avg.
Fair Value
15.51
51.43
21.77
14.04
22.22
425 $
93 $
(125) $
(9) $
384 $
Units
Wt. Avg.
Fair Value
18.72
13.18
21.40
20.25
15.51
364 $
200 $
(39) $
(100) $
425 $
Wt. Avg.
Units Fair Value
17.89
340 $
14.11
167 $
11.35
(36) $
11.35
(107) $
18.72
364 $
Share-based Compensation – We estimate the fair value of stock options and RSUs on the grant date
using the Black-Scholes valuation model. The estimated fair value of PSUs is determined on the grant date
using the Monte Carlo simulation valuation model. Option valuation models require the input of highly
subjective assumptions and changes in the assumptions used can materially affect the grant date fair value
of an award. These assumptions for the Black-Scholes model include the risk-free rate of interest, expected
dividend yield, expected volatility, and the expected life of the award. The risk-free rate of interest is
based on the U.S. Treasury rates appropriate for the expected term of the award as of the grant date.
Expected dividends are based primarily on historical factors related to our common stock. Expected
volatility is based on historic weekly stock price observations of our common stock during the period
immediately preceding the share-based award grant that is equal in length to the award’s expected term.
We believe that historical volatility is the best estimate of future volatility. Expected life of the award is
based on historical option exercise data. The Monte Carlo simulation model incorporates assumptions for
the risk-free interest rate, Cohu and the selected peer group price volatility, the correlation between Cohu and
the selected index, and dividend yields. Share-based compensation expense related to restricted stock unit
awards is calculated based on the market price of our common stock on the date of grant, reduced by the
present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock
unit. As a result of the COVID-19 pandemic, Cohu’s Board of Directors authorized suspending our
quarterly cash dividend indefinitely, as of May 5, 2020. All awards granted in 2021 and 2020 exclude the
assumption of dividend payments and the estimated fair value awards granted in prior years, when
dividends were paid, are unchanged.
The following weighted average assumptions were used to value share-based awards granted:
Employee Stock Purchase Plan
Dividend yield
Expected volatility
Risk-free interest rate
Expected term (years)
Weighted-average grant date fair
value per share
Restricted Stock Units
Dividend yield
2021
0.0 %
58.3 %
0.1 %
0.5
2020
0.5 %
67.1 %
1.1 %
0.5
$
9.42
$
6.01
$
2021
0.0%
2020
0.0%
2019
1.3 %
46.4 %
2.2 %
0.5
5.35
2019
1.6 %
Reported share-based compensation is classified in the consolidated financial statements as follows:
(in thousands)
Cost of sales
Research and development
Selling, general and administrative
Share-based compensation of continuing operations
Income tax benefit
Total share-based compensation, net of tax
2021
2020
2019
828 $
3,017
9,947
13,792
(722)
13,070 $
893
3,245
10,096
14,234
(963)
13,271
$
$
736
2,994
10,418
14,148
(587)
13,561
$
$
We account for forfeitures of plan-based awards as they occur. At December 25, 2021, we had approximately
$19.5 million of pre-tax unrecognized compensation cost related to unvested restricted stock units and
performance stock units which is expected to be recognized over a weighted-average period of
69
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
approximately 2.3 years.
7. Derivative Financial Instruments
Foreign Exchange Derivative Contracts
We operate and sell our products in various global markets and, as a result, we are exposed to changes in
foreign currency exchange rates. In the fourth quarter of 2020, we began utilizing foreign currency forward
contracts to offset against future movements in foreign exchange rates that affect certain existing foreign
currency denominated assets and liabilities. Under this program, our strategy is to have increases or decreases
in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts to
mitigate the risks and volatility associated with foreign currency transaction gains or losses.
We do not use derivative financial instruments for speculative or trading purposes. For accounting purposes,
our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record
the fair value of these contracts as of the end of our reporting period in our consolidated balance sheets with
changes in fair value recorded within foreign transaction gain (loss) in our consolidated statements of
operations for both realized and unrealized gains and losses. The cash flows associated with the foreign
currency forward contracts are reported in net cash provided by operating activities in our consolidated
statements of cash flows.
The fair value of our foreign exchange derivative contracts was determined based on current foreign currency
exchange rates and forward points. All our foreign exchange derivative contracts outstanding at December
25, 2021 will mature during the first quarter of fiscal 2022.
The following table provides information about our foreign currency forward contracts outstanding as of
December 25, 2021 (in thousands):
Currency
Euro
Swiss Franc
Contract Position
Contract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
Buy
Buy
30,185 $
19,086
$
34,200
20,800
55,000
Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued
using pricing models that utilize observable market inputs. The fair value of our foreign currency contracts as
of December 25, 2021 was immaterial.
The location and amount of gains (losses) related to non-designated derivative instruments in the
consolidated statements of operations were as follows (in thousands):
Derivatives Not Designated
as Hedging Instruments
Foreign exchange forward contracts
Location of Gain (Loss)
Recognized on Derivatives
Foreign transaction gain (loss)
8. Equity
Common Stock Issuance
Fiscal Year
2020
2021
$ (3,428) $
2019
n/a
756
On March 8, 2021, we closed an underwritten follow-on public offering of 4,950,000 shares of our common
stock at $41.00 per share. As part of the transaction, the underwriters were also granted a 30-day option to
purchase up to an aggregate of 742,500 additional shares of common stock to cover over-allotments which
was exercised in full on March 11, 2021. The offering, and the follow-on option to sell additional shares,
resulted in net proceeds, after deducting underwriting discounts and commissions and offering expenses, of
approximately $223.1 million. All of the shares were sold pursuant to an effective shelf registration statement
previously filed with the SEC.
Share Repurchase Program
On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase
program. This share repurchase program was effective as of November 2, 2021 and has no expiration date,
and the timing of share repurchases and the number of shares of common stock to be repurchased will
depend upon prevailing market conditions and other factors. Repurchases under this program will be made
70
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
using our existing cash resources and may be commenced or suspended from time-to-time at our discretion
without prior notice. Repurchases may be made in the open market, through 10b5-1 programs, or in privately
negotiated transactions at prevailing market rates in accordance with federal securities laws. For the year
ended December 25, 2021, we repurchased 206,572 shares of our common stock for $7.3 million to be held
as treasury stock. As of December 25, 2021, we may purchase up to $62.7 million of shares of our common
stock under our share repurchase program.
9. Income Taxes
Significant components of the provision (benefit) for income taxes for continuing operations are as follows:
2021
2020
2019
(in thousands)
Current:
U.S. Federal
U.S. State
Foreign
Total current
Deferred:
U.S. Federal
U.S. State
Foreign
Total deferred
$
$
1,103
101
22,862
24,066
5
-
948
953
25,019
$
$
-
21
5,950
5,971
8
-
(5,313)
(5,305)
666
$
$
$
$
-
130
2,173
2,303
98
1
(5,484)
(5,385)
(3,082)
2019
(72,669)
592
(72,077)
Income (loss) before income taxes from continuing operations consisted of the following:
(in thousands)
U.S.
Foreign
Total
Deferred tax effects
2021
30,588
161,756
192,344
$
$
2020
(25,005)
11,828
(13,177)
$
$
Except for working capital requirements in certain foreign jurisdictions, we provide for all taxes, including
withholding and other residual taxes, related to unremitted earnings of our foreign subsidiaries.
71
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting and tax purposes. Significant components of our deferred tax
assets and liabilities were as follows:
(in thousands)
Deferred tax assets:
Inventory, receivable and warranty reserves
Net operating loss carryforwards
Tax credit carryforwards
Accrued employee benefits
Stock-based compensation
Lease liabilities
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets and other acquisition basis differences
Operating lease right-of-use assets
Unremitted earnings of foreign subsidiaries
Total deferred tax liabilities
Net deferred tax liabilities
2021
2020
$
$
12,166
44,806
31,264
5,695
2,222
4,500
2,674
103,327
(76,250)
27,077
39,929
4,066
4,207
48,202
(21,125)
$
$
11,720
56,777
37,393
5,306
2,210
5,146
4,309
122,861
(86,124)
36,737
52,012
4,706
3,119
59,837
(23,100)
The components of total net deferred tax assets (liabilities), net of valuation allowances, as shown in our
consolidated balance sheets are as follows:
(in thousands)
Other assets (long-term)
Long-term deferred income tax liabilities
Net deferred tax liabilities
2021
4,762
(25,887)
(21,125)
$
$
2020
5,716
(28,816)
(23,100)
$
$
Companies are required to assess whether a valuation allowance should be recorded against their deferred tax
assets (“DTAs”) based on the consideration of all available evidence, using a “more likely than not”
realization standard. The four sources of taxable income that must be considered in determining whether
DTAs will be realized are, (1) future reversals of existing taxable temporary differences (i.e. offset of gross
deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if
carryback is permitted under the tax law; (3) tax planning strategies and (4) future taxable income exclusive
of reversing temporary differences and carryforwards.
In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can
be objectively verified. We have evaluated our DTAs each reporting period, including an assessment of our
cumulative income or loss over the prior three-year period and future periods, to determine if a valuation
allowance was required. A significant negative factor in our assessment was Cohu’s three-year cumulative
loss history incurred at our U.S. operations at the end of various fiscal periods including 2021.
As a result of our cumulative, three-year U.S. GAAP pretax loss and excluding the one-time gain on the sale
of PTG from our U.S. continuing operations at the end of 2021, we were unable to conclude that it was
“more likely than not” that our U.S. DTAs would be realized. We will evaluate the realizability of our DTAs
at the end of each quarterly reporting period in 2022 and should circumstances change it is possible an
additional valuation allowance will be recorded or the remaining valuation allowance, or a portion thereof,
will be reversed in a future period.
Our valuation allowance on our DTAs at December 25, 2021, and December 26, 2020, was approximately
$76.3 million and $86.1 million, respectively. The remaining gross DTAs for which a valuation allowance
was not recorded are realizable primarily through future reversals of existing taxable temporary differences
and to a lesser extent future taxable income in certain jurisdictions exclusive of reversing temporary
differences and carryforwards.
72
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As the realization of DTAs is determined by tax jurisdiction, the deferred tax liabilities recorded by our non-
U.S. subsidiaries were not a source of taxable income in assessing the realization of our DTAs in the U.S.
The CARES Act was signed into law on March 27, 2020. The CARES Act includes several significant
business tax provisions that, among other things, would eliminate the taxable income limit for certain net
operating losses (“NOL”) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the
five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate
alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163(j)
from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax
provisions. Due to our overall loss position in the U.S. during the last five years, the CARES Act did not
have a significant impact on Company’s financial position or statement of operations.
The reconciliation of income tax computed at the U.S. federal statutory tax rate to the provision (benefit) for
income taxes for continuing operations is as follows:
(in thousands)
Tax provision at U.S. 21% statutory rate
State income taxes, net of federal tax benefit
Settlements, adjustments and releases from statute expirations
Federal R&D credits
Stock-based compensation
Excess executive compensation
Change in valuation allowance
Exemption of PTG gain
Dividend, net of foreign tax credits
GILTI, net of foreign tax credits
Foreign rate differential
Other, net
2021
40,392 $
2,246
(787)
(943)
(4,802)
1,608
(9,882)
(12,378)
693
9,343
(1,023)
552
25,019 $
$
$
2019
2020
(2,757) $ (15,136)
(1,097)
(1,160)
(1,204)
(118)
(1,458)
(46)
587
727
190
491
11,270
(1,691)
-
-
1,453
1,224
2,480
4,191
(1,266)
(1,512)
1,099
1,317
(3,082)
666 $
An accounting policy may be selected to either (i) treat taxes due on future U.S. inclusions in taxable income
related to global intangible low-taxed income (“GILTI”) as a current-period expense when incurred or (ii)
factor such amounts into a company’s measurement of its deferred taxes. We have elected to account for
GILTI as a period cost.
At December 25, 2021, we had federal, state and foreign net operating loss carryforwards of approximately
$160.5 million, $135.3 million and $9.6 million, respectively, that expire in various tax years beginning in
2022 through 2040 or have no expiration date. We also have federal and state tax credit carryforwards at
December 25, 2021 of approximately $6.8 million and $30.9 million, respectively, certain of which expire in
various tax years beginning in 2022 through 2040 or have no expiration date. The federal and state loss and
credit carryforwards are subject to annual limitations under Sections 382 and 383 of the Internal Revenue
Code and applicable state tax law.
We have completed a Section 382 and 383 analysis of the Internal Revenue Code and applicable state law,
regarding the limitation of its net operating loss and business tax credit carryforwards through October 1,
2018. As a result of the analysis, we concluded that the acquisition of Xcerra on October 1, 2018, triggered a
limitation in the utilization of Xcerra’s net operating loss and research credit carryforwards. We’ve also
analyzed and determined that there were no subsequent ownership changes during the three-year period
ending December 25, 2021. We will continue to assess the realizability of these carryforwards in subsequent
periods. Future changes in the ownership of Cohu could further limit the utilization of these carryforwards.
We have certain tax holidays with respect to our operations in Malaysia and the Philippines. These holidays
require compliance with certain conditions and expire at various dates through 2027. The impact of these
holidays was an increase in net income of approximately $4.5 million or $0.09 per share in 2021,
$3.6 million, or $0.09 per share, in 2020 and $2.1 million, or $0.05 per share, in fiscal 2019.
73
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of our gross unrecognized tax benefits, excluding accrued interest and penalties, is as
follows:
(in thousands)
Balance at beginning of year
Additions for tax positions of current year
Reductions for tax positions of prior years
Reductions due to lapse of the statute of limitations
Reductions due to settlements
Foreign exchange rate impact
Balance at end of year
2021
33,696 $
686
(83)
(1,012)
-
104
33,391 $
2020
34,740 $
817
(425)
(304)
(1,134)
2
33,696 $
2019
34,873
1,231
(484)
(957)
(30)
107
34,740
$
$
If the unrecognized tax benefits at December 25, 2021 are ultimately recognized, excluding the impact of
U.S. tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately
$5.3 million ($5.9 million at December 26, 2020 and $7.0 million at December 28, 2019) would result in a
reduction in our income tax expense and effective tax rate.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. Cohu had
approximately $0.8 million and $1.0 million accrued for the payment of interest and penalties at
December 25, 2021, and December 26, 2020, respectively. Interest expense, net of accrued interest reversed,
was $(0.2) million in 2021 and $(0.3) million in both 2020 and 2019.
Our U.S. federal and state income tax returns for years after 2017 and 2016, respectively, remain open to
examination, subject to the statute of limitations. Net operating loss and credit carryforwards arising prior to
these years are also open to examination if and when utilized. The statute of limitations for the assessment
and collection of income taxes related to our foreign tax returns varies by country. In the foreign countries
where we have significant operations these time periods generally range from four to ten years after the year
for which the tax return is due or the tax is assessed.
We conduct business globally and as a result, Cohu or one or more of its subsidiaries files income tax returns
in the US and various state and foreign jurisdictions. In the normal course of business, we are subject to
examinations by taxing authorities throughout the world and are currently under examination in Germany
and Malaysia. We believe our financial statement accruals for income taxes are appropriate.
74
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Segment and Geographic Information
We applied the provisions of ASC Topic 280, Segment Reporting, (“ASC 280”), which sets forth a
management approach to segment reporting and establishes requirements to report selected segment
information quarterly and to report annually entity-wide disclosures about products, major customers and the
geographies in which the entity holds material assets and reports revenue. An operating segment is defined as
a component that engages in business activities whose operating results are reviewed by the chief operating
decision maker and for which discrete financial information is available. We have determined that our three
identified operating segments are: Test Handler Group (THG), Semiconductor Tester Group (STG) and
Interface Solutions Group (ISG). Our THG, STG and ISG operating segments qualify for aggregation under
ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and
services provided. As a result, we report in one segment, Semiconductor Test and Inspection Equipment
(“Semiconductor Test & Inspection”). Prior to the sale of our PCB Test Group (PTG) on June 24, 2021, we
reported in two segments, Semiconductor Test & Inspection and PCB Test Equipment.
2021
2020
2019
(in thousands)
Net sales by segment:
Semiconductor Test & Inspection
PCB Test
Total consolidated net sales for
reportable segments
Segment profit (loss) before tax:
Semiconductor Test & Inspection
PCB Test
Profit (loss) for reportable segments
Other unallocated amounts:
Corporate expenses
Gain on sale of PCB Test business
Interest expense
Interest income
Gain on extinguishment of debt
Profit (loss) from continuing operations before taxes
$
$
$
$
860,454
26,760
887,214
138,026
3,907
141,933
(10,819)
70,815
(6,413)
239
(3,411)
192,344
$
$
$
$
2021
(in thousands)
Depreciation and amortization by segment deducted in arriving at profit (loss):
Semiconductor Test & Inspection
PCB Test
Total depreciation and amortization
Capital expenditures by segment:
Semiconductor Test & Inspection
PCB Test
Total consolidated capital expenditures
11,954 $
46
12,000 $
48,129 $
439
48,568 $
$
$
$
$
585,240
50,767
636,007
(2,497)
6,971
4,474
(4,384)
-
(13,759)
224
268
(13,177)
$
$
$
$
540,878
42,451
583,329
(45,072)
2,635
(42,437)
(9,848)
-
(20,556)
764
-
(72,077)
2020
2019
51,548 $
1,198
52,746 $
18,616 $
44
18,660 $
56,621
2,250
58,871
17,831
169
18,000
(in thousands)
Total assets by segment:
Semiconductor Test & Inspection
PCB Test
Total assets for reportable segments
Corporate, principally cash and investments
Discontinued operations
Total consolidated assets
2021
2020
2019
$ 1,121,858
-
1,121,858
137,186
-
$ 1,259,044
$
968,028
66,826
1,034,854
55,492
-
$ 1,090,346
$
998,756
56,938
1,055,694
18,398
3,618
$ 1,077,710
75
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the last three years, the following customers of our Semiconductor Test & Inspection segment that
comprised 10% or greater of our consolidated net sales were as follows:
Analog Devices
Intel
* Less than 10% of consolidated net sales.
2021
14.1%
*
2020
*
*
2019
*
11.1%
On June 24, 2021, we completed the divestment of our PCB Test business. Prior to this, no customer of our
PCB Test segment exceeded 10% of consolidated net sales for the years ended December 25, 2021,
December 26, 2020 and December 28, 2019.
Net sales to customers, attributed to countries based on product shipment destination, were as follows:
(in thousands)
China
Philippines
Taiwan
Malaysia
United States
Rest of the world
Total, net
2021
213,575
155,070
88,152
79,777
77,495
273,145
887,214
$
$
2020
143,360
56,272
83,685
57,893
108,694
186,103
636,007
$
$
2019
118,213
51,683
75,725
61,826
71,963
203,919
583,329
$
$
Geographic location of our property, plant and equipment and other long-lived assets was as follows:
(in thousands)
Property, plant and equipment:
United States
Germany
Japan
Philippines
Malaysia
Rest of the world
Total, net
Goodwill and other intangible assets:
Germany
United States
Malaysia
Singapore
Switzerland
Japan
Rest of the world
Total, net
11. Leases
2021
2020
$
$
$
$
18,375
17,419
11,156
10,384
4,082
2,541
63,957
181,146
150,477
43,611
12,990
4,583
3,148
1,156
397,111
$
$
$
$
17,800
19,817
13,231
9,333
3,986
2,749
66,916
232,925
177,585
45,435
13,469
5,006
3,703
7,866
485,989
We lease certain of our facilities, equipment and vehicles under non-cancelable operating and finance leases.
Leases with initial terms with 12 months or less are not recorded in the consolidated balance sheet, but we
recognized those lease payments in the consolidated statements of operations on a straight-line basis over the
lease term. Lease and non-lease components are included in the calculation of the right of use asset (“ROU”)
asset and lease liabilities.
Our leases have remaining lease terms ranging from 1 year to 36 years, some of which include one or more
options to extend the lease for up to 25 years. Our lease term includes renewal terms when we are reasonably
certain that we will exercise the renewal options. We sublease certain leased assets to third parties, mainly as
a result of unused space in our facilities.
76
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental balance sheet information related to leases was as follows:
(in thousands)
Assets:
Classification
December 25,
2021
December 26,
2020
Operating lease assets Operating lease right-of-use assets
Finance lease assets
Total lease assets
$
Property, plant and equipment, net (1)
$
Liabilities:
Current:
Operating
Finance
Noncurrent:
Operating
Finance
Total lease liabilities
Other accrued liabilities
Other accrued liabilities
Long-term lease liabilities
Long-term lease liabilities
Weighted-average remaining lease term (years):
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
$
$
$
$
$
$
25,060
423
25,483
4,886
167
21,977
63
27,093
6.9
1.8
6.3%
0.7%
29,203
486
29,689
5,287
179
25,565
222
31,253
7.3
2.3
6.3%
0.0%
(1) Finance lease assets are recorded net of accumulated amortization of $0.1 million in 2021 and 2020.
The components of lease expense were as follows:
(in thousands)
Operating leases
Variable lease expense
Short-term operating leases
Finance leases:
Amortization of leased assets
Interest on lease liabilities
Sublease income
December 25,
December 26,
2021
2020
$
$
7,638
2,192
69
8,374
2,110
93
84
57
(113)
10,605
86
2
(81)
9,906
Net lease cost
$
Future minimum lease payments at December 25, 2021, are as follows:
$
(in thousands)
2022
2023
2024
2025
2026
Thereafter
$
Total lease payments
Less: Interest
Present value of lease liabilities
$
Operating
leases (1)
Finance
leases
Total
6,341
5,445
5,050
4,912
2,617
9,656
34,021
(7,158)
26,863
$
$
170
40
11
11
2
-
234
(4)
230
$
$
6,511
5,485
5,061
4,923
2,619
9,656
34,255
(7,162)
27,093
(1) Excludes sublease income of $0.1 million in 2022 and 2023.
77
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental cash flow information related to leases was as follows:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Leased assets obtained in exchange for new finance lease liabilities
Leased assets obtained in exchange for new operating lease liabilities
December 25,
2021
December 26,
2020
$
$
$
$
$
7,628 $
1 $
186 $
54 $
3,866 $
8,079
57
146
489
2,403
12. Commitments and Contingencies
From time-to-time we are involved in various legal proceedings, examinations by various tax authorities and
claims that have arisen in the ordinary course of our business. The outcome of any litigation is inherently
uncertain. While there can be no assurance, we do not believe at the present time that the resolution of these
matters will have a material adverse effect on our assets, financial position or results of operations.
13. Guarantees
Accrued Warranty
Changes in accrued warranty during the three-year period ended December 25, 2021, was as follows:
(in thousands)
Beginning balance
Warranty accruals
Warranty payments
Warranty liability transferred
Ending balance
2021
2020
2019
$
$
6,382
13,389
(11,135)
(945)
7,691
$
$
6,155
6,173
(5,946)
-
6,382
$
$
8,014
6,714
(8,573)
-
6,155
Accrued warranty amounts expected to be incurred after one year are included in noncurrent other accrued
liabilities in the consolidated balance sheet. These amounts totaled $1.1 million and $0.3 million at
December 25, 2021 and December 26, 2020, respectively.
14. Business Divestitures and Discontinued Operations
PCB Test Equipment Business
On June 24, 2021, we completed the sale of our PCB Test Equipment (“PCB Test”) business, which
represented our PCB Test reportable segment. As part of the transaction we also sold certain intellectual
property held by our Semiconductor Test & Inspection segment that is utilized by the PCB Test business.
Our decision to sell this non-core business resulted from management’s determination that that they were
no longer a fit within our organization. We received gross proceeds of $125.1 million, subject to certain
closing adjustments. The sale generated a $70.8 million pre-tax gain on sale of business, which was
recorded in our consolidated statements of operations for the twelve months ended December 25, 2021. As
a result of the closing of the transaction, we derecognized net assets of $48.2 million, including goodwill
of $21.9 million and intangible assets of $14.8 million.
We evaluated the guidance in ASC 205-20, Presentation of Financial Statements – Discontinued Operations,
and determined that the divestment of our PCB Test business does not represent a strategic shift as the
divestiture will not have a major effect on Cohu’s operations and financial results and, as a result, it is not
presented as discontinued operations in any periods presented. Subsequent to the sale of our PCB Test
business, we have one reportable segment, Semiconductor Test & Inspection.
Fixtures Services Business (“FSG”)
On October 1, 2018, we acquired a fixtures services business as part of Xcerra. At the time of the acquisition
our management determined that this business did not align with Cohu’s core business and was not a
strategic fit within our organization. The fixtures services business was marketed for sale since we acquired
Xcerra on October 1, 2018 and it has been presented as discontinued operations as it met the held for sale
criteria. For financial statement purposes, the results of operations for this business have been segregated
78
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from those of continuing operations and are presented in our consolidated financial statements as
discontinued operations for all periods presented.
During the fourth quarter of 2019, we recorded a charge of $1.1 million to impair goodwill and purchased
intangible assets associated with this operating segment as the estimated fair value less cost to sell exceeded
the carrying value. We completed the sale of this business in February 2020 which resulted in an immaterial
gain that that was recorded in our statement of operations for the twelve months ended December 26, 2020,
as noted below.
Operating results of our discontinued operations are summarized as follows (in
thousands):
Net sales
Operating income
Loss from impairment of FSG
Gain on sale of FSG
Income (loss) before taxes
Income tax provision
Income (loss), net of tax
December 26,
2020
December 28,
2019
$
$
$
432
11
-
35
46
4
42
$
$
$
6,136
478
(1,086)
-
(608)
89
(697)
15. Accumulated Other Comprehensive Income (Loss)
Components of other comprehensive income (loss), on an after-tax basis, were as follows:
$
$
(in thousands)
Year ended December 28, 2019
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Other comprehensive income (loss)
Year ended December 26, 2020
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Other comprehensive income (loss)
Year ended December 25, 2021
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Change in unrealized gain/loss on investments
Reclassification due to sale of PBC Test Business
$
Other comprehensive income (loss)
$
$
$
Before Tax
amount
Tax
(Expense)
Benefit
Net of Tax
Amount
(7,522)
(856)
(8,378)
27,321
2,599
29,920
(22,859)
2,920
(67)
(2,515)
(22,521)
$
$
$
$
$
$
-
228
228
-
(216)
(216)
(97)
(318)
-
-
(415)
$
$
$
$
$
$
(7,522)
(628)
(8,150)
27,321
2,383
29,704
(22,956)
2,602
(67)
(2,515)
(22,936)
Components of accumulated other comprehensive income (loss), net of tax, at the end of each period are
as follows:
(in thousands)
Accumulated net currency translation adjustments
$
Accumulated net adjustments related to postretirement benefits
Accumulated net unrealized gain/loss on investments
Accumulated reclassification due to sale of PBC Test Business
$
Total accumulated other comprehensive loss
2021
2020
(25,833)
1,153
(67)
(2,515)
(27,262)
$
$
(2,877)
(1,449)
-
-
(4,326)
79
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Related Party Transactions
At December 25, 2021, certain of our cash and short-term investments were held and managed by
BlackRock, Inc. which owns 15.1% of our outstanding common stock as reported in its Form 13-G/A
filing made with the Securities and Exchange Commission on January 27, 2022.
We have an ownership interest in Fraes-und Technologiezentrum GmbH Frasdorf (“FTZ”), a company
based in Germany that provides milling services to one of our wholly owned subsidiaries. This investment
is accounted for under the equity method and is not material to our consolidated balance sheets. During
2021, 2020 and 2019, purchases of products from FTZ were not material.
We also had an ownership interest in ETZ Elektrisches Testzentrum fuer Leiterplatten GmbH (“ETZ”)
which provided our PCB Test business, atg-Luther & Maelzer GmbH, with certain component parts. Our
ownership interest in ETZ was transferred on June 24, 2021 as part of the sale of the PCB Test business
and ETZ is no longer a related party. During 2021, 2020 and 2019, purchases of products from ETZ, when
it was a related party, were not material.
80
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cohu, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cohu, Inc. (the Company) as of December 25, 2021
and December 26, 2020, and the related consolidated statements of operations, comprehensive income (loss),
stockholders’ equity, and cash flows for each of the three years in the period ended December 25, 2021, and the related
notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 25, 2021 and December 26, 2020, and the results of its operations and
its cash flows for each of the three years in the period ended December 25, 2021, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 25, 2021, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 18, 2022 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of inventories
Description of
the Matter
As of December 25, 2021, the Company’s consolidated inventories balance was $161.1 million.
As described in Note 1 to the consolidated financial statements, the Company values its
inventories at lower of cost, determine on a first-in, first-out basis, or net realizable value.
Obsolete inventory or inventory in excess of management's estimated usage requirement is written
down to its estimated net realizable value.
Auditing management’s estimates for excess and obsolete inventory involved subjective auditor
judgment because the estimates rely on a number of factors that are affected by market and
economic conditions outside the Company's control. In particular, the excess and obsolete
inventory calculations are sensitive to significant assumptions, including product life cycles,
historical usage, expected future usage and on-hand quantities of individual materials.
81
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls over the Company's excess and obsolete inventory valuation process, including
management's assessment of the assumptions stated above and data underlying the excess and
obsolete inventory valuation.
To test the valuation of inventories, our audit procedures included, among others, evaluating the
significant assumptions stated above and testing the completeness and accuracy of the underlying
data used by management in the analysis of excess and obsolete inventory. We evaluated
adjustments to inventory reserves for specific product life cycles, compared the balance of on-
hand inventories to usage forecasts and historical usage, and assessed the historical accuracy of
management’s estimates by performing a retrospective analysis comparing prior period
forecasted demand to actual historical sales.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1956.
San Diego, California
February 18, 2022
82
Index to Exhibits
15. (b)
The following exhibits are filed as part of, or incorporated into, the 2021 Cohu, Inc. Annual Report
on Form 10-K:
Exhibit No.
Description
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by
reference to Exhibit 3.1 from the Cohu, Inc. Current Report on Form 8-K (file no. 001-04298)
filed with the Securities and Exchange Commission on May 17, 2018
Amended and Restated Bylaws of Cohu, Inc. incorporated herein by reference to Exhibit 3.2
from the Cohu, Inc. Current Report on Form 8-K (file no. 001-04298) filed with the Securities
and Exchange Commission on May 17, 2018
Description of Capital Stock incorporated herein by reference to Exhibit 4.1 from the Cohu,
Inc. Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 10, 2020
Credit and Guaranty Agreement dated as of October 1, 2018, by and among Cohu, Inc., Certain
Subsidiaries of Cohu, Inc. and Deutsche Bank AG New York Branch, incorporated herein by
reference to Exhibit 10.1 from the Cohu, Inc. Form 10-Q filed with the Securities and
Exchange Commission on November 7, 2018
Pledge and Security Agreement dated as of October 1, 2018, by and among Cohu, Inc., Certain
Subsidiaries of Cohu, Inc. and Deutsche Bank AG New York Branch, incorporated herein by
reference to Exhibit 10.2 from the Cohu, Inc. Form 10-Q filed with the Securities and
Exchange Commission on November 7, 2018
Amended Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to Appendix
A from the Cohu, Inc. Form DEF 14A filed with the Securities and Exchange Commission on
March 28, 2019*
Amended Cohu, Inc. 1997 Employee Stock Purchase Plan, herein by reference to Appendix B
from the Cohu, Inc. Form DEF 14A filed with the Securities and Exchange Commission on
March 28, 2019*
Cohu, Inc. Deferred Compensation Plan (as amended and restated) incorporated herein by
reference to Exhibit 10.1 from the Cohu, Inc. Current Report on Form 8-K (file no. 001-04298)
filed with the Securities and Exchange Commission on December 29, 2008*
Form of employee restricted stock unit agreement for use with restricted stock units granted
pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to
Exhibit 10.1 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 4, 2015*
Form of non-employee director restricted stock unit agreement for use with restricted stock
units granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by
reference to Exhibit 10.2 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 4, 2015*
Form of non-employee director restricted stock unit deferral election form for use with
restricted stock units granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan
incorporated herein by reference to Exhibit 10.3 from the Cohu, Inc. Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on August 4, 2015*
83
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
Non-employee director fee deferral election form incorporated herein by reference to Exhibit
10.4 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 4, 2015*
Form of deferred stock agreement for shares granted pursuant to the Cohu, Inc. 2005 Equity
Incentive Plan incorporated herein by reference to Exhibit 10.5 from the Cohu, Inc. Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015*
Form of stock option agreement for use with stock options granted pursuant to the Cohu, Inc.
2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.6 from the Cohu,
Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
August 4, 2015*
Intel Corporation Purchase Agreement Capital Equipment, Goods and Services, dated April 30,
2012, by and between Delta Design, Inc. and Intel Corporation incorporated herein by
reference to Exhibit 99.1 from the Cohu, Inc. Current Report on Form 8-K/A (file no. 001-
04298) filed August 1, 2012
Form of Indemnification Agreement, incorporated herein by reference to Exhibit 10.1 from the
Cohu, Inc. Current Report on Form 8-K (file no. 001-04298) filed December 13, 2018*
Cohu, Inc. Retiree Health Benefits Agreement (as amended) incorporated herein by reference
to Exhibit 10.2 from the Cohu, Inc. Current Report on Form 8-K (file no. 001-04298) filed with
the Securities and Exchange Commission on December 29, 2008*
Lease agreement dated December 4, 2015 by and between CT Crosthwaite I, LLC and Cohu,
Inc. incorporated herein by reference to Exhibit 10.14 from the Cohu, Inc. Annual Report on
Form 10-K filed with the Securities and Exchange Commission on February 23, 2016
Severance Agreement, dated September 8, 2020, between the Company and Christopher G.
Bohrson incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *
Severance Agreement, dated September 8, 2020, between the Company and Jeffrey D. Jones
incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc. Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on November 4, 2020 *
Severance Agreement, dated September 8, 2020, between the Company and Thomas D.
Kampfer incorporated herein by reference to Exhibit 10.3 from the Cohu, Inc. Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *
Severance Agreement, dated September 8, 2020, between the Company and Luis A. Müller
incorporated herein by reference to Exhibit 10.4 from the Cohu, Inc. Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on November 4, 2020 *
Change in Control Agreement, dated September 8, 2020, between the Company and
Christopher G. Bohrson incorporated herein by reference to Exhibit 10.5 from the Cohu, Inc.
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
November 4, 2020 *
Change in Control Agreement, dated September 8, 2020, between the Company and Jeffrey D.
Jones incorporated herein by reference to Exhibit 10.6 from the Cohu, Inc. Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *
84
10.22
10.23
10.24
10.25
21
23
Change in Control Agreement, dated September 8, 2020, between the Company and Thomas
D. Kampfer incorporated herein by reference to Exhibit 10.7 from the Cohu, Inc. Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on November 4,
2020 *
Change in Control Agreement, dated September 8, 2020, between the Company and Luis A.
Müller incorporated herein by reference to Exhibit 10.8 from the Cohu, Inc. Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *
Settlement Agreement regarding employment, dated October 27, 2020, between the Company
and Pascal Rondé incorporated herein by reference to Exhibit 10.9 from the Cohu, Inc.
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
November 4, 2020 *
Share and Asset Purchase Agreement, dated May 10, 2021, by and among Cohu, Inc., Cohu
Semiconductor Test GmbH, Credence International Ltd. (BVI), Xcerra Corporation, Everett
Charles Tech, Inc., KOGNITEC Vertrieb & Service GmbH, Mycronic AB and Mycronic, Inc.
incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Current Report on Form
8-K filed with the Securities and Exchange Commission on May 13, 2021
Subsidiaries of Cohu, Inc.
Consent of Independent Registered Public Accounting Firm
31.1 Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 for Luis A. Müller
31.2 Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 for Jeffrey D. Jones
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 for Luis A. Müller
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 for Jeffrey D. Jones
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Dat
a File because its XBRL tags are embedded within the Inline XBRL document)
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement
85
Item 16. Form 10-K Summary.
None.
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 18, 2022
COHU, INC.
By: /s/ Luis A. Müller
Luis A. Müller
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ James A. Donahue
James A. Donahue
Chairperson of the Board,
Director
February 18, 2022
/s/ Luis A. Müller
Luis A. Müller
/s/ Jeffrey D. Jones
Jeffrey D. Jones
/s/ William E. Bendush
William E. Bendush
/s/ Steven J. Bilodeau
Steven J. Bilodeau
/s/ Andrew M. Caggia
Andrew M. Caggia
/s/ Lynne J. Camp
Lynne J. Camp
/s/ Yon Y. Jorden
Yon Y. Jorden
/s/ Nina L. Richardson
Nina L. Richardson
President and Chief Executive Officer, Director
(Principal Executive Officer)
February 18, 2022
Vice President, Finance and CFO
(Principal Financial and Accounting Officer)
February 18, 2022
February 18, 2022
February 18, 2022
February 18, 2022
February 18, 2022
February 18, 2022
February 18, 2022
Director
Director
Director
Director
Director
Director
87
COHU, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Description
Allowance for doubtful accounts:
Year ended December 28, 2019
Year ended December 26, 2020
Year ended December 25, 2021
$
$
$
Additions
(Reductions)
Not
Charged
to Expense
(1)
Additions
(Reductions)
Charged
(Credited)
to Expense
Balance at
Beginning
of Year
Deductions/
Write-offs
Balance
at End
of Year
40 $
9 $
128 $
24 $
(1) $
14 $
(28) $
79 $
149 $
27 $
(41) $
1 $
9
128
290
Reserve for excess and obsolete inventories:
Year ended December 28, 2019
Year ended December 26, 2020
Year ended December 25, 2021
$
$
$
23,938 $
20,958 $
1,285 $
4,792 $
9,057 $
4,611 $
8,117 $
6,749 $
20,958
26,937
26,937 $
(2,926) $
(2)
7,102 $
8,101 $
23,012
All amounts presented above have been restated to exclude the impact of our discontinued operations.
(1) Changes in reserve balances resulting from foreign currency impact and reclassifications from other reserves.
(2) Reductions not charged to expense includes $2.2 million transferred as part of the sale of our PCB Test business.
88
SUBSIDIARIES OF COHU, INC.
LEGAL ENTITY NAME
------------------------------------------
Delta Design, Inc. (1)
FRL, Incorporated
Cohu Foreign Sales Corp
Xcerra Corporation (5)
------------------
(1) Delta Design, Inc. owns the following subsidiaries:
Delta Design Singapore PTE LTD (2)
Cohu S.A.
Cohu Semiconductor Test GmbH (Partial ownership 37%) (3)
Rosenheim Automation Systems Corporation
Ismeca Semiconductor Holding SA (4)
(2) Delta Design Singapore PTE LTD owns the following subsidiaries:
Delta Design Philippines LLC (14)
Delta Design Singapore PTE LTD, Taiwan Branch
(3) Cohu Semiconductor Test GmbH owns the following subsidiaries:
Multitest GmbH (7)
(4) Ismeca Semiconductor Holding SA owns the following subsidiaries:
Ismeca Europe Semiconductor SA (6)
Cohu Malaysia Sdn. Bhd.
Ismeca Semiconductor (Suzhou) Co Ltd
(5) Xcerra Corporation owns the following subsidiaries:
LTX-Credence France S.A.S.
LTX-Credence Italia S.r.l.
LTX Asia International, Inc. (15)
LTX-Credence Sdn BhD. (10)
LTX LLC
Multitest Electronic Systems Inc.
Cohu Interface Solutions LLC (9)
Credence Capital Corporation
Xcerra International Inc. (12)
Credence International Ltd. (13)
LTX-Credence KK
Xcerra (Thailand) Company Limited
Credence Systems (M) Sdn BhD
Credence Systems (UK) Limited (16)
Everett Charles Technologies Mexico, S. de R.L. de C.V.
Cohu Semiconductor Test GmbH (Partial ownership 63%) (3)
(6) Ismeca Europe Semiconductor SA owns the following subsidiaries:
Ismeca Europe Semiconductor SA, Korean Branch
(7) Multitest GmbH owns the following subsidiaries:
Cohu GmbH (8)
(8) Cohu GmbH owns the following subsidiaries:
Kita Manufacturing Co., LTD
FTZ Fraes-und Techologiezentrum GmbH Frasdorf (39% Ownership)
Exhibit 21
PLACE OF
INCORPORATION
------------------------------
Delaware
California
Barbados
Massachusetts
Singapore
Costa Rica
Germany
California
Switzerland
Delaware
Taiwan
Germany
Switzerland
Malaysia
China
France
Italy
Delaware
Malaysia
Delaware
Delaware
Delaware
California
Delaware
British Virgin Islands
Japan
Thailand
Malaysia
United Kingdom
Mexico
Germany
South Korea
Germany
Japan
Germany
(9) Cohu Interface Solutions LLC owns the following subsidiaries:
Everett Charles Tech, Inc.
(10) LTX-Credence Sdn BhD. owns the following subsidiaries:
LTX Corporation Philippine Branch (11)
Multitest Electronic Systems (Penang) Sdn. Bhd.
(11) LTX Corporation Philippine Branch owns the following subsidiaries:
Multitest Electronic Systems (Philippines) Corporation
(12) Xcerra International Inc. owns the following subsidiaries:
Credence Systems Korea Ltd.
Xcerra International Inc., Taiwan Branch
(13) Credence International Ltd. owns the following subsidiaries:
Credence Malta Limited
LTX-Credence Singapore Pte Ltd.
NPTest de Costa Rica SA.
Cohu Semiconductor (Shenzhen) Co., Ltd (17)
(14) Delta Design Philippines LLC owns the following subsidiaries:
Delta Design Philippines LLC, Philippines Branch
(15) LTX Asia International, Inc. owns the following subsidiaries:
LTX Asia International, Inc., Taiwan Branch
(16) Credence Systems (UK) Limited owns the following subsidiaries:
Credence Systems (UK) Limited, Belgium Branch
(17) Cohu Semiconductor (Shenzhen) Co., Ltd owns the following subsidiaries:
Cohu Semiconductor (Shenzhen) Co., Ltd, Suzhou Branch
Cohu Semiconductor (Shenzhen) Co., Ltd, Shanghai Branch
Massachusetts
Philippines
Malaysia
Philippines
South Korea
Taiwan
Malta
Singapore
Costa Rica
China
Philippines
Taiwan
Belgium
China
China
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 No. 333-237067) of Cohu, Inc, and
(2) Registration Statements (Form S-8 Nos. 333-233080, 333-207016, 333-62803, 333-27663, 333-40610,
333-66466, 333-97449, 333-117554, 333-132605, 333-142579, 333-160760, 333-177453 and 333-
186973) pertaining to the 1996 and 1998 Stock Option Plans, 1996 Outside Directors Stock Option Plan,
1997 Employee Stock Purchase Plan, and 2005 Equity Incentive Plan of Cohu, Inc.;
of our reports dated February 18, 2022, with respect to the consolidated financial statements and schedule of
Cohu, Inc., and the effectiveness of internal control over financial reporting of Cohu, Inc., included in this Annual
Report (Form 10-K) of Cohu, Inc. for the year ended December 25, 2021.
/s/ Ernst & Young LLP
San Diego, California
February 18, 2022
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Luis A. Müller, certify that:
1. I have reviewed this Form 10-K of Cohu, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of
Directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Dated: February 18, 2022
/s/ Luis A. Müller
-----------------------------
Luis A. Müller,
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey D. Jones, certify that:
1. I have reviewed this Form 10-K of Cohu, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of
Directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Dated: February 18, 2022
/s/ Jeffrey D. Jones
---------------------------
Jeffrey D. Jones,
Vice President Finance and Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Annual Report of Cohu, Inc. (the "Company") on Form 10-K for the
fiscal year ended December 25, 2021 (the "Report"), I, Luis A. Müller, President and Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that, based on my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: February 18, 2022
/s/ Luis A. Müller
---------------------------------------------
Luis A. Müller,
President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Annual Report of Cohu, Inc. (the "Company") on Form 10-K for the
fiscal year ended December 25, 2021 (the "Report"), I, Jeffrey D. Jones, Vice President Finance and Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: February 18, 2022
/s/ Jeffrey D. Jones
---------------------------------------------------
Jeffrey D. Jones,
Vice President Finance and Chief Financial Officer