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 31, 2022
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.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
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 $1,286,100,000 based on the closing stock price
as reported by the Nasdaq Stock Market LLC as of June 25, 2022. 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 8, 2023, the Registrant had 47,282,254 shares of its $1.00 par value common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Cohu, Inc.’s 2023 Annual Meeting of Stockholders to be held on May 10, 2023, and to be filed pursuant to
Regulation 14A within 120 days after registrant’s fiscal year ended December 31, 2022, are incorporated by reference into Part III of this Report.
COHU, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
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 ............. 29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ............................................................ 41
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 .................................................................. 46
Item 11. Executive Compensation ...................................................................................................................... 46
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters .............................................................................................................................. 46
Item 13. Certain Relationships and Related Transactions, and Director Independence .................................... 46
Item 14. Principal Accounting Fees and Services .............................................................................................. 46
PART IV
Item 15. Exhibits, Financial Statement Schedules.............................................................................................. 47
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
assumptions and known and unknown risks and uncertainties. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and assumptions, 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. This Form 10-K also
contains estimates, projections and other information concerning our industry, our business, and the markets for
certain of our products, including data regarding the estimated size of those markets. Information that is based
on estimates, forecasts, projections, market research or similar methodologies is inherently subject to
uncertainties and actual events or circumstances may differ materially from events and circumstances reflected
in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data
from reports, research surveys, studies, and similar data prepared by market research firms and other third
parties, industry, general publications, government data, and similar sources.
PART I
Item 1. Business.
Cohu is a global technology leader supplying test, automation, inspection and metrology products and services to
the semiconductor industry. Cohu’s differentiated and broad product portfolio is designed to optimize
semiconductor manufacturing yield and productivity, accelerating customers’ time-to-market. 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.
MCT Worldwide, LLC (“MCT”), acquired by Cohu on January 30, 2023, is a United States (“U.S.”) based
company with a principal manufacturing site in Penang, Malaysia. MCT provides automated solutions for the
semiconductor industry and designs, manufactures, markets, services and distributes strip test handlers, film
frame handlers and laser mark handlers. The acquisition of MCT was completed subsequent to Cohu’s fiscal year
ended December 31, 2022 and certain disclosures include MCT to enable investors to evaluate the operating and
financial effects to our business recognized in the subsequent accounting period. Unless otherwise indicated,
disclosures made throughout this Form 10-K exclude the effect of the acquisition of MCT.
On June 24, 2021, we completed the sale of our PCB Test Equipment (“PCB Test”) business, that represented the
entirety of our PCB Test reportable segment. As part of this divestiture, we also sold certain intellectual property
held by our Semiconductor Test & Inspection segment that was used by the PCB Test business. 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 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
1
Information” in Part IV, Item 15(a) of this Form 10-K.
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
2022 (1)
100 %
- %
100 %
2021 (1)
97 %
3 %
100 %
2020
92 %
8 %
100 %
(1) Our PCB Test segment was sold on June 24, 2021.
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 Automated Test Equipment (“ATE”) is used both for wafer level and device package testing. Our
semiconductor ATE solutions consist primarily of two platforms for the system on a chip (“SoC”) device market.
The Diamondx tester offers high-density instrumentation for testing microcontrollers, application specific standard
products (“ASSP”), power management, display drivers, sensors and other mixed signal devices. The PAx tester is
focused primarily on the RF Front End IC and Module applications.
Semiconductor 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, mobility, industrial and computing applications, among others. We offer a broad range of test
handlers, including pick-and-place, turret, gravity, strip, film frame, laser mark, MEMS and thermal sub-systems.
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.
Inspection and Metrology are products that provide advanced vision capabilities. We offer a wide range of
solutions for inspection of singulated molded leaded and leadless devices, and post-singulated wafer level chip
scale packages (“WLCSP”) and bare dies. NV-Core is our unique vision technology, enabling advanced inspection
and metrology, such as 3-dimensional topographic inspection, sidewall micro-crack detection, and infrared
inspection for sub-surface defect detection.
Data Analytics (“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, manage
predictive maintenance, and link semiconductor tester, handler and test contactor data. DI-Core is included in our
recurring revenue.
Spares and Kits are 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 are provided by our worldwide service organization and include 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. 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.
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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), DI-Core and services
2022
58 %
42 %
- %
2021
61 %
37 %
2 %
2020
50 %
45 %
5 %
Customers
Our customers include semiconductor integrated device manufacturers, fabless design houses, 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
* Less than 10% of consolidated net sales.
2022
*
2021
14.1%
2020
*
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 or December 26, 2020.
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 U.S. sales offices are located in Poway and Milpitas, California, St. Paul, Minnesota,
Lincoln, Rhode Island, Norwood, Massachusetts and, subsequent to our recent acquisition of MCT on January
30, 2023, Minneapolis, Minnesota. 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 show preference to purchase from local Asian competitors. In the semiconductor ATE 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, was $279.8 million at December 31, 2022 and $292.9 million at
December 25, 2021.
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 and subsequent to our acquisition
of MCT on January 30, 2023, Penang, 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 sole source contract manufacturing partner is responsible for significant
material procurement, assembly and test. 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.
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
supplier 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 $92.6 million in 2022, $92.0 million in 2021 and $86.2 million in
2020.
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 make significant investments in research and development and must
manage product 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
4
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 8, 2023. 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
53 President and Chief Executive Officer
61 Senior Vice President, Finance and Chief Financial Officer
63 Senior Vice President and Chief Customer Officer
59 Vice President, Corporate Development, General Counsel and Secretary
56 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, and was
subsequently promoted on February 3, 2022 to Senior Vice President, Finance and Chief Financial Officer.
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 promoted to Senior Vice President and Chief Customer Officer on February 2, 2023, and
prior to that he served as Senior Vice President, Global Customer Group since 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. Prior to Cohu, Mr. Kampfer 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 was 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 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.
5
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 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 or our 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 technology leader supplying test, automation, inspection and metrology products and services to
the semiconductor industry. 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
Including headcount additions arising from our acquisition of MCT, as of January 30, 2023, we had
approximately 3,218 employees, including approximately 104 temporary employees, in 24 countries.
Approximately 19% of our employees are located in the Americas, 13% are located in EMEA (Europe, the
Middle East and Africa) and 68% 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
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.
6
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. As COVID-19 has evolved to a more endemic state, we have continued monitoring and complying
with governmental guidelines for safe operations and have returned, but not fully, to the levels of travel and in
person interactions that occurred prior to the pandemic. In addition, while our manufacturing sites have continued
at pre-pandemic occupancy and function, a portion of our employees that moved to remote work are continuing
in fully remote or hybrid work status.
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, and others.
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 63% 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 (the “SEC”). 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
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.
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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”). 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
• While the ongoing global COVID-19 pandemic has stabilized within many global regions, it may
cyclically continue to adversely affect our business, financial condition and results of 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.
• 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 source contract manufacturer for
certain semiconductor automated test equipment could adversely impact our operations.
• Ongoing inflationary pressures on costs, including those for raw and packaging materials, components
and subassemblies, labor and distribution costs, along with rising interest rates, increase the threat of
recession and 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.
• 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.
Risks Associated with Operating a Global Business
• Geopolitical instability in locations critical to Cohu and its customers’ business, manufacturing, and
engineering operations may adversely impact our operations and sales.
•
Increasingly restrictive trade and export regulations may materially harm and limit Cohu’s business and
restrict our ability to sell its products, specifically within China.
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,
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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 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
While the ongoing global COVID-19 pandemic has stabilized within many global regions, it may cyclically
continue to adversely affect our business, financial condition and results of operations.
The ongoing global COVID-19 pandemic and its related macroeconomic effects have adversely affected, and
may continue to adversely affect, our business, financial condition and results of operations in a cyclical manner.
As the COVID-19 virus has evolved from March 2020 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 may continue 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 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 may in the future 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
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, if they reoccur, 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 any 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.
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
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enter new markets. We are currently significantly investing in new product development programs relating to test
contactors, test handlers and automated test equipment. In fiscal 2022, we incurred $92.6 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
susceptible to impacts from natural disasters, health epidemics and geopolitical instability (see risk factors entitled
“While the ongoing global COVID-19 pandemic has stabilized within many global regions, it may cyclically
continue 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 source 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 is 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. There can be no assurance that alternative capacity could be obtained on
favorable terms, if at all.
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
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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 experienced
supply constraints and delays in accessing certain specialty semiconductors necessary for the production of test
instruments for our semiconductor ATE products, and these supply constraints adversely impacted our overall
gross margin in 2022. Although the supply constraints have subsided entering 2023, they may reoccur at any time
due to factors beyond our control. 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.
Ongoing inflationary pressures on costs, including those for raw and packaging materials, components and
subassemblies, labor and distribution costs, along with rising interest rates, increase the threat of recession
and 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 2022, these costs, including those for
transportation and other inputs necessary for the production and distribution of our products, increased. The
COVID-19 pandemic caused significant increases in freight and shipping costs, and global inflationary pressures
have pushed those costs even higher. In addition, we continue to see price increases and shortages on certain
specialty semiconductors necessary for the production of test instruments for our semiconductor ATE products,
and these events have adversely impacted our gross margins on such products. Further, we also continue to incur
higher employee wage costs and generally higher costs for outside services. These events are driven by factors
beyond our control, and although we are unable to predict the longer-term impacts, we expect these cost pressures
to continue in 2023.
Our efforts 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
as 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 this may result in decreases in
sales volume, our financial condition or operating results may be adversely affected. Further, an extended period
of higher prices may lead to continued regulatory efforts to tame price inflation, resulting in an increased risk of
recession.
Our financial condition or operating results may also be affected by increasing interest rates, which the Federal
Reserve raised multiple times in 2022, with expectations for additional increases in 2023. The raising of interest
rates intended to cool down price inflation may also contribute to the risk of recession, which may result in
customer projections of slowed growth and an overall impact on customer’s and Cohu’s corporate earnings. We
saw slowing customer demand in 2022 and that trend has continued into 2023. Cohu is incurring increased
interest expenses on our remaining indebtedness. In addition, our indebtedness may make us more vulnerable to
changes in general economic conditions, with future inflationary pressures and efforts to reign in such an impact
coupled with continued interest rate increases, thereby making it more costly for us to satisfy our obligations.
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 2022, 2021 and 2020, we recorded pre-tax inventory-
related charges of approximately $7.2 million, $7.1 million, and $6.0 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. After record sales in
2021, demand weakened in 2022. 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
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particular, we have seen demand fluctuations in our test handler group (“THG”) and semiconductor test group
(“STG”) businesses. Our recent sales have become more weighted toward THG and less toward STG products,
which have had a material negative impact on our gross margins. The company took action to reduce expenses
and improve overall operational efficiency, and such actions largely offset the mix-related gross margin impacts.
Given the nature of our industry, we generally cannot accurately predict mix swings from quarter-to-quarter and
such changes may have sudden adverse impacts on our gross margin.
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 price our existing products
competitively and successfully introduce new competitively priced 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.
With respect to Cohu’s automated test equipment (“ATE”) business, our ability to increase ATE sales depends,
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 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 2022. 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 31, 2022. Future inventory write-offs and increased inventory reserve
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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
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 2022,
net revenue from our ten largest customers represented 56% 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
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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 expenses, 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
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
15
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 increasing further due to inflationary effects, 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:
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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 resulting from the COVID-19 pandemic and still continuing for
certain functions);
difficulties in enforcing contractual and intellectual property rights;
longer payment cycles and receivable collections;
health epidemics, such as the COVID-19 pandemic;
local and global political and economic conditions, including ongoing uncertainty surrounding the
evolution of 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.
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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 2022, 90% 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 Germany,
Japan, Malaysia, Philippines, Singapore, South Korea, 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
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 adversely affected by the COVID-19 global pandemic (see risk factor entitled “While the ongoing global
COVID-19 pandemic has stabilized within many global regions, it may cyclically continue to adversely affect, our
business, financial condition and results of operations”).
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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
restrict our ability to sell products, specifically within China.
There have been significant changes in U.S. export regulations relating to China since 2019. Such changes initially
included restrictions on exports to certain China-domiciled entities including Huawei and broader definitions and
restrictions on “military end users” and “uses.” In 2022, export controls were issued relating to the Chinese
semiconductor manufacturing, advanced computing, and supercomputer industries, where these additional controls
may impact our ability, and/or that of our customers, to sell and ship products to semiconductor fabrication
facilities located in China. These export controls include restrictions on certain semiconductor integrated circuits,
commodities containing such integrated circuits, and semiconductor manufacturing equipment. Furthermore, the
export controls restrict the ability of U.S. persons to support the development or production of integrated circuits at
certain semiconductor fabrication facilities in China.
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. These ongoing actions indicate that the U.S. government may impose other
new export restrictions. If implemented with no prior notice, even controls that ultimately have minimal long-term
impact to Cohu, may create short-term limitations on Cohu’s business as it evaluates the full impact of such new
and any subsequent controls. The prospect of future export controls that are implemented in a similar manner may
continue to have an ongoing impact on Cohu’s business, results of operations, or financial conditions.
Political instability resulting from the military incursion into Ukraine by Russia continues to cause significant
disruption to foreign and domestic economies, leading to broad and significant economic sanctions against
Russia with an ongoing impact to material and commodity prices while raising sustained global uncertainty.
The tensions related to Russia’s actions have resulted in the United States and many European countries imposing
significant economic sanctions on Russia and specific individuals targeted as having connections to the Russian
government. The totality of these actions has continued to impact international trade relationships, and resulted in
sustained increases in the cost of materials, where higher oil and other commodity prices have resulted in further
increased shipping and transportation costs. Furthermore, energy shortages, particularly with respect to natural gas,
should they occur in Europe, would disrupt our test handler operations and research and development activities at
our Kolbermoor, Germany and La Chaux-de-Fonds facilities. Any increases in the cost, or shortages, of materials
or energy may continue to create supply issues for critical materials that could constrain manufacturing levels for
Cohu’s customers, leading to a decrease in demand for Cohu’s products.
The global impact of the military action and subsequent imposing of sanctions continues to evolve and cannot be
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sufficiently measured or predicted with certainty. The inherent uncertainty surrounding this war may negatively
impact the share prices of publicly traded companies. Government entities and both public and private companies
within the United States may be exposed to attempted or actual cybersecurity attacks launched in retaliation,
resulting in disruptions to domestic markets and a prolonged state of global market volatility. Furthermore, there
remains ongoing uncertainty with respect to China’s willingness to support ongoing or expanded sanctions, which
could distance China from its existing trade partners, potentially creating a significant impact to the semiconductor
chip and equipment industries that conduct operations within China, Taiwan and the region. There is a likelihood
that these sanctions, and related geopolitical tensions, will not be resolved in the short-term but will have a lengthy
disruption to all global companies.
Risks Relating to our Indebtedness, Financing and Future Access to Capital
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, take certain actions.
Cohu’s existing indebtedness of approximately $79 million, primarily the result of Cohu previously entering into a
term loan facility (the “Credit Agreement”), limits our ability to:
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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:
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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;
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
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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.
Goodwill and other intangibles comprise 29% of Cohu’s total assets, of which approximately $213.5 million of
our total assets are allocated to goodwill. In accordance with Accounting Standards Codification (“ASC”) Topic
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 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. 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. 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
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risks, including, but not limited to:
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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.
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:
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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;
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inability to deliver solutions as expected by our customers;
• geopolitical changes impacting our business, including with respect to China and Taiwan;
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intangible and deferred tax asset write-downs; and
• general economic and market conditions, including impacts from sanctions against Russia and the military
conflict in Ukraine, increased inflationary pressures, interest rate changes, and any resurgence of the 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
three-year period ended December 31, 2022, 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,
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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, 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.
On October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase
program. 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, as it could leave
the company limited in its ability to obtain cash necessary for ongoing operations or potential acquisition targets.
In addition, any repurchase of stock may have no positive impact on our stock price. 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.
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, Singaporean, Philippines, and Malaysian subsidiaries have income tax returns
currently under routine examination by tax authorities for different periods between 2015 and 2020. 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
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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 during 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.
Beginning in 2022, the Tax Cuts and Jobs Act, or the Tax Act, eliminated the option to deduct research and
development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen
years pursuant to Internal Revenue Code Section 174. This has increased our effective tax rate and our cash tax
payable in 2022. If the requirement to capitalize Section 174 expenditures is not modified, it may also impact our
effective tax rate and our cash tax liability in future years.
During December 2022, the Organization for Economic Cooperation and Development (“OECD”) announced
that it has reached agreement among its 136-member countries that certain multinational enterprises will be
subject to a global minimum tax rate of 15%, also known as Pillar Two. South Korea became the first country to
enact such global minimum tax rules, which will be effective for fiscal years beginning on or after January 1,
2024. These specific actions did not impact our consolidated financial statements in 2022, however, many more
countries are expected to issue laws and regulations to conform with this guidance soon. We will continue to
monitor the pertinent law changes and regulations to determine the impact they would have on our operating and
financial results.
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
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
24
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 the implementation of extensive employee
telework practices has 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 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 our competitors and 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 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.
25
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Certain information concerning our principal properties at December 31, 2022, is set forth below:
Major
Activities
Location
1, 2, 3, 4, 5
Poway, California
2, 3, 4, 5
Malacca, Malaysia
2, 3, 4, 5
Kolbermoor, Germany
2, 3, 4, 5
Osaka, Japan
2, 4, 5
Norwood, Massachusetts
2, 3, 4, 5
Calamba City, Laguna, Philippines
2, 4, 5
La Chaux-de-Fonds, Switzerland
2, 4, 5
Milpitas, California
2, 3, 4, 5
Lincoln, Rhode Island
2, 4, 5
Singapore
2, 3, 4, 5
St. Paul, Minnesota
Penang, Malaysia (1)
2, 3, 4, 5
(1) Location was acquired on January 30, 2023, in conjunction with the purchase of MCT, see Note 17, “Subsequent
Event”, included in Part IV, Item 15(a) of this Form 10-K.
Ownership
Leased
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Approx.
Sq. Ft.
147,000
96,000
83,000
67,000
56,000
52,000
33,000
31,000
22,000
20,000
17,000
10,000
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 8, 2023, Cohu had 577 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
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 2022, 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. On October 25, 2022, our Board of Directors authorized an additional $70 million under the share
repurchase program. This share repurchase program was effective as of November 2, 2021 and has no expiration
date. 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 31, 2022 was 1,767,070 shares.
27
Share repurchase activity during the fourth quarter of 2022 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)
200 $
61 $
150 $
411 $
5,513
27.54 $
2,041
33.20 $
33.87 $
5,088
30.70 $ 12,642
Sep 25, 2022 - Oct 22, 2022
Oct 23, 2022 - Nov 19, 2022
Nov 20, 2022 - Dec 31, 2022
200 $
61 $
150 $
411
(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. On
October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase program. This
share repurchase program is effective as of November 2, 2021 and has no expiration date. 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.
89,085
87,044
81,957
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 30, 2017, and reinvestment of all dividends). The custom Peer
Group Indexes are comprised of companies within our industry and are utilized in our executive compensation
planning process. This peer group is revised annually to reflect acquisitions and to include comparable companies
in the semiconductor equipment market to ensure a sufficient number of companies in the peer group
composition to enable a meaningful comparison and benchmarking. In 2022, the custom peer group was
comprised of Advanced Energy Industries, Inc., Alpha & Omega Semiconductor Limited, Axcelis Technologies,
Inc., Badger Meter, Inc., Cirrus Logic, Inc., FormFactor, Inc., Harmonic Inc., Ichor Holdings Ltd., Kulicke and
Soffa Industries, Inc., MACOM Technology Solutions Holdings, Inc., MaxLinear, Inc., National Instruments
Corporation, Novanta, Inc., Onto Innovation, OSI Systems, Inc., Photronics, Inc., Smart Global Holdings, Inc.,
Ultra Clean Holdings, Inc. and Veeco Instruments, Inc. In selecting our 2022 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. In 2021, the custom Peer Group Index was comprised of
Advanced Energy Industries, Inc., Axcelis Technologies, Inc., Azenta, Inc. (formerly Brooks Automation, Inc.),
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.
28
Cohu, Inc.
NASDAQ Index
Russell 2000
2021 Peer Group
2022 Peer Group
Item 6. Reserved.
2017
2018
2019
2020
2021
2022
$
$
$
$
$
100 $
100 $
100 $
100 $
100 $
116 $
97 $
89 $
85 $
83 $
167 $
133 $
112 $
149 $
124 $
291 $
192 $
134 $
210 $
154 $
173 $
235 $
154 $
314 $
212 $
146
159
122
194
162
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.
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 automation systems (handlers), micro-
electromechanical system (“MEMS”) test modules, test contactors and thermal subsystems, and semiconductor
automated test equipment used by global semiconductor 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
29
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 31, 2022, our net sales decreased 8.4% year-over-year to $812.8 million.
Although customer test cell utilization rates remain high and we continue to benefit from robust demand for
semiconductor test equipment, as compared to the prior year, our net sales declined during 2022 due to lower
demand for mobility and 5G-related products as well as the divestiture of our PCB Test business, which
contributed $26.8 million in sales during 2021 through its disposition on June 24, 2021. Over the past twelve
months, consolidated net sales benefitted from growth in our semiconductor test business, and we saw
improvements in gross margin due to favorable product mix, and increased insourcing of contactor
manufacturing. Also, price increases offset cost increases in our supply chain. Based on the strength of current
business conditions and the results from our operations, we have continued to take actions to reduce
outstanding principal under our Term Loan Credit Facility through voluntary prepayments and we have also
repurchased 1,767,070 shares of our common stock for $50.7 million during 2022.
We continue to focus on building a well-balanced and resilient business model. Our long-term market drivers
and market strategy remain intact, and we are encouraged by demand across our main market segments, along
with customer traction with our new products. We continue to capture new customers and remain optimistic
about the long-term prospects for our business due to the increasing ubiquity of semiconductors, the continued
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
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; and
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.
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
30
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 31, 2022, and
December 25, 2021, we had $7.1 million and $7.7 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 Topic 606, Revenue from Contracts with Customers (“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 Topic 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
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, 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
31
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 31, 2022, was approximately
$114.5 million, with a valuation allowance of approximately $89.2 million.
During December 2022, the Organization for Economic Cooperation and Development (OECD) announced
that it has reached agreement among its 136-member countries that certain multinational enterprises will be
subject to a global minimum tax rate of 15%, also known as Pillar Two. South Korea became the first country
to enact such global minimum tax rules, which will be effective for fiscal years beginning on or after January
1, 2024. These specific actions did not impact our consolidated financial statements in 2022, however, many
more countries are expected to issue laws and regulations to conform with this guidance soon. We will
continue to monitor the pertinent law changes and regulations to determine the impact they would have on our
operating and financial results.
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 using a weighting of the income and market
approaches. Under the income approach, we use a discounted cash flow methodology to derive an indication of
value, which requires management to make significant estimates and assumptions related to forecasted revenues,
gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term
discount rates, among others. For the market approach, we use the guideline public company method. Under this
method we utilize information from comparable publicly traded companies with similar operating and investment
characteristics as the reporting units, to create valuation multiples that are applied to the operating performance
metrics of the reporting unit being tested, in order to obtain an indication of value. We then apply a 50/50
weighting to the indicated values from the income and market approaches to derive the fair values of the
reporting units. 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, 2022, 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
32
tested for impairment between annual measurement dates. As of December 31, 2022, 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 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
financial statements, see Note 1, “Recent Accounting Pronouncements” in Part IV, Item 15(a) of this Form 10-K.
33
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 our
results for the period ended December 26, 2020 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 operating results
of our fixtures business are presented as “discontinued operations” for the periods ended December 31, 2022,
December 25, 2021 and December 26, 2020. 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 from operations
2022
100.0 %
(52.8)
47.2
(11.4)
(16.2)
(4.1)
-
(0.1)
-
-
15.4 %
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 %
Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7 in our 2021 Annual Report on Form 10-K, filed with the SEC on February 18, 2022, for
comparative discussion of our fiscal years ended December 25, 2021 and December 26, 2020.
2022 Compared to 2021
Net Sales
Cohu’s consolidated net sales decreased 8.4% from $887.2 million in 2021 to $812.8 million in 2022. During
2022, although customer test cell utilization rates remained high and we continued to benefit from robust
demand for semiconductor test equipment, as compared to 2021, net sales declined due to lower demand for
mobility and 5G-related products as well as the divestiture of our PCB Test business, which contributed
$26.8 million in sales during 2021 through its disposition on June 24, 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). 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 47.2% in 2022 from 43.6% in 2021. During 2022 our gross margin
improved compared to 2021 due to favorable product mix, increased insourcing of contactor manufacturing
and foreign currency fluctuations.
We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage
forecasts. During 2022, we recorded net charges to cost of sales of approximately $7.2 million for excess and
obsolete inventory. In 2021, net charges to cost of sales for excess and obsolete inventory were $7.1 million.
We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are
34
adequate to cover known exposures at December 31, 2022. 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 2022 was $92.6 million,
or 11.4% of net sales, compared to $92.0 million, or 10.4% of net sales in 2021. R&D expense in 2021 includes
the results of our PCB Test business, which incurred $1.5 million of costs prior to its disposition on June 24,
2021. During 2022 R&D expense increased due to higher spending on labor and materials associated with
product development.
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 increased to 16.2% in 2022, from 14.3% in 2021, increasing from $127.0 million in 2021
to $131.4 million in 2022. SG&A expense in 2021 includes the results of our PCB Test business, which
incurred $3.3 million of SG&A expense prior to its disposition on June 24, 2021. During 2022 SG&A expense
has increased due to higher labor and professional services costs.
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 $33.2 million and $35.4 million for 2022 and 2021, 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 the PCB test business was 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 totaling $0.6 million
and $1.8 million in 2022 and 2021, respectively. The decrease in expense year-over-year is a result of fewer
activities under the restructuring projects.
See Note 4, “Restructuring Charges” in Part IV, Item 15(a) of this Form 10-K for additional information with
respect to restructuring charges.
Impairment Charges
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.
35
Interest Expense and Income
Interest expense was $4.2 million in 2022 compared to $6.4 million in 2021. The year-over-year decrease in our
interest expense resulted from a reduction in the outstanding balance of our Term Loan Credit Facility.
Interest income was $4.0 million and $0.2 million in 2022 and 2021, respectively. The increase in interest
income year-over-year is a result of increased investments and higher rates.
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 that are
held at our subsidiaries whose functional currency is the local currency. During both 2022 and 2021, the U.S.
Dollar strengthened against the Swiss Franc, Euro and Japanese Yen resulting in foreign currency gains.
During 2022 we recognized gains of $1.6 million, net of $5.4 million of losses generated by our foreign
currency forward contracts and in 2021 we recognized gains of $0.4 million, net of $3.4 million of losses
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 2022 and 2021 was 23.6% and
13.0%, respectively. The increase in the provision for income taxes from 2021 to 2022 is primarily related to the
changes in our jurisdictional mix of income, offset by lower GILTI inclusion and foreign tax withholdings 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.
Based on the evidence available including a lack of sustainable earnings and history of expiring unused NOLs,
and tax credits, we continue to maintain our judgement that a previously recorded valuation allowance against
substantially of our net deferred tax assets in the United States is still required. If a change in judgement
regarding this valuation allowance were to occur in the future, we will record a potentially material deferred tax
benefit, which could result in a favorable impact on the effective tax rate in that period.
Our valuation allowance on our DTAs at December 31, 2022, and December 25, 2021, was approximately
$89.2 million and $76.3 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.
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.
Net Income
As a result of the factors set forth above, our net income was $96.8 million in 2022 and $167.3 million in 2021.
36
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 31, 2022, $154.5 million or 40.1% 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 31, 2022, our total indebtedness, net of discount and deferred financing costs, was $79.0 million,
which included $66.2 million outstanding under the Term Loan Credit Facility, $2.5 million outstanding under
Kita’s term loans, $8.4 million outstanding under Cohu GmbH’s construction loans, and $1.9 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
2022, we repurchased 1,767,070 shares of our outstanding common stock for $50.7 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 26, 2020 has been omitted from this Annual Report on Form 10-K, but may be
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 25, 2021, filed with the SEC on February 18, 2022, 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 31, 2022 and December 25, 2021:
(in thousands)
Cash, cash equivalents and short-term investments
Working capital
2022
$ 385,576
$ 603,979
2021
$ 379,905
$ 558,334
Increase
$
$
5,671
45,645
Percentage
Change
1.5 %
8.2 %
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 2022 totaled $112.9 million compared to
$97.9 million in 2021. Cash provided by operating activities in the current year was a result of an increase in net
37
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 decreases in accounts payable and accounts receivable.
The timing of payments to our suppliers resulted in the $33.1 million decrease in accounts payable, and net sales
in the fourth quarter of 2022 and the timing of the resulting cash conversion cycle drove the $12.5 million
decrease in accounts receivable. Deferred profit decreased $5.0 million as a result of the recognition of revenue
that had been previously deferred in accordance with our revenue recognition policy, and accrued compensation,
warranty and other liabilities decreased $4.0 million due to lower business volume resulting in lower rates of
accrual. Cash provided by operating activities was also impacted by increases in income taxes payable of
$20.9 million a result of higher income tax to be paid in certain jurisdictions. During 2022, inventories increased
$18.5 million due to purchases from suppliers made in the fourth quarter to fulfill anticipated future shipments of
product, and other current assets increased $16.2 million due to income tax prepayments and supplier advance
deposits for inventory that will be received over the next twelve months.
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 used in investing activities in 2022 totaled $67.9 million. In
2022 we used $208.9 million in cash for purchases of short-term investments and generated $155.4 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 2022 were $14.8 million and were made to support our operating
and development activities. Our net cash provided by investing activities in 2021 totaled $39.9 million. In 2021
we used $12.0 million for additions to property, plant and equipment and we used $204.7 million in cash for
purchases of short-term investments and generated $135.5 million from sales and maturities. Our net cash
provided by investing activities in 2021 also included the net cash proceeds of $120.9 million from the sale of our
PCB Test business on June 24, 2021. 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.
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 2022, our cash used in financing activities totaled
$91.1 million. In fiscal 2021, our cash provided by financing activities totaled $6.5 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. Repayments of short-term borrowings and long-term debt during 2022 totaled $38.2 million,
which includes $31.7 million of cash prepayments of our Term Loan Credit Facility. During 2021 our repayments
totaled $206.1 million and included $200.0 million of cash prepayments 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. In 2021, we received proceeds under a revolving line of credit and construction loan totaling $1.4 million.
Proceeds from the construction loan was 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. During 2022 and 2021, we made payments totaling
$50.7 million and $7.3 million, respectively 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 2022, 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 $2.0 million. In 2021, net cash used to
settle the minimum statutory tax withholding requirements on behalf of our employees totaled $4.4 million.
The decrease in cash used to settle tax withholding requirements between 2022 and 2021 is directly correlated to
the decrease in Cohu’s stock price at the end of March year over year when the majority of awards vest.
38
Share Repurchase Program
On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase
program. On October 25, 2022, our Board of Directors authorized an additional $70 million under the share
repurchase program. This share repurchase program was effective as of November 2, 2021, and has no expiration
date. 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
31, 2022, we repurchased 1,767,070 shares of our common stock for $50.7 million to be held as treasury stock.
As of December 31, 2022, we may purchase up to $82.0 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 31, 2022, the
outstanding loan balance, net of discount and deferred financing costs, was $66.2 million and $3.2 million of the
outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. 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. As of December 31, 2022, the fair value of the debt was $66.6 million. The
measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of December
31, 2022 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 31, 2022, we believe no such events of default have occurred.
During 2022, we prepaid $31.8 million in principal of our Term Loan Credit Facility for $31.7 million in cash.
We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $0.3 million reflected in
our consolidated statement of operations and a $0.4 million reduction in debt discounts and deferred financing
costs in our consolidated balance sheets. During 2021, we repurchased $200.0 million in principal of our Term
Loan Credit Facility for $200.0 million in cash. We accounted for the repurchase as a debt extinguishment, which
resulted in a loss of $3.4 million reflected in our consolidated statement of operations, as well as a $3.4 million
reduction in debt discounts and deferred financing costs in our consolidated balance sheets. Approximately
$67.0 million in principal of the Term Loan Credit Facility remains outstanding as of December 31, 2022.
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 31, 2022, the outstanding loan balance was $2.5 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 25, 2021, the
outstanding loan balance was $3.1 million and $0.2 million of the outstanding balance is presented as current
39
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 €0.9 million has been fully
drawn and 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 31, 2022, total outstanding borrowings under the Loan Facilities was $8.4 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 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. 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 31, 2022.
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 250 million Japanese Yen is drawn. At December 31, 2022, total
borrowings outstanding under the revolving lines of credit were $1.9 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 31, 2022
and December 25, 2021, 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 31, 2022,
$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 31, 2022, 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 31, 2022. We are
currently unable to provide a reasonably reliable estimate of the amount or period(s) the cash settlement of this
liability may occur.
40
$
2023
Total
29,812 $
75
(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.
93,703
1,907
125,497 $
10,132
1,907
18,286 $
6,197 $
50
Fiscal year-end
2024-2025 2026-2027 Thereafter
11,082 $
22
75,925
-
87,029 $
4,629 $
3
2,486
-
7,118 $
7,904
-
5,160
-
13,064
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 31, 2022, $0.3 million was outstanding under standby
letters of credit.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Investment and Interest Rate Risk.
At December 31, 2022, our investment portfolio included short-term, fixed-income investment securities with
a fair value of approximately $143.2 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 31, 2022, the cost and fair value of investments with loss positions were
approximately $86.3 million and $85.5 million, respectively. 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 31, 2022, we have approximately $67.0 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 would 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
41
outstanding and overdue interest payments and other overdue fees and amounts. At December 31, 2022, the
interest rate in effect on these borrowings was 6.37%.
In July 2017, the UK’s Financial Conduct Authority (“FCA”), which regulates the LIBOR, announced that it
intended to phase out LIBOR by the end of 2021. In March 2021, the FCA announced an extension of the phase
out in the case of U.S. dollar settings for certain tenors until the end of June 2023. Various central bank
committees and working groups continue to discuss replacement of benchmark rates, the process for amending
existing LIBOR-based contracts, and the potential economic impacts of different alternatives. It is unclear
whether new methods of calculating LIBOR will be established such that it continues to exist after 2023. While
the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, has chosen the secured
overnight financing rate (“SOFR”) as the recommended risk-free reference rate for the U.S, we cannot currently
predict the extent to which this index will gain widespread acceptance as a replacement for LIBOR. 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 on 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
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 31, 2022 compared to December 25, 2021, our stockholders’ equity decreased by
$18.0 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 31, 2022 would result in an approximate $34.2 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 31, 2022
would result in an approximate $34.2 million negative translation adjustment recorded in other comprehensive
income within stockholders’ equity.
42
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 31, 2022, 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 31, 2022, 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 31,
2022.
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 31, 2022, 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 31, 2022, 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 31, 2022, 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 31, 2022 and December 25, 2021,
and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2022, and the related notes and the financial statement
schedule listed in the Index at Item 15(a) and our report dated February 17, 2023, 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 17, 2023
44
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
45
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information under the heading “Information About Our Executive Officers” 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 2022.
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 2022.
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 2022.
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 2022.
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 2022.
46
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 48:
Description
Form 10-K
Page Number
Consolidated Balance Sheets at
December 31, 2022 and December 25, 2021 ......................................................................... 48
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 2022 ........................................................................ 49
Consolidated Statements of Comprehensive Income for each of the three
years in the period ended December 31, 2022 ........................................................................ 50
Consolidated Statements of Stockholders’ Equity for each of
the three years in the period ended December 31, 2022 ........................................................ 51
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2022 ........................................................................ 52
Notes to Consolidated Financial Statements ............................................................................. 53
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.
47
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; 90,000 shares authorized, 49,276
shares issued and outstanding in 2022 and 48,756 shares in 2021
Paid-in capital
Treasury stock, at cost; 1,767 shares in 2022 and 207 shares in 2021
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
December 31,
2022
December 25,
2021
$
$
242,341
143,235
176,148
170,141
24,017
8,969
764,851
290,201
89,704
192,873
161,053
16,194
768
750,793
65,011
213,539
140,104
21,105
22,804
$ 1,227,414
63,957
219,791
177,320
22,123
25,060
$ 1,259,044
$
$
1,907
4,404
51,763
6,886
38,348
5,614
8,022
26,648
17,280
160,872
7,620
6,486
10,363
21,359
72,664
19,209
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
-
-
49,276
687,218
(58,043)
290,402
(40,012)
928,841
$ 1,227,414
48,756
674,777
(7,324)
193,555
(27,262)
882,502
$ 1,259,044
The accompanying notes are an integral part of these statements.
48
COHU, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
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 from operations
Other (expense) income:
Interest expense
Interest income
Foreign transaction gain (loss)
Gain (loss) on extinguishment of debt
Income (loss) from continuing operations before taxes
Income tax provision
Income (loss) from continuing operations
Income from discontinued operations, net of tax
Net income (loss)
Income (loss) per share:
Basic:
Income (loss) from continuing operations
Income from discontinued operations
Net income (loss)
Diluted:
Income (loss) from continuing operations
Income from discontinued operations
Net income (loss)
Weighted average shares used in computing
income (loss) per share:
Basic
Diluted
December 31,
2022
Years ended
December 25,
2021
December 26,
2020
$
812,775
$
887,214
$
636,007
429,449
92,589
131,390
33,185
-
605
-
-
687,218
125,557
(4,177)
4,012
1,635
(312)
126,715
29,868
96,847
-
96,847
$
500,253
91,963
126,958
35,414
(70,815)
1,823
100
-
685,696
201,518
(6,413)
239
411
(3,411)
192,344
25,019
167,325
-
167,325
$
2.01
-
2.01
$
$
1.98
-
1.98
$
$
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)
(0.33)
0.00
(0.33)
(0.33)
0.00
(0.33)
48,178
48,799
47,409
48,460
41,854
41,854
$
$
$
$
$
(1) Excludes amortization of $26,023, $27,508, and $29,510 for the years ended December 31, 2022, December 25, 2021, and December
26, 2020, 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.
49
COHU, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Years ended
December 31, December 25, December 26,
2021
167,325 $
96,847 $
(13,801)
2022
2020
$
(17,950)
5,894
(694)
-
(12,750)
84,097 $
(22,956)
2,602
(67)
(2,515)
(22,936)
144,389 $
27,321
2,383
-
-
29,704
15,903
$
Net income (loss)
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
Comprehensive income
The accompanying notes are an integral part of these statements.
50
COHU, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except par value and per share amounts)
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
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
Share-based compensation expense
Balance at December 31, 2022
$
Paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
Stock
Common
stock
$1 par value
$
41,395
-
$ 433,190 $
-
-
-
-
1,001
3,026
(660)
(2,597)
14,234
448,194
-
-
-
-
-
2,260
3,403
(704)
(10,222)
-
14,420
217,426
674,777
-
-
-
-
-
105
3,470
42,517 $
(13,801)
(34,030) $
-
-
27,321
-
(2,486)
-
-
-
-
-
26,230
-
167,325
-
-
-
-
-
-
-
-
-
-
193,555
-
96,847
-
-
-
-
-
2,383
-
-
-
-
-
-
(4,326)
-
-
(22,956)
2,602
(67)
-
-
-
-
(2,515)
-
-
(27,262)
-
-
(17,950)
5,894
(694)
-
-
Total
- $ 483,072
(13,801)
-
-
-
-
-
-
-
-
-
-
(7,324)
-
-
-
-
-
-
-
-
-
-
-
(7,324)
(50,719)
-
-
-
-
-
-
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
(50,719)
96,847
(17,950)
5,894
-
(694)
117
3,631
-
-
-
101
243
660
(209)
-
42,190
-
-
-
-
-
250
161
704
(242)
-
-
5,693
48,756
-
-
-
-
-
12
161
529
(182)
-
49,276
(529)
(5,523)
14,918
-
-
-
$ 687,218 $ 290,402 $
-
-
-
(40,012) $
-
-
-
-
(5,705)
14,918
(58,043) $ 928,841
The accompanying notes are an integral part of these statements.
51
COHU, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income (loss)
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
Net accretion on investments
(Gain) loss on extinguishment of debt
Impairment charges related to indefinite lived intangibles
Depreciation and amortization
Share-based compensation expense
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
Operating lease right-of-use assets
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
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
Payments on current and long-term finance lease liabilities
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
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 31, December 25,
2022
2021
December 26,
2020
$
96,847 $
167,325 $
(13,801)
-
(199)
(859)
312
-
46,016
14,918
6,725
315
(1,589)
(3,504)
(3,230)
2,060
(203)
(943)
5,139
(184)
12,451
(18,508)
(4,007)
(33,130)
(5,014)
(16,202)
20,908
(5,258)
112,861
(14,770)
349
(208,856)
155,406
-
(67,871)
-
-
(38,226)
(1,957)
(167)
(50,719)
-
(91,069)
(1,781)
(47,860)
290,201
242,341 $
23,123 $
3,443 $
152 $
2,529 $
$
$
$
$
$
(70,815)
(91)
-
3,411
100
48,568
13,792
6,523
643
(500)
953
(1,652)
1,644
1
(416)
6,746
(4,090)
(59,123)
(35,864)
225
17,316
4,732
1,709
3,444
(6,666)
97,915
(12,000)
157
(204,699)
135,549
120,886
39,893
-
1,376
(206,069)
(4,390)
(186)
(7,324)
223,119
6,526
(3,491)
140,843
149,358
290,201 $
22,717 $
6,253 $
624 $
1,635 $
(35)
(124)
-
(268)
11,249
52,746
14,234
3,731
1,177
1,675
(5,305)
285
1,191
(4,170)
91
6,831
2,188
(20,210)
(14,982)
4,678
15,058
871
1,150
(2,089)
(6,291)
49,880
(18,660)
17,025
(19,703)
-
2,975
(18,363)
(4,971)
5,878
(41,056)
2,077
(146)
-
-
(38,218)
129
(6,572)
155,930
149,358
5,772
16,324
1,063
1,050
The accompanying notes are an integral part of these statements.
52
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. 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 31, 2022, consisted of 53 weeks. Our fiscal years ended on December
25, 2021, and December 26, 2020, each consisted of 52 weeks.
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 31, 2022, December 25, 2021
and December 26, 2020, approximately 261,000, 180,000, and 113,000 shares, respectively, of potentially
issuable shares of our common stock were excluded from the computation.
The following table reconciles the denominators used in computing basic and diluted income (loss) per share:
2020
41,854
-
41,854
(in thousands)
Weighted average common shares outstanding
Effect of dilutive stock options and restricted stock units
2022
48,178
621
48,799
2021
47,409
1,051
48,460
For the year ended December 26, 2020, 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,
53
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 31, 2022, we will continue to monitor customer liquidity and other
economic conditions, 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 $7.2 million
and $7.1 million in 2022 and 2021, respectively. 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 Xcerra’s semiconductor test handler products.
Inventories by category were as follows (in thousands):
Raw materials and purchased parts
Work in process
Finished goods
Total inventories
December 31, December 25,
2022
106,041 $
36,024
28,076
170,141 $
2021
92,798
40,732
27,523
161,053
$
$
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.
54
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 31, December 25,
2022
2021
$
$
7,066 $
31,161
105,109
143,336
(78,325)
65,011 $
7,703
31,711
95,542
134,956
(70,999)
63,957
Depreciation expense was $12.8 million in 2022, $13.2 million in 2021 and $14.0 million in 2020. The
decrease in depreciation expense recognized is a result of assets becoming fully depreciated.
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 $14.7 million and
$13.5 million at December 31, 2022 and December 25, 2021, respectively. These amounts are recorded
within other assets in our consolidated balance sheets. During the fourth quarter of 2022 the final phase of
ERP system development was completed. Implementation costs are amortized using the straight-line
method over seven years and we recorded $2.1 million and $1.6 million in amortization expense during
the years ended December 31, 2022 and December 25, 2021, 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
& Inspection. Prior to the sale of our PCB Test Group on June 24, 2021, we reported in two segments,
Semiconductor Test & Inspection and 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 using a weighting of the income and market approaches. Under the income
approach, we use a discounted cash flow methodology to derive an indication of value, which requires
management to make significant estimates and assumptions related to forecasted revenues, gross profit
margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term
discount rates, among others. For the market approach, we use the guideline public company method. Under
this method we utilize information from comparable publicly traded companies with similar operating and
investment characteristics as the reporting units, to create valuation multiples that are applied to the operating
performance metrics of the reporting unit being tested, in order to obtain an indication of value. We then
apply a 50/50 weighting to the indicated values from the income and market approaches to derive the fair
values of the reporting units. Forecasts of future cash flows are based on our best estimate of future net sales
55
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2022, 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 31, 2022, 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
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 of January 1, 2019, or the
commencement date for leases entered into after the adoption date. As most of our leases do not provide an
56
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 consolidated 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.
Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. At
December 31, 2022 and December 25, 2021, we had $7.1 million and $7.7 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 Topic 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
57
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 31, 2022, we had deferred revenue
totaling approximately $16.1 million, current deferred profit of $8.0 million and deferred profit expected to
be recognized after one year included in noncurrent other accrued liabilities of $5.5 million. 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.
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
$
$
2022
2021
2020
474,655
338,120
-
-
812,775
$
$
541,589
318,865
17,831
8,929
887,214
$
$
317,821
267,419
33,293
17,474
636,007
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, Exit or Disposal Cost Obligations (“ASC 420”). 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
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 defer 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 $0.3 million, $0.6 million and $1.2 million for the years ended
December 31, 2022, December 25, 2021 and December 26, 2020, respectively.
Share-based Compensation – We measure and recognize all share-based compensation under the fair value
58
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
method. Our estimate of share-based compensation expense requires a number of 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 years ended December 31, 2022 and December 25, 2021, in our consolidated
statement of operations we recognized foreign exchange gains totaling $1.6 million and $0.4 million,
respectively. During the year ended December 26, 2020, we recognized a foreign exchange loss of
$3.2 million.
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 $40.0 million at December 31, 2022, and $27.3 million at December 25, 2021, and was
attributed to, net of income taxes where applicable, foreign currency adjustments resulting from the
translation of certain accounts into U.S. Dollars, changes in unrealized gains and losses on investments 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 and continued to
strengthen as of December 31, 2022 and consequently, our accumulated other comprehensive loss attributed
to foreign currency translation adjustments increased by $23.0 million and $18.0 million during the years
ended December 25, 2021 and December 31, 2022, respectively. Reclassification adjustments from
accumulated other comprehensive loss during 2022 and 2021 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”.
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
59
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
be applied prospectively to contract modifications made on or before December 31, 2022. In December
2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of
Topic 848, to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December
31, 2024. 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 31, 2022, and December 25,
2021, were as follows (in thousands):
Semiconductor Test &
Inspection
PCB Test
Total Goodwill
Balance December 26, 2020
Sale of PCB Test Business (1)
Impact of currency exchange
Balance December 25, 2021
Impact of currency exchange
$
230,724 $
-
(10,933)
219,791
(6,252)
213,539 $
21,580 $
(21,899)
319
-
-
- $
252,304
(21,899)
(10,614)
219,791
(6,252)
213,539
Balance December 31, 2022
(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 31, 2022
December 25, 2021
Remaining
Gross Carrying Accumulated Useful Life
Amortization
Amount
Developed technology
Customer relationships
Trade names
Covenant not-to-compete
$
$
224,253 $
64,632
20,461
269
309,615 $
128,938
31,015
9,397
161
169,511
(years)
3.6
6.5
6.4
4.0
$
Amount
Gross Carrying Accumulated
Amortization
104,855
26,189
7,714
154
138,912
229,131 $
65,916
20,877
308
316,232 $
$
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 impairment testing as of October 1, 2022, 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 fourth quarter of 2021 we completed and transferred to developed technology an 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 $33.2 million in 2022,
$35.4 million in 2021 and $38.7 million in 2020. As of December 31, 2022, we expect amortization expense
in future periods to be as follows: 2023 - $33.4 million; 2024 - $33.4 million; 2025 - $24.8 million; 2026 -
$18.6 million 2027 - $15.1 million; and thereafter $14.8 million.
60
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Borrowings and Credit Agreements
The following table is a summary of our borrowings as of December 31, 2022 and December 25, 2021:
(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 31, 2022
December 25, 2021
66,952
2,466
8,414
1,907
79,739
(764)
(6,311)
72,664
$
$
103,130
3,070
10,045
3,059
119,304
(1,514)
(14,397)
103,393
The debt principal payments, excluding financing lease obligations, for the next five years and thereafter are
as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
Credit Agreement
$
$
6,574
4,672
61,130
1,183
1,189
4,991
79,739
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 31,
2022, the outstanding loan balance, net of discount and deferred financing costs, was $66.2 million and
$3.2 million of the outstanding balance is presented as current installments of long-term debt in our
consolidated balance sheets. 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. As of December 31, 2022, the fair
value of the debt was $66.6 million. The measurement of the fair value of debt is based on the average of the
bid and ask trading quotes as of December 31, 2022 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 31, 2022, we believe no such events of default have
occurred.
During 2022 we prepaid $31.8 million in principal of our Term Loan Credit Facility for $31.7 million in
cash. We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $0.3 million
reflected in our consolidated statement of operations and a $0.4 million reduction in debt discounts and
deferred financing costs in our consolidated balance sheets. During 2021 we repurchased $200.0 million in
principal of our Term Loan Credit Facility for $200.0 million in cash. We accounted for the repurchase as a
debt extinguishment, which resulted in a loss of $3.4 million reflected in our consolidated statement of
operations, as well as a $3.4 million reduction in debt discounts and deferred financing costs in our
61
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
consolidated balance sheets. Approximately $67.0 million in principal of the Term Loan Credit Facility
remains outstanding as of December 31, 2022.
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 31, 2022, the outstanding loan
balance was $2.5 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 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. The fair value of the debt approximates the carrying value at
December 31, 2022.
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 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
€0.9 million has been fully drawn and 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 31, 2022, total outstanding borrowings under the Loan Facilities was $8.4 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 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. 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 31, 2022.
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 250 million Japanese Yen is drawn. At December 31, 2022,
total borrowings outstanding under the revolving lines of credit were $1.9 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 31,
2022, and December 25, 2021, no amounts were outstanding under this line of credit.
62
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $0.2 million, $1.3 million
and $11.4 million for the years ended December 31, 2022, December 25, 2021 and December 26, 2020,
respectively, that are within the scope of 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 31, 2022, December 25, 2021 and
December 26, 2020, were as follows (in thousands):
(in thousands)
Employee severance costs
Inventory related charges (adjustments)
Other restructuring costs
Total
$
$
2022
2021
2020
(8) $
(454)
613
151 $
1,161 $
(558)
662
1,265 $
6,485
3,731
1,138
11,354
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.
The following table summarizes the activity within the restructuring related accounts for the Integration
Program during the years ended December 31, 2022 and December 25, 2021 (in thousands):
Employee
Severance
Other Exit Costs
Total
Balance, December 26, 2020
Costs accrued
Amounts paid or charged
Impact of currency exchange
Balance, December 25, 2021
Costs accrued
Amounts paid or charged
Impact of currency exchange
Balance, December 31, 2022
$
5,826
1,161
(6,545)
(94)
348
(8)
(331)
(9)
$
- $
-
662
(662)
-
-
613
(613)
-
- $
5,826
1,823
(7,207)
(94)
348
605
(944)
(9)
-
At December 31, 2022, we have no accrual for restructuring. All amounts accrued related to inventory will
remain in our consolidated balance sheet until it is scrapped.
63
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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):
At December 31, 2022
Gross
Gross
Unrealized
Losses (1)
Gains
Unrealized
Amortized
Cost
Estimated
Fair
Value
Corporate debt securities (2)
U.S. treasury securities
Bank certificates of deposit
Asset-backed securities
Foreign government security
Corporate debt securities (2)
U.S. treasury securities
Bank certificates of deposit
Foreign government security
$
$
$
$
59,283 $
34,614
36,500
12,727
828
143,952 $
$
30
1
20
10
-
61 $
$
240
418
41
79
-
778 $
59,073
34,197
36,479
12,658
828
143,235
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
Amortized
Cost
84,060 $
3,953
800
925
89,738 $
(1) As of December 31, 2022, the cost and fair value of investments with loss positions were approximately $86.3 million and
$85.5 million, respectively. As of December 25, 2021, the cost and fair value of investments with loss positions was
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.
(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 31, 2022, were as follows:
(in thousands)
Due in one year or less
Due after one year through three years
Amortized
Cost
112,956 $
30,996
143,952 $
Estimated
Fair Value
112,683
30,552
143,235
$
$
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
64
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
Corporate debt securities
Money market funds
Bank certificates of deposit
U.S. treasury securities
Asset-backed securities
Foreign government security
Cash
Money market funds
Corporate debt securities
U.S. treasury securities
Foreign government security
Bank certificates of deposit
Fair value measurements at December 31, 2022 using:
Level 1
Level 2
Level 3
fair value
Total estimated
$
190,371 $
-
-
-
-
-
-
$
190,371 $
- $
69,753
40,290
37,480
34,196
12,658
828
195,205 $
- $
-
-
-
-
-
-
- $
190,371
69,753
40,290
37,480
34,196
12,658
828
385,576
Fair value measurements at December 25, 2021 using:
Level 1
Level 2
Level 3
fair value
Total estimated
$
195,297 $
-
-
-
-
-
$
195,297 $
- $
92,400
86,535
3,948
925
800
184,608 $
- $
-
-
-
-
-
- $
195,297
92,400
86,535
3,948
925
800
379,905
6. Employee Benefit Plans
Defined Contribution Retirement Plans – Cohu maintains a defined contribution 401(k) retirement savings
plan covering all salaried and hourly U.S. employees. 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 2022, 2021 and
2020 we made matching contributions to the plan of $2.4 million, $2.4 million and $2.3 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
2022
2021
2020
954 $
56
(128)
(487)
395 $
1,223 $
61
(128)
72
1,228 $
1,310
67
(200)
292
1,469
$
$
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
2022
2021
(28,765) $
(954)
(56)
6,043
(1,459)
378
397
2,426
362
(21,628)
18,919
119
831
1,459
(378)
(2,426)
(113)
18,411
(3,217) $
(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)
$
$
At December 31, 2022 and December 25, 2021, 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 gains totaling $6.8 million and $0.9 million at
December 31, 2022 and December 25, 2021, respectively.
Actuarial gains of $6.0 million and $1.2 million for the years ended December 31, 2022 and December 25,
2021, respectively, were due to assumption changes as well as plan experience.
Weighted-average actuarial assumptions used to determine the projected benefit obligation under the Swiss
Plan are as follows:
Discount rate
Compensation increase
2022
2.3%
3.0%
2021
0.2%
1.5%
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
2022
2.3%
1.8%
3.0%
2021
0.2%
0.7%
1.1%
2020
0.2%
1.0%
1.1%
During 2023 employer and employee contributions to the Swiss Plan are expected to total $0.9 million.
Estimated benefit payments are expected to be as follows: 2023 - $1.2 million; 2024 - $1.3 million; 2025 -
$1.0 million; 2026 - $1.2 million; 2027 - $1.3 million; and $6.8 million thereafter through 2032.
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 54% debt securities and cash, 23% real estate investments, 13% 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 $0.1 million in both 2022 and 2020 and was
insignificant in 2021. 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 4.9% in 2022, 2.5% in 2021 and 2.1% in 2020. The annual rates of increase of the cost of health benefits
was assumed to be 6.8% and 7.2% in 2023 for pre-65 participants and post-65 participants, respectively. This
rate was then assumed to decrease 0.27% per year and 0.31% per year for pre-65 participants and post-65
participants, respectively, to 4.4% in 2032 and remain level thereafter.
Contributions to the post-retirement health benefit plan are expected to total $0.1 million in 2023. Estimated
benefit payments are expected to be as follows: 2023 - $0.1 million; 2024 - $0.1 million; 2025 - $0.1 million;
2026 - $0.1 million; 2027 - $0.1 million and $0.6 million thereafter through 2032.
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
2022
2021
(2,097)
(51)
382
109
(1,657)
-
(1,657)
$
$
(2,398)
(49)
241
109
(2,097)
-
(2,097)
$
$
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 31, 2022, the
payroll liability to participants, included in accrued compensation and benefits in the consolidated balance
sheet, was approximately $1.1 million and the cash surrender value of the related life insurance policies
included in other current assets was approximately $1.4 million. At December 25, 2021, the liability totaled
$1.6 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: 2022 - 160,855; 2021 - 161,351 and
2020 - 242,633. At December 31, 2022, there were 346,498 shares available for issuance under the Plan.
Employee Stock Benefit Plans – Our 2005 Equity Incentive Plan (“2005 Plan”) is a broad-based, long-
term retention program intended to attract, motivate, and retain talented employees as well as align
stockholder and employee interests. Awards that may be granted under the program include, but are not
limited to, non-qualified and incentive stock options, restricted stock units, and performance stock units.
We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of
restricted stock units, and performance stock units with newly issued common shares. At December 31,
2022, there were 914,705 shares available for future equity grants under the 2005 Plan.
Stock Options
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
67
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
During 2022, 2021 and 2020 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
2022
Wt. Avg.
Ex. Price
Shares
2021
Wt. Avg.
Ex. Price
Shares
2020
Wt. Avg.
Ex. Price
Shares
12
(12)
$
$
9.44
9.44
262
(250)
$
$
10.01
10.03
363
(101)
$
$
10.27
10.95
-
$
-
12
$
9.44
262
$
10.01
The aggregate intrinsic value of options exercised was $0.2 million in 2022, $8.4 million in 2021, and
$1.3 million in 2020. At December 31, 2022, we had no stock options exercisable and outstanding.
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 31,
2022.
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
Equity-Based Performance Stock Units
2022
Wt. Avg.
Fair Value
21.16
27.74
19.94
24.33
24.55
Units
1,058 $
431 $
(474) $
(46) $
969 $
2021
2020
Units
Wt. Avg.
Fair Value
15.16
41.66
16.23
18.96
21.16
1,414 $
270 $
(579) $
(47) $
1,058 $
Wt. Avg.
Units Fair Value
17.05
14.02
17.48
17.59
15.16
1,328 $
779 $
(621) $
(72) $
1,414 $
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 0% 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:
2022
2021
2020
(in thousands, except per share data)
Outstanding, beginning of year
Granted
Released
Cancelled
Outstanding, end of year
Units
Wt. Avg.
Fair Value
22.22
33.22
14.11
15.94
28.64
384 $
151 $
(55) $
(77) $
403 $
Units
Wt. Avg.
Fair Value
15.51
51.43
21.77
14.04
22.22
425 $
93 $
(125) $
(9) $
384 $
Wt. Avg.
Units Fair Value
18.72
364 $
13.18
200 $
21.40
(39) $
20.25
(100) $
15.51
425 $
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. Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May
5, 2020. All awards granted in 2022, 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
2022
0.0 %
45.6 %
1.2 %
0.5
2021
0.0 %
58.3 %
0.1 %
0.5
$
8.79
$
9.42
$
2022
0.0%
2021
0.0%
2020
0.5 %
67.1 %
1.1 %
0.5
6.01
2020
0.0%
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
2022
2021
2020
646 $
3,100
11,172
14,918
(4,004)
10,914 $
828
3,017
9,947
13,792
(722)
13,070
$
$
893
3,245
10,096
14,234
(963)
13,271
$
$
We account for forfeitures of plan-based awards as they occur. At December 31, 2022, we had approximately
$21.6 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
approximately 2.3 years.
69
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
31, 2022 will mature during the first quarter of fiscal 2023.
The following table provides information about our foreign currency forward contracts outstanding as of
December 31, 2022 (in thousands):
Currency
Euro
Swiss Franc
Contract Position
Contract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
Buy
Buy
81,677 $
20,714
$
87,300
22,500
109,800
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 31, 2022 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)
2022
(5,356) $
Fiscal Year
2021
(3,428) $
$
2020
756
8. Equity
Common Stock Issuance
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. On October 25, 2022, our Board of Directors authorized an additional $70 million under the 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-
70
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 31, 2022, we repurchased 1,767,070 shares of our common
stock for $50.7 million to be held as treasury stock. For the year ended December 25, 2021, we repurchased
206,572 shares of our common stock for $7.3 million. As of December 31, 2022, we may purchase up to
$82.0 million of shares of our common stock under our share repurchase program.
Common Stock
On May 4, 2022, our stockholders approved an amendment to Cohu’s Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of common stock from 60,000,000 to 90,000,000
shares. Accordingly, on May 5, 2022, we filed with the Secretary of State of the State of Delaware an
Amended and Restated Certificate of Incorporation implementing the approved changes (the “Restated
Certificate”), and the Restated Certificate was effective as of that date.
9. Income Taxes
Significant components of the provision (benefit) for income taxes for continuing operations are as follows:
2022
2021
2020
(in thousands)
Current:
U.S. Federal
U.S. State
Foreign
Total current
Deferred:
U.S. Federal
Foreign
Total deferred
$
$
1,609
456
31,307
33,372
(9)
(3,495)
(3,504)
29,868
$
$
1,103
101
22,862
24,066
5
948
953
25,019
$
$
$
$
-
21
5,950
5,971
8
(5,313)
(5,305)
666
2020
(25,005)
11,828
(13,177)
Income (loss) before income taxes from continuing operations consisted of the following:
(in thousands)
U.S.
Foreign
Total
Deferred tax effects
2022
9,180
117,535
126,715
$
$
2021
30,588
161,756
192,344
$
$
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
Capitalized R&D
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
2022
2021
$
$
13,599
39,545
29,646
19,819
4,416
2,990
3,965
472
114,452
(89,234)
25,218
38,921
3,573
153
42,647
(17,429)
$
$
12,166
44,806
31,264
8,728
5,695
2,222
4,500
2,674
112,055
(76,250)
35,805
48,657
4,066
4,207
56,930
(21,125)
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
2022
3,930
(21,359)
(17,429)
2021
4,762
(25,887)
(21,125)
$
$
$
$
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
taxable income in prior carryback years, future reversals of existing taxable temporary differences, future
taxable income exclusive of reversing temporary differences and carryforwards, and prudent and feasible tax
planning strategies that we would be willing to undertake to prevent a deferred tax asset from otherwise
expiring.
The assessment regarding whether a valuation allowance is required or whether a change in judgement
regarding the valuation allowance has occurred also considers all available positive and negative evidence,
including but not limited to:
• Nature, frequency, and severity of cumulative losses in recent years
• Duration of statutory carryforward and carryback periods
• Statutory limitations against utilization of tax attribute carryforwards against taxable income
• Historical experience with tax attributes expiring unused
72
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Near- and medium-term financial outlook
The weight given to the positive and negative evidence is commensurate with the extent to which the
evidence may be objectively verified. Accordingly, it is generally difficult to conclude a valuation allowance
is not required when there is significant objective and verifiable negative evidence, such as cumulative losses
in recent years. We use the actual results for the last two years and current year results as the primary
measure of cumulative losses in recent years.
The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of
events recognized in the financial statements or tax returns and future profitability. The recognition of
deferred tax assets represents our best estimate of those future events. Changes in the current estimates, due
to unanticipated events or otherwise, could have a material effect on our results of operations and financial
condition.
In certain tax jurisdictions, our analysis indicates that it has cumulative losses in recent years. This is
considered significant negative evidence, which is objective and veritable and, therefore, difficult to
overcome. However, the cumulative loss position is not solely determinative and, accordingly, we consider
all other available positive and negative evidence in this analysis. Based on the evidence available including
a lack of sustainable earnings and history of expiring unused NOLs, and tax credits, we continue to maintain
the judgement that a previously recorded valuation allowance against substantially all net deferred tax assets
in the United States is still required. If a change in judgement regarding this valuation allowance were to
occur in the future, we will record a potentially material deferred tax benefit, which could result in a
favorable impact on the effective tax rate in that period.
Our valuation allowance on our DTAs at December 31, 2022, and December 25, 2021, was approximately
$89.2 million and $76.3 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.
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
2022
26,610
$
(1,535)
348
(1,679)
(572)
946
13,307
-
13
3,458
(6,131)
(4,897)
$
29,868
$
$
$
2021
40,392
2,246
(787)
(943)
(4,802)
1,608
(9,882)
(12,378)
693
9,343
(1,023)
552
25,019
$
2020
(2,757)
(1,160)
(118)
(46)
727
491
(1,691)
-
1,224
4,191
(1,512)
1,317
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 31, 2022, we had federal, state and foreign net operating loss carryforwards of approximately
$140.0 million, $113.9 million and $9.0 million, respectively, that expire in various tax years beginning in
2023 through 2041 or have no expiration date. We also have federal and state tax credit carryforwards at
December 31, 2022 of approximately $3.7 million and $32.9 million, respectively, certain of which expire in
various tax years beginning in 2023 through 2041 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
73
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Code and applicable state tax laws. We analyzed and determined that there were no ownership changes
during the three-year period ending December 31, 2022. 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 both 2022 and
2021, and $3.6 million, or $0.09 per share, in fiscal 2020.
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
2022
2021
2020
$
$
33,391 $
910
(428)
(354)
-
(151)
33,368 $
33,696 $
686
(83)
(1,012)
-
104
33,391 $
34,740
817
(425)
(304)
(1,134)
2
33,696
If the unrecognized tax benefits at December 31, 2022 are ultimately recognized, excluding the impact of
U.S. tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately
$5.8 million ($5.3 million at December 25, 2021 and $5.9 million at December 26, 2020) 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 $0.6 million and $0.8 million accrued for the payment of interest and penalties at
December 31, 2022, and December 25, 2021, respectively. Interest expense, net of accrued interest reversed,
was $(0.1) million in 2022, $(0.2) million in 2021 and $(0.3) million in 2020.
Our U.S. federal and state income tax returns for years after 2018 and 2017, 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,
Singapore, Philippines 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 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: THG, STG
and 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 & Inspection. All amounts presented in
our consolidated balance sheet as of December 31, 2022, and our consolidated statement of operations for the
twelve months ended December 31, 2022, represents the financial position and results of our remaining
reportable segment. Prior to the sale of our PCB Test Group on June 24, 2021, we reported in two segments,
Semiconductor Test & Inspection and PCB Test.
2021
2020
585,240
50,767
636,007
(2,497)
6,971
4,474
(4,384)
-
(13,759)
224
268
(13,177)
2020
51,548
1,198
52,746
18,616
44
18,660
(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 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 $
$
$
$
$
(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
2020
$
968,028
66,826
1,034,854
55,492
-
$ 1,090,346
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
* Less than 10% of consolidated net sales.
2022
*
2021
14.1%
2020
*
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 and
December 26, 2020.
Net sales to customers, attributed to countries based on product shipment destination, were as follows:
(in thousands)
China
Philippines
Malaysia
United States
Taiwan
Rest of the world
Total, net
2022
146,227
111,647
99,508
79,093
59,835
316,465
812,775
$
$
2021
213,575
155,070
79,777
77,495
88,152
273,145
887,214
$
$
2020
143,360
56,272
57,893
108,694
83,685
186,103
636,007
$
$
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
Philippines
Japan
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
2022
2021
$
$
$
$
18,419
15,977
14,706
9,316
4,300
2,293
65,011
158,401
131,068
43,571
12,512
4,299
2,641
1,151
353,643
$
$
$
$
18,375
17,419
10,384
11,156
4,082
2,541
63,957
181,146
150,477
43,611
12,990
4,583
3,148
1,156
397,111
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 35 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 31,
2022
December 25,
2021
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
$
$
$
$
$
$
22,804
323
23,127
4,927
49
19,185
24
24,185
6.2
1.7
6.2%
2.2%
25,060
423
25,483
4,886
167
21,977
63
27,093
6.9
1.8
6.3%
0.7%
(1) Finance lease assets are recorded net of accumulated amortization of $0.2 million and $0.1 million in 2022 and 2021,
respectively.
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 31,
December 25,
2022
2021
$
$
6,698
2,220
4
7,638
2,192
69
86
2
(81)
9,906
88
1
(69)
8,942
Net lease cost
$
Future minimum lease payments at December 31, 2022, are as follows:
$
Operating
leases
Finance
leases
Total
$
6,197
5,848
5,234
2,849
1,780
7,904
29,812
(5,700)
24,112
$
$
50
11
11
3
-
-
75
(2)
73
$
$
6,247
5,859
5,245
2,852
1,780
7,904
29,887
(5,702)
24,185
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
$
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 31,
2022
December 25,
2021
$
$
$
$
$
6,716 $
1 $
167 $
- $
2,874 $
7,628
1
186
54
3,866
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 31, 2022, was as follows:
(in thousands)
Beginning balance
Warranty accruals
Warranty payments
Warranty liability transferred
Ending balance
2022
2021
2020
$
$
7,691
8,897
(10,374)
-
6,214
$
$
6,382
13,389
(11,135)
(945)
7,691
$
$
6,155
6,173
(5,946)
-
6,382
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 $0.6 million and $1.1 million at
December 31, 2022 and December 25, 2021, respectively.
14. Business Divestitures and Discontinued Operations
PCB Test Equipment Business
On June 24, 2021, we completed the sale of our 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 Topic 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.
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
Gain on sale of FSG
Income before taxes
Income tax provision
Income, net of tax
December 26,
2020
$
$
$
432
11
35
46
4
42
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 26, 2020
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Other comprehensive income
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 loss
$
Year ended December 31, 2022
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Change in unrealized gain/loss on investments
Other comprehensive loss
$
$
$
Before Tax
amount
Tax
(Expense)
Benefit
Net of Tax
Amount
27,321
2,599
29,920
(22,859)
2,920
(67)
(2,515)
(22,521)
(17,991)
6,690
(694)
(11,995)
$
$
$
$
$
$
-
(216)
(216)
(97)
(318)
-
-
(415)
41
(796)
-
(755)
$
$
$
$
$
$
$
$
27,321
2,383
29,704
(22,956)
2,602
(67)
(2,515)
(22,936)
(17,950)
5,894
(694)
(12,750)
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
2022
2021
(46,308)
7,031
(735)
-
(40,012)
$
$
$
$
$
(25,833)
1,153
(67)
(2,515)
(27,262)
79
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Related Party Transactions
At December 31, 2022, certain of our cash and short-term investments were held and managed by
BlackRock, Inc. which owns 15.9% of our outstanding common stock as reported in its Form 13-G/A
filing made with the Securities and Exchange Commission on January 20, 2023.
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
2022, 2021 and 2020, 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 and 2020, purchases of products from ETZ, when it was
a related party, were not material.
17. Subsequent Event
On January 30, 2023, we completed the acquisition of all the outstanding membership units of MCT
Worldwide, LLC. (“MCT”), pursuant to a membership unit purchase agreement dated January 30, 2023,
by and among MCT Worldwide, LLC, Arise Acquisition Co., LLC, The Seaport Group LLC Profit
Sharing Plan, and Delta Design, Inc., a wholly owned subsidiary of Cohu (“the Acquisition”). MCT is a
U.S. based company with a principal manufacturing site in Penang Malaysia. MCT provides automated
solutions for the semiconductor industry and designs, manufactures, markets, services and distributes strip
test handlers, film frame handlers and laser mark handlers. On January 30, 2023, we made a cash payment
totaling $28.0 million for MCT. The Acquisition is a cash free debt free transaction and is subject to a
working capital adjustment for the difference between the actual and estimated net working capital. In
connection with the Acquisition, we incurred approximately $0.1 million in acquisition-related costs,
which were expensed as selling, general and administrative costs during the year ended December 31,
2022. Additional acquisition-related costs will be incurred during fiscal 2023.
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 31, 2022
and December 25, 2021, and the related consolidated statements of operations, comprehensive income, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2022, 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 31, 2022 and December 25, 2021, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2022, 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 31, 2022, 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 17, 2023 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 Matter
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 31, 2022, the Company’s consolidated inventories balance was $170.1 million.
As described in Note 1 to the consolidated financial statements, the Company values its
inventories at lower of cost, determined 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 expectations and
expected future usage 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 expectations, 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 17, 2023
82
Index to Exhibits
15. (b)
The following exhibits are filed as part of, or incorporated into, the 2022 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
10.9
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 5, 2022
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
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*
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*
83
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
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*
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 *
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 *
Severance Agreement, dated September 8, 2020, between the Company and Ian Lawee
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 April 29, 2022 *
84
10.24
10.25
21
23
Change in Control Agreement, dated September 8, 2020, between the Company and Ian Lawee
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 April 29, 2022 *
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 17, 2023
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 17, 2023
/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/ Yon Y. Jorden
Yon Y. Jorden
/s/ Andreas W. Mattes
Andreas W. Mattes
/s/ Nina L. Richardson
Nina L. Richardson
President and Chief Executive Officer, Director
(Principal Executive Officer)
February 17, 2023
Senior Vice President, Finance and CFO
(Principal Financial and Accounting Officer)
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
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 26, 2020
Year ended December 25, 2021
Year ended December 31, 2022
$
$
$
Additions
(Reductions)
Not
Charged
to Expense
Balance at
Beginning
of Year
Additions
Charged
to Expense
(1)
Deductions/
Write-offs
Balance
at End
of Year
9 $
128 $
290 $
(1) $
14 $
(8) $
79 $
149 $
122 $
(41) $
1 $
205 $
128
290
199
Reserve for excess and obsolete inventories:
Year ended December 26, 2020
Year ended December 25, 2021
Year ended December 31, 2022
$
$
$
20,958 $
4,611 $
8,117 $
6,749 $
26,937
26,937 $
23,012 $
(2,926) $
(2)
7,102 $
8,101 $
698 $
7,179 $
4,018 $
23,012
26,871
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
EXHIBIT 4.1
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Cohu, Inc. (“us,” “our,” “we” or the “Company”) is a
summary of the rights of our common stock and certain provisions of our certificate of incorporation and bylaws
currently in effect. This summary does not purport to be complete and for the complete terms of our capital
stock, please refer to our amended and restated certificate of incorporation, as amended (our “certificate of
incorporation”) and our amended and restated bylaws, as amended (our “bylaws”). The terms of these securities
may also be affected by the Delaware General Corporation Law (the “DGCL”). The summary below is qualified
in its entirety by reference to our certificate of incorporation and our bylaws.
Common Stock
We are authorized to issue 90,000,000 shares of common stock. The holders of Common Stock possess
exclusive voting rights in us, except to the extent our board of directors specifies voting power with respect to any
other class of securities issued in the future. Each holder of our common stock is entitled to one vote for each
share held of record on each matter submitted to a vote of stockholders, including the election of directors.
Stockholders have the right to cumulate votes in the election of directors.
Subject to preferences that may be granted to the holders of preferred stock, each holder of our common
stock is entitled to share ratably in distributions to stockholders and to receive ratably such dividends as may be
declared by our board of directors out of funds legally available therefor. In the event of our liquidation,
dissolution or winding up, the holders of our common stock will be entitled to receive, after payment of all of our
debts and liabilities and of all sums to which holders of any preferred stock may be entitled, the distribution of
any of our remaining assets. Holders of our common stock have no conversion, exchange, sinking fund,
redemption or appraisal rights (other than such as may be determined by our board of directors in its sole
discretion) and have no preemptive rights to subscribe for any of our securities.
All of the outstanding shares of our common stock are, and the shares of common stock issued upon the
conversion of any securities convertible into our common stock will be, fully paid and non-assessable. Our
common stock is listed on the Nasdaq Global Select Market under the symbol “COHU”.
Preferred Stock
We are authorized to issue 1,000,000 shares of preferred stock, none of which were issued and outstanding.
Our board is authorized, without action by our stockholders, to classify or reclassify any unissued portion of our
authorized shares of preferred stock to provide for the issuance of shares of other classes or series, including
preferred stock in one or more series. Our board may fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or
prices, the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of
shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
Possible Anti-Takeover Effects of Delaware Law and our Certificate of Incorporation and Bylaws
Delaware Anti-Takeover Statute
89
We are subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL
prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested
stockholder” for a period of three years following the time the person became an interested stockholder, unless
the business combination or the acquisition of shares that resulted in a stockholder becoming an interested
stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or
stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an
“interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior
to the determination of interested stockholder status did own) 15% or more of a corporation’s voting stock. The
existence of this provision would be expected to have an anti-takeover effect with respect to transactions not
approved in advance by our board of directors, including discouraging attempts that might result in a premium
over the market price for the shares of common stock held by our stockholders. In addition, our certificate of
incorporation provides that any business combination involving any stockholder who, together with affiliates and
associates, owns 5% or more of our outstanding common stock, must be approved by affirmative vote of the
holders of not less than 80% of the total voting power of all outstanding shares of stock, provided, however, that
the foregoing shall not apply to any business combination which was approved by resolution of our Board of
Directors prior to the acquisition of the ownership or control of ten (10%) percent of our outstanding shares by
such related party, nor shall it apply to any business combination between Cohu and another corporation, fifty
(50%) percent or more of the voting stock of which is owned by Cohu, and none of which is owned or controlled
by a related party, provided that each Cohu stockholder receives the same type of consideration in such
transaction in proportion to his stockholding.
Board Vacancies
Our bylaws provide that any vacancy or vacancies in the Board resulting from the death, resignation or
removal of any director, or an increase in the authorized number of directors, may be filled by a majority of the
remaining directors, though less than a quorum.
Undesignated Preferred Stock
The authority that will be possessed by our board of directors to issue preferred stock could potentially be
used to discourage attempts by third parties to obtain control of our company through a merger, tender offer,
proxy contest or otherwise by making such attempts more difficult or more costly. Our board of directors may
issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting
power of the holders of our common stock.
Special Meeting Requirements
Our bylaws provide that special meetings of our stockholders may only be called at the request of a majority
of our Board of Directors or at the request, in writing, of stockholders owning a majority of our then issued and
outstanding capital stock provided such meeting is for the sole purpose of considering the removal from office of
a director who has been convicted of a felony by a court of competent jurisdiction and such conviction is no
longer subject to a direct repeal, or a director who has been adjudged to be liable for negligence or misconduct in
the performance of his duty to the Company by a court of competent jurisdiction and such adjudication is no
longer subject to direct appeal.
Classified Board
Our certificate of incorporation provides that our board of directors is divided into three classes, each
comprised of three directors. The directors designated as Class 1 directors have a term expiring at our annual
meeting of stockholders in 2023. The directors designated as Class 2 directors have a term expiring at our annual
meeting of stockholders in 2024, and the directors designated as Class 3 directors have a term expiring at our
annual meeting of stockholders in 2025. Directors for each class will be elected at the annual meeting of
stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three
years. At any meeting of stockholders for the election of directors at which a quorum is present, the election will
be determined by a majority of the votes cast in an uncontested election by the stockholders entitled to vote at the
election. A contested election will be determined by a plurality of the votes cast. Under the classified board
provisions, it will take at least two elections of directors for any individual or group to gain control of our board.
Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender
offer or otherwise attempting to gain control of us.
90
Stockholder Action by Written Consent
Our bylaws expressly eliminates the right of our stockholders to act by written consent. Stockholder action
must take place at the annual or a special meeting of our stockholders.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock and preferred stock will be available for future
issuance without stockholder approval. We may use additional shares for a variety of purposes, including future
public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of
authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
The above provisions may deter a hostile takeover or delay a change in control or management of us.
Transfer Agent and Registrar
The transfer agent and registrar for our capital stock is ComputerShare Investor Services, LLC.
91
SUBSIDIARIES OF COHU, INC.
LEGAL ENTITY NAME
------------------------------------------
Delta Design, Inc. (1)
FRL, Incorporated
Cohu Foreign Sales Corp
Xcerra Corporation (4)
------------------
(1) Delta Design, Inc. owns the following subsidiaries:
Delta Design Singapore PTE LTD (2)
Cohu S.A.
Xcerra Corporation (Partial ownership 14.46%) (4)
Rosenheim Automation Systems Corporation
Ismeca Semiconductor Holding SA (5)
MCT Worldwide, LLC (18)
(2) Delta Design Singapore PTE LTD owns the following subsidiaries:
Delta Design Philippines LLC (14)
Delta Design Singapore PTE LTD, Taiwan Branch
(3) Ismeca Semiconductor Holding SA owns the following subsidiaries:
Ismeca Europe Semiconductor SA (6)
Cohu Malaysia Sdn. Bhd.
Ismeca Semiconductor (Suzhou) Co Ltd
(4) Xcerra Corporation owns the following subsidiaries:
Exhibit 21
PLACE OF
INCORPORATION
------------------------------
Delaware
California
Barbados
Massachusetts
Singapore
Costa Rica
Germany
California
Switzerland
Delaware
Delaware
Taiwan
Switzerland
Malaysia
China
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 (FKA: Everett Charles Technologies LLC) (9)
Credence Capital Corporation
Xcerra International Inc. (12)
Credence International Ltd. (13)
LTX-Credence KK
Xcerra (Thailand) Company Limited
Credence Systems (UK) Limited (16)
Cohu Semiconductor Test GmbH (FKA: Delta Design Europe GmbH) (6)
France
Italy
Delaware
Malaysia
Delaware
Delaware
Delaware
California
Delaware
British Virgin Islands
Japan
Thailand
United Kingdom
Germany
(5) Ismeca Europe Semiconductor SA owns the following subsidiaries:
Ismeca Europe Semiconductor SA, Korean Branch
South Korea
(6) Cohu Semiconductor Test GmbH owns the following subsidiaries:
Multitest GmbH (7)
(7) Multitest GmbH owns the following subsidiaries:
Cohu GmbH (FKA: Rasco GmbH) (8)
(8) Cohu GmbH owns the following subsidiaries:
Kita Manufacturing Co., LTD
FTZ Fraes-und Techologiezentrum GmbH Frasdorf (39% Ownership)
(9) Cohu Interface Solutions LLC owns the following subsidiaries:
Germany
Germany
Japan
Germany
Everett Charles Tech, Inc. (FKA: Kita USA, 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 (FKA:Everett Charles Technologies
(Shenzhen) Limited) (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
(18) MCT Worldwide, LLC owns the following subsidiaries:
MCT Asia (Penang) SDN BHD
Massachusetts
Philippines
Malaysia
Philippines
South Korea
Taiwan
Malta
Singapore
Costa Rica
China
Philippines
Taiwan
Belgium
China
China
Malaysia
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 17, 2023, 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 31, 2022.
/s/ Ernst & Young LLP
San Diego, California
February 17, 2023
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 17, 2023
/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 17, 2023
/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 31, 2022 (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 17, 2023
/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 31, 2022 (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 17, 2023
/s/ Jeffrey D. Jones
---------------------------------------------------
Jeffrey D. Jones,
Vice President Finance and Chief Financial Officer