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 30, 2023
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 $1,930,300,000 based on the closing stock price
as reported by the Nasdaq Stock Market LLC as of June 30, 2023. 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 7, 2024, the Registrant had 47,076,499 shares of its $1.00 par value common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Cohu, Inc.’s 2024 Annual Meeting of Stockholders to be held on June 5, 2024, and to be filed pursuant to
Regulation 14A within 120 days after registrant’s fiscal year ended December 30, 2023, are incorporated by reference into Part III of this Report.
COHU, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 30, 2023
TABLE OF CONTENTS
PART I
Page
Item 1. Business ................................................................................................................................................... 1
Item 1A. Risk Factors ............................................................................................................................................. 7
Item 1B. Unresolved Staff Comments ................................................................................................................. 28
Item 1C. Cybersecurity ........................................................................................................................................ 28
Item 2.
Properties ............................................................................................................................................... 30
Item 3.
Legal Proceedings ................................................................................................................................. 30
Item 4. Mine Safety Disclosures ....................................................................................................................... 30
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ............................................................................................................. 31
Item 6. Reserved ................................................................................................................................................ 33
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ............. 33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ............................................................ 44
Item 8. Financial Statements and Supplementary Data .................................................................................... 46
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............. 46
Item 9A. Controls and Procedures ....................................................................................................................... 46
Item 9B. Other Information ................................................................................................................................. 48
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections ............................................... 48
PART III
Item 10. Directors, Executive Officers and Corporate Governance .................................................................. 48
Item 11. Executive Compensation ...................................................................................................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters .............................................................................................................................. 49
Item 13. Certain Relationships and Related Transactions, and Director Independence .................................... 49
Item 14. Principal Accounting Fees and Services .............................................................................................. 49
PART IV
Item 15. Exhibits, Financial Statement Schedules.............................................................................................. 50
Item 16. Form 10-K Summary ............................................................................................................................ 92
Signatures ............................................................................................................................................................... 93
[This page intentionally left blank]
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, Inc. (“Cohu”, “we”, “our”, “us” and the “Company”) is a global technology leader supplying test,
interface, automation, inspection and metrology products, software and services to the semiconductor industry.
Cohu’s differentiated and broad product portfolio enables optimized yield and productivity, accelerating
customers’ manufacturing 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 increases in our product
installed base and in the number of semiconductor devices that are tested, and by the continuous introduction of
new products and technologies by our customers.
On January 30, 2023, we completed the acquisition of MCT Worldwide, LLC (“MCT”), a U.S. based company
with its 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 October 2, 2023, we acquired Equiptest Engineering Pte. Ltd.
(“EQT”), a Singapore-based company. EQT is a provider of semiconductor test contactors and other test
consumables. MCT and EQT are included in Cohu’s consolidated results from operations as of the date of
acquisition.
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 business, we reported two segments,
Semiconductor Test & Inspection and PCB Test. Financial information on our reportable segments for each of
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the last three years is included in Note 11, “Segment and Geographic 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
2023 (1)
100 %
- %
100 %
2022 (1)
100 %
- %
100 %
2021
97 %
3 %
100 %
(1) Our PCB Test segment was sold on June 24, 2021.
Cohu 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 various semiconductors: microcontrollers,
application specific standard products (“ASSP”), power management, radio frequency (RF), display drivers,
sensors and other mixed signal devices. The PAx tester is a focused tester for 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, micro-electromechanical system
(MEMS) and thermal sub-systems. T-Core is our proprietary thermal technology for improving device under test
temperature accuracy, enabling higher test yield, particularly for power dissipative devices such as
microprocessors, graphic processor units, and high-performance semiconductors used in artificial intelligence data
centers.
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. With the
recent acquisition of EQT, we expanded our interface products in mid- to high-power contactors. 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.
DI-CoreTM Data Analytics is a comprehensive software suite used to optimize Cohu equipment performance. DI-
Core data analytics 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 data
analytics is a software subscription service 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 installation and necessary maintenance of
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our systems’ installed base. We provide various parts and labor warranties on our test and handling systems and
instruments. 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.
Sales by Product Line and Related Marketing Efforts
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 software and services
2023
51 %
49 %
- %
2022
58 %
42 %
- %
2021
61 %
37 %
2 %
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 and Norwood, Massachusetts. Our European sales offices are located in Kolbermoor,
Germany; Grenoble, France; Agrate, Italy and La Chaux-de-Fonds, Switzerland. We operate in Asia with sales
and service offices in Singapore, Malaysia, Thailand, Philippines, Taiwan, China, South Korea and Japan.
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:
STMicroelectronics
Analog Devices
* Less than 10% of consolidated net sales.
2023
12.0%
*
2022
*
*
2021
*
14.1%
The loss of, or a significant reduction in, orders by these or other significant customers, including reductions due to
market, economic or competitive conditions or the outsourcing of final integrated circuit test to subcontractors that
are not our customers, would adversely affect our financial condition and results of operations. For further
information, see Item 1A entitled “Risk Factors” below.
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 year ended December 25, 2021.
Additional financial information on revenues from external customers by geographic area for each of the last
three years is included in Note 11, “Segment and Geographic Information” in Part IV, Item 15(a) of this Form 10-
K.
Backlog
Our backlog of unfilled orders for products was $160.4 million at December 30, 2023 and $279.8 million at
December 31, 2022.
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.
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 third-party systems which are
not compatible with our systems. While we are the leading global supplier of test handlers, we face substantial
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competition from suppliers headquartered in Japan, China and Taiwan. 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.
Manufacturing and Raw Materials
Our principal manufacturing operations are currently located in Melaka, Malaysia; Laguna, Philippines; Lincoln,
Rhode Island; Osaka, Japan; and Singapore.
We outsource the manufacturing of many of our semiconductor automated test equipment products to Jabil Circuit,
Inc.’s facility in Penang, Malaysia. Our contract manufacturing partner is responsible for significant material
procurement, assembly and 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. While our contract manufacturer is responsible for funding a substantial portion of the capital expenses
incurred in connection with the manufacture of our products, we finance and own end-of-line testing equipment
and other specific manufacturing equipment utilized in assembling our products or sub-components.
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, Trademarks and Intellectual Property
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 heavily upon our experience, technological know-how, manufacturing and marketing skills and
speed of response to sales opportunities. 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.
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 $88.6 million in 2023, $92.6 million in 2022 and $92.0 million in
2021.
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.
Seasonality and Cyclicality
Historically, the semiconductor industry has been cyclical as well as 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, such as 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 and our
business will continue to experience similar fluctuations.
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 7, 2024. Executive officers serve at the discretion of the Board of Directors, until their successors are
appointed.
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Name
Luis A. Müller
Jeffrey D. Jones
Christopher G. Bohrson
Thomas D. Kampfer
Age
Position
54 President and Chief Executive Officer
62 Senior Vice President, Finance and Chief Financial Officer
64 Senior Vice President and Chief Customer Officer
60 Senior Vice President, Corporate Development, General Counsel and
Secretary
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 was promoted to Senior Vice President Corporate Development, General Counsel and Secretary
on February 6, 2024. 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.
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. Notably, 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. 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.
Sustainability
We believe that sound corporate governance is critical to helping us achieve our goals, including with respect to
Sustainability considerations. We continue to evolve a governance framework that exercises appropriate
oversight of responsibilities at all levels throughout the company and manage our affairs consistent with high
principles of business ethics. Our Sustainability Report is available on our website and contains further
5
information on our ESG initiatives and performance, including data indices that reflect the Technology and
Communications Sector – Semiconductor Standard of the Sustainability Accounting Standards Board. We also
submit responses to Carbon Disclosure Project’s (“CDP”) climate change questionnaire and post our responses
on our website. The contents of the Sustainability Report, the responses to CDP’s questionnaire, and our website
are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or
document we file or furnish with the SEC, and any reference to the Sustainability Report and our website are
intended to be inactive textual references only.
Human Capital Management
Employees
As of December 30, 2023, we had approximately 3,259 employees, including approximately 68 temporary
employees, in 24 countries. Approximately 18% of our employees are located in the Americas, 12% are located
in EMEA (Europe, the Middle East and Africa) and 70% 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.
To ensure we maintain our position as a global leader in the semiconductor equipment space, we endeavor to
provide 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 endeavor
to increase the hiring, retention and advancement of women and underrepresented populations. We are committed
to respecting and protecting the human rights of all our employees.
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.
However, certain employees at our operation in Germany are represented by a works council and employees in
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 importance 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 and adverse health impacts 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.
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,
6
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 certain eligible employees
may elect 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.
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 58% of our current executive leadership team. In 2023 we deployed a new
development plan process to a select group of high potential managers and contributors, continuing to invest in
educating and growing our next generation of leaders.
Available Information
Our website 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 website 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.
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.
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Risks Relating to Our Business Operations, Growth Strategy and Industry
• Semiconductor equipment is subject to rapid technological change, product introductions and transitions
which may result in inventory write-offs, and our new product development involves numerous risks and
uncertainties.
• The semiconductor industry we serve is cyclical, seasonal, volatile and unpredictable, and increased
cyclicality could have an adverse impact on our sales and gross margin.
• The erosion in mobility, and automotive & industrial market sales are collectively causing an adverse
impact on our sales.
• Any failure to effectively manage multiple overseas manufacturing operations could harm our sales,
service levels and reputation.
• We outsource select manufacturing activities to third-party service providers, which decreases our
control over the performance of these functions.
•
If we deliver systems with defects, our reputation and demand of our systems may decrease, and the cost
of quality events could be harmful to our operating results.
• Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner
could adversely impact our operations.
•
Inflationary pressures, along with any further increase in interest rates, increase the threat of recession
and may impact our financial condition or results of operations.
• The semiconductor equipment industry is intensely competitive and we may not be able to win business
over that of our competition.
• Consolidation could adversely affect the market for our products and negatively impact our ability to
compete.
• The cyclical nature of the semiconductor equipment industry places enormous demands on our
employees, operations and infrastructure.
• A limited number of customers account for a substantial percentage of our net sales.
•
•
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.
If our relationships with our large customers deteriorate, our product development activities could be
adversely affected.
• We must attract and retain experienced personnel to help support our future growth, and competition for
such personnel in our industry is high.
• The use of, or failure to properly implement the use of, Artificial Intelligence within Cohu’s product
development involves risks and uncertainties that may impact our operational performance and be
subject to legal and/or regulatory action.
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.
• Geopolitical instability in locations critical to Cohu and its customers may adversely impact our
operations, sales and profitability.
• 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 business could be adversely affected by climate change effects and related matters.
• We are exposed to additional risks as a result of increased attention by our stakeholders to sustainability,
including environmental, social and governance matters.
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Risks Relating to Acquisitions and Other Strategic Transactions
• We may choose to acquire new and complementary businesses, products or technologies instead of
developing them ourselves, and we may be unable to complete these acquisitions or may not be able to
successfully integrate an acquired business in a cost-effective and non-disruptive manner.
Risks Relating to our Indebtedness, Financing and Future Access to Capital
• 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 foreign operations expose us to additional risks relating to currency fluctuations.
• We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may
do so again in the future, which could have a material negative impact on our business.
• We are exposed to the instability of financial institutions where we maintain cash deposits or other liquid
holdings, which could result in a lack of liquidity.
• 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.
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.
•
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 have experienced significant volatility in our stock price.
• We may underperform relative to our expectations.
• Provisions of our certificate of incorporation and bylaws and Delaware law may make a takeover of
Cohu more difficult.
• 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.
• Cohu’s stock repurchase program may not have an impact that is fully reflected in the current stock
valuation.
Risks Relating to Regulatory Matters
• There may be changes in, and uncertainty with respect to, legislation, regulation and governmental
policy in the United States.
• Trade regulations and restrictions impact our ability to manufacture certain products and to sell to
customers, specifically in China, which may materially harm and limit Cohu’s business.
• Unanticipated changes in our tax provisions, enactment of new tax laws, or exposure to additional
income tax liabilities could affect our profitability.
• Compliance with regulations may impact sales to foreign customers and impose costs and any failure to
comply with such laws may result in severe sanctions and liabilities, which may negatively affect our
business, operating results and financial condition.
• 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.
Risks Relating to Cybersecurity, Intellectual Property, Privacy and Litigation
• Our business and operations could suffer in the event of cybersecurity breaches within our operational
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systems or products.
• We may fail to adequately protect our intellectual property and, therefore, lose our competitive
advantage.
• We may not be able to adequately protect or defend ourselves against intellectual property infringement
claims, which may be time consuming and expensive, or affect the freedom to operate our business.
• Data privacy, identity protection and information security compliance may require significant resources
and presents certain risks.
• We currently are, and in the future may be, subject to litigation or regulatory proceedings that could have
an adverse effect on our business.
For a more complete discussion of the material risks facing our business, see below.
Risks Relating to Our Business Operations, Growth Strategy and Industry
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 30, 2023. Future inventory write-offs and increased inventory reserve
requirements could have a material adverse impact on our results of operations and financial condition. We are
currently significantly investing in new product development programs relating to test handlers, test contactors
and automated test equipment. In fiscal 2023, we incurred $88.6 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.
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, 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.
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The semiconductor industry we serve is cyclical, seasonal, volatile and unpredictable, and increased
cyclicality could have an adverse impact on our sales and gross margin.
Capital equipment providers in the semiconductor industry, such as Cohu, have, in the past, been negatively
impacted by both sudden slowdowns in global economies and recurring cyclicality within the markets we serve.
These cycles have resulted in periods of over-supply and excess capacity; a trend we believe will continue to
occur. Our business and results of operations depend, in significant part, upon capital expenditures of
manufacturers and designers of semiconductor devices and other industrial products, which in turn depend upon
the current and anticipated market demand for those products. Disruption or deterioration in economic conditions
may reduce customer purchases of our products, thereby reducing our revenues and earnings.
In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our
products, may, among other things, result in increased price competition for our products, increased risk of excess
and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers,
potential reserves for doubtful accounts and write-offs of accounts receivable, increased risk of restructuring
charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely
affect our operating results. We are unable to predict the likely duration, frequency and severity of disruptions in
financial markets, credit availability, and adverse economic conditions throughout the world will have on our
customers, and we cannot ensure that the level of revenues or new orders for a fiscal year or quarter will be
sustained in subsequent periods. In 2023, 2022 and 2021, we recorded pre-tax inventory-related charges of
approximately $4.5 million, $7.2 million, and $7.1 million, respectively, primarily as a result of changes in
customer forecasts. From quarter-to-quarter, we may see material swings in product mix among our test handler
group (“THG”), interface solutions group (“ISG”) and semiconductor test group (“STG”) businesses, wherein
each business has a different gross margin profile. Given the cyclical 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 erosion in mobility, and automotive & industrial market sales are collectively causing an adverse impact
on our sales.
A material portion of Cohu’s sales have historically been derived from customers that provide semiconductor
devices for use within the mobility, and automotive & industrial markets. These markets continued to weaken
during 2023. For example, mobility, and automotive & industrial system sales in the last twelve months (as
measured from the end of fourth quarter fiscal 2023), compared to the prior year period, have declined 54% and
24%, respectively. This decline has had, and is expected to continue to have, an adverse impact on our business
and operating results. Given the inherent uncertainty and volatility within our industry, at this time, we are unable
to predict when the mobility, and automotive & industrial markets, or the overall market, will recover or the
extent of any such recovery.
Any failure to effectively manage multiple overseas manufacturing operations 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 and
manage 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 factor entitled
“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 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,
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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.
We outsource select manufacturing activities to third-party service providers, which decreases our control over
the performance of these functions.
We outsource certain product manufacturing to third-party service providers. Outsourcing reduces our control over
the performance of the outsourced functions. Dependence on outsourcing may also adversely affect our ability to
bring new products to market. For example, 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 to our customers, or have significant delays in fulfilling their 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. If we do not effectively
manage our outsourcing strategy or if third-party service providers do not perform as anticipated, we may
experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the operation of
our supply chain, any or all of which could delay our delivery of products to our customers, and materially and
adversely affect our business, financial condition, and results of operations.
If we deliver systems with defects, our reputation and demand of our systems may decrease, and the cost of
quality events could be harmful to our operating results.
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. Our systems are complex and have occasionally
contained errors, defects and bugs when introduced. When this occurs, our credibility and the market acceptance
and sales of our systems may be harmed. Further, if our systems contain errors, defects or bugs, computer viruses
or malicious code as a result of cyber-attacks to our computer networks, we may be required to expend significant
capital and resources to alleviate these problems. To proactively 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.
Defects could also lead to product liability lawsuits against us or against our customers. Our product liability
insurance policy currently provides both aggregate coverage as well as overall umbrella coverage. In the event
of a successful product liability claim, we could be obligated to pay damages significantly in excess of our
product liability insurance limits. 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.
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) that are difficult to replace without significant reengineering of our products. On
occasion, we have experienced problems in obtaining adequate and reliable quantities of various parts and
components from certain key or sole source suppliers. For example, at the beginning of 2022, we experienced
supply constraints and delays in accessing certain specialty semiconductors necessary for the production of test
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instruments for our semiconductor ATE products, and these supply constraints adversely impacted our overall
gross margin in 2022. Although the supply constraints subsided during 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.
Inflationary pressures, along with any further increase in 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 and 2023, these costs, including those for
transportation and other inputs necessary for the production and distribution of our products, increased in large
part due to global inflationary pressures. In addition, we also continue to incur higher employee wage costs and
generally higher costs for outside services. These economic events are driven by factors beyond our control, and
although inflationary pressures have recently moderated, we are unable to predict the future impacts, and such
cost pressures may continue to adversely impact us in 2024 and beyond.
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 increased interest rates, which the Federal
Reserve raised multiple times in 2022 and 2023. Increased interest rates intended to reduce price inflation may
also contribute to the risk of recession, which may result in customer projections of slowed growth and an overall
impact on customers’ and Cohu’s corporate earnings. We saw slowing customer demand in 2022 and 2023 and
that trend has continued into 2024. While some experts believe that the Federal Reserve may start cutting interest
rates in 2024, there can be no assurance that such rate cuts will happen or that such rate cuts will result in a
reduction in expense to Cohu or its customers. Cohu is incurring 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 rein in such an impact coupled with continued interest
rate increases, thereby making it more costly for us to satisfy our obligations or causing an adverse effect on our
free cashflows.
The semiconductor equipment industry is intensely competitive and we may not be able to win business over
that of our competition.
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 to 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 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
13
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 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’s reliance on
the mobility market for ATE sales had a significant adverse impact on our 2023 ATE sales. These factors may
materially and adversely affect our current and future target markets and our ability to compete successfully in
those markets.
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-sales 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.
Consolidation in the semiconductor industry and within the semiconductor test equipment market could
adversely affect the market for our products and negatively impact our ability to compete.
Consolidation in the semiconductor industry may reduce our customer base and could adversely affect the market
for our products, which could cause a decline in our revenues. With consolidation, the number of actual and
potential customers for our products has decreased in recent years. Consolidation may lead to relatively fewer
opportunities to sell our products if we are not chosen as a supplier by any given prospective customer, and may
lead to increased pricing pressures from customers that have greater volume purchasing power. There has also
been consolidation within the semiconductor test equipment market. This consolidation trend could change our
interactions and relationships with complementary tester, instrument, and probe card suppliers, and negatively
impact our revenue and operating results.
The cyclical 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 products. 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. Regardless of the reason, sudden changes in demand
for semiconductor equipment may 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 cyclical nature
of the semiconductor industry, may require that we invest substantial amounts in new operational and financial
systems, procedures and quality controls. We may not be able to timely or successfully adjust our systems,
facilities, production capacity and quality standards 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.
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 2023,
net revenue from our ten largest customers represented 62% 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
14
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.
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, could have a material adverse
impact on our business, financial condition and results of operations.
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 a period of time at no charge, in pursuit
of a single customer opportunity. For example, we typically expend significant resources educating our prospective
customers regarding the uses and benefits of our products, customizing our products in ways that are specific to the
potential customer’s needs or loaning out test equipment, and we might not be reimbursed for such activities. The
substantial resources we devote to our sales efforts may not result in any revenues from a customer. For example,
any semiconductor project may never reach production or customers elect to validate a project with our products
and then search for a lower cost vendor for production equipment. We may not win the competitive selection
process and may never generate any revenue despite incurring such expenditures. In addition, prospective
customers might decide not to use our products or use our products for a relatively small percentage of their
requirements after we have expended significant effort and expense toward product design, development, and/or
manufacture. 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.
If our relationships with our large customers deteriorate, our product development activities could be adversely
affected.
The success of our product development efforts depends on our ability to anticipate market trends and the price,
performance and functionality requirements of semiconductor device manufacturers. In order to anticipate these
trends and ensure that critical development projects proceed in a coordinated manner, we must continue to
collaborate closely with our largest customers. Our relationships with these and other customers provide us with
access to valuable information regarding trends in the semiconductor device industry, which enables us to better
plan our product development activities. If current relationships with our large customers are impaired, or if we
are unable to develop similar collaborative relationships with important customers in the future, our product
development activities could be adversely affected.
We must attract and retain experienced personnel to help support our future growth, and competition for such
personnel in our industry is high.
Our success depends, to a significant degree, upon the continued contributions of our key executive management,
engineering, sales and marketing, customer support, administrative and manufacturing personnel. The loss of any
of these key personnel, each of whom would be extremely difficult to replace, through resignations, retirement or
other circumstances, could harm our business and operating results. Despite our incentive arrangements with key
members of our senior management team, these individuals or other key employees may still leave us, which
could have a material adverse effect on our business. We do not have key person life insurance on any of our
executives. In addition, to support our future growth, we will need to attract and retain additional qualified
employees. Competition for such personnel in our industry is intense, and we may not be successful in attracting
and retaining qualified employees. The expansion of high technology companies worldwide and growth in the
demand for semiconductors have increased demand and competition for qualified personnel has intensified. In
addition, the cost of living in San Diego and the 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
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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. Competition for
engineering and other technical personnel in some of the markets in which we operate is especially competitive
due to continued increases in the number of technology companies worldwide. In order to attract and retain
executives and other key employees, we must provide a competitive compensation package, including cash and
stock-based compensation, along with other benefits and workplace policies. If the anticipated value of our stock-
based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or
if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate
executives and key employees could be weakened. 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.
The use of, or failure to properly implement the use of, Artificial Intelligence within Cohu’s product
development involves risks and uncertainties that may impact our operational performance and be subject to
legal and/or regulatory action.
The information technology industry has experienced rapid technological developments, changes in industry
standards, changes in customer requirements and frequent new product introductions and improvements We
currently utilize, and expect in the future to continue to utilize, Artificial Intelligence (“AI”) technology within
certain of our products, including data analytics software designed to provide predictive maintenance
recommendations and vision inspection software designed to find pattern recognition within large image datasets.
The primary goal of these technologies is to improve the efficiency and performance of our customer deployed
systems.
While our use of AI technology is intended to accelerate innovation and improve productivity, the algorithmic
calculations used by AI may result in incorrect data production and flawed root cause analysis of identified
issues. Additionally, it is likely that legal and/or regulatory actions that will be taken by impacted jurisdictions
may include enhanced legislation that addresses the protection of individuals from data privacy harm resulting
from AI use. Finally, an overreliance on AI technology could result in the loss of or diminished human oversight
and uncaught errors that could have a negative impact on our business operations and productivity. The continued
rapid evolution of AI, including potential government regulation of AI, will require resources to develop, test and
maintain our products and features to help us implement AI ethically in order to minimize unintended, harmful
impact. If we are unable to respond quickly and successfully to these developments in AI requirements or
policies, we may lose our competitive position, and our products or technologies may become uncompetitive or
obsolete resulting in a loss of sales.
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 Japan,
Malaysia, Philippines and the U.S. Additionally, sales of our products to customers outside of the United States
represent a significant part of our past and anticipated revenues. Our international sales as a percentage of our
revenues were 88%, 90% and 91% for fiscal 2023, 2022 and 2021, respectively. Certain of our non-U.S. based
customers also purchase through their subsidiaries in the United States. In the future we expect international sales
to continue to account for a significant percentage of our revenues. Certain aspects inherent in transacting
business internationally could negatively impact our operating results, including:
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currency exchange rate fluctuations, which could affect the value of our assets denominated in local
currency, as well as the price of our products relative to locally produced products;
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;
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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 and/or hybrid work arrangements;
difficulties in enforcing contractual and intellectual property rights;
longer payment cycles and receivable collections;
fluctuations in freight rates and transportation disruptions;
seasonal fluctuations in purchasing patterns in other countries;
health epidemics or other disruptions to trade and production;
local and global political and economic instability or foreign conflicts, including trade wars, that involve or
affect the countries of our customers;
natural disasters and other climate risks;
varied environmental laws and regulations at each of our principal locations; and
complex tax laws and potentially adverse tax consequences, including restrictions on repatriating earnings
and the threat of “double taxation.”
Additionally, managing geographically dispersed operations presents difficult challenges associated with
organizational alignment and infrastructure, communications and information technology, inventory control,
customer relationship management, terrorist threats and related security matters and cultural diversities. If we are
unsuccessful in managing such operations effectively, our business and results of operations will be adversely
affected.
We have observed a continuing trend of increasing risks and challenges in the conduct of our international
business activities, including expanded tariffs and other trade barriers affecting the United States and China.
Additionally, we are required to comply with foreign import and export requirements, customs and value added
tax standards that can be unclear or complex. Our failure to meet these requirements and standards could
negatively impact our business operations. 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 may adversely impact our operations,
sales and profitability.
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. In addition, we face intense competition from a number of Asian suppliers that have certain
advantages over 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 or subsidy programs, and affiliation with significantly larger organizations. In addition, changes in
the amount or price of semiconductors produced in Asia could negatively impact the profitability or capital
equipment spending programs of our foreign and domestic customers.
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. Recently, the armed conflict involving Hamas and Israel, as well
as further escalation of tensions between Israel and various countries in the Middle East and North Africa, may
cause increased inflation in energy and logistics costs and could further cause general economic conditions in the
U.S. or abroad to deteriorate. It is unknown how long any of these disruptions will continue and whether such
disruptions will become more severe.
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The tensions related to Russia’s actions have resulted in the U.S. 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, Switzerland facilities. In addition, the conflict
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 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
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.
Any of these conflicts or other threatened conflicts, if they cause interruption to semiconductor chip supply and
related impacts to the company’s customers, any increased costs, increased competition or constraints on
resources such as freight, or other disruption in our supply chain, could result in an adverse impact to our
financial results.
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 the San Diego, California area, 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, such
as we were adversely affected by the COVID-19 global pandemic. Our business has previously, 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 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, 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 reemerging COVID-19 surge or new
health epidemic, we believe the risks of material adverse business disruption increase. We continuously monitor
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and react to the pandemic but cannot predict its future course or impacts.
Our business could be materially and adversely affected by transition and physical climate change effects 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 greenhouse 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”).
We are exposed to additional risks as a result of increased attention by our stakeholders to sustainability,
including environmental, social and governance matters.
Our stakeholders, including customers, investors, advisory firms, employees, and suppliers, among others, are
increasing their attention to, and establishing expectations for, sustainability and related matters. These
expectations can extend to our corporate practices, initiatives, and disclosures, as well as stakeholder standards or
preferences for investments or doing business. Third-party agencies have also established or added standards for
rating companies on a range of sustainability-related factors that may be inconsistent and subject to change. As a
result, these expectations may impact the attractiveness of our business, the manner in which we do business, our
reputation, the costs of doing business, and the willingness of these stakeholders to engage with, invest in, or retain
us. We may be further impacted by the adoption and evolution of sustainability-related regulation and legislation in
the jurisdictions in which we do business, such as the SEC and California state disclosure requirements, which
could result in increased compliance, operational, and other costs. In addition, the Company has provided
voluntary disclosures on sustainability matters, including regarding energy usage, greenhouse gas emissions, health
and safety, diversity and inclusion, and labor and human rights. Such disclosures are aspirational and based on
frameworks and standards for such initiatives and progress that are still developing, assumptions that may change,
and disclosure control and procedures that continue to evolve. We may fail, or be perceived to fail, in attaining or
maintaining our sustainability-related initiatives. The topics on which we focus may not be popular with our
stakeholders. These events or perceptions may expose us to additional reputational and operational risks.
Risks Relating to Acquisitions and Other Strategic Transactions
We may choose to acquire new and complementary businesses, products or technologies instead of developing
them ourselves, and we may be unable to complete these acquisitions or may not be able to successfully
integrate an acquired business in a cost-effective and non-disruptive manner.
Our success depends on our ability to continually enhance and broaden our product offerings in response to
changing technologies, customer demands and competitive pressures. 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. We may, however, face competition for acquisition targets from larger and more
established companies with greater financial resources, making it more difficult for us to complete acquisitions.
We cannot provide any assurance that we will be successful in consummating future acquisitions on favorable
terms or that we will realize the benefits that we anticipate from one or more acquisitions that we consummate.
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Integrating any business, product, technology or service into our current operations could be expensive and time-
consuming and/or disrupt our ongoing business. Acquisitions and investments involve numerous 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;
unexpected reduction of sales of existing products as a result of the introduction of new products;
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 and current products and customers;
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;
integration of acquired businesses and their operations, including enterprise resource planning systems,
may be costly and time-consuming and divert resources away from other projects;
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 or meet the expected performance of the purchased technology or business;
failure to retain key employees and customer or supplier relationships;
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. In addition, any impairment of goodwill or other
intangible assets, amortization of intangible assets, write-down of other assets or charges resulting from the costs
of acquisitions and purchase accounting could harm our business and operating results.
Risks Relating to our Indebtedness, Financing and Future Access to Capital
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
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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. For example, under our Credit Agreement
which was repaid in full on February 9, 2024, we were 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.
Our foreign operations expose us to additional risks relating to currency fluctuations.
Our international operations are significant to our revenues and net income, and we plan to continue to grow
internationally. We report our financial results in U.S. dollars, but we incur certain costs in other currencies, and
have certain foreign currency denominated assets and liabilities. For example, we have significant business
operations located in Germany and Switzerland, each of which engage in transactions with end customers, while
costs related to manufacturing products are incurred in our manufacturing facilities in Asia and raw material
supply chain costs are incurred in yet other currencies. We, therefore, face exposure to fluctuations in currency
exchange rates. Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may
adversely affect our revenues and earnings, despite our hedging of a portion of our international currency
exposures. Additionally, hedging programs are inherently risky, may be ineffective, and could expose us to
additional costs and risks that could adversely affect our financial condition and results of operations.
We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may do so
again in the future, which could have a material negative impact on our business.
We plan to record restructuring charges in the first quarter of 2024, have previously recorded restructuring charges
in prior years and we may implement restructuring plans in the future, which would require us to take additional,
potentially material, restructuring charges related to employee terminations, asset disposal or exit costs. We may
also be required to write-off additional inventory if our product build plans or usage of inventory experience
declines, and such additional write-offs could constitute material charges. In addition, significant adverse changes
in market conditions could require us to take additional material impairment charges related to our long-lived
assets if the changes impact the critical assumptions or estimates that we use in our assessment of the
recoverability of our long-lived assets. Any such additional charges, whether related to restructuring, asset
impairment or factory underutilization, may have a material negative impact on our operating results and related
financial statements.
We are exposed to the instability of financial institutions where we maintain cash deposits or other liquid
holdings, which could result in a lack of liquidity.
To ensure financial flexibility, we maintain a substantial amount of cash deposit holdings in financial banks that
exceed the limits insured by the Federal Deposit Insurance Corporation (“FDIC”). A bank failure, default, or
other adverse events that restrict the ability of financial institutions to perform, including elevated concerns of
such potential events that are rapidly communicated across media platforms, may lead to liquidity constraints for
those institutions. For example, on March 10, 2023, Silicon Valley Bank (“SVB”), now a division of First
Citizens Bank and formerly the country’s 16th largest bank by total assets, experienced a significant and rapid
withdrawal of funds that led to its collapse. The FDIC determined that it would guarantee all deposit amounts
held at SVB, including amounts above FDIC insurance limits. However, there is no guarantee that the FDIC will
similarly protect deposit amounts held above insurance limits if other banks were to fail or other adverse
conditions were to impact financial institutions.
We held cash deposits at SVB in excess of FDIC insurance limits at the time of its failure totaling approximately
$12.3 million which, based on the FDIC’s specific determination with respect to SVB, was fully protected and
guaranteed by the FDIC and therefore we did not experience any losses on our cash deposits. Since that time, we
have maintained a limited commercial relationship with SVB, but have minimal deposit risk when viewed as part
of our overall financial strategy and diversification of assets across multiple financial institutions.
While SVB’s collapse was partly driven by recent interest rate increases, which resulted in steep realized losses to
cover the run on withdrawals, the potential for similar events occurring pose ongoing risk to us. Such events
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could cause the loss of cash deposits, limit our access to debt facilities and restrict our ability to obtain needed
liquidity from financial institutions, hampering our ability to make strategic acquisitions or investments.
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 34% of Cohu’s total assets, of which approximately $241.7 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.
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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• 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, which was recently paid in February 2024, 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.
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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 SEC 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.
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. Likewise, if our financial statements are
not filed on a timely basis as required by the SEC and Nasdaq Global Select Market, we could face severe
consequences from those authorities. In either case, there could be a material adverse effect on our business
and/or our stock price.
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 30, 2023, the price of our common stock has ranged from $51.86 to $24.06.
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. We may become subject to campaigns by shareholders advocating corporate
actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or divestitures.
Such activities could interfere with our ability to execute our business plans, be costly and time-consuming,
disrupt our operations, divert the attention of management or result in other short-term focused corporate actions,
any of which could have an adverse effect on our business or stock price.
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.
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 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, which represented an increase of 13.4% of outstanding shares of
common stock at the time. 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
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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.
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 strategic initiatives. 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.
Trade regulations and restrictions impact our ability to manufacture certain products and to sell to certain
customers, specifically in China, which may materially harm and limit Cohu’s business.
We are subject to U.S. laws and regulations that limit and restrict the export of some of our products and services
and may restrict our transactions with certain customers, business partners and other persons. In certain
circumstances, export control and economic sanctions regulations prohibit the export of certain products, services
and technologies, and in other circumstances are required to obtain an export license before exporting the
controlled item. We must also comply with export restrictions and laws imposed by other countries affecting trade
and investments. We maintain an export compliance program but there are risks that the compliance controls could
be circumvented, exposing us to legal liabilities. There have been several significant changes in U.S. export
regulations relating to China since 2019. More recently, 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. In addition to the specific restrictions
impacting our business, the regulations may have an adverse impact on certain actual or potential customers and on
the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt
the global semiconductor industry, our business and revenues will be adversely impacted.
Additionally, 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
24
similar manner may continue to have an ongoing impact on Cohu’s business, results of operations, or financial
conditions.
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 Thailand subsidiaries have income tax returns currently
under routine examination by tax authorities for different periods between 2017 and 2021. We may be subject to
ongoing tax examinations in various jurisdictions. Tax authorities may disagree with our intercompany charges or
other matters and assess additional taxes. While we regularly assess the likely outcomes of these examinations to
determine the appropriateness of our tax provision, tax audits are inherently uncertain, and an unfavorable
outcome could occur. An unanticipated, unfavorable outcome in any specific period could harm our operating
results for that period or future periods. The financial cost and management attention and time devoted to
defending income tax positions may divert resources from our business operations, which could harm our
business and profitability. Tax examinations may also adversely impact the timing and/or amount of our refund
claims.
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.
For example, 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 increased our effective tax rate and our cash
tax payable in 2022 and 2023. If the requirement to capitalize Section 174 expenditures is not modified, it may
also continue to adversely impact our effective tax rate and our cash tax liability in future years.
The OECD/G20 Inclusive Framework on Base Erosion & Profit Shifting (“BEPS”) reached agreement on the
Pillar Two global minimum tax rules in October 2021 to address the challenges arising from the digitalization of
the economy. These new Global Anti-Base Erosion (“GloBE”) rules are now being implemented by jurisdictions
around the world and will apply to many companies from 2024. Pillar Two introduces a global minimum
Effective Tax Rate (“ETR”) where multinational groups with consolidated revenue over €750m are subject to a
minimum ETR of 15% on income arising in low-tax jurisdictions. These specific actions did not impact our
consolidated financial statements in 2023. However, it is likely that these new rules will have an impact in some
form on our operations and financial results and may adversely impact our operational decisions and/or our
profitability.
We have tax incentives or tax holiday arrangements in the Philippines and Malaysia which may change or cease
to be in effect or applicable, in part or in whole, for reasons within or beyond our control. In addition, if our
assumptions and interpretations regarding tax laws, incentives or holiday arrangements prove to be incorrect or
are otherwise modified, our corporate income tax burden may significantly increase. Also, some of our various
tax incentives in Malaysia are expiring and if we are unable to secure renewal of the expiring tax incentives, our
effective tax rate may be adversely impacted.
Compliance with regulations may impact sales to foreign customers and impose costs and any failure to
comply with such laws may result in severe sanctions and liabilities, which may negatively affect our business,
operating results and financial condition.
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
25
us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.
Some of our distribution partners are located in parts of the world that have experienced governmental
corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict
with local customs and practices. The policies and procedures we have implemented to discourage these
practices by our employees, our existing safeguards and any future improvements may prove to be ineffective,
and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held
responsible. 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. In addition, the U.S. government may seek to
hold us liable for successor liability FCPA violations committed by companies in which we invest or that we
acquire. 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. SEC 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
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, Privacy 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. See Item 1C entitled “Cybersecurity” for additional information about our cybersecurity processes,
oversight, risk mitigation and governance. 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. In response to these
risks, we expect to continue to devote additional resources to the security of our information technology systems.
26
Any future attacks which may disrupt our IT systems, or those of our suppliers, could impact our sales, financial
results and stock price.
We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage.
Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary
technology for our principal product families. If we fail to adequately protect our intellectual property, it will give
our competitors a significant advantage. We own or have licensed a number of patents relating to our products, and
have filed applications for additional patents. Any of our pending patent applications may be rejected, however,
and we may be unable to develop additional proprietary technology that is patentable in the future. In addition, the
patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages
and/or may be challenged by third parties.
Third parties may also design around our patents or copy our patented inventions without our knowledge. In
addition to patent protection, we rely upon copyrights for protection of our proprietary software and
documentation, trademarks for protection of our brand and source of goods, and trade secret law and
confidentiality and exclusivity agreements for protection of our confidential and proprietary information and
technology. These measures do not guarantee protection of our intellectual property, however. We can give no
assurance that our copyrights will be upheld or will successfully deter infringement by third parties. Even though
we routinely enter into confidentiality agreements with our employees and other third parties there can be no
assurances that trade secrets and proprietary information will not be disclosed, that others will not independently
develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade
secrets, or that we can fully protect our trade secrets and proprietary information. Violations by others of our
confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm
our competitive position and cause our sales and operating results to decline as a result of increased competition. It
is also possible that third parties will misappropriate our trade secrets or other confidential information. We may be
subject to cybersecurity breaches in which a third party obtains our confidential information. Third parties may
also reverse engineer our products to copy our technology. Any of these circumstances could result in harm to our
competitive position in the market.
Failure to protect our trademarks can lead to other companies selling products using confusing similar names,
thereby damaging our brand. In some countries, it can be difficult to register trademarks because of the strict
examination process or blocking trademarks for other goods. Costly and time-consuming litigation might be
necessary to enforce and determine the scope of our intellectual property rights, and failure to obtain or maintain
trade secret protection might adversely affect our ability to continue our research or bring products to market. From
time to time, we may find it necessary to initiate litigation against other persons or entities to protect and/or enforce
our intellectual property or contractual rights. However, litigation is costly and time consuming and there is no
assurance that any lawsuit we bring will yield the result that we seek, as (i) the lawsuit may be dismissed or there
could be an adverse finding, (ii) we may not be able to pursue the lawsuit due to the laws of the applicable country
or (iii) there may be a subsequent unfavorable change in law that limits our ability to pursue the lawsuit. For
example, litigation discovery practice in China, Japan, South Korea, continental Europe and Taiwan is not as
robust as the United States, so it can be more difficult to determine if a company is infringing on our patents and
more challenging to bring a lawsuit.
Monitoring and preventing unauthorized use are also difficult and the measures we take to protect our intellectual
property rights may not be adequate. Accordingly, infringement of our intellectual property rights poses a serious
risk of doing business. There is a risk that we may be unable to adequately protect our intellectual property rights
in certain foreign countries. For example, our competitors may independently develop similar technology or
duplicate our products. If this occurs, it would be easier for our competitors to develop and sell competing products
in these countries resulting in a loss of sales.
We may not be able to adequately protect or defend ourselves against intellectual property infringement claims,
which may be time-consuming and expensive, or affect the freedom to operate our business.
Our competitors or other third parties may hold or obtain patents, copyrights, trademarks or other proprietary rights
that could prevent, limit or interfere with our ability to make, use, develop, sell or market our products and
services, which could make it more difficult for us to operate our business. From time to time, the holders of such
intellectual property rights may assert their rights and urge us to take licenses and/or may bring suits alleging
infringement or misappropriation of such rights, which could result in substantial costs, negative publicity and
management attention, regardless of merit.
27
While we endeavor to obtain and protect the intellectual property rights that we expect will allow us to retain or
advance our strategic initiatives in these circumstances, there can be no assurance that we will be able to
adequately identify and protect the portions of intellectual property that are strategic to our business or mitigate the
risk of potential suits or other legal demands by third parties. Accordingly, we may consider the entering into
licensing agreements with respect to such rights, although no assurance can be given that such licenses can be
obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could
significantly increase our operating expenses. Further, if we are determined to have or believe there is a high
likelihood that we have infringed upon a third party’s intellectual property rights, we may be required to cease
making, selling or incorporating certain components or intellectual property into the goods and services we offer,
to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and
maintain alternative branding for our products and services. In the event that we are required to take one or more
such actions, our brand, business, financial condition and operating results may be harmed.
Data privacy, identity protection and information security compliance may require significant resources and
presents certain risks.
We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary
business information, customer data, personal data or other information that is subject to privacy and security laws,
regulations and/or customer-imposed controls. We continue to monitor global privacy laws and legislation to
determine its impact on our business. We do not process individual credit card information, but we do maintain
certain personally identifiable information on our employees. Such employee information may be subject to the
EU General Data Protection Regulation and/or the 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. In addition, we operate in an
environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S.
states and foreign jurisdictions in which we operate and we must understand and comply with each law and
standard in each of these jurisdictions while ensuring the data is secure. Government enforcement actions can be
costly and interrupt the regular operation of our business, and violations of data privacy laws can result in fines,
reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial
statements.
We could face negative consequences in the future if we, our suppliers, channel partners, customers or other third
parties experience the actual or perceived risk of theft, loss, fraudulent use or misuse of data. Such an event could
lead customers to select the products and services of our competitors. An incident could harm our reputation, cause
unfavorable publicity or otherwise adversely affect certain potential customers’ perception of the security and
reliability of our services as well as our credibility and reputation, which could result in the loss of sales or
curtailed growth. While we maintain general liability and cybersecurity insurance coverage, such coverage might
not be adequate or otherwise protect us from liabilities or damages with respect to claims alleging compromises of
customer data, that such coverage will continue to be available to us on acceptable terms or at all, or that such
coverage will pay future claims. The successful assertion of one or more large claims against us that exceeds our
available insurance coverage, or results in changes to our insurance policies (including premium increases or the
imposition of large deductible or co-insurance requirements), could have an adverse effect on our business.
We currently are, and in the future may be, subject to litigation or regulatory proceedings that could have an
adverse effect on our business.
From time to time, we may be subject to litigation or other administrative, regulatory or governmental proceedings,
including tax audits and resulting claims that could require significant management time and resources and cause
us to incur expenses and, in the event of an adverse decision, pay damages or incur costs in an amount that could
have a material adverse effect on our financial position or results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity
measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our
intellectual property and data. We maintain policies and procedures designed to allow management to assess,
28
identify, and manage material risks from cybersecurity threats. We integrate our cybersecurity policies and
procedures into our overall enterprise risk management program, which is implemented by management and
overseen by the Board of Directors through its Audit Committee.
We utilize the Center for Internet Security (“CIS”) Critical Security Controls as a framework for managing our
cybersecurity program. The CIS framework outlines 18 critical control areas relating to organizational security
and provides effective methodologies, guidelines, and industry standard best practices to develop and manage
a comprehensive cybersecurity program. Additionally, we align our controls to various international security
certifications and standards and have adopted best practices from industry leading frameworks. Our
cybersecurity program includes policies and procedures relating to encryption, data loss prevention
technology, authentication technology, access control, anti-malware software, third-party risk monitoring,
insider risk management and identity management. We engage third-party services to conduct evaluations of
our security controls, whether through penetration testing, independent audits, or consulting on best practices
to address new challenges. These evaluations include testing both the design and operational effectiveness of
security controls. We also regularly obtain system and organization control (“SOC”) reports from our service
providers (“SOC 2”). Members of our corporate information security organization receive information
exchanges from their professional networks and attend training, webinars, and conferences to stay up to date
on both trends and system-specific updates. In addition, all Cohu employees are required to complete regular
security awareness training including testing, each of which are designed to promote a company-wide culture
of cybersecurity risk awareness and management.
As part of the Board of Directors’ role in overseeing our enterprise risk management program, which includes
our cybersecurity risk management, the Board is responsible for exercising oversight of management’s
identification and management of, and planning for, material cybersecurity risks that may reasonably be
expected to have an adverse effect on us. While the full Board has overall responsibility for risk oversight, the
Board has delegated oversight responsibility related to risks from cybersecurity threats to the Audit
Committee. The Audit Committee conducts reviews of the effectiveness of our risk management strategies.
This review helps in identifying areas for improvement and in aligning cybersecurity efforts with the overall
risk management framework and promotion of our business objective and operational needs. In addition to our
scheduled meetings, the Audit Committee maintains an ongoing dialogue with management, including
emerging or potential cybersecurity risks.
Our corporate information security organization, led by our Chief Information Security Officer (“CISO”), is
responsible for our overall information security strategy, policy, security engineering, operations and cyber
threat detection and response. Our CISO has over 35 years of experience in various roles in information
technology and information security, including serving as SVP and CIO or VP and CIO at various defense,
aerospace and semiconductor supplier companies. He holds a bachelor’s degree in Computer Science, an
MBA, and holds several relevant certifications, including ITIL Certification. The corporate information
security organization manages and regularly enhances our enterprise security structure with the goal of
preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience
in an effort to minimize the business impact should an incident occur. Central to this organization is our
cybersecurity incident response team (“CIRT”), which is responsible for the protection, detection and response
capabilities used in the defense of Cohu’s data and enterprise computing networks. In the event of an incident,
we intend to follow our incident response plan, which outlines the steps to be followed from incident detection
to mitigation, mitigation or eradication, recovery and notification, including notifying key functional areas, as
well as the CEO, Chairperson and Chairperson of the Audit Committee and other members of the Board, as
appropriate.
In the last three fiscal years, we have not experienced any material cybersecurity incidents and the expenses we
have incurred from security incidents were immaterial. As a result, we do not believe that risks from
cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected us,
our results of operations or financial condition. Notwithstanding the measures we take to assess, identify, and
manage cybersecurity risks, we may not be successful in preventing or mitigating a cybersecurity incident that
could have a material adverse effect on us. For a discussion of how risks from identified cybersecurity threats,
including as a result of any previous cybersecurity incidents, may materially affect or are reasonably likely to
materially affect us, see the risk factor entitled “Our business and operations could suffer in the event of
cybersecurity breaches within our operational systems or products”.
29
Item 2. Properties.
Certain information concerning our principal properties at December 30, 2023, is set forth below:
Location
Poway, California
Melaka, Malaysia (1)
Kolbermoor, Germany
Osaka, Japan
Calamba City, Laguna, Philippines
Norwood, Massachusetts
Calamba City, Laguna, Philippines
La Chaux-de-Fonds, Switzerland
Singapore (2)
Milpitas, California
Lincoln, Rhode Island
St. Paul, Minnesota
(1) On January 10, 2024 we entered into a purchase agreement to acquire our facility in Melaka, Malaysia.
Major
Activities
1, 2, 3, 4, 5
2, 3, 4, 5
2, 3, 4, 5
2, 3, 4, 5
2, 3, 4, 5
2, 4, 5
3, 4
2, 4, 5
2, 3, 4, 5
2, 4, 5
2, 3, 4, 5
2, 3, 4, 5
Approx.
Sq. Ft.
147,000
96,000
83,000
67,000
64,000
56,000
37,000
33,000
32,000
31,000
22,000
17,000
Ownership
Leased
Leased
Owned
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
(2) Increase in square footage from the prior year is a result of our acquisition of EQT on October 2, 2023.
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 13, “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.
30
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
PART II
Equity Securities.
(a) Market Information
Cohu, Inc. stock is traded on the Nasdaq Global Select Market under the symbol “COHU”.
Holders
At February 7, 2024, Cohu had 499 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 fiscal 2023, 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 30, 2023 was 700,270 shares.
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Share repurchase activity during the fourth quarter of 2023 was as follows:
Total
Number of
Shares
Purchased
(in thousands except price per share)
Weighted
Average
Price Paid Purchase
Per Share(1) Cost(2)
Total
Total Number of Maximum $
Shares Purchased Value of Shares
as Part of Publicly That May Yet Be
Purchased Under
The Programs(3)
Announced
Programs(3)
Oct 1, 2023 - Oct 28, 2023
Oct 29, 2023 - Nov 25, 2023
Nov 26, 2023 - Dec 30, 2023
110 $
165 $
116 $
391 $
3,715
33.75 $
5,195
31.54 $
33.48 $
3,876
32.74 $ 12,786
110 $
165 $
116 $
391
67,387
62,192
58,316
(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.
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 29, 2018, 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. The custom peer group in fiscal 2023 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., Novanta, Inc., Onto
Innovation, OSI Systems, Inc., Photronics, Inc., Smart Global Holdings, Inc., Ultra Clean Holdings, Inc. and
Veeco Instruments, Inc. The only change from the custom peer group used in fiscal 2022 was the removal of
National Instruments Corporation, due to it being acquired by Emerson Electric Co. In selecting our 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 based on
revenue, our market capitalization, and that had similar scope of operations.
32
Cohu, Inc.
NASDAQ Index
Russell 2000
Peer Group
Item 6. Reserved.
2018
2019
2020
2021
2022
2023
$
$
$
$
100 $
100 $
100 $
100 $
143 $
137 $
126 $
165 $
249 $
198 $
151 $
211 $
245 $
242 $
173 $
303 $
206 $
163 $
138 $
228 $
228
236
161
316
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 Income 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 and metrology automation systems (handlers),
MEMS test modules, test contactors, thermal subsystems, and semiconductor ATE 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 and operating budgets of our customers, who
often abruptly delay or accelerate purchases in reaction to variations in their business. The level of expenditures
by these companies depends on the current and anticipated market demand for semiconductor devices and the
products that incorporate them. Our recurring 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 recurring products provide a more stable recurring source of revenue and generally do not have the
same degree of cyclicality as our capital equipment products.
In 2023, global macroeconomic and geopolitical factors impacted the semiconductor industry. In response to the
higher cost of capital and slowing demand, many chip companies are cutting costs, reducing employee
33
headcount, and pushing out capital expenditures for additional capacity. For the year ended December 30, 2023,
our net sales decreased 21.7%, year-over-year, to $636.3 million due to lower demand for automotive, industrial,
consumer, mobility, and 5G-related products driven by these global economic conditions. Over the past twelve
months, we have seen improvements in our gross margin due to favorable revenue mix, and greater insourcing of
contactor manufacturing. Despite recent weakness in the semiconductor industry based on our ongoing
assessment of business conditions and the results from our operations, we have continued to take actions to
reduce outstanding principal debt under our Term Loan Credit Facility through voluntary prepayments. On
February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding principal of our
Term Loan Credit Facility. During 2023 we repurchased 700,270 shares of our common stock for approximately
$23.6 million.
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 increased use of semiconductors including the most
recent developments in artificial intelligence (“AI”), along with customer traction with our new products. We
continue to capture new customers and new opportunities within our current customers’ business and remain
optimistic about the long-term prospects for our business due to the increasing ubiquity of semiconductors,
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, computing, 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 assets and 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
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
34
standard warranties. 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 30, 2023, and December 31, 2022, we had
$6.2 million and $7.1 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
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
35
valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the
statement of income. 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 30, 2023, was approximately $124.0 million, with
a valuation allowance of approximately $99.9 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 2023, 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, Test & Inspection. Prior to the
sale of our PCB Test business on June 24, 2021, we reported in two segments, Semiconductor Test &
Inspection and 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 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, 2023, 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 30, 2023, 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.
36
During 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 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. When granted, 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.
RESULTS OF OPERATIONS
Recent Transactions Impacting Results of Operations
On January 30, 2023, we completed the acquisition of MCT, a U.S. based company that 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 October 2, 2023, we acquired EQT, a Singapore-
based company that is a provider of semiconductor test contactors and other test consumables. MCT and EQT
are included in Cohu’s consolidated results from operations as of the date of they were acquired by Cohu.
In 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.
37
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
Income from operations
2023
100.0 %
(52.4)
47.6
(13.9)
(20.8)
(5.7)
-
(0.4)
-
6.8 %
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 %
Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7 in our 2022 Annual Report on Form 10-K, filed with the SEC on February 17, 2023, for
comparative discussion of our fiscal years ended December 31, 2022 and December 25, 2021.
2023 Compared to 2022
Net Sales
Cohu’s consolidated net sales decreased 21.7% from $812.8 million in 2022 to $636.3 million in 2023. The
decrease was due to the current global macroeconomic environment, which is driving lower demand for
automotive, industrial, and mobility products (including 5G-related products). Our consolidated net sales in
2023 also include the net sales of MCT and EQT, which Cohu acquired during 2023, and totaled $13.8 million.
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, changes in 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 47.6% in 2023 from 47.2% in 2022. During 2023, our gross margin
improved compared to 2022 due to favorable product mix and increased insourcing of contactor
manufacturing.
We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage
forecasts. During 2023, we recorded net charges to cost of sales of approximately $4.5 million for excess and
obsolete inventory. In 2022, net charges to cost of sales for excess and obsolete inventory were $7.2 million.
We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are
adequate to cover known exposures at December 30, 2023. 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 2023 was $88.6 million,
or 13.9% of net sales, compared to $92.6 million, or 11.4% of net sales in 2022. R&D expenses decreased during
fiscal 2023 due to lower spending on material costs associated with product development during the current year.
Our R&D costs in 2023 include $0.9 million of incremental R&D costs from MCT and EQT.
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 20.8% in 2023, from 16.2% in 2022, increasing from $131.4 million in 2022
38
to $132.2 million in 2023. The increase in SG&A expense during 2023 resulted from $2.5 million of incremental
SG&A costs from the operations of MCT and EQT and $1.6 million of transaction related costs incurred
specifically related to the acquisitions of MCT and EQT.
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 $36.4 million and $33.2 million for 2023 and 2022, respectively. The increase in
expenses recorded during the current year was a result of the amortization of acquired intangible assets from
MCT and EQT.
Restructuring Charges
After 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. During the first
quarter of 2023, we began a strategic restructuring and integration program in connection with the acquisition of
MCT. In connection with these integration plans, we recorded restructuring charges totaling $2.4 million and
$0.6 million in 2023 and 2022, respectively. Restructuring costs incurred in 2023 relate to the integration of
MCT and restructuring costs incurred in 2022 relate to the integration of Xcerra.
See Note 4, “Restructuring Charges” in Part IV, Item 15(a) of this Form 10-K for additional information with
respect to restructuring charges.
Interest Expense and Income
Interest expense was $3.4 million in 2023 compared to $4.2 million in 2022. 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 $11.5 million and $4.0 million in 2023 and 2022, 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 2023, the U.S. Dollar
weakened against foreign currencies we operate in resulting in foreign currency losses. During 2023 we
recognized losses of $5.2 million, net of $2.1 million of gains generated by our foreign currency forward
contracts. In 2022, the U.S. Dollar strengthened against foreign currencies we operate in resulting in foreign
currency gains. In 2022 we recognized gains of $1.6 million, net of $5.4 million of losses generated by our
foreign currency forward contracts.
See Note 8 “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 2023 and 2022 was 38.6% and
23.6%, respectively. The provision for income taxes decreased from $29.9 million in 2022 to $17.7 million in
2023 primarily due to the reduction in pre-tax income from continuing operations, a lower GILTI inclusion, and
higher stock-based compensation deductions, offset by changes in our jurisdictional mix of income.
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
39
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 30, 2023, and December 31, 2022, was approximately
$99.9 million and $89.2 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 10, “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 $28.2 million in 2023 and $96.8 million in 2022.
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 cyclical, 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 30, 2023, $155.7 million or 46.4% 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 30, 2023, our total indebtedness, net of discount and deferred financing costs, was $40.6 million,
which included $29.1 million outstanding under the Term Loan Credit Facility, $2.1 million outstanding under
Kita’s term loans, $7.6 million outstanding under Cohu GmbH’s construction loans, and $1.8 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.
On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding principal of
our Term Loan Credit Facility. In 2023 and 2022, we repurchased 700,270 shares and 1,767,070 shares of our
outstanding common stock for $23.6 million and $50.7 million to be held as treasury stock, respectively.
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 25, 2021 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
40
December 31, 2022, filed with the SEC on February 17, 2023, 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 30, 2023 and December 31, 2022:
(in thousands)
Cash, cash equivalents and short-term investments
Working capital
2023
$ 335,698
$ 535,397
2022
$ 385,576
$ 603,979
Decrease
$
$
(49,878)
(68,582)
Percentage
Change
(12.9)%
(11.4)%
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 2023 totaled $101.5 million compared to
$112.9 million in 2022. The decrease in cash provided by operating activities in the current year was a result of
weaker business conditions. 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 $21.4 million decrease in accounts payable, and net sales in the fourth quarter of
2023 and the timing of the resulting cash conversion cycle drove the $61.9 million decrease in accounts
receivable. Deferred profit decreased $4.4 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 $14.9 million due to lower business volume resulting in lower rates of accrual. Cash
provided by operating activities was also impacted by decreases in income taxes payable of $24.8 million a result
of payments made. During 2023, inventories decreased $12.8 million due to lower business volume and strict
inventory management, and other current assets increased $10.9 million due to a reduction in prepaid expenses.
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 2023 totaled $30.2 million. In
2023 we used $97.3 million in cash for purchases of short-term investments and generated $152.6 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.
During 2023, we used $26.3 million of cash, net of cash received, for the acquisition of MCT which was a
strategic transaction for our test handler group. In 2023, we also used $43.4 million of cash, net of cash received,
for the acquisition of EQT, which was a strategic transaction for our interface solutions group. Additions to
property, plant and equipment in 2023 were $16.1 million and were made to support our operating and
development activities. Our net cash used in investing activities in 2022 totaled $67.9 million. In 2022 we used
$14.8 million for additions to property, plant and equipment and we used $208.9 million in cash for purchases of
short-term investments and generated $155.4 million from sales and maturities.
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 2023, our cash used in financing activities totaled
$68.1 million. In fiscal 2022, our cash used in financing activities totaled $91.1 million. Repayments of short-
term borrowings and long-term debt during 2023 totaled $38.8 million, which includes $34.1 million of cash
prepayments of our Term Loan Credit Facility. During 2022 our repayments totaled $38.2 million and included
$31.7 million of cash prepayments of our Term Loan Credit Facility. During 2023 and 2022, we made payments
totaling $23.6 million and $50.7 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 2023, 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
41
purchase plan and from the exercise of employee stock options was $5.7 million. In 2022, net cash used to
settle the minimum statutory tax withholding requirements on behalf of our employees totaled $2.0 million.
The increase in cash used to settle tax withholding requirements between 2023 and 2022 is directly correlated to
the increase in Cohu’s stock price at the end of March year over year when the majority of awards vest.
Share Repurchase Program
On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase
program. 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
30, 2023, we repurchased 700,270 shares of our common stock for $23.6 million to be held as treasury stock. As
of December 30, 2023, we may purchase up to $58.3 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 was
due on or before October 1, 2025. The loans under the Term Loan Credit Facility bore interest, at Cohu’s option,
at a floating annual rate equal to the London Interbank Offered Rate (“LIBOR”) plus a margin of 3.00%. On June
16, 2023, in connection with the discontinuation of LIBOR, we entered into an amendment to our Term Loan
Credit Facility, which provided for the transition of the benchmark interest rate from LIBOR to the Secured
Overnight Financing Rate (“SOFR” or “Term SOFR”). Effective with the interest period beginning July 1, 2023,
LIBOR was replaced with Adjusted Term SOFR, a floating annual rate equal to SOFR plus a margin of 3.0%. At
December 30, 2023, the outstanding loan balance, net of discount and deferred financing costs, was $29.1 million
and $3.4 million of the outstanding balance is presented as current installments of long-term debt in our
consolidated balance sheets. 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. As of December 30, 2023, the fair value of the debt was
$29.4 million. The measurement of the fair value of debt is based on the average of the bid and ask trading quotes
as of December 30, 2023 and is considered a Level 2 fair value measurement.
Under the terms of the Credit Agreement, the lender had the option to accelerate the payment terms upon the
occurrence of certain events of default set forth therein, which included: 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 30, 2023, we believe no such events of default have occurred.
During 2023, we prepaid $34.1 million in principal of our Term Loan Credit Facility in cash. We accounted for
the prepayment as a debt extinguishment, which resulted in a loss of $0.4 million reflected in our consolidated
statement of income and a $0.4 million reduction in debt discounts and deferred financing costs in our
consolidated balance sheets. During 2022, we repurchased $31.8 million in principal of our Term Loan Credit
Facility for $31.7 million in cash. We accounted for the repurchase as a debt extinguishment, which resulted in a
loss of $0.3 million reflected in our consolidated statement of income, as well as a $0.4 million reduction in debt
discounts and deferred financing costs in our consolidated balance sheets. Approximately $29.3 million in
42
principal of the Term Loan Credit Facility remained outstanding as of December 30, 2023. Subsequent to our
fiscal year ended December 30, 2023, on February 9, 2024, we made a cash payment of $29.3 million to repay
the remaining outstanding amounts owed under our Term Loan Credit Facility. We accounted for the transaction
as a debt extinguishment, and in the first quarter of fiscal 2024 we will recognize a loss of $0.2 million due to the
recognition of the remaining debt discount and deferred financing costs.
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 0.45%, and expire at various dates through 2034. At
December 30, 2023, the outstanding loan balance was $2.1 million and $0.2 million of the outstanding balance is
presented as current installments of long-term debt in our consolidated balance sheets. At December 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. 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 30, 2023, total outstanding borrowings under the Loan Facilities was $7.7 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 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. 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 30, 2023.
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 30, 2023, total
borrowings outstanding under the revolving lines of credit were $1.8 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 30, 2023
and December 31, 2022, 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 30, 2023,
$0.3 million was outstanding under standby letters of credit and bank guarantees.
43
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 30, 2023, and the effect such
obligations are expected to have on our liquidity and cash flows in future periods. Amounts excluded are our
liability for unrecognized tax benefits that totaled approximately $35.9 million at December 30, 2023. We are
currently unable to provide a reasonably reliable estimate of the amount or period(s) the cash settlement of this
liability may occur.
Fiscal year-end
2025-2026 2027-2028 Thereafter
$
2024
Total
22,200 $
27
(in thousands)
Operating leases (1)
Finance leases
Bank term loans
principal and interest (2)
Revolving credit facilities
Total contractual obligations $
(1) Excludes an insignificant amount of short-term lease obligations.
(2) On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding amounts owed under
7,664
1,773
15,539 $
44,358
1,773
68,358 $
30,283
-
38,089 $
2,554
-
5,326 $
6,090 $
12
2,772 $
-
7,791 $
15
3,857
-
9,404
5,547
-
our Term Loan Credit Facility.
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 14, “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 30, 2023, $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 30, 2023, our investment portfolio included short-term, fixed-income investment securities with
a fair value of approximately $90.2 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 30, 2023, the cost and fair value of investments with loss positions were
approximately $38.5 million and $38.4 million, respectively. We evaluated the nature of these investments,
44
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 30, 2023, we had approximately $29.3 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 SOFR plus a margin of up to 3.0% per annum. Prior to the discontinuation of LIBOR and the
amendment of our Term Loan Credit Facility on June 30, 2023, our quarterly interest payments were based on
either a base rate plus a margin of up to 2.0% per annum, or 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
outstanding and overdue interest payments and other overdue fees and amounts. At December 30, 2023, the
interest rate in effect on these borrowings was 8.88%. Subsequent to our fiscal year ended December 30, 2023, on
February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding principal of our
Term Loan Credit Facility.
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 30, 2023 compared to December 31, 2022, our stockholders’ equity increased by
$6.8 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 30, 2023 would result in an approximate $34.3 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 30, 2023
would result in an approximate $34.3 million negative translation adjustment recorded in other comprehensive
income within stockholders’ equity.
45
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 30, 2023, 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 30, 2023, 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 30,
2023.
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 30, 2023, as stated in their report which is included herein.
46
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 30, 2023, 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 30, 2023, 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 30, 2023 and December 31, 2022,
and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for
each of the three years in the period ended December 30, 2023, and the related notes and the financial statement
schedule listed in the Index at Item 15(a) and our report dated February 16, 2024, 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 16, 2024
47
Item 9B. Other Information.
Rule 10b5-1 Trading Plans
Our directors and executive officers may purchase or sell shares of our common stock in the market from time to
time, including pursuant to equity trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act
and in compliance with guidelines specified by our insider trading policy. In accordance with Rule 10b5-1 and
our insider trading policy, directors, officers and certain employees who, at such time, are not in possession of
material non-public information are permitted to enter into written plans that pre-establish amounts, prices and
dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our stock,
including shares acquired pursuant to our equity incentive plans. Under a Rule 10b5-1 trading plan, a broker
executes trades pursuant to parameters established by the director or executive officer when entering into the
plan, without further direction from them. The use of these trading plans permits asset diversification as well as
personal financial and tax planning. Our directors and executive officers also may buy or sell additional shares
outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to
compliance with SEC rules, the terms of our insider trading policy and certain minimum holding requirements.
The following table shows the Rule 10b5-1 trading plans intended to satisfy the affirmative defense conditions of
Rule 10b-1(c) adopted or terminated by our directors and executive officers during the fourth quarter of fiscal
2023.
Name and Position
Nina L. Richardson, Director
Plan
Action
Adoption 11/7/2023
Plan
Adoption Date
Expiration Number of Shares
Date
10/11/2024
to be Sold under Plan
4,999
Transactions by Section 16 directors and officers will be disclosed publicly through Form 144 and Form 4 filings
with the SEC to the extent required by law. No non-Rule 10b5-1 trading arrangements (as defined by Item 408(a)
of Regulation S-K) were entered into, adopted or terminated by any Section 16 director or officer during the
fourth quarter of fiscal 2023.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information under the heading “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 SEC within 120 days after the
close of fiscal 2023.
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 2023.
48
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 2023.
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 2023.
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 2023.
49
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 51:
Description
Form 10-K
Page Number
Consolidated Balance Sheets at
December 30, 2023 and December 31, 2022 ......................................................................... 51
Consolidated Statements of Income for each of the three
years in the period ended December 30, 2023 ........................................................................ 52
Consolidated Statements of Comprehensive Income for each of the three
years in the period ended December 30, 2023 ........................................................................ 53
Consolidated Statements of Stockholders’ Equity for each of
the three years in the period ended December 30, 2023 ........................................................ 54
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 30, 2023 ........................................................................ 55
Notes to Consolidated Financial Statements ............................................................................. 56
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) ........................ 87
(2) Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts .................................................................... 94
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.
50
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, 49,429
shares issued and outstanding in 2023 and 49,276 shares in 2022
Paid-in capital
Treasury stock, at cost; 2,253 shares in 2023 and 1,767 shares in 2022
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
December 30,
2023
December 31,
2022
$
$
245,524
90,174
124,624
155,793
17,696
5,007
638,818
242,341
143,235
176,148
170,141
24,017
8,969
764,851
69,085
241,658
151,770
32,243
16,778
$ 1,150,352
65,011
213,539
140,104
21,105
22,804
$ 1,227,414
$
$
1,773
4,551
33,600
4,748
31,897
4,653
3,586
4,024
14,589
103,421
8,262
7,065
10,802
23,154
34,303
13,175
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
-
-
49,429
686,146
(69,184)
318,558
(34,779)
950,170
$ 1,150,352
49,276
687,218
(58,043)
290,402
(40,012)
928,841
$ 1,227,414
The accompanying notes are an integral part of these statements.
51
COHU, INC.
CONSOLIDATED STATEMENTS OF INCOME
(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
Income from operations
Other (expense) income:
Interest expense
Interest income
Foreign transaction gain (loss)
Loss on extinguishment of debt
Income before taxes
Income tax provision
Net income
Income per share:
Basic:
Diluted:
December 30,
2023
Years ended
December 31,
2022
December 25,
2021
$
636,322
$
812,775
$
887,214
333,454
88,571
132,249
36,355
-
2,421
-
593,050
43,272
429,449
92,589
131,390
33,185
-
605
-
687,218
125,557
(3,382)
11,504
(5,209)
(369)
45,816
17,660
28,156
$
(4,177)
4,012
1,635
(312)
126,715
29,868
96,847
$
$
$
0.59
$
2.01
$
$
0.59
$
1.98
$
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
3.53
3.45
Weighted average shares used in computing
income per share:
Basic
Diluted
47,486
48,025
48,178
48,799
47,409
48,460
(1) Excludes amortization of $28,418, $26,023, and $27,508 for the years ended December 30, 2023, December 31, 2022, and December
25, 2021, 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.
52
COHU, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Years ended
December 30, December 31, December 25,
2022
2023
2021
Net income
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
$
28,156 $
96,847 $
167,325
6,815
(2,375)
793
-
5,233
33,389 $
(17,950)
5,894
(694)
-
(12,750)
84,097 $
(22,956)
2,602
(67)
(2,515)
(22,936)
144,389
$
The accompanying notes are an integral part of these statements.
53
COHU, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except par value and per share amounts)
Common
stock
$1 par value
$
42,190
-
-
-
-
-
250
161
704
(242)
-
-
5,693
48,756
-
-
-
-
-
12
161
529
(182)
-
49,276
-
-
-
-
-
147
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
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
Shares issued under ESPP
Shares issued for restricted stock units
vested
Repurchase and retirement of stock
Share-based compensation expense
Balance at December 30, 2023
$
Paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
Stock
Total
$ 448,194 $
-
-
-
-
-
2,260
3,403
(704)
(10,222)
-
14,420
217,426
674,777
-
-
-
-
-
105
3,470
(529)
(5,523)
14,918
687,218
-
-
-
-
-
3,785
26,230 $
-
167,325
(4,326) $
-
-
- $ 512,288
(7,324)
167,325
(7,324)
-
-
-
-
-
-
-
-
-
-
-
193,555
-
96,847
-
-
-
-
-
-
-
-
290,402
-
28,156
-
-
-
-
(22,956)
2,602
(67)
-
-
-
-
(2,515)
-
-
(27,262)
-
-
(17,950)
5,894
(694)
-
-
-
-
-
(40,012)
-
-
6,815
(2,375)
793
-
-
-
-
-
-
-
-
-
-
-
(7,324)
(50,719)
-
-
-
-
-
-
-
-
-
(58,043)
(23,641)
-
-
-
-
-
(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
-
(5,705)
14,918
928,841
(23,641)
28,156
6,815
(2,375)
793
3,932
6
-
-
49,429
(20,174)
(1,920)
17,237
-
-
-
$ 686,146 $ 318,558 $
-
-
-
(34,779) $
20,168
(7,668)
-
-
(9,588)
17,237
(69,184) $ 950,170
The accompanying notes are an integral part of these statements.
54
COHU, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on business divestitures
Interest capitalized associated with cloud computing implementation
Net accretion on investments
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
Payment for purchase of MCT, net of cash received
Payment for purchase of EQT, net of cash received
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Years ended
December 30, December 31,
2023
2022
December 25,
2021
$
28,156 $
96,847 $
167,325
-
-
(1,364)
369
-
49,744
17,237
5,619
146
(540)
(4,774)
(13,286)
2,800
(4)
(702)
7,656
(2,309)
61,899
12,839
(14,897)
(21,356)
(4,447)
10,920
(24,782)
(7,454)
101,470
(16,053)
216
(97,290)
152,649
-
(26,331)
(43,401)
(30,210)
-
(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)
(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
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
-
(38,788)
(5,656)
(52)
(23,641)
-
(68,137)
60
3,183
242,341
245,524 $
44,276 $
3,424 $
124 $
1,215 $
-
(38,226)
(1,957)
(167)
(50,719)
-
(91,069)
(1,781)
(47,860)
290,201
242,341 $
23,123 $
3,443 $
152 $
2,529 $
$
$
$
$
$
The accompanying notes are an integral part of these statements.
55
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 fiscal
years ended on December 30, 2023 and December 25, 2021, each consisted of 52 weeks. Our fiscal year
ended on December 31, 2022 consisted of 53 weeks.
Business Divestitures – 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. Our decision to
sell this non-core business and assets resulted from management’s determination that that it was 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. See Note 15, “Business
Divestitures” for additional information.
Income Per Share – Basic income per common share is computed by dividing net income by the weighted-
average number of common shares outstanding during the reporting period. Diluted income 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 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 30, 2023, December 31, 2022 and December 25,
2021, approximately 193,000, 261,000, and 180,000 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 per share:
(in thousands)
Weighted average common shares outstanding
Effect of dilutive stock options and restricted stock units
2023
47,486
539
48,025
2022
48,178
621
48,799
2021
47,409
1,051
48,460
Cash, Cash Equivalents and Short-term Investments – Highly liquid investments with insignificant
interest rate risk and original maturities of three months or less are classified as cash and cash equivalents.
Investments with maturities greater than three months are classified as short-term investments. All of our
short-term investments in debt securities are classified as available-for-sale and are reported at fair value,
with any unrealized gains and losses, net of tax, recorded in the statement of comprehensive income (loss).
We manage our cash equivalents and short-term investments as a single portfolio of highly marketable
securities. We have the ability and intent, if necessary, to liquidate any of our investments in order to meet
the liquidity needs of our current operations during the next 12 months. Accordingly, investments with
contractual maturities greater than one year have been classified as current assets in the accompanying
consolidated balance sheets.
Fair Value of Financial Instruments – The carrying amounts of our financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value
due to the short maturities of these financial instruments.
56
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 30, 2023, 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 $4.5 million,
$7.2 million and $7.1 million in 2023, 2022 and 2021, respectively.
Inventories by category were as follows (in thousands):
Raw materials and purchased parts
Work in process
Finished goods
Total inventories
December 30, December 31,
2023
103,118 $
26,820
25,855
155,793 $
2022
106,041
36,024
28,076
170,141
$
$
Property, Plant and Equipment – Depreciation and amortization of property, plant and equipment, both
owned and under financing lease, is calculated principally on the straight-line method based on estimated
useful lives of thirty to forty years for buildings, five to fifteen years for building improvements, three to ten
years for machinery, equipment and software and the lease life for financing leases. Land is not depreciated.
Property, plant and equipment, at cost, consisted of the following (in thousands):
Land and land improvements
Buildings and building improvements
Machinery and equipment
Less accumulated depreciation and amortization
Property, plant and equipment, net
December 30, December 31,
2023
2022
$
$
7,301 $
39,677
108,831
155,809
(86,724)
69,085 $
7,066
31,161
105,109
143,336
(78,325)
65,011
Depreciation expense was $13.4 million in 2023, $12.8 million in 2022 and $13.2 million in 2021. The
decrease in depreciation expense between 2022 and 2021 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 $12.2 million and
$14.7 million at December 30, 2023 and December 31, 2022, respectively. These amounts are recorded
within other assets in our consolidated balance sheets. Implementation costs are amortized using the
straight-line method over seven years and we recorded $2.8 million and $2.1 million in amortization
expense during the years ended December 30, 2023 and December 31, 2022, respectively.
57
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 business 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
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, 2023, 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 30, 2023, 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 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
58
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
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
59
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 standard warranties. 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 30, 2023 and December 31, 2022, we had $6.2 million and $7.1 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
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 represent 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 30, 2023, we had deferred revenue
totaling approximately $8.8 million, current deferred profit of $3.6 million and deferred profit expected to
be recognized after one year included in noncurrent other accrued liabilities of $4.9 million. 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.
60
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
$
$
2023
2022
2021
326,448
309,874
-
-
636,322
$
$
474,655
338,120
-
-
812,775
$
$
541,589
318,865
17,831
8,929
887,214
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 $0.1 million, $0.3 million and $0.6 million for the years ended
December 30, 2023, December 31, 2022 and December 25, 2021, respectively.
Share-based Compensation – We measure and recognize all share-based compensation under the fair value
method. Our estimate of share-based compensation expense requires a number of assumptions including our
stock price volatility, employee exercise patterns (expected life of the options) and related tax effects. The
assumptions used in calculating the fair value of share-based awards represent our best estimates, but these
estimates involve inherent uncertainties and the application of management judgment. Although we believe
the assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could
materially impact our reported financial results.
Foreign Remeasurement and Currency Translation – Assets and liabilities of our wholly owned foreign
subsidiaries that use the U.S. Dollar as their functional currency are re-measured using exchange rates in
effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and
equipment, which are re-measured using historical exchange rates. Revenues and costs are re-measured using
average exchange rates for the period, except for costs related to those balance sheet items that are re-
measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized
as incurred. During the year ended December 30, 2023, in our consolidated statement of income we
recognized a foreign exchange loss of $5.2 million. During the years ended December 31, 2022 and
December 25, 2021, we recognized foreign exchange gains totaling $1.6 million and $0.4 million,
respectively.
Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a
result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue
and expenses are translated using the average exchange rate for the period. Cumulative translation
adjustments resulting from the translation of the financial statements are included as a separate component of
stockholders’ equity.
Foreign Exchange Derivative Contracts – We operate and sell our products in various global markets. As a
result, we are exposed to changes in foreign currency exchange rates. To minimize foreign exchange
volatility we enter 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
61
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 8, “Derivative Financial Instruments”.
Accumulated Other Comprehensive Loss – Our accumulated other comprehensive loss totaled
approximately $34.8 million at December 30, 2023, and $40.0 million at December 31, 2022, 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 31, 2022 and then
weakened as of December 30, 2023 and consequently, our accumulated other comprehensive loss attributed
to foreign currency translation adjustments increased by $18.0 million and decreased by $6.8 million during
the years ended December 31, 2022 and December 30, 2023, respectively. Reclassification adjustments from
accumulated other comprehensive loss during 2023 and 2022 were not significant. Additional information
related to accumulated other comprehensive loss, on an after-tax basis is included in Note 16, “Accumulated
Other Comprehensive Income”.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements – In March 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848)
Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASC 848”). ASC 848 provides
temporary optional expedients and exceptions to certain U.S. GAAP contract modification requirements for
contracts affected by reference rate reform as entities transition away from the London Interbank Offered
Rate (“LIBOR”) to alternative reference rates. In December 2022, the FASB issued ASU 2022-06, Reference
Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 to defer the sunset date of ASC 848 from
December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the
optional expedients in ASC 848.
Effective June 16, 2023, we adopted ASC 848. Our Term Loan B Credit and Guaranty Agreement is our
only contract where interest expense is based on LIBOR. The ICE Benchmark Administration Limited,
LIBOR’s administrator, has ceased publishing certain LIBOR settings and stopped publishing the Overnight,
1-month, 3-month, 6-month, and 12-month USD LIBOR U.S. dollar settings in 2023. As a result, we
commenced the transition of our LIBOR-based contract to SOFR. The optional expedients under ASC 848
have allowed and will allow us to account for contract modifications as continuations of the existing contract
without further reassessments or remeasurements that would otherwise be required under the applicable U.S.
GAAP.
Subsequent to our fiscal year ended December 30, 2023, on February 9, 2024, we made a cash payment of
$29.3 million to repay the remaining outstanding principal of our Term Loan Credit Facility.
Recently Issued Accounting Pronouncements – In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires enhancements and
further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income
taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, may be applied
prospectively or retrospectively, and allows for early adoption. We are currently evaluating the impact of the
adoption of this standard.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses. The amendments in the ASU require,
among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief
operating decision maker (“CODM”) and a description of other segment items (the difference between
segment revenue less the segment expenses disclosed under the significant expense principle and each
reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and
position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit
or loss in assessing segment performance and deciding how to allocate resources. This ASU is effective for
62
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal
years beginning after December 15, 2024. Retrospective application is required, and early adoption is
permitted. We are currently evaluating the impact of the adoption of this standard.
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 30, 2023, and December 31,
2022, were as follows (in thousands):
Balance December 25, 2021
$
Impact of currency exchange
Balance December 31, 2022
Additions
Impact of currency exchange
Balance December 30, 2023
$
Total Goodwill
219,791
(6,252)
213,539
24,132
3,987
241,658
Purchased intangible assets, subject to amortization, are as follows (in thousands):
December 30, 2023
December 31, 2022
Remaining
Gross Carrying Accumulated Useful Life
Amortization
Amount
Developed technology
Customer relationships
Trade names
Backlog
Covenant not-to-compete
$
$
233,623 $
73,759
21,569
100
250
329,301 $
137,168
28,932
11,231
25
175
177,531
(years)
4.2
7.1
5.4
0.8
3.0
$
Amount
Gross Carrying Accumulated
Amortization
128,938
31,015
9,397
-
161
169,511
224,253 $
64,632
20,461
-
269
309,615 $
$
Changes in the carrying values of purchased intangible assets presented above are a result of the impact of
fluctuation in currency exchange rates, the sale of our PCB Test business and the acquisitions of MCT and
EQT.
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, 2023, 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 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 $36.4 million in 2023,
$33.2 million in 2022 and $35.4 million in 2021. As of December 30, 2023, we expect amortization expense
in future periods to be as follows: 2024 - $39.3 million; 2025 - $30.6 million; 2026 - $24.4 million; 2027 -
$20.8 million 2028 - $18.2 million; and thereafter $18.5 million.
63
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Borrowings and Credit Agreements
The following table is a summary of our borrowings as of December 30, 2023 and December 31, 2022:
(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 30, 2023
December 31, 2022
29,327
2,095
7,681
1,773
40,876
(249)
(6,324)
34,303
$
$
66,952
2,466
8,414
1,907
79,739
(764)
(6,311)
72,664
The debt principal payments, excluding financing lease obligations, for the next five years and thereafter are
as follows (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
Credit Agreement
$
$
6,459
27,018
1,197
1,203
1,258
3,741
40,876
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 was due on or before October 1, 2025. The loans under the Term Loan Credit Facility bore interest,
at Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of 3.00%. On June 16, 2023, in
connection with the discontinuation of LIBOR, we entered into an amendment to our Term Loan Credit
Facility, which provided for the transition of the benchmark interest rate from LIBOR to SOFR. Effective
with the interest period beginning July 1, 2023, LIBOR was replaced with Adjusted Term SOFR, a floating
annual rate equal to SOFR plus a margin of 3.0%. At December 30, 2023, the outstanding loan balance, net
of discount and deferred financing costs, was $29.1 million and $3.4 million of the outstanding balance is
presented as current installments of long-term debt in our consolidated balance sheets. 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. As of December 30, 2023, the fair value of the debt was $29.4 million. The
measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of
December 30, 2023 and is considered a Level 2 fair value measurement.
Under the terms of the Credit Agreement, the lender had the option to accelerate the payment terms upon the
occurrence of certain events of default set forth therein, which included: 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 30, 2023, we believe no such events of default
have occurred.
During 2023 we prepaid $34.1 million in principal of our Term Loan Credit Facility in cash. We accounted
for the prepayment as a debt extinguishment, which resulted in a loss of $0.4 million reflected in our
consolidated statement of income and a $0.4 million reduction in debt discounts and deferred financing costs
64
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in our consolidated balance sheets. During 2022 we repurchased $31.8 million in principal of our Term Loan
Credit Facility for $31.7 million in cash. We accounted for the repurchase as a debt extinguishment, which
resulted in a loss of $0.3 million reflected in our consolidated statement of income, as well as a $0.4 million
reduction in debt discounts and deferred financing costs in our consolidated balance sheets. Approximately
$29.3 million in principal of the Term Loan Credit Facility remained outstanding as of December 30, 2023.
Subsequent to our fiscal year ended December 30, 2023, on February 9, 2024, we made a cash payment of
$29.3 million to repay the remaining outstanding amounts owed under our Term Loan Credit Facility. We
accounted for the transaction as a debt extinguishment, and in the first quarter of fiscal 2024 we will
recognize a loss of $0.2 million due to the recognition of the remaining debt discount and deferred financing
costs.
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 0.45%, and expire at various dates through 2034. At December 30, 2023, the outstanding loan
balance was $2.1 million and $0.2 million of the outstanding balance is presented as current installments of
long-term debt in our consolidated balance sheets. At December 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. The fair value of the debt approximates the carrying value at
December 30, 2023.
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 30, 2023, total outstanding borrowings under the Loan Facilities was $7.7 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 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. 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 30, 2023.
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 30, 2023,
total borrowings outstanding under the revolving lines of credit were $1.8 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.
65
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 30,
2023, and December 31, 2022, no amounts were outstanding under this line of credit.
4. Restructuring Charges
MCT Integration Program
During 2023, we began a strategic restructuring and integration program in connection with the acquisition of
MCT (“MCT Integration Program”). As part of the MCT Integration Program, we consolidated MCT’s
Penang, Malaysia manufacturing operations into Cohu’s Melaka, Malaysia manufacturing operations by the
end of 2023. Relating to the facility consolidation actions, we notified certain impacted employees of a
reduction in force program and the facility consolidation and reduction in force programs are being
implemented as part of a comprehensive review of our operations and are intended to reduce our operating
cost structure and capitalize on acquisition synergies.
As a result of the activities described above, we recognized total pretax charges of $2.4 million during the
twelve months ended December 30, 2023, that are within the scope of ASC 420.
Charges related to the MCT Integration Program for the year ended December 30, 2023, were as follows:
(in thousands)
Employee severance costs
Other restructuring costs
Total
2023
2,159
262
2,421
$
$
Costs associated with restructuring activities are presented in our consolidated statements of income as
restructuring charges. Other restructuring costs include facility closure and manufacturing software
integration costs.
The following table summarizes the activity within the restructuring related accounts for the MCT
Integration Program during the year ended December 30, 2023 (in thousands):
Balance, December 31, 2022
Costs accrued
Amounts paid or charged
Impact of currency exchange
Balance, December 30, 2023
$
Xcerra Integration Program
Employee
Severance
Other Exit Costs
-
262
(262)
-
- $
-
2,159
(2,091)
-
68 $
Total
-
2,421
(2,353)
-
68
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 (“Xcerra Integration Program”). As part of the Xcerra
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 Xcerra 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 of December 31, 2022, restructuring activities
associated with the Xcerra Integration Program were materially complete. Certain end of life inventory
adjustment continued during the current year.
66
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As a result of the activities described above, we recognized total pretax (credits)/charges of $(0.1) million,
$0.2 million and $1.3 million for the years ended December 30, 2023 ,December 31, 2022 and December 25,
2021, respectively, that are within the scope of ASC 420.
All costs of the Xcerra Integration Program were incurred by our Semiconductor Test & Inspection segment.
Charges related to the Xcerra Integration Program for the years ended December 30, 2023, December 31,
2022 and December 25, 2021, were as follows (in thousands):
(in thousands)
Employee severance costs
Inventory related charges (adjustments)
Other restructuring costs
Total
$
$
2023
2022
2021
- $
(62)
-
(62) $
(8) $
(454)
613
151 $
1,161
(558)
662
1,265
Costs associated with restructuring activities were presented in our consolidated statements of income 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 were 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 Xcerra
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 30, 2023, our total accrual for restructuring related items for both the MCT and Xcerra
Integration Programs is reflected within current liabilities in our consolidated balance sheets as these
amounts are expected to be paid out in 2024. The estimated costs associated with the employee severance
and facility consolidation actions will be paid predominantly in cash. All amounts accrued related to
inventory will remain in our consolidated balance sheet until it is scrapped.
5. Financial Instruments Measured at Fair Value
Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment
grade securities. We do not hold investment securities for trading purposes. All short-term investments in
debt securities are classified as available-for-sale and recorded at fair value. Investment securities are
exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and
attempt to mitigate exposure by making high-quality investments and through investment diversification.
Gains and losses on investments are calculated using the specific-identification method and are recognized
during the period in which the investment is sold or when an investment experiences an other-than-
temporary decline in value. Factors that could indicate an impairment exists include, but are not limited to
earnings performance, changes in credit rating or adverse changes in the regulatory or economic
environment of the asset. Gross realized gains and losses on sales of short-term investments are included
in interest income. Realized gains and losses for the periods presented were not significant.
67
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investments that we have classified as short-term, by security type, are as follows (in thousands):
At December 30, 2023
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
Municipal securities
Corporate debt securities (2)
Bank certificates of deposit
U.S. treasury securities
Asset-backed securities
Foreign government security
$
$
$
$
45,105 $
20,439
15,468
8,017
741
330
90,100 $
$
147
26
20
17
-
5
215 $
$
15
116
-
10
-
-
141 $
45,237
20,349
15,488
8,024
741
335
90,174
At December 31, 2022
Gross
Gross
Unrealized
Unrealized
Losses (1)
Gains
Estimated
Fair
Value
$
30
20
1
10
-
61 $
$
240
41
418
79
-
778 $
59,073
36,479
34,197
12,658
828
143,235
Amortized
Cost
59,283 $
36,500
34,614
12,727
828
143,952 $
(1) As of December 30, 2023, the cost and fair value of investments with loss positions were approximately $38.5 million and
$38.4 million, respectively. As of December 31, 2022, the cost and fair value of investments with loss positions was
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 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 30, 2023, were as follows:
(in thousands)
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Amortized
Cost
Estimated
Fair Value
57,887
31,546
741
90,174
57,981 $
31,378
741
90,100 $
$
$
Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs
such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or
no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use
quoted market prices to determine the fair value of our investments, and they are included in Level 1. When
quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent
trading activity and other relevant information.
68
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes, by major security type, our financial instruments that are measured at fair
value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
Cash
Money market funds
Corporate debt securities
U.S. treasury securities
Bank certificates of deposit
Asset-backed securities
Foreign government security
Municipal securities
Cash
Corporate debt securities
Money market funds
Bank certificates of deposit
U.S. treasury securities
Asset-backed securities
Foreign government security
Fair value measurements at December 30, 2023 using:
Level 1
Level 2
Level 3
fair value
Total estimated
$
157,697 $
-
-
-
-
-
-
-
$
157,697 $
- $
81,115
51,949
20,349
15,488
8,024
741
335
178,001 $
- $
-
-
-
-
-
-
-
- $
157,697
81,115
51,949
20,349
15,488
8,024
741
335
335,698
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
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 2023, 2022 and
2021 we made matching contributions to the plan of $2.5 million, $2.4 million and $2.4 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
2023
2022
2021
551 $
510
(331)
(177)
553 $
954 $
56
(128)
(487)
395 $
1,223
61
(128)
72
1,228
$
$
69
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 (loss)
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
2023
2022
(21,628) $
(551)
(510)
(1,391)
(1,153)
385
-
2,177
(2,213)
(24,884)
18,411
52
860
1,153
(385)
(2,177)
1,786
19,700
(5,184) $
(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)
$
$
At December 30, 2023 and December 31, 2022, 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 $4.2 million and $6.8 million at
December 30, 2023 and December 31, 2022, respectively.
The actuarial loss of $1.4 million and the actuarial gain of $6.0 million for the years ended December 30,
2023 and December 31, 2022, 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
2023
1.5%
2.0%
2022
2.3%
3.0%
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
2023
1.5%
1.5%
2.0%
2022
2.3%
1.8%
3.0%
2021
0.2%
0.7%
1.1%
During 2024 employer and employee contributions to the Swiss Plan are expected to total $0.9 million.
Estimated benefit payments are expected to be as follows: 2024 - $1.2 million; 2025 - $1.1 million; 2026 -
$1.2 million; 2027 - $1.4 million; 2028 - $1.3 million; and $7.3 million thereafter through 2033.
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 50% debt securities and cash, 24% real estate investments, 16% 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
70
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 2023 and 2022 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 4.7% in 2023, 4.9% in 2022 and 2.5% in 2021. The annual rates of increase of the cost of health benefits
was assumed to be 7.9% and 8.7% in 2024 for pre-65 participants and post-65 participants, respectively. This
rate was then assumed to decrease 0.39% per year and 0.48% per year for pre-65 participants and post-65
participants, respectively, to 4.4% in 2033 and remain level thereafter.
Contributions to the post-retirement health benefit plan are expected to total $0.1 million in 2024. Estimated
benefit payments are expected to be as follows: 2024 - $0.1 million; 2025 - $0.1 million; 2026 - $0.1 million;
2027 - $0.1 million; 2028 - $0.1 million and $0.6 million thereafter through 2033.
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) loss
Benefits paid
Accumulated benefit obligation at end of year
Plan assets at end of year
Funded status
2023
2022
(1,657)
(78)
(6)
90
(1,651)
-
(1,651)
$
$
(2,097)
(51)
382
109
(1,657)
-
(1,657)
$
$
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 30, 2023, the
payroll liability to participants, included in accrued compensation and benefits in the consolidated balance
sheet, was approximately $0.9 million and the cash surrender value of the related life insurance policies
included in other current assets was approximately $1.4 million. At December 31, 2022, the liability totaled
$1.1 million and the corresponding assets were $1.4 million.
Employee Stock Purchase Plan – The Cohu, Inc. 1997 Employee Stock Purchase Plan (“the Plan”)
provides for the issuance of a maximum of 3,750,000 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: 2023 - 146,829; 2022 - 160,855 and
2021 - 161,351. At December 30, 2023, there were 799,669 shares available for issuance under the Plan. On
May 10, 2023, our stockholders approved an amendment to the ESPP which increased the number of ESPP
shares that may be issued by 600,000 and eliminated the requirement that no participant may purchase shares
for any offering period with a value exceeding $12,500 divided by the share value on the first date of the
offering period.
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 30,
2023, there were 3,509,023 shares available for future equity grants under the 2005 Plan. On May 10,
71
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2023, our stockholders approved amendments to the 2005 Plan which increased the shares of stock
available for issuance by 3,200,000, specified an annual limit of $750,000 on our non-employee director
compensation, increased the amounts permitted for cash payouts of performance awards from current limit
of $2,000,000 to $4,000,000 per each fiscal year and provided updated criteria for performance awards.
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
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 2023, 2022 and 2021 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
12
(12)
$
$
9.44
9.44
262
(250)
$
$
10.01
10.03
-
$
-
12
$
9.44
The aggregate intrinsic value of options exercised was $0.2 million in 2022 and $8.4 million in 2021. At
December 30, 2023, 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 30,
2023.
Restricted stock unit activity under our share-based compensation plans was as follows:
2023
2022
2021
(in thousands, except per share data)
Outstanding, beginning of year
Granted
Released
Cancelled
Outstanding, end of year
Equity-Based Performance Stock Units
Units
Wt. Avg.
Fair Value
24.55
36.66
22.33
28.62
30.52
969 $
365 $
(428) $
(22) $
884 $
Units
Wt. Avg.
Fair Value
21.16
27.74
19.94
24.33
24.55
1,058 $
431 $
(474) $
(46) $
969 $
Wt. Avg.
Units Fair Value
15.16
41.66
16.23
18.96
21.16
1,414 $
270 $
(579) $
(47) $
1,058 $
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 majority of 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.
72
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
PSU activity under our share-based compensation plans was as follows:
2023
2022
2021
(in thousands, except per share data)
Outstanding, beginning of year
Granted
Released
Cancelled
Outstanding, end of year
Units
Wt. Avg.
Fair Value
28.64
39.97
13.18
42.52
45.65
403 $
270 $
(258) $
(7) $
408 $
Units
Wt. Avg.
Fair Value
22.22
33.22
14.11
15.94
28.64
384 $
151 $
(55) $
(77) $
403 $
Wt. Avg.
Units Fair Value
15.51
425 $
51.43
93 $
21.77
(125) $
14.04
(9) $
22.22
384 $
Share-based Compensation – We estimate the fair value of our employee stock purchase plan using the
Black-Scholes valuation model. The 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 estimated fair
value of PSUs is determined on the grant date using the Monte Carlo simulation valuation model. 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
2023, 2022 and 2021 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
2023
0.0 %
36.3 %
4.5 %
0.5
2022
0.0 %
45.6 %
1.2 %
0.5
$
8.54
$
8.79
$
2023
0.0%
2022
0.0%
2021
0.0 %
58.3 %
0.1 %
0.5
9.42
2021
0.0%
73
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
2023
2022
2021
845 $
3,394
12,998
17,237
(1,770)
15,467 $
646
3,100
11,172
14,918
(4,004)
10,914
$
$
828
3,017
9,947
13,792
(722)
13,070
$
$
We account for forfeitures of plan-based awards as they occur. At December 30, 2023, we had approximately
$27.9 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 2.2 years.
7. Business Acquisitions
MCT
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 MCT 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 of which $0.6 million was used to pay former MCT CFO and CEO and
expensed as restructuring severance expense. Taking into consideration the amount expensed as severance
and the working capital adjustment receivable resulted in a final net purchase price of approximately
$26.8 million. The MCT Acquisition was a cash free debt free transaction and was subject to a working
capital adjustment for the difference between the actual and estimated net working capital. The MCT
Acquisition has been accounted for in conformity with ASC Topic 805, Business Combinations, (“ASC
805”).
The acquired assets and liabilities of MCT were recorded at their respective fair values including an amount
for goodwill representing the difference between the consideration paid and the fair value of the identifiable
net assets. The purchase price allocation was finalized during the fourth quarter of 2023. The table below
summarizes the assets acquired and liabilities assumed as of January 30, 2023 (in thousands):
Current assets, including cash received
Property, plant and equipment
Other assets
Intangible assets
Goodwill
Total assets acquired
Liabilities assumed
Net assets acquired
9,505
197
356
12,000
8,755
30,813
(4,024)
26,789
$
$
74
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The allocation of the intangible assets subject to amortization is as follows (in thousands):
Developed technology
Customer relationships
Product backlog
Total intangible assets
Weighted
Average
Useful Life
(years)
7.0
10.0
0.5
Estimated
Fair Value
7,500
4,000
500
12,000
$
$
Acquired intangible assets reported above are being amortized using the straight-line method over their
estimated useful lives which approximates the pattern of how the economic benefit is expected to be used.
This includes amounts allocated to customer relationships because of anticipated high customer retention
rates that are common in the semiconductor capital equipment industry.
The value assigned to developed technology was determined by using the relief from royalty method under
the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount
rates. Developed technology, which comprises products that have reached technological feasibility, includes
the products in MCT’s product line. The revenue estimates used to value the developed technology were
based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature
and expected timing of new product introductions by MCT and competitors. The estimated after-tax cash
flows were based on a hypothetical royalty rate applied to the revenues for the developed technology. The
discount rate utilized to discount the net cash flows of the developed technology to present value was based
on the risk associated with the respective cash flows taking into consideration the perceived risk of the
technology relative to the other acquired assets, the weighted average cost of capital, the internal rate of
return, and the weighted average return on assets.
The value assigned to customer relationships was determined by using the multi-period excess earnings
method under the income approach. The estimated cash flows were based on revenues from the existing
customers net of operating expenses and net of contributory asset charges. The discount rate utilized to
discount the net cash flows of the customer relationships to present value was based on the respective cash
flows taking into consideration the perceived risks.
The value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of
January 30, 2023, using the multi-period excess earnings method under the income approach to discount
back to present value the cash flows attributable to the backlog at a discount rate commensurate with the
expected risks of the backlog cash flows.
MCT’s results of operations have been included starting January 30, 2023. The impact of MCT on our
consolidated statements of income and comprehensive income was not material.
In connection with the MCT Acquisition, during the twelve months ended December 30, 2023 we incurred
acquisition-related costs, which were expensed as selling, general and administrative costs totaling $0.5
million. During the prior year period no acquisition-related costs were incurred.
EQT
On October 2, 2023, we completed the acquisition of Equiptest Engineering Pte. Ltd. (“EQT”), a provider of
semiconductor test contactors and other consumables. (“the EQT Acquisition”). EQT is a Singapore based
company with a principal manufacturing site located there. EQT provides test interface products including,
high performance thermal, MEMS, Infrared, Coaxial and Kelvin Contactors that expands our interface
products in mid- to high-power contactors. The EQT Acquisition was a cash free debt free transaction and
was subject to a working capital adjustment for the difference between the actual and estimated net working
capital. We made a cash payment of SGD 66.0 million ($48.3 million) on October 2, 2023, and set up a
retention sum liability for potential adjustments to working capital, future tax or insurance claims in the
amount of SGD 2.2 million ($1.6 million) resulting in an initial purchase price of SGD 68.3 million
($49.9 million). The working capital adjustment was finalized in January 2024 and an additional cash
payment was made to EQT owners of SGD 0.8 million (approximately $0.6 million). As of December 30,
75
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2023 we accrued this additional payment due to the sellers in resulting in an adjusted purchase price of
SGD 68.8 million ($50.3 million) and the additional SGD 0.5 million ($0.4 million) is accrued in the short
term other liabilities. The retention liability for net working capital, remaining tax, insurance and other claims
as of December 30, 2023 was SGD 2.2 million ($1.6 million) and $0.3 million and $1.3 million is accrued in
short term and long term other liabilities, respectively, on our consolidated balance sheet. The EQT
Acquisition has been accounted for in conformity with ASC Topic 805, Business Combinations, (“ASC
805”).
As of December 30, 2023, we have not finalized the purchase price allocation. Accordingly, the preliminary
purchase price allocation shown below could change as we are still in the process of finalizing the fair values
of the tangible and intangible assets acquired and liabilities assumed, and the related income tax effects may
still be adjusted as they are finalized during the remainder of the measurement period (which will not exceed
12 months from the acquisition closing date). The EQT Acquisition was nontaxable and certain of the assets
acquired, including goodwill and intangibles, will not be deductible for tax purposes. The acquired assets and
liabilities of EQT were recorded at their respective fair values including an amount for goodwill representing
the difference between the consideration paid and the fair value of the identifiable net assets. The table below
summarizes the assets acquired and liabilities assumed as of October 2, 2023 (in thousands):
Current assets, including cash received
Property, plant and equipment
Intangible assets
Goodwill
Total assets acquired
Liabilities assumed
Net assets acquired
$
$
10,135
538
34,500
15,377
60,550
(10,203)
50,347
The preliminary allocation of the intangible assets subject to amortization is as follows (in thousands):
Developed technology
Customer relationships
Product backlog
Trademarks and trade name
Total intangible assets
Weighted
Average
Useful Life
(years)
8.0
10.0
1.0
5.0
Estimated
Fair Value
20,600
12,900
100
900
34,500
$
$
Acquired intangible assets reported above are being amortized using the straight-line method over their
estimated useful lives which approximates the pattern of how the economic benefit is expected to be used.
This includes amounts allocated to customer relationships because of anticipated high customer retention
rates that are common in the semiconductor capital equipment industry.
The preliminary value assigned to developed technology was determined by using the relief from royalty
method under the income approach, which included assumptions related to revenue growth rates, royalty
rates, and discount rates. Developed technology, which comprises products that have reached technological
feasibility, includes the products in EQT’s product line. The revenue estimates used to value the developed
technology were based on estimates of relevant market sizes and growth factors, expected trends in
technology and the nature and expected timing of new product introductions by EQT and competitors. The
estimated after-tax cash flows were based on a hypothetical royalty rate applied to the revenues for the
developed technology. The discount rate utilized to discount the net cash flows of the developed technology
to present value was based on the risk associated with the respective cash flows taking into consideration the
perceived risk of the technology relative to the other acquired assets, the weighted average cost of capital, the
internal rate of return, and the weighted average return on assets.
The preliminary value assigned to customer relationships was determined by using the multi-period excess
earnings method under the income approach. The estimated cash flows were based on revenues from the
76
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
existing customers net of operating expenses and net of contributory asset charges. The discount rate utilized
to discount the net cash flows of the customer relationships to present value was based on the respective cash
flows taking into consideration the perceived risks.
The preliminary value assigned to backlog acquired was estimated based upon the contractual nature of the
backlog as of October 2, 2023, using the multi-period excess earnings method under the income approach to
discount back to present value the cash flows attributable to the backlog at a discount rate commensurate
with the expected risks of the backlog cash flows.
The preliminary value assigned to trademarks and trade names acquired was determined by using the using
the relief from royalty method under the income approach, which included assumptions related to revenue
growth rates, royalty rates, and discount rates.
EQT’s results of operations have been included starting October 2, 2023. The impact of EQT on Cohu’s
condensed consolidated statements of income and comprehensive income were not material.
In connection with the acquisition of EQT, during the twelve months ended December 30, 2023 we incurred
acquisition-related costs, which were expensed as selling, general and administrative costs totaling
$1.1 million. During the prior year period no acquisition-related costs were incurred.
8. 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. To minimize foreign exchange volatility we utilize 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 income
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
30, 2023 will mature during the first quarter of fiscal 2024.
The following table provides information about our foreign currency forward contracts outstanding as of
December 30, 2023 (in thousands):
Contract Position
Contract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
Currency
Euro
Swiss Franc
South Korean
Malaysian Ringgit
Won
Buy
Buy
89,186 $
10,407
2,574,040
9,200
$
98,800
12,400
2,000
2,000
115,200
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 30, 2023 was immaterial.
77
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The location and amount of losses related to non-designated derivative instruments in the consolidated
statements of income 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)
2023
(2,127) $
Fiscal Year
2022
(5,356) $
$
2021
(3,428)
9. 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-
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 30, 2023, we repurchased 700,270 shares of our common stock
for $23.6 million to be held as treasury stock. For the year ended December 31, 2022, we repurchased
1,767,070 shares of our common stock for $50.7 million. As of December 30, 2023, we may purchase up to
$58.3 million of shares of our common stock under our share repurchase program.
10. Income Taxes
Significant components of the provision (benefit) for income taxes for continuing operations are as follows:
2023
2022
2021
(in thousands)
Current:
U.S. Federal
U.S. State
Foreign
Total current
Deferred:
U.S. Federal
Foreign
Total deferred
$
$
694
86
21,654
22,434
61
(4,835)
(4,774)
17,660
$
$
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
2021
30,588
161,756
192,344
Income (loss) before income taxes from continuing operations consisted of the following:
(in thousands)
U.S.
Foreign
Total
Deferred tax effects
2023
(37,799)
83,615
45,816
$
$
2022
9,180
117,535
126,715
$
$
Except for working capital requirements in certain foreign jurisdictions, we provide for all taxes, including
78
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
withholding and other residual taxes, related to unremitted earnings of our foreign subsidiaries.
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
Uniform capitalization
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
Other
Total deferred tax liabilities
Net deferred tax liabilities
2023
2022
$
$
10,931
36,602
34,637
30,485
3,348
3,227
3,222
1,564
-
124,016
(99,888)
24,128
34,076
2,854
4,106
50
41,086
(16,958)
$
$
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)
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
2023
6,196
(23,154)
(16,958)
2022
3,930
(21,359)
(17,429)
$
$
$
$
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
79
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Statutory limitations against utilization of tax attribute carryforwards against taxable income
• Historical experience with tax attributes expiring unused
• 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 net operating losses 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 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 30, 2023, and December 31, 2022, was approximately
$99.9 million and $89.2 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 for income
taxes is as follows:
(in thousands)
Tax provision at U.S. 21% statutory rate
State income taxes, net of federal tax benefit
Accruals, 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
2023
$
9,470
(633)
579
(1,360)
(1,504)
1,375
10,654
-
-
1,735
2,093
(4,749)
$
17,660
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
$
$
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 30, 2023, we had federal, state and foreign net operating loss carryforwards of approximately
$120.9 million, $130.1 million and $13.2 million, respectively, that expire in various tax years beginning in
2024 through 2042 or have no expiration date. We also have federal and state tax credit carryforwards at
80
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 30, 2023 of approximately $4.0 million and $33.7 million, respectively, certain of which expire in
various tax years beginning in 2024 through 2042, or have no expiration date. The federal and state loss and
credit carryforwards are subject to annual limitations under Sections 382 and 383 of the Internal Revenue
Code and applicable state tax laws. We analyzed and determined that there were no ownership changes
during the three-year period ending December 30, 2023. 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 $3.8 million or $0.08 per share in 2023 and
$4.5 million, or $0.09 per share, in both fiscal 2022 and 2021.
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
Additions/(Reductions) for tax positions of prior years
Reductions due to lapse of the statute of limitations
Foreign exchange rate impact
Balance at end of year
2023
2022
2021
$
$
33,368 $
899
1,802
(295)
126
35,900 $
33,391 $
910
(428)
(354)
(151)
33,368 $
33,696
686
(83)
(1,012)
104
33,391
If the unrecognized tax benefits at December 30, 2023 are ultimately recognized, excluding the impact of
U.S. tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately
$7.5 million ($5.8 million at December 31, 2022 and $5.3 million at December 25, 2021) would result in a
reduction in our income tax expense and effective tax rate. It is reasonably possible that unrecognized tax
benefits related to transfer pricing will decrease by up to $1.1 million within the next 12 months.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. Cohu had
approximately $0.7 million and $0.6 million accrued for the payment of interest and penalties at December
30, 2023, and December 31, 2022, respectively. Interest expense, net of accrued interest reversed, was
$(0.1) million in 2023 and 2022 and $(0.2) million in 2021.
Our U.S. federal and state income tax returns for years after 2019 and 2018, 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 U.S. 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 Thailand. We believe our financial statement accruals for income taxes are
appropriate.
Tax positions have been reflected in the consolidated financial statements in accordance ASC 740, Income
Taxes. Such tax positions are, based solely on their technical merits, more likely than not to be sustained
upon examination by taxing authorities and reflect the largest amount of benefit, determined on a cumulative
probability basis, that is more likely than not to be realized upon settlement with the applicable taxing
authority with full knowledge of all relevant information. We have both intent and ability to initiate a claim
pursuant to the competent authority (e.g., Mutual Agreement Procedure) for reasonable and prudent
situations such as, for example, when the resulting tax benefit exceeds the costs involved to obtain such tax
benefit, and the success of prevailing upon pursuing the competent authority is more-likely-than-not
achievable.
81
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. 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 30, 2023 and December 31, 2022, and our consolidated
statement of income for the twelve months ended December 30, 2023 and December 31, 2022, represents the
financial position and results of our remaining reportable segment. Prior to the sale of our PCB Test business
on June 24, 2021, we reported in two segments, Semiconductor Test & Inspection and PCB Test.
(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
2021
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
82
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:
STMicroelectronics
Analog Devices
* Less than 10% of consolidated net sales.
2023
12.0%
*
2022
*
*
2021
*
14.1%
On June 24, 2021, we completed the divestment of our PCB Test business. Prior to this, no customer of our
PCB Test segment exceeded 10% of consolidated net sales for the year ended December 25, 2021.
Net sales to customers, attributed to countries based on product shipment destination, were as follows:
(in thousands)
Malaysia
Philippines
China
United States
Rest of the world
Total, net
2023
100,949
92,529
92,408
76,995
273,441
636,322
$
$
2022
99,508
111,647
146,227
79,093
376,300
812,775
$
$
2021
79,777
155,070
213,575
77,495
361,297
887,214
$
$
Geographic location of our property, plant and equipment and other long-lived assets was as follows:
(in thousands)
Property, plant and equipment:
Philippines
United States
Germany
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
12. Leases
2023
2022
$
$
$
$
22,501
16,093
15,843
7,810
4,700
2,138
69,085
149,592
111,660
63,249
60,875
4,439
2,358
1,255
393,428
$
$
$
$
14,706
18,419
15,977
9,316
4,300
2,293
65,011
158,401
131,068
43,571
12,512
4,299
2,641
1,151
353,643
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 34 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.
83
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental balance sheet information related to leases was as follows:
(in thousands)
Assets:
Classification
December 30,
2023
December 31,
2022
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
$
$
$
$
$
$
16,778
247
17,025
5,122
11
13,160
15
18,308
5.5
2.1
6.4%
4.0%
22,804
323
23,127
4,927
49
19,185
24
24,185
6.2
1.7
6.2%
2.2%
(1) Finance lease assets are recorded net of accumulated amortization of $0.3 million and $0.2 million in 2023 and 2022,
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 30,
December 31,
December 25,
2023
2022
2021
$
$
6,691
2,389
16
90
1
(29)
9,158
6,698
2,220
4
88
1
(69)
8,942
$
$
7,638
2,192
69
86
2
(81)
9,906
Net lease cost
$
Future minimum lease payments at December 30, 2023, are as follows:
$
Operating
leases
Finance
leases
Total
$
6,090
5,271
2,520
1,503
1,269
5,547
22,200
(3,918)
18,282
$
$
12
12
3
-
-
-
27
(1)
26
$
$
6,102
5,283
2,523
1,503
1,269
5,547
22,227
(3,919)
18,308
(in thousands)
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
$
84
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental cash flow information related to leases was as follows:
(in thousands)
December 30,
2023
December 31,
2022
December 25,
2021
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
Financing lease assets acquired in MCT acquisition
Operating lease assets acquired in MCT acquisition
$
$
$
$
$
$
$
6,756 $
1 $
52 $
6,716 $
1 $
167 $
- $
- $
1,415 $
19 $
130 $
2,874 $
- $
- $
7,628
1
186
54
3,866
-
-
13. 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.
14. Guarantees
Accrued Warranty
Changes in accrued warranty during the three-year period ended December 30, 2023, was as follows:
(in thousands)
Beginning balance
Warranty accruals
Warranty payments
Warranty liability transferred
Ending balance
2023
2022
2021
6,214
6,555
(7,862)
110
5,017
$
$
7,691
8,897
(10,374)
-
6,214
$
$
6,382
13,389
(11,135)
(945)
7,691
$
$
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 $0.4 million and $0.6 million at
December 30, 2023 and December 31, 2022, respectively.
15. Business Divestitures
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.
85
COHU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Accumulated Other Comprehensive Income (Loss)
Components of other comprehensive income (loss), on an after-tax basis, were as follows:
$
(in thousands)
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
Year ended December 30, 2023
Foreign currency translation adjustments
Adjustments related to postretirement benefits
Change in unrealized gain/loss on investments
Other comprehensive income
$
$
$
$
Before Tax
amount
Tax
(Expense)
Benefit
Net of Tax
Amount
(22,859)
2,920
(67)
(2,515)
(22,521)
(17,991)
6,690
(694)
(11,995)
6,256
(2,800)
793
4,249
$
$
$
$
$
$
(97)
(318)
-
-
(415)
41
(796)
-
(755)
559
425
-
984
$
$
$
$
$
$
(22,956)
2,602
(67)
(2,515)
(22,936)
(17,950)
5,894
(694)
(12,750)
6,815
(2,375)
793
5,233
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
Total accumulated other comprehensive loss
$
2023
2022
(39,493)
4,656
58
(34,779)
$
$
(46,308)
7,031
(735)
(40,012)
17. Related Party Transactions
At December 30, 2023, certain of our cash and short-term investments were held and managed by
BlackRock, Inc. which owns 15.8% of our outstanding common stock as reported in its Form 13-G/A
filing made with the Securities and Exchange Commission on January 22, 2024.
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
2023, 2022 and 2021, 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, purchases of products from ETZ, when it was a related
party, were not material.
86
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 30, 2023
and December 31, 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity
and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and 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 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of
the three years in the period ended December 30, 2023, 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 30, 2023, 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 16, 2024 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.
87
Valuation of inventories
Description of
the Matter
As of December 30, 2023, the Company’s consolidated inventories balance was $155.8 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 the determination of expected future product demand.
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 expected future product demand and data underlying the excess
and obsolete inventory valuation.
To test the valuation of inventories, our audit procedures included, among others, evaluating
expected future product demand 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 demand assumptions, and assessed the historical accuracy of management’s
estimates by comparing prior period forecasted demand to actual consumption.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1956.
San Diego, California
February 16, 2024
88
Index to Exhibits
15. (b)
The following exhibits are filed as part of, or incorporated into, the 2023 Cohu, Inc. Annual Report
on Form 10-K:
Exhibit No.
Description
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by
reference to Exhibit 3.1 from the Cohu, Inc. Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 5, 2022
Amended and Restated Bylaws of Cohu, Inc. incorporated herein by reference to Exhibit 3.1
from the Cohu, Inc. Form 8-K filed with the Securities and Exchange Commission on May 12,
2023
Description of Capital Stock incorporated herein by reference to Exhibit 4.1 from the Cohu,
Inc. Annual Report on Form 10-K filed with the Securities and Exchange Commission on
February 17, 2023
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
Cohu, Inc. 2005 Equity Incentive Plan, as amended May 10, 2023, incorporated herein by
reference to Appendix B from the Cohu, Inc. Form DEF 14A filed with the Securities and
Exchange Commission on March 28, 2023*
Cohu, Inc. 1997 Employee Stock Purchase Plan, as amended May 10, 2023, incorporated
herein by reference to Appendix C from the Cohu, Inc. Form DEF 14A filed with the Securities
and Exchange Commission on March 28, 2023*
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 filed with the
Securities and Exchange Commission on December 29, 2008*
Form of executive 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. Form 10-Q filed with the Securities and Exchange
Commission on May 5, 2023*
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*
89
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
Non-employee director fee deferral election form incorporated herein by reference to Exhibit
10.4 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 4, 2015*
Form of deferred stock agreement for shares granted pursuant to the Cohu, Inc. 2005 Equity
Incentive Plan incorporated herein by reference to Exhibit 10.5 from the Cohu, Inc. Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015*
Form of stock option agreement for use with stock options granted pursuant to the Cohu, Inc.
2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.6 from the Cohu,
Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
August 4, 2015*
Form of Indemnification Agreement, incorporated herein by reference to Exhibit 10.1 from the
Cohu, Inc. Current Report on Form 8-K 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 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 *
90
10.23
10.24
10.25
10.26
21
23
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 *
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, In
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
First Amendment to Credit and Guaranty Agreement, dated as of June 16, 2023, between
Cohu, Inc. and Deutsche Bank AG New York Branch, as administrative agent incorporated
herein by reference to Exhibit 10.1 from the Cohu, Inc. Form 8-K filed with the Securities and
Exchange Commission on June 23, 2023
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
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
97
Cohu, Inc. Policy for Recovery of Erroneously Awarded Incentive Compensation
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
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
91
Item 16. Form 10-K Summary.
None.
92
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 16, 2024
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 16, 2024
/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 16, 2024
Senior Vice President, Finance and CFO
(Principal Financial and Accounting Officer)
February 16, 2024
February 16, 2024
February 16, 2024
February 16, 2024
February 16, 2024
February 16, 2024
February 16, 2024
Director
Director
Director
Director
Director
Director
93
COHU, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Description
Allowance for doubtful accounts:
Year ended December 25, 2021
Year ended December 31, 2022
Year ended December 30, 2023
$
$
$
Additions
(Reductions)
Not
Charged
to Expense
Balance at
Beginning
of Year
Additions
Charged
to Expense
(1)
Deductions/
Write-offs
Balance
at End
of Year
128 $
290 $
199 $
14 $
(8) $
5 $
149 $
122 $
140 $
1 $
205 $
4 $
290
199
340
Reserve for excess and obsolete inventories:
Year ended December 25, 2021
Year ended December 31, 2022
Year ended December 30, 2023
$
$
$
26,937 $
(2,926) $
(2)
7,102 $
8,101 $
23,012
23,012 $
26,871 $
698 $
648 $
7,179 $
4,018 $
4,540 $
11,641 $
26,871
20,418
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.
94
SUBSIDIARIES OF COHU, INC.
LEGAL ENTITY NAME
------------------------------------------
Delta Design, Inc. (1)
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 (3)
MCT Asia (Penang) SDN BHD
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
Barbados
Massachusetts
Singapore
Costa Rica
Germany
California
Switzerland
Malaysia
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
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
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.)
Equiptest Engineering Pte. Ltd.
(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 Worldwide, LLC Philippine Office
Massachusetts
Singapore
Philippines
Malaysia
Philippines
South Korea
Taiwan
Malta
Singapore
Costa Rica
China
Philippines
Taiwan
Belgium
China
China
Philippines
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. 333-270586) 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, 333-186973
and 333-273711) 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 16, 2024, 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 30, 2023.
/s/ Ernst & Young LLP
San Diego, California
February 16, 2024
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 16, 2024
/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 16, 2024
/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 30, 2023 (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 16, 2024
/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 30, 2023 (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 16, 2024
/s/ Jeffrey D. Jones
---------------------------------------------------
Jeffrey D. Jones,
Vice President Finance and Chief Financial Officer
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BR192576-0424-10K