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2021 ANNUAL REPORT
2021
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Vision
The leading technology and service provider
of innovative interconnect solutions enabling
a smart future.
Company
Kulicke & Soffa (NASDAQ: KLIC) is a leading
provider of semiconductor and electronic
assembly solutions serving the global automotive,
consumer, communications, computing and
industrial markets. Founded in 1951, K&S
prides itself on establishing foundations for
technological advancement - creating pioneering
interconnect solutions that enable performance
improvements, power efficiency, form-factor
reductions and assembly excellence of current
and next-generation semiconductor devices.
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Dear Shareholders:
Fiscal 2021 was a significant
year, where we dramatically
enhanced profitability
and the long-term growth
prospects of our broadening
business. We reacted quickly
to customers’ aggressive
capacity and technology
needs while successfully
navigating a challenging
global supply-chain
environment and executing
on several high-potential
growth initiatives.
In addition, we also extended our global Environmental,
Social and Governance (ESG) commitments by
expanding on our corporate oversight, organizational
framework and also through the initiation of a
comprehensive global diversity and inclusion program.
We have also recently joined the Climate Disclosure
Project, which enhances the quality and transparency
of global environmental reporting efforts. Additional
information regarding our ongoing ESG program,
commitments and long-term goals will be published
within our upcoming 2021 sustainability report.
During fiscal 2021 revenue increased by 144 percent
sequentially as we reached new milestones and
achieved a new annual corporate revenue record of
$1,517 million. Through this period net income increased
to $367.2 million – an increase of 6 times from fiscal
year 2020 – highlighting the inherent leverage in the
business as well as our long-term growth potential. We
believe this new level of performance is sustainable over
the coming years with dramatic upside potential related
to ongoing and fundamental technology transitions.
Through fiscal 2021 we continued to execute on
our ongoing development efforts, close customer
engagements and market adoption of our leading
solutions. These ongoing efforts allowed us to expand
our portfolio of next-generation systems and solutions
– greatly enhancing our ability to support several
significant technology transitions within the automotive,
semiconductor and display markets.
and create additional value through several strategic
initiatives that expands our served markets and improve
our positioning with the fundamental technology
transitions outlined below.
In addition to creating value, throughout 2020 we also
delivered value by returning $85 million to shareholders
through the share repurchase and dividend programs.
Over the long-term, we continue to target returning
at least 50% of free cash flow to investors. Since
2015, we have dramatically exceeded that target
by returning 87% of free cash flows. These returns
provided a competitive dividend yield and allowed
us to opportunistically repurchase nearly 20 million
shares. Currently, we expect our dominant market share
positions, strategic long-term development and recent
entry into the advanced display space, to provide many
more opportunities for value creation and value delivery
for shareholders.
Recently, market visibility and order intake activity
improved, enhancing our near-term outlook. As we
look to fiscal 2021, we are increasingly optimistic
that a broader semiconductor recovery has begun.
This recovery is supported by smartphone demand
improvements, 5G rollouts and changing consumer
patterns which benefit our core business and new
growth prospects. We also expect our advanced
packaging, advanced display and automotive solutions
to further extend the diversification of our product
portfolio, while strengthening our long-term potential
for value creation. We are increasingly well positioned
to benefit from these new growth vectors as we execute
on our strategic path.
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Automotive – Market adoption of electric and
autonomous features are accelerating semiconductor
content per vehicle, providing many new opportunities
for our growing portfolio of electronic and battery
assembly solutions. During fiscal 2021 we strengthened
our existing positions with new power-semiconductor
offerings, including Power-C™, while also introducing
new assembly solutions that support the high-growth
cylindrical and prismatic battery assembly markets.
Semiconductor Assembly Complexity – Rising costs
and yield challenges of two-dimensional node shrink
are increasing demand for new assembly solutions
which address both high-volume and leading-edge
semiconductor applications. We anticipated this
transition and have expanded our portfolio and
access to high-growth served markets including
mobile sensing, mobile applications processors, silicon
photonics and heterogeneous integration. Our close
customer engagements and recent product adoption
are enhancing our long-term visibility. We remain very
optimistic on our positions and roadmaps regarding
these new technology-driven growth drivers effecting
our core semiconductor market.
Advanced Display – Mini and micro LED technology is
driving the need for new innovative solutions which can
efficiently assemble semiconductor dense backlighting
and self-emissive panels. Since 2017, we have developed,
gained acceptance and ramped production of the
PIXALUX™ system which now represents the world’s
largest installed base of ultra-fast advanced LED
placement equipment. During fiscal 2021 we delivered our
next-generation advanced display solution – LUMINEX™
– which has dramatically enhanced our technology lead
and customer engagements within this fast-growing and
high potential long-term technology transition.
Additional details regarding these technology
transitions, our other ongoing market opportunities and
financial expectations are detailed in our 2021 Investor
Day presentation.
K&S has a long-established history of innovation
and market leadership, although we are currently
in a uniquely exciting period. Over the past several
years we have refined the organization by fostering
empowerment and accountability at the business
unit and team level, while leveraging new external
engagements with technology partners and customers.
These past organizational refinements have increased
the effectiveness of our performance-centric
organization and have greatly enhanced our long-
term growth prospects - allowing us to efficiently
intercept market opportunities and rapidly develop new
innovations that directly address our customers’ and the
industry’s growing challenges.
The entire K&S organization remains extremely focused
to continue creating and delivering long-term value to
our shareholders.
Thank you,
FUSEN E. CHEN
President & Chief Executive Officer
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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 October 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 0-121
KULICKE AND SOFFA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
23-1498399
(IRS Employer Identification No.)
23A Serangoon North Avenue 5, #01-01, Singapore 554369
1005 Virginia Dr., Fort Washington, PA 19034
(Address of Principal Executive Offices and Zip Code)
Registrant’s telephone number, including area code: (215) 784-6000
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, Without Par Value
Trading Symbol(s)
KLIC
Name of each exchange on which registered
The Nasdaq Global Market
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 ☒(cid:2)No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
☒
☐
☐
Accelerated filer
Smaller reporting company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 3, 2021, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was
approximately $3,189.3 million based on the closing sale price as reported on The Nasdaq Global Market (reference is made to
Part II, Item 5 herein for a statement of assumptions upon which this calculation is based).
As of November 12, 2021, there were 62,421,143 shares of the registrant's common stock, without par value, outstanding.
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed on or about January 14,
2022 are incorporated by reference into Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14 herein of this Report. Such
Proxy Statement, except for the parts therein which have been specifically incorporated by reference, shall not be deemed
“filed” for the purposes of this Report on Form 10-K.
KULICKE AND SOFFA INDUSTRIES, INC.
2021 Annual Report on Form 10-K
October 2, 2021
Index
Page Number
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
Part I
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Item 6.
[Reserved]
Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
Item 10. Directors, Executive Officers and Corporate Governance
Part III
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14. Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Part IV
Item 16. Form 10-K Summary
Signatures
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Forward-Looking Statements
PART I
In addition to historical information, this filing contains statements relating to future events or our future results. These
statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section
27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and are subject to the safe harbor provisions created by statute. Such forward-looking
statements include, but are not limited to, statements with respect to our future revenue, increasing, continuing or
strengthening, or decreasing or weakening, demand for our products, replacement demand, our research and development
efforts, our ability to identify and realize new growth opportunities, our ability to control costs and our operational flexibility as
a result of (among other factors):
•
•
•
our expectations regarding the potential impacts on our business of the COVID-19 pandemic, including
supply chain disruptions, the economic and public health effects, and governmental and other responses
to these impacts;
projected growth rates in the overall semiconductor industry, the semiconductor assembly equipment
market, and the market for semiconductor packaging materials; and
projected demand for ball bonder, wedge bonder, advanced packaging and electronic assembly
equipment and for tools, spare parts and services.
Generally, words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,”
“continue,” “goal” and “believe,” or the negative of or other variations on these and other similar expressions identify
forward-looking statements. These forward-looking statements are made only as of the date of this filing. We do not undertake
to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements are based on current expectations and involve risks and uncertainties. Our future results could
differ significantly from those expressed or implied by our forward-looking statements. These risks and uncertainties include,
without limitation, those described below and under the heading “Risk Factors” in this Annual Report on Form 10-K for the
fiscal year ended October 2, 2021 (the “Annual Report” or "Form 10-K") and our other reports and registration statements
filed from time to time with the Securities and Exchange Commission. This discussion should be read in conjunction with our
audited financial statements included in this Annual Report.
We operate in a rapidly changing and competitive environment. New risks emerge from time to time and it is not possible for us
to predict all risks that may affect us. Future events and actual results, performance and achievements could differ materially
from those set forth in, contemplated by or underlying the forward-looking statements, which speak only as of the date on which
they were made. Except as required by law, we assume no obligation to update or revise any forward-looking statement to
reflect actual results or changes in, or additions to, the factors affecting such forward-looking statement. Given those risks and
uncertainties, investors should not place undue reliance on forward-looking statements as predictions of actual results.
Item 1. BUSINESS
Kulicke and Soffa Industries, Inc. ("we", the "Company" or "K&S") designs, manufactures and sells capital equipment and
tools used to assemble semiconductor devices, including integrated circuits (“ICs”), high and low powered discrete devices,
light-emitting diodes (“LEDs”), and power modules. In addition, we have a portfolio of equipment that is used to assemble
components onto electronic circuit boards. We also service, maintain, repair and upgrade our equipment, and sell consumable
aftermarket tools for our and our peer companies' equipment. Our customers primarily consist of semiconductor device
manufacturers, integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”),
other electronics manufacturers and automotive electronics suppliers.
K&S was incorporated in Pennsylvania in 1956. Our principal offices are located at 23A Serangoon North Avenue 5, #01-01,
Singapore 554369 and 1005 Virginia Dr., Fort Washington, PA 19034, and our telephone number in the United States is (215)
784-6000. We maintain a website with the address www.kns.com. We are not including the information contained on our
website as a part of, or incorporating it by reference into, this filing. We make available free of charge (other than an investor's
own Internet access charges) on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after the material is
electronically filed with or otherwise furnished to the Securities and Exchange Commission (“SEC”). Our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are also available
on the SEC's website at www.sec.gov.
1
Our year end for each of fiscal 2021, 2020 and 2019 was October 2, 2021, October 3, 2020, and September 28, 2019,
respectively.
Key Events in Fiscal 2021
Business Combination
On January 19, 2021, we entered into and closed a Stock Purchase Agreement with Uniqarta, Inc. (“Uniqarta”) and the equity
holders of Uniqarta to purchase all of Uniqarta's outstanding equity interests. The purchase price consisted of $26.5 million in
cash paid at closing. Uniqarta is a developer of laser transfer technology and the acquisition expands our presence in the LED
end market. Upon the closing of the acquisition on January 19, 2021, Uniqarta became our wholly-owned subsidiary.
COVID-19 Pandemic
The COVID-19 pandemic has significantly impacted the global economy, disrupted global supply chains, created volatility in
equity market valuations, created significant volatility and disruption in financial markets, and significantly increased
unemployment levels. In addition, the pandemic has resulted in temporary closures and failures of many businesses and the
institution of social distancing and sheltering-in-place requirements in many jurisdictions. As these measures were relaxed, in
certain jurisdictions there has been a resurgence of illnesses, which has led to more severe restrictions.
In response to the pandemic, we temporarily closed certain offices in the United States, Europe and Asia as well as executed our
Business Continuity Plan (“BCP”), which measures have disrupted how we operate our business. While we are currently
operating at full capacity in all of our manufacturing locations, work-from-home practices were instituted across many offices
worldwide, which have impacted our non-manufacturing productivity, including our research & development. At this point, our
BCP has not included significant headcount reductions or changes in our overall liquidity position. As certain countries have
relaxed the measures over the past few months, we have restarted certain activities in accordance with local guidelines.
We are impacted by the global shortage in electronic components and our supply chain is strained in some cases as the
availability of materials, logistics and freight options are challenging in many jurisdictions. As a result, we have at times
experienced delays in customer deliveries during the course of fiscal 2021. However, in most cases we successfully managed
our customers' expectations. Demand for our products was consistent with or exceeded our expectations for fiscal 2021. We
believe semiconductor industry macroeconomics have not changed and we anticipate the industry’s long-term growth
projections will normalize, but the sector could see short-term volatility and potential disruption.
Various countries have announced measures, including government grants, tax changes and tax credits, among other types of
relief, in response to the pandemic. For fiscal 2021, we received a $2.0 million COVID-19-related grant from the Singapore
government as well as other measures including rental rebates and a social insurance exemption, which are not material to our
operating results.
Based on our current evaluation, the pandemic has not had a material impact on our financial condition and operating results
through fiscal 2021. We believe that our existing cash, cash equivalents, short-term investments, existing Facility Agreements,
and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements, notwithstanding the
COVID-19 pandemic, for at least the next twelve months from the date of filing. However, as this is a highly dynamic situation,
and it is still developing rapidly, including new strains as it relates to the effectiveness and utilization rates of vaccines for
COVID-19 and its variants, there is uncertainty surrounding our business, and our near- and long-term liquidity, financial
condition and operating results could deteriorate.
For other information, please see Part II Item 1A. Risk Factors - The effects of the COVID-19 pandemic could adversely affect
our business, results of operations, and financial condition.
Share Repurchase Program
On August 15, 2017, the Company's Board of Directors authorized a program (the "Program") to repurchase up to $100 million
of the Company’s common stock on or before August 1, 2020. In 2018 and 2019, the Board of Directors increased the share
repurchase authorization under the Program to $200 million and $300 million, respectively. On July 3, 2020, the Board of
Directors increased the share repurchase authorization under the Company's existing share repurchase program by an additional
$100 million to $400 million, and extended its duration through August 1, 2022. The Company has entered into a written
trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be
suspended or discontinued at any time and is funded using the Company's available cash, cash equivalents and short-term
investments. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at
prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on
market conditions as well as corporate and regulatory considerations. During the fiscal year ended October 2, 2021, the
Company repurchased a total of approximately 215.0 thousand shares of common stock at a cost of approximately $10.2
2
million. As of October 2, 2021, our remaining share repurchase authorization under the Program was approximately $132.0
million.
Dividends
On August 26, 2021, May 28, 2021, March 5, 2021 and December 10, 2020, the Board of Directors declared a quarterly
dividend of $0.14 per share of common stock. During the fiscal year ended October 2, 2021, the Company declared dividends
of $0.56 per share of common stock. The declaration of any future cash dividend is at the discretion of the Board of Directors
and will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other
factors, as well as a determination that such dividends are in the best interests of the Company's shareholders.
Business Environment
The semiconductor business environment is highly volatile and is driven by internal dynamics, both cyclical and seasonal, in
addition to macroeconomic forces. Over the long term, semiconductor consumption has historically grown, and is forecast to
continue to grow. This growth is driven, in part, by regular advances in device performance and by price declines that result
from improvements in manufacturing technology. In order to exploit these trends, semiconductor manufacturers, both IDMs
and OSATs, periodically invest aggressively in latest generation capital equipment. This buying pattern often leads to periods of
excess supply and reduced capital spending—the so-called semiconductor cycle. Within this broad semiconductor cycle there
are also, generally weaker, seasonal effects that are specifically tied to annual, end-consumer purchasing patterns. Typically,
semiconductor manufacturers prepare for heightened demand by adding or replacing equipment capacity by the end of the
September quarter. Occasionally, this results in subsequent reductions in the December quarter. This annual seasonality can be
overshadowed by effects of the broader semiconductor cycle. Macroeconomic factors also affect the industry, primarily through
their effect on business and consumer demand for electronic devices, as well as other products that have significant electronic
content such as automobiles, white goods, and telecommunication equipment. There can be no assurances regarding levels of
demand for our products and we believe historic industry-wide volatility will persist.
In the Asia/Pacific region, our customer base has also become more geographically concentrated as a result of economic and
industry conditions. Approximately 96.4% and 94.2% of our net revenue for fiscal 2021 and 2020, respectively, was for
shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. Approximately 55.6% and 51.6% of
our net revenue for fiscal 2021 and 2020, respectively, was for shipments to customers located in China, which is subject to
risks and uncertainties related to the respective policies of the governments of China and the U.S.
The U.S. and several other countries have levied tariffs on certain goods, and have introduced other trade restrictions, which,
together with the impact of the COVID-19 pandemic discussed above, has resulted in substantial uncertainties in the
semiconductor, LED, memory and automotive markets.
Our Capital Equipment segment is primarily affected by the industry's internal cyclical and seasonal dynamics in addition to
broader macroeconomic factors that can positively or negatively affect our financial performance. The sales mix of IDM and
OSAT customers in any period also impacts financial performance, as changes in this mix can affect our products' average
selling prices and gross margins due to differences in volume purchases and machine configurations required by each customer
type.
Our Aftermarket Products and Services ("APS") segment has historically been less volatile than our Capital Equipment
segment. The APS sales are more directly tied to semiconductor unit consumption rather than capacity requirements and
production capability improvements.
We continue to position our business to leverage our research and development leadership and innovation and to focus our
efforts on mitigating volatility, improving profitability and ensuring longer-term growth. We remain focused on operational
excellence, expanding our product offerings and managing our business efficiently throughout the business cycles. Our
visibility into future demand is generally limited, forecasting is difficult, and we generally experience typical industry
seasonality.
3
To limit potential adverse cyclical, seasonal and macroeconomic effects on our financial position, we have continued our efforts
to maintain a strong balance sheet. As of October 2, 2021, our total cash, cash equivalents and short-term investments were
$739.8 million, a $209.7 million increase from the prior fiscal year end. We believe our strong cash position will allow us to
continue to invest in product development and pursue non-organic opportunities.
Technology Leadership
We compete largely by offering our customers advanced equipment and tools available for interconnect processes. We believe
our technology leadership contributes to the strong market positions of our ball bonder, wedge bonder, mini LED placement,
and tools products. To maintain our competitive advantage, we invest in product development activities designed to produce
improvements to existing products and to deliver next-generation products. These investments often focus as much on
improvements in the semiconductor assembly process as on specific pieces of assembly equipment or tools. In order to generate
these improvements, we typically work in close collaboration with customers, end users, and other industry members. In
addition to producing technical advances, these collaborative development efforts strengthen customer relationships and
enhance our reputation as a technology leader and solutions provider.
In addition to gold, silver alloy wire and aluminum wire, our leadership in the industry's use of copper wire for the bonding
process is an example of the benefits of our collaborative efforts. By working with customers, material suppliers, and other
equipment suppliers, we have developed a series of robust, high-yielding production processes, which have made copper wire
widely accepted and significantly reduced the cost of assembling an integrated circuit.
Our leadership also has allowed us to maintain a competitive position in the latest generations of ball bonders. RAPID™ is the
first product in the smart bonder series to address the Industry 4.0 requirements. The key features of this series include real-time
process & performance monitoring, real-time equipment health monitoring, advanced data analytics & traceability, predictive
maintenance monitoring & analysis, and detection & enhanced post-bond inspection.
We optimize our bonder platforms to deliver variants of our products to serve emerging high-growth markets. For example, we
have developed extensions to address opportunities in memory assembly with our RAPID™ MEM, in particular for NAND
Flash storage.
Our leading technology for wedge bonder equipment uses ribbon or heavy wire for different applications such as power
electronics, automotive and semiconductor applications. The advanced interconnect capabilities of PowerFusionPS
improve the
®
processing of high-density power packages, due to an expanded bondable area, wider leadframe capability, indexing accuracy
and teach mode. In all cases, we are making a concerted effort to develop commonality of subsystems and design practices, in
order to improve performance and design efficiencies. We believe this will benefit us as it will increase synergies between the
various engineering product groups. Furthermore, we continually research adjacent market segments where our technologies
could be used. Many of these initiatives are in the early stages of development and some have yielded results such as the
Asterion™ hybrid wedge bonder, which is built on an enhanced architecture that includes an expanded bond area, new robust
pattern recognition capabilities and extremely tight process controls. Another example of our developing equipment for high-
growth niche markets is our AT Premier PLUS. This machine utilizes a modified wire bonding process to mechanically place
bumps on devices in a wafer format, for variants of the flip chip assembly process. Typical applications include complementary
metal-oxide semiconductor (“CMOS”) image sensors, surface acoustical wave (“SAW”) filters and high brightness
LEDs. These applications are commonly used in most, if not all, smartphones available today in the market. We also have
expanded the use of AT Premier PLUS for wafer level wire bonding for micro-electro-mechanical systems (“MEMS”) and other
sensors.
Our technology leadership and bonding process know-how have enabled us to develop highly function-specific equipment with
high throughput and accuracy. This forms the foundation for our advanced packaging equipment development. We are also
developing and manufacturing advanced packaging bonders for the emerging 2.5 dimensional integrated circuit (“2.5D IC”)
and 3 dimensional integrated circuit (“3D IC”) markets. By reducing the interconnect dimensions, 2.5D ICs and 3D ICs are
expected to provide form factor, performance and power efficiency enhancements over traditional flip-chip packages in
production today. High-performance processing and memory applications, in addition to mobile devices such as smartphones
and tablets, are anticipated to be earlier adopters of this new packaging technology. Chiplets are emerging as an alternative
methodology for developing advanced system-level designs. Chiplets of various functions and typically fabricated in different
process nodes are mixed-and-matched and assembled in a package with the goal of speeding up time-to-market and reducing
cost. This methodology of developing advanced system-level designs is increasing the complexity of packages. Our leadership
in system-in-package ("SiP"), multi-chip module ("MCM") and heterogeneous integration are well positioned to address the
requirements in this emerging and growing trend.
We have also broadened our advanced packaging solutions for mass reflow to include high accuracy flip chip and fan-out wafer
level packaging ("FOWLP") with the KatalystTM. Our electronics assembly solutions are also capable of advanced package-on-
4
package, wafer level packaging ("WLP"), embedded die, and active and passive die placement for SiP, enabling us to diversify
our business while further expanding market reach into the automotive, LED lighting, medical and industrial segments.
During fiscal 2019, we entered into a new market, miniLED for display backlighting and direct emitting display, with the
launch of PIXALUXTM. The PIXALUX is a high-speed die placement equipment, and one of the most mass production ready
solutions for miniLED placement in the market. MiniLEDs are used in TV, IT display, large display, signage display, consumer
display and automotive markets. The usage of miniLEDs is expected to grow significantly over the next few years, followed by
microLED adoption. We intend to leverage the momentum we already have with PIXALUX to continue to innovate and
provide solutions to the industry to meet the challenges of packaging and assembling the next-generation of electronic devices.
In order to help strengthen this position, we have developed LUMINEXTM which is a laser-based mini and micro LED die
transfer system. It is a highly flexible system capable of a single die transfer, multi-die transfer and mass transfer for the various
applications in the advanced display value chain. LUMINEX combines laser technology, state-of-the-art optical systems,
material engineering and high precision motion control to deliver industry leading throughput and placement accuracy.
We bring the same technology focus to our tools business, driving tool design and manufacturing technology to optimize the
performance and process capability of the equipment in which our tools are used. For all our equipment products, tools are an
integral part of their process capability. We believe our unique ability to simultaneously develop both equipment and tools is a
core strength supporting our products' technological differentiation.
Customers
Our major customers include IDMs and OSATs, industrial manufacturers and automotive electronics suppliers. Revenue from
our customers may vary significantly from year-to-year based on their respective capital investments, operating expense
budgets, and overall industry trends. There was no customer with sales representing more than 10% of net revenue in fiscal
2020 and 2019.
The following table reflects our top ten customers, based on net revenue, for each of the last three fiscal years:
Fiscal 2021
1 ASE Technology Holding (1)
2 Haoseng Industrial Co., Ltd. (2)
3 Tianshui Huatian Technology Co., Ltd.
4 Forehope Electronic Co., Ltd
5 Powertech Technology Inc.
Matfron Semiconductor Technology Co.
Ltd (2)
6
7 Regent Manner Limited
Fiscal 2020
1 Forehope Electronic Co., Ltd
2 Haoseng Industrial Co., Ltd. (2)
3 ASE Technology Holding
4 Xinye Electronics Co. (2)
5 Regent Manner Limited
Fiscal 2019
1 Super Power International Ltd (2)
2 Micron Technology, Inc.
3 First Technology China, Ltd. (2)
4 ASE Technology Holding
5 Xinye Electronics Co. (2)
6 First Technology China Ltd (2)
6 Forehope Electronic Co., Ltd
Matfron Semiconductor Technology Co.
Ltd (2)
7
7 Infineon Technologies
Changjin Technology (Shanghai) Co., Ltd.
(2)
8
9 Super Power International Ltd. (2)
10 First Technology China Ltd. (2)
(1) Represents more than 10% of our net revenue for the applicable fiscal year.
(2) Distributor of our products.
8 Tesla, Inc.
9 Micron Technology, Inc.
10 ST Microelectronics
8 ST Microelectronics
9 On Semiconductor
10 Haoseng Industrial Co., Ltd. (2)
5
Sales and Customer Support
We believe long-term customer relationships are critical to our success, and comprehensive sales support and customer support
are an important means of establishing those relationships. To maintain these relationships, we primarily utilize our direct sales
force, as well as distribution channels such as agents and distributors, depending on the product, region, or end-user application.
In all cases, our goal is to position our sales support and customer support resources near our customers' facilities so as to
provide support for customers in their own language and consistent with local customs. Our sales support and customer support
resources are located primarily in Singapore, Israel, Taiwan, China, Korea, Malaysia, the Philippines, Vietnam, Japan, Thailand,
the U.S., Germany, Mexico, Switzerland and the Netherlands. Supporting these local resources, we have technology centers
offering additional process expertise in Singapore, China, Switzerland, Israel, the U.S. and the Netherlands.
By establishing relationships with semiconductor manufacturers, OSATs, and vertically integrated manufacturers of electronic
systems, we gain insight into our customers' future semiconductor packaging strategies. In addition, we also send our products
and equipment to customers or potential customers for trial and evaluation. These insights assist us in our efforts to develop
products and processes that address our customers' future assembly requirements.
Backlog
Our backlog consists of customer orders scheduled for shipment within the next twelve months. A majority of our orders are
subject to cancellation or deferral by our customers with limited or no penalties. Also, customer demand for our products can
vary dramatically without prior notice. Because of the volatility of customer demand, possibility of customer changes in
delivery schedules or cancellations and potential delays in product shipments, our backlog as of any particular date may not be
indicative of net revenue for any succeeding period.
The following table reflects our backlog as of October 2, 2021 and October 3, 2020:
(in thousands)
Backlog
Manufacturing
As of
October 2, 2021
October 3, 2020
$
787,241 $
127,924
We believe excellence in manufacturing can create a competitive advantage, both by producing at lower costs and by providing
superior responsiveness to changes in customer demand. To achieve these goals, we manage our manufacturing operations
through a single organization and believe that fewer, larger factories allow us to capture economies of scale and generate cost
savings through lower manufacturing costs.
Our equipment manufacturing activities consist mainly of integrating outsourced parts and subassemblies and testing finished
products to customer specifications. We largely utilize an outsource model, allowing us to minimize our fixed costs and capital
expenditures. For certain low-volume, high customization parts, we manufacture subassemblies ourselves. Just-in-time
inventory management has reduced our manufacturing cycle times and lowered our on-hand inventory requirements. Raw
materials used in our equipment manufacturing are generally available from multiple sources; however, many outsourced parts
and components are only available from a single or limited number of sources.
Our ball bonder, wedge bonder, AT Premier, APAMA and Katalyst bonder manufacturing and assembly is done at our facility in
Singapore. Our Hybrid and Electronic Assembly solutions manufacturing and assembly is done at our facility in the
Netherlands. We have ISO 9001 and ISO 14001 certifications for our equipment manufacturing facilities in Singapore and the
Netherlands.
We manufacture dicing blades, capillaries and a portion of our bonding wedge inventory at our facility in China. The capillaries
are made using blanks produced at our facilities in China and Israel. We both produce and outsource the production of our
bonding wedges. Both the China and Israel facilities are ISO 9001 certified. The China facility is also ISO 14001 and ISO
18001 certified.
Research and Product Development
Many of our customers generate technology roadmaps describing their projected packaging technology requirements. Our
research and product development activities are focused on delivering robust production solutions to those projected
requirements. We accomplish this by regularly introducing improved versions of existing products or by developing next-
generation products. We follow this product development methodology in all our major product lines.
6
Intellectual Property
Where circumstances warrant, we apply for patents on inventions governing new products and processes developed as part of
our ongoing research, engineering, and manufacturing activities. We currently hold a number of U.S. patents, many of which
have foreign counterparts. We believe the duration of our patents often exceeds the commercial life cycles of the technologies
disclosed and claimed in the patents. Additionally, we believe much of our important technology resides in our trade secrets and
proprietary software.
Competition
The market for semiconductor equipment and packaging materials products is intensely competitive. Significant competitive
factors in the semiconductor equipment market include price, speed/throughput, production yield, process control, delivery
time, innovation, quality and customer support, each of which contribute to lower the overall cost per package being
manufactured. Our major equipment competitors are ASM Pacific Technology, BE Semiconductor Industries N.V. and
Shinkawa Ltd.
Significant competitive factors in the semiconductor packaging materials industry include performance, price, delivery, product
life, and quality. Our significant tools competitors are PECO, Disco Corporation, Small Precision Tools and CCTC.
In each of the markets we serve, we face competition and the threat of competition from established competitors and potential
new entrants, some of which may have greater financial, engineering, manufacturing, and marketing resources.
Environmental and Other Regulatory Matters
We are subject to various federal, state, local and foreign laws and regulations governing, among other things, the generation,
storage, use, emission, discharge, transportation and disposal of hazardous materials and the health and safety of our
employees. In addition, we are subject to environmental laws which may require investigation and cleanup of any
contamination at facilities we own or operate or at third-party waste disposal sites we use or have used.
We have incurred in the past, and expect in the future to incur, costs to comply with environmental laws. We are not, however,
currently aware of any material costs or liabilities relating to environmental matters, including any claims or actions under
environmental laws or obligations to perform any cleanups at any of our facilities or any third-party waste disposal sites, that
we expect to have a material adverse effect on our business, financial condition or operating results. However, it is possible that
material environmental costs or liabilities may arise in the future.
Though the majority of our manufacturing activities take place outside of the U.S., certain of our advanced packaging products
are subject to the U.S. Export Administration Regulations ("EAR") because they are based on U.S. technology or contain more
than a de minimis amount of controlled U.S. content. The EAR require licenses for, and sometimes prohibit, the export of
certain products. The Commerce Control List (“CCL”) sets forth the types of goods and services controlled by the EAR,
including civilian science, technology, and engineering dual use items. For products listed on the CCL, a license may be
required as a condition to export depending on the end destination, end use or end user and any applicable license exceptions.
Our business is subject to various other regulations typical of businesses of our type in the jurisdictions in which we operate.
Business Continuity Management Plan
We have developed and implemented a global Business Continuity Management Plan ("BCP") for our business operations. The
BCP is designed to facilitate the prompt resumption of our business operations and functions arising from an event which
impacts or potentially impacts our business operations. As the scale, timing, and impact of disasters and disruptions are
unpredictable, the BCP has been designed to be flexible in responding to actual events as they occur. The BCP provides a
structured framework for safeguarding our employees and property, making a financial and operational assessment, protecting
our books and records, perpetuating critical business functions, and enabling the continuation of customer transactions.
Human Capital
Our Employees
Our talented employees are critical to our ability to achieve the Company's vision to be the leading technology and service
provider of innovative interconnect solutions enabling a smart future. As of October 2, 2021, we had 2,854 regular full-time
employees and 732 temporary workers worldwide.
7
Diversity & Inclusion
We are committed to providing a diverse and collaborative environment that is rich in opportunities and which enables our
employees to grow both professionally and personally in their careers within the organization. We are also committed to
treating employees with dignity and respect. Diversity is important at K&S and we believe that the combined knowledge and
diverse views that our employees contribute across our global locations strengthens our competitive edge. We value different
backgrounds and celebrate unique perspectives and believe that diversity and inclusion are essential to creating an environment
where we can achieve our best innovation essential to the success of K&S. In fiscal year 2021, the Company formalized a
Diversity & Inclusion Pillar under its Corporate Social Responsibility initiatives with a committee comprising team members
from across the globe. This committee’s vision is to enhance and improve the experience of everyone who works at the
Company; encourage and recognize their contributions and successes, in an inclusive, cohesive, and collegial environment; and
celebrate the diverse voices of our employees.
Safe Workplace
We endeavor to provide a safe and healthy workplace for all our employees. The health and safety of our employees is of
paramount importance to K&S, and forms an integral part of our organizational culture. We have Environment, Health and
Safety (EHS) practices, objectives and performance targets at each of our key manufacturing and R&D sites, which are
overseen by an EHS Committee, led by an EHS Manager or a Safety Representative from each key operations function. To
ensure that all employees are familiar with our safety standards and actions, we conduct regular health and safety-related
trainings including an online based Corporate Safety Training module as well as hands-on preparedness training comprising
periodic fire drill evacuations, first-aid, fire-fighting and hazardous chemical spillage response drills. This training is included
in our new hire on-boarding programs with employee-wide refresher trainings conducted every two years.
Additionally, as part of our business continuity measures, we have assembled a management-led COVID-19 Committee
comprising directors and managers of various key departments to provide global oversight and guidance in implementing site-
specific business continuity and risk mitigation plans across our key sites. We regularly communicate with country management
teams and tailor our policies according to the latest developments and guidelines provided by global authorities such as World
Health Organization (WHO) and the local authorities at each site with the goal of ensuring the safety of all our team members
whilst minimizing disruption to operations and providing support to our local communities.
Human Resource ("HR") Practices
At K&S, we aim to recruit, develop and retain a high performing and diverse workforce whilst fostering a safe and productive
work environment for employees to maximize individual and organizational potential. Our regional HR managers support the
local leaders and managers, ensuring that our employment and labor practices adhere to regional and local regulations. We
continually review these policies and benchmark them against market peers to help ensure that we implement leading practices
on recruitment, onboarding and employee development. Our HR function also includes centers of excellence in Talent
Management, Talent Acquisition, HR Management Information System and Compensation, ensuring best practices in these
important areas.
Employee Development
We believe in investing in our employees’ professional growth by encouraging them to continually develop their functional and
leadership skills and to gain different experiences across the Company as they progress along their career paths and grow within
our organization. Our Learning and Development Framework which is based on identified professional and management
competencies and our K&S core values, is tailored to specific target groups such as new hires, professional and support staff
levels, manager levels as well as identified key talents from our succession planning process. These development programs are
also based on the 70/20/10 learning and development model under which individuals obtain 70% of their knowledge through
experiential learning, 20% through social learning and 10% from formal educational events. We encourage our employees to
not only participate actively in technical and soft skill training programs, but also to learn through peer coaching and mentoring,
and to develop professionally through various stretch assignments and projects.
Compensation & Benefits
We strive to ensure fair and equitable pay for all employees, and we obtain market knowledge about pay levels by participating
in several globally recognized compensation surveys annually. The survey organizations pool our data together with all the
responding companies to determine market relevant pay ranges for all our positions. The Company also strives to ensure that
our employee benefits are compliant in the cities, states and countries in which we operate, while annual benefits benchmarking
ensures that our benefits are attractive in the markets where we compete for talent.
8
Employee Engagement
As part of our employee engagement initiatives, every two to three years, we conduct a global employee engagement survey,
the Voice of K&S, to gather feedback from all our employees on various aspects of their work and on our corporate culture.
Survey results are reviewed by management teams to identify improvement opportunity areas. Following employee feedback in
the last survey, the Company has introduced a formalized career progression framework and associated tools to provide clarity
and guidance to both managers and employees.
Open Door Policy
We maintain an open-door policy and provide multiple avenues for employees to voice their concerns and raise suggestions.
Employees may also report any grievances through the global Whistleblower Hotline. Employees also have access to local HR
representatives and the Global Vice President of HR.
9
Item 1A. RISK FACTORS
Semiconductor Industry and Macroeconomic Risks
Our operating results and financial condition could be adversely impacted by volatile worldwide economic conditions and
unpredictable spending by our customers due to uncertainties in the macroeconomic environment.
Though the semiconductor industry's cycle can be independent of the general economy, global economic conditions may have a
direct impact on demand for semiconductor units and ultimately demand for semiconductor capital equipment and tools.
Accordingly, our business and financial performance is impacted, both positively and negatively, by fluctuations in the
macroeconomic environment. Expenditures by our customers depend on the current and anticipated market demand for
semiconductors and products that use semiconductors, LEDs and batteries, including mobile devices, personal computers,
consumer electronics, telecommunications equipment, automotive components, electric vehicles and other industrial products.
Reductions or other fluctuations in our customers' spending as a result of uncertain conditions in the macroeconomic
environment, including from government, economic or fiscal instability, global health crises and pandemics, restricted global
credit conditions, reduced demand, unbalanced inventory levels, fluctuations in interest rates, higher energy prices, or other
conditions, could adversely affect our business, financial condition and operating results. Further, our profitability can be
affected by volatility because we incur a certain amount of fixed costs that we cannot modulate up and down to meet increases
or decreases in demand. The impact of general economic slowdowns could also make our customers cautious and delay orders
until the economic environment becomes clearer. Significant downturns in the market for semiconductor devices or in general
economic conditions reduce demand for our products and can materially and adversely affect our business, financial condition
and operating results. Our visibility into future demand is generally limited and forecasting is difficult. There can be no
assurances regarding levels of demand for our products and we believe historic, industry-wide volatility will persist.
The COVID-19 pandemic has adversely affected our business, and may in the future materially and adversely affect our
results of operations and financial condition.
The ongoing COVID-19 pandemic has significantly impacted the global economy, disrupted global supply chains, created
significant volatility and disruption in financial markets, and initially significantly increased unemployment levels. As a result
of the pandemic, many countries have suspended or restricted travel to and from affected countries and imposed quarantines. In
addition, the pandemic has resulted in temporary closures and failures of many businesses and the institution of social
distancing and sheltering-in-place requirements in many jurisdictions. As these measures begin to be relaxed, in certain
jurisdictions there has been a resurgence of illnesses, potentially leading to more severe restrictions in the future.
While we are currently operating at full capacity in all of our manufacturing locations, work-from-home practices have been
instituted from time-to-time across every office worldwide, which have impacted our non-manufacturing productivity,
including our research & development.
The COVID-19 pandemic has caused disruptions to our supply chain, including materials, equipment, engineering support and
services, due to efforts to contain the spread of COVID-19. It has also caused more difficult and more expensive travel and
transportation of our supplies and products, ultimately affecting the sales of our products. In addition, the costs of logistics have
increased, and labor shortages have further contributed to rising costs across the supply chain, further exacerbating the impact
the pandemic has had on the supply chain.
Other effects of the COVID-19 pandemic on our business will depend on future developments that cannot be accurately
predicted at this time, but may include the following:
•
•
•
•
a decrease in short-term and/or long-term demand for our products resulting from widespread business shutdowns and
slowdowns, quarantines, travel and logistics restrictions and other actions taken by governments, businesses, and the
general public in an effort to limit exposure to and spread of COVID-19;
negative impacts to our operations, technology development, new product introduction and customer qualifications
resulting from our efforts to mitigate the impact of COVID-19 through execution of our BCP;
increased volatility in the semiconductor and electric vehicle industries due to heightened uncertainty, including our
inability to keep pace relative to our competitors during a post-COVID-19 market recovery should that occur; and
reduced sales volume to or loss of customers, or cancellation, delay or reduction of backlogged customer orders.
The ultimate significance of COVID-19 on our business will depend on, among other things: the extent and duration of the
pandemic, the severity of the disease and the number of people infected with the virus; the emergence of new variants or strains
of the virus; the distribution and effectiveness of available vaccines and the rates at which they are administered; the effects on
the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting day-to-
10
day life, international travel and border crossings, and the length of time that such measures remain in place; and governmental
programs implemented to assist businesses impacted by the COVID-19 pandemic. At this time, we cannot estimate the short- or
long-term impacts of COVID-19 on our business, liquidity, results of operations or financial condition due to the unprecedented
and rapidly changing social and economic impacts associated with the COVID-19 pandemic.
We depend on our suppliers, including sole source suppliers, for critical raw materials, components and subassemblies. If
our suppliers do not deliver their products to us, or deliver non-compliant or defective products, we would be unable to
deliver our products to our customers.
Our products are complex and require raw materials, components and subassemblies having a high degree of reliability,
accuracy and performance. We rely on subcontractors to manufacture many of these components and subassemblies and we rely
on sole source suppliers for certain key technology parts and raw materials. As a result, we are exposed to a number of
significant risks, including:
•
•
•
•
•
•
•
•
•
•
•
decreased control over the manufacturing process for components and subassemblies;
changes in our manufacturing processes in response to changes in the market, which may delay our shipments;
our inadvertent use of defective or contaminated raw materials;
the relatively small operations and limited manufacturing resources of some of our suppliers, which may limit their
ability to manufacture and sell subassemblies, components or parts in the volumes we require and at acceptable quality
levels and prices;
restrictions on our ability to rely on suppliers due to changes in trade regulation as well as laws and regulations
enacted in response to concerns related to climate change, conflict minerals, or responsible sourcing practices;
the inability of suppliers to meet our or other customer demand requirements;
reliability or quality issues with certain key subassemblies provided by single source suppliers as to which we may not
have any short-term alternative;
shortages caused by disruptions at our suppliers and subcontractors for a variety of reasons, including health
pandemics (such as the current COVID-19 pandemic), regional or localized stay-at-home orders, work stoppage or
fire, earthquake, flooding or other natural disasters;
delays in the delivery of raw materials or subassemblies, which, in turn, may delay shipments to our customers;
loss of suppliers as a result of consolidation of suppliers in the industry; and
loss of suppliers because of their bankruptcy or insolvency.
If any of these risks were to materialize, we might be unable to deliver our products to our customers on time and at expected
cost, or at all. For example, during fiscal year 2021 and in the first quarter of fiscal 2022, as demand for many of our products
surged to unprecedented levels, some of our suppliers were not able to timely meet our full demand. In some cases, the
shortfalls were exacerbated by COVID-19 related disruptions. In particular, at times we were not able to obtain all our chip
requirements as the global semiconductor industry suffered broad shortages. To date, these shortages and our resulting inability
to deliver our products to some of our customers have not had a material impact on our results of operations or financial
condition. However, if demand for our products remains high or increases, or if other challenges in the supply chain continue,
our suppliers may again be unable to fulfill all our needs.
If we persistently remain unable to deliver our products to our customers for these or any other reasons, or we are unable to
meet customer expectations as to cycle time, or we are unable to maintain acceptable product quality or reliability, we may lose
customers as a result or otherwise experience a reduction in the demand for our products, as a result of which our business,
financial condition and operating results would be materially and adversely affected.
The semiconductor industry is volatile with sharp periodic downturns and slowdowns. Cyclical industry downturns are made
worse by volatile global economic conditions.
The semiconductor industry is volatile, with periods of rapid growth followed by industry-wide retrenchment. These periodic
downturns and slowdowns have in the past adversely affected our business, financial condition and operating results.
Downturns have been characterized by, among other things, diminished product demand, excess production capacity, and
accelerated erosion of selling prices. Historically these downturns have severely and negatively affected the industry's demand
for capital equipment, including assembly equipment and, to a lesser extent, tools. There can be no assurances regarding levels
11
of demand for our products. In any case, we believe the historical volatility of our business, both upward and downward, will
persist.
Difficulties in forecasting demand for our product lines may lead to periodic inventory shortages or excesses.
We typically operate our business with limited visibility of future demand. We do not have long-term contracts with many of
our customers. As a result, demand for our products in future periods is difficult to predict and we sometimes experience
inventory shortages or excesses. We generally order supplies and otherwise plan our production based on internal forecasts for
demand. We have in the past failed, and may again in the future fail, to accurately forecast demand for our products. This has
led to, and may in the future lead to, delays in product shipments or, alternatively, an increased risk of inventory obsolescence.
If we fail to accurately forecast demand for our products, our business, financial condition and operating results may be
materially and adversely affected.
Our quarterly operating results fluctuate significantly and may continue to do so in the future.
In the past, our quarterly operating results have fluctuated significantly. We expect that our quarterly results will continue to
fluctuate. Although these fluctuations are partly due to the cyclical and volatile nature of the semiconductor industry, they also
reflect other factors, many of which are outside of our control.
Some of the factors that may cause our net revenue and operating margins to fluctuate significantly from period to period are:
• market downturns;
•
•
industry inventory levels;
the mix of products we sell because, for example:
◦
◦
certain lines of equipment within our business segments are more profitable than others; and
some sales arrangements have higher gross margins than others;
•
•
•
•
•
•
•
•
canceled or deferred orders;
seasonality;
competitive pricing pressures may force us to reduce prices;
higher than anticipated costs of development or production of new equipment models;
the availability and cost of the components for our products;
delays in the development and manufacture of our new products and upgraded versions of our products and market
acceptance of these products when introduced;
customers' delay in purchasing our products due to anticipation that we or our competitors may introduce new or
upgraded products; and
our competitors' introduction of new products.
Many of our expenses, such as research and development, selling, general and administrative expenses, and interest expense, do
not vary directly with our net revenue. Our research and development efforts include long-term projects lasting a year or more,
which require significant investments. In order to realize the benefits of these projects, we believe that we must continue to
fund them even during periods when our revenue has declined. As a result, a decline in our net revenue would adversely affect
our operating results as we continue to make these expenditures. In addition, if we were to incur additional expenses in a
quarter in which we did not experience comparable increased net revenue, our operating results would decline. In a downturn,
we may have excess inventory, which could be written off. Some of the other factors that may cause our expenses to fluctuate
from period-to-period include:
•
•
•
•
timing and extent of our research and development efforts;
severance, restructuring, and other costs of relocating facilities;
inventory write-offs due to obsolescence or other causes; and
an increase in the cost of labor or materials.
Because our net revenue and operating results are volatile and difficult to predict, we believe consecutive period-to-period or
year-over-year comparisons of our operating results may not be a good indication of our future performance.
Competitive Risks
Our average selling prices usually decline over time and may continue to do so.
12
Typically, our average selling prices have declined over time due to continuous price pressure from our customers and
competitive cost reductions in our industry’s supply chains. We seek to offset this decline by continually reducing our cost
structure by consolidating operations in lower cost areas, reducing other operating costs, by pursuing product strategies focused
on product performance and customer service, and developing new products for which we are able to charge higher prices.
These efforts may not enable us to fully offset price declines, and if they do not, our financial condition and operating results
may be materially and adversely affected.
We may not be able to rapidly develop, manufacture and gain market acceptance of new and enhanced products required to
maintain or expand our business.
We believe our continued success depends on our ability to continuously develop and manufacture new products and product
enhancements on a timely and cost-effective basis. We must introduce these products and product enhancements into the market
in a timely manner in response to customers' demands for higher performance assembly equipment and leading-edge materials
customized to address rapid technological advances in integrated circuits, and capital equipment designs. Our competitors may
develop new products or enhancements to their products that offer improved performance and features, or lower prices which
may render our products less competitive. The development and commercialization of new products require significant capital
expenditures over an extended period of time, and some products we seek to develop may never become profitable. In addition,
we may not be able to develop and introduce products incorporating new technologies in a timely manner that will satisfy our
customers' future needs or achieve market acceptance. If we are not able to develop and sell our products that meet the demands
of our customers, it would result in lower net revenues and our operating results would be adversely affected.
We may be unable to continue to compete successfully in the highly competitive semiconductor equipment and packaging
materials industries.
The semiconductor equipment and packaging materials industries are very competitive. In the semiconductor equipment
industry, significant competitive factors include price, speed/throughput, production yield, process control, delivery time,
innovation, quality and customer support. In the semiconductor packaging materials industry, competitive factors include price,
delivery and quality.
In each of our markets, we face competition and the threat of competition from established competitors and potential new
entrants. In addition, established competitors may combine to form larger, better-capitalized companies. Some of our
competitors have or may have significantly greater financial, engineering, manufacturing and marketing resources than we do.
Some of these competitors are Asian and European companies that have had, and may continue to have, an advantage over us in
supplying products to local customers who appear to prefer to purchase from local suppliers.
We expect our competitors to improve their current products' performance, and to introduce new products and materials with
improved price and performance characteristics. Our competitors may independently develop technology similar to or better
than ours. They may also appropriate our technology and our intellectual property to compete against us and we may not have
adequate legal recourse. New product and material introductions by existing competitors or by new market entrants could hurt
our sales. If a semiconductor manufacturer or subcontract assembler selects a competitor's product or materials for a particular
assembly operation, we may not be able to sell products or materials to that manufacturer or assembler for a significant period
of time. Manufacturers and assemblers sometimes develop lasting relationships with suppliers and assembly equipment
providers in our industry and often go years without requiring replacement. In addition, we may have to lower our prices in
response to price cuts by our competitors, which may materially and adversely affect our business, financial condition and
operating results. If we cannot compete successfully, we could lose customers and experience reduced margins and profitability.
Geographic, Trade and Customer Risks
Substantially all of our sales, distribution channels and manufacturing operations are located outside of the U.S., which
subjects us to risks, including risks from changes in trade regulations, currency fluctuations, political instability and
conflicts.
Over 90% of our net revenue is for shipments to customers located outside of the U.S., primarily in the Asia/Pacific region. In
the Asia/Pacific region, our customer base has and continues to become more geographically concentrated in China as a result
of economic and industry conditions. Approximately 55.6%, 51.6% and 46.7% of our net revenue for fiscal 2021, 2020, and
2019, respectively, was for shipments to customers located in China.
We expect our future performance to depend on our ability to continue to compete in foreign markets, particularly in the
Asia/Pacific region. Some of these economies have been highly volatile, resulting in significant fluctuation in local currencies,
and political and economic instability. These conditions may continue or worsen, which may materially and adversely affect our
business, financial condition and operating results.
13
We also rely on non-U.S. suppliers for materials and components used in our products, and substantially all of our
manufacturing operations are located in countries other than the U.S. We manufacture our ball, wedge and APAMA bonders in
Singapore, our Hybrid and Electronic Assembly solutions in the Netherlands, our dicing blades, capillaries and bonding wedges
in China, and our capillary blanks in Israel and China. We also rely on independent foreign distribution channels for certain of
our product lines. As a result, a major portion of our business is subject to the risks associated with international, and
particularly Asia/Pacific, commerce, such as:
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stringent and frequently changing trade compliance regulations;
less protective foreign intellectual property laws;
longer payment cycles in foreign markets;
foreign exchange restrictions and capital controls, monetary policies and regulatory requirements;
restrictions or significant taxes on the repatriation of our assets, including cash;
tariff and currency fluctuations;
difficulties of staffing and managing dispersed international operations, including labor work stoppages and strikes in
our factories or the factories of our suppliers;
changes in our structure or tax incentive arrangements;
possible disagreements with tax authorities;
episodic events outside our control such as, for example, outbreaks of coronaviruses, influenza or other illnesses;
natural disasters such as earthquakes, fires or floods;
risks of war and civil disturbances or other events that may limit or disrupt manufacturing and markets;
act of terrorism that impact our operations, customers or supply chain or that target U.S. interests or U.S. companies;
seizure of our foreign assets, including cash;
changing political conditions; and
legal systems which are less developed and may be less predictable than those in the U.S.
In addition, there is a potential risk of conflict and instability in the relationship between Taiwan and China which could disrupt
the operations of our customers and/or suppliers in both Taiwan and China and our manufacturing operations in China.
Our international operations also depend on favorable trade relations between the U.S. and those foreign countries in which our
customers, subcontractors and materials suppliers have operations. A protectionist trade environment in either the U.S. or those
foreign countries in which we do business, such as a change in the current tariff structures, export compliance or other trade
policies, may materially and adversely affect our ability to sell our products in foreign markets.
Catastrophic events, such as pandemics and extreme weather events as a result of climate change, can have a material
adverse effect on our operations and financial results.
Our operations and business, and those of our customers and suppliers, can be disrupted by natural disasters, public health
issues (including the COVID-19 pandemic), cybersecurity incidents, interruptions of service from utilities, or other catastrophic
events. For example, we have at times experienced temporary disruptions in our manufacturing processes as a result of power
outages. Global climate change can result in natural disasters occurring more frequently, with greater intensity and with less
predictability. For example, in February 2021, Texas experienced historic cold weather, resulting in prolonged power outages,
which impacted our components suppliers who operate there. The long-term effects of climate change on the global economy
and the semiconductor industry in particular are unclear but could be severe. Catastrophic events could make it difficult or
impossible to manufacture or deliver products to our customers, receive materials from our suppliers, or perform critical
functions, whether on a timely basis or at all, which could adversely affect our revenue and operations. Some of the systems we
maintain as part of our business recovery plans cannot guarantee us protection from such disruptions. Furthermore, even if our
operations are unaffected or recover quickly, if our customers or suppliers cannot timely resume their own operations due to a
catastrophic event, we may be unable to fulfil our customers' orders, and experience reduced or cancelled orders or other
disruptions to our supply chain that may adversely affect our results of operations.
14
We are subject to export restrictions that may limit our ability to sell to certain customers and the U.S.-China trade war
could adversely affect our business.
The U.S. and several other countries levy tariffs on certain goods and impose other trade restrictions that may impact our
customers’ investment in manufacturing equipment, reduce the competitiveness of our products, or inhibit our ability to sell
products or purchase necessary equipment and supplies. In particular, trade tensions between the U.S. and China have been
escalating since 2018, with U.S. tariffs on Chinese goods and retaliatory Chinese tariffs on U.S. goods. We cannot predict what
further actions may ultimately be taken with respect to tariffs or trade relations between the U.S. and other countries, what
products may be subject to such actions, or what actions may be taken by other countries in response. Further changes in trade
policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw
materials, may limit our ability to produce products, increase our selling and/or manufacturing costs, reduce the
competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which
could have a material adverse effect on our business, results of operations, or financial condition.
Though nearly all of our manufacturing activities take place outside of the U.S., certain of our advanced packaging products are
subject to the EAR because they are based on U.S. technology or contain more than a de minimis amount of controlled U.S.
content. The EAR require licenses for, and sometimes prohibit, the export of certain products. The CCL sets forth the types of
goods and services controlled by the EAR, including civilian science, technology, and engineering dual use items. For products
listed on the CCL, a license may be required as a condition to export depending on the end destination, end use or end user and
any applicable license exceptions.
In 2020, the BIS amended the EAR to expand controls on certain foreign products based on U.S. technology and sold to
Huawei and certain other companies. This amendment impacts some of our advanced packaging products, which are based on
U.S. technology and are within the scope of the expanded EAR controls on Huawei. Therefore, these products cannot be sold to
Huawei, and are subject to certain end-use restrictions. To date, this amendment to the EAR has not had a material direct impact
on our business, financial condition or results of operations and we do not expect that it will, although it could have indirect
impacts, including increasing tensions in U.S. and Chinese trade relations, potentially leading to negative sentiments towards
U.S.-based companies among Chinese consumers. Additionally, some end users may prefer to avoid the U.S. supply chain to
avoid the application of these regulations.
Future changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to
decline, and therefore could have a material adverse effect on our business, financial condition or results of operations.
Because a small number of customers account for most of our sales, our net revenue could decline if we lose a significant
customer.
The semiconductor manufacturing industry is highly concentrated, with a relatively small number of large semiconductor
manufacturers and their subcontract assemblers and vertically integrated manufacturers of electronic systems purchasing a
substantial portion of our semiconductor assembly equipment and packaging materials. Sales to a relatively small number of
customers have historically accounted for a significant percentage of our net revenue. There was one customer with sales
representing more than 10% of net revenue in fiscal 2021. Sales to our ten largest customers comprised 62.0% and 50.0% of
our net revenue for fiscal 2021 and fiscal 2020, respectively.
We expect a small number of customers will continue to account for a high percentage of our net revenue for the foreseeable
future. Thus, our business success depends on our ability to maintain strong relationships with our customers. Any one of a
number of factors could adversely affect these relationships. If, for example, during periods of escalating demand for our
equipment, we were unable to add inventory and production capacity quickly enough to meet the needs of our customers, or if
because of supply chain constraints we are not able to fulfil our customers' orders, they may turn to other suppliers making it
more difficult for us to retain their business. We may also make commitments from time-to-time to our customers regarding
minimum volumes and performance standards, and if we are unable to meet those commitments, we may incur liabilities to our
customers. If we lose orders from a significant customer that we are not able to replace, if a significant customer reduces its
orders substantially, or if we incur liabilities for not meeting customer commitments, these losses, reductions or liabilities may
materially and adversely affect our business, financial condition and operating results.
We maintain a backlog of customer orders that is subject to cancellation, reduction or delay in delivery schedules, which
may result in lower than expected revenues.
We manufacture products primarily pursuant to purchase orders for current delivery or to forecast, rather than pursuant to long-
term supply contracts. As a result, we must commit resources to the manufacture of products without binding purchase
commitments from customers. The semiconductor industry is occasionally subject to double-booking and rapid changes in
customer outlooks or unexpected build ups of inventory in the supply channel as a result of shifts in end market demand and
15
macro-economic conditions. Accordingly, many of these purchase orders or forecasts may be revised or canceled without
penalty. Even in cases where our standard terms and conditions of sale or other contractual arrangements do not permit a
customer to cancel an order without penalty, we may from time to time accept cancellations to maintain customer relationships
or because of industry practice, custom or other factors. Our inability to sell products after we devote significant resources to
them could have a material adverse effect on our levels of inventory, revenues and profitability. While we currently believe our
inventory levels are appropriate for the current economic environment, continued global economic uncertainty may result in
lower than expected demand.
Human Capital Risks
Increased labor costs and competition for qualified personnel may reduce the efficiency of our flexible manufacturing model
and adversely impact our operating results.
There is some uncertainty with respect to the pace of rising labor costs in the various countries in which we operate. In addition,
there is substantial competition in China, Singapore, Israel and the Netherlands for qualified and capable manufacturing
personnel, which may make it difficult for us to recruit and retain qualified employees. For example, the Singapore border
restrictions related to COVID-19 have made hiring and retaining qualified direct labor for our Singapore manufacturing
operations in particular more difficult. If we are unable to staff sufficient personnel at our China, Singapore, Israel and the
Netherlands facilities or if there are increases in labor costs that we are unable to recover in our pricing to our customers, we
may experience increased manufacturing costs, which would adversely affect our operating results.
Our business depends on attracting and retaining management, sales and technical employees as well as on the succession
of senior management.
Our future success depends on our ability to hire and retain qualified management, sales, finance, accounting and technical
employees, including senior management. Experienced personnel with the relevant and necessary skill sets in our industry are
in high demand and competition for their talents is intense, especially in Asia, where most of the Company’s key personnel are
located. If we are unable to continue to attract and retain the managerial, marketing, finance, accounting and technical
personnel we require, our business, financial condition and operating results may be materially and adversely affected.
Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and
smooth transitions involving senior management could hinder our strategic planning and execution. From time to time, senior
management or other key employees may leave our company. While we strive to reduce the negative impact of such changes,
the loss of any key employee could result in significant disruptions to our operations, including adversely affecting the
timeliness of product releases, the successful implementation and completion of company initiatives, the effectiveness of our
disclosure controls and procedures and our internal control over financial reporting, and the results of our operations. In
addition, hiring, training, and successfully integrating replacement critical personnel could be time consuming, may cause
additional disruptions to our operations, and may be unsuccessful, which could negatively impact future revenues.
Product Risks
Alternative packaging technologies may render some of our products obsolete and materially and adversely affect our
overall business and financial results.
Alternative packaging technologies have emerged that may improve device performance or reduce the size of an integrated
circuit package, as compared to traditional wire bonding. These technologies include flip chip and wafer-level packaging. Some
of these alternative technologies eliminate the need for wires to establish the electrical connection between a die and its
package. The semiconductor industry may, in the future, shift a significant part of its volume into alternative packaging
technologies which do not employ our products. If a significant shift to alternative packaging technologies or to another
technology not offered by us were to occur, demand for our equipment and related packaging materials may be materially and
adversely affected. Given that a majority of our revenue comes from wire bonding, a reduced demand for our wire bonding
equipment could materially and adversely affect our financial results.
We send products and equipment to customers or potential customers for trial, evaluation or other purposes which may
result in retrofit charges, impairments or write-down of inventory value if the products and equipment are not subsequently
purchased by the customers.
From time to time we send certain products and equipment to customers or potential customers for testing, evaluation or other
purposes in advance of receiving any confirmation of purchase or purchase orders. Such equipment may be at the customer
location for an extended period of time per the agreements with these customers and potential customers. The customer may
refuse to buy all or partial quantities of such product or equipment and return this back to us. As a result, we may incur charges
16
to retrofit the machines or sell the machines as second hand at a lower price, and accordingly may have to record impairments
on the returned inventory, all of which would adversely affect our operating results.
Undetected problems in our products could directly impair our financial results.
If errata (deviations from product specifications) or flaws in design, production, assembly or testing of our products (by us or
our suppliers) were to occur, we could experience a rate of failure in our products that would result in materially adverse
consequences, including:
•
incurring warranty expenses;
• writing off the value of inventory;
•
disposing of products that cannot be fixed;
retrofitting products that have been shipped;
providing product replacements or modifications; and
defending against litigation.
•
•
•
Continued improvement in manufacturing capabilities, control of material and manufacturing quality and costs and product
testing are critical factors in our future growth. There can be no assurance that our efforts to monitor, develop, modify and
implement appropriate tests and manufacturing processes for our products will be sufficient to permit us to avoid a rate of
failure in our products that results in substantial delays in shipment, significant repair or replacement costs, potential damage to
our reputation or general customer dissatisfaction with our products. We may also not be able to obtain product liability or other
insurance to fully cover such risks. Any of the foregoing risks, if they were to materialize, could have a material adverse effect
on our business, results of operations or financial condition.
Operations and Supply Chain Risks
We may not be able to continue to consolidate manufacturing and other facilities or entities without incurring unanticipated
costs and disruptions to our business.
As part of our ongoing efforts to drive further efficiency, we may consolidate our manufacturing and other facilities or entities.
Should we consolidate, we may experience unanticipated events, including the actions of governments, suppliers, employees or
customers, which may result in unanticipated costs and disruptions to our business. We may also incur restructuring charges,
severance costs, asset impairments and other effects that could negatively impact our financial condition and results of
operations.
We may be materially and adversely affected by environmental and safety laws and regulations, including laws and
regulations implemented in response to climate change.
We are subject to various federal, state, local and foreign laws and regulations governing, among other things, the generation,
storage, use, emission, discharge, transportation and disposal of hazardous material, investigation and remediation of
contaminated sites and the health and safety of our employees. Increasingly, public attention has focused on the environmental
impact of manufacturing operations and the risk to neighbors of chemical releases from such operations. Regulations in
response to climate change could result in increased manufacturing costs (for us and for our suppliers) associated with air
pollution requirements and increased compliance and energy costs.
Proper waste disposal plays an important role in the operation of our manufacturing plants. In many of our facilities we
maintain wastewater treatment systems that remove metals and other contaminants from process wastewater. These facilities
operate under permits that must be renewed periodically. A violation of those permits may lead to revocation of the permits,
fines, penalties or the incurrence of capital or other costs to comply with the permits, including potential shutdown of
operations.
Compliance with existing or future land use, environmental, climate-related and health and safety laws and regulations may: (1)
result in significant costs to us for additional capital equipment or other process requirements, (2) restrict our ability to expand
our operations and/or (3) cause us to curtail our operations. We also could incur significant costs, including cleanup costs, fines
or other sanctions and third-party claims for property damage or personal injury, as a result of violations of or liabilities under
such laws and regulations. To the extent that higher costs result in higher prices for our products, we may experience a
reduction in the demand for those products, which could negatively affect our results of operations. Conversely, we may not be
able to pass these increased costs onto our customers in the form of higher prices, as a result of which our results of operations
may also be adversely affected.
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•
•
We may acquire or divest businesses or enter into joint ventures or strategic alliances, which may materially affect our
business, financial condition and operating results.
We continually evaluate our portfolio of businesses and may decide to buy or sell businesses or enter into joint ventures or other
strategic alliances. We may be unable to successfully integrate acquired businesses with our existing businesses and
successfully implement, improve and expand our systems, procedures and controls to accommodate these acquisitions. These
transactions place additional demands on our management and current labor force. Additionally, these transactions require
significant resources from our legal, finance and business teams. In addition, we may divest existing businesses, which would
cause a decline in revenue or profitability and may make our financial results more volatile. If we fail to integrate and manage
acquired businesses successfully or to mitigate the risks associated with divestitures, joint ventures or other alliances, our
business, financial condition and operating results may be materially and adversely affected.
Intellectual Property Risks
Our success depends in part on our intellectual property, which we may be unable to protect.
Our success depends in part on our proprietary technology. To protect this technology, we rely principally on contractual
restrictions (such as nondisclosure and confidentiality provisions) in our agreements with employees, subcontractors, vendors,
consultants and customers and on the common law of trade secrets and proprietary “know-how.” We also rely, in some cases, on
patent and copyright protection, although this protection may in some cases be insufficient due to the rapid development of
technology in our industry. We may not be successful in protecting our technology for a number of reasons, including the
following:
•
employees, subcontractors, vendors, consultants and customers may violate their contractual agreements, and the cost
of enforcing those agreements may be prohibitive, or those agreements may be unenforceable or more limited than we
anticipate;
foreign intellectual property laws may not adequately protect our intellectual property rights; and
our patent and copyright claims may not be sufficiently broad to effectively protect our technology; our patents or
copyrights may be challenged, invalidated or circumvented; or we may otherwise be unable to obtain adequate
protection for our technology.
Also, competitors may copy or misappropriate our trade secrets, products or designs either through lawful means of reverse
engineering or through unlawful means that we are unable to prove, in either case eroding our market share. In addition, our
partners and alliances may have rights to technology developed by us. We may incur significant expense to protect or enforce
our intellectual property rights. If we are unable to protect our intellectual property rights, our competitive position may be
weakened.
Third parties may claim we are infringing on their intellectual property, which could cause us to incur significant litigation
costs or other expenses, or prevent us from selling some of our products.
The semiconductor industry is characterized by rapid technological change, with frequent introductions of new products and
technologies. Industry participants often develop products and features similar to those introduced by others, creating a risk that
their products and processes may give rise to claims they infringe on the intellectual property of others. We may unknowingly
infringe on the intellectual property rights of others and incur significant liability for that infringement. If we are found to have
infringed on the intellectual property rights of others, we could be enjoined from continuing to manufacture, market or use the
affected product, or be required to obtain a license to continue manufacturing or using the affected product. A license could be
very expensive to obtain or may not be available at all. Similarly, changing or re-engineering our products or processes to avoid
infringing the rights of others may be costly, impractical or time consuming.
Occasionally, third parties assert that we are, or may be, infringing on or misappropriating their intellectual property rights. In
these cases, we defend, and will continue to defend, against claims or negotiate licenses where we consider these actions
appropriate. Intellectual property cases are uncertain and involve complex legal and factual questions. If we become involved in
this type of litigation, it could consume significant resources and divert our attention from our business.
Information Technology and Enterprise System Risks
We may be subject to disruptions or failures in our information technology systems and network infrastructures that could
have a material adverse effect on us.
We maintain and rely extensively on information technology systems and network infrastructures for the effective operation of
our business. We also hold large amounts of data in data center facilities around the world, primarily in Singapore and the U.S.,
18
on which our business depends. A disruption, infiltration or failure of our information technology systems or any of our data
centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power
disruptions, natural disasters or accidents could cause breaches of data security and loss of critical data, which in turn could
materially adversely affect our business. Our security procedures, such as virus protection software and our business continuity
planning, such as our disaster recovery policies and back-up systems, may not be adequate or implemented properly to fully
address the adverse effect of such events, which could adversely impact our operations. In addition, our business could be
adversely affected to the extent we do not make the appropriate level of investment in our technology systems as our
technology systems become out-of-date or obsolete and are not able to deliver the type of data integrity and reporting we need
to run our business. Furthermore, when we implement new systems and/or upgrade existing systems, we could be faced with
temporary or prolonged disruptions that could adversely affect our business.
We have experienced, and expect to continue to be subject to, cybersecurity threats and incidents, ranging from employee error
or misuse, to individual attempts to gain unauthorized access to information systems, to sophisticated and targeted measures
known as advanced persistent threats, none of which have been material to the Company to date. We devote significant
resources to network security and other measures to protect our systems and data from unauthorized access or misuse.
However, depending on the nature and scope, cybersecurity incidents could result in business disruption; the misappropriation,
corruption or loss of confidential information and critical data (of the Company or that of third parties); reputational damage;
litigation with third parties; diminution in the value of our investment in research, development and engineering; data privacy
issues; and increased cybersecurity protection and remediation costs.
We are implementing a new enterprise resource planning system. Our failure to implement it successfully, on time and on
budget could have a material adverse effect on us.
We are currently implementing a new enterprise resource planning (“ERP”) system and will be implementing the new system
over the next two years. ERP implementations are complex, time-consuming, and involve substantial expenditures on system
software and implementation activities. The ERP system will be critical to our ability to provide important information to our
management, obtain and deliver products, provide services and customer support, send invoices and track payments, fulfill
contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial
and operating results, and otherwise operate our business. ERP implementations also require transformation of business and
financial processes in order to reap the benefits of the ERP system. Any such implementation involves risks inherent in the
conversion to a new computer system, including loss of information and potential disruption to our normal operations. The
implementation and maintenance of the new ERP system has required, and will continue to require, the investment of
significant financial and human resources and the implementation may be subject to delays and cost overruns. In addition, we
may not be able to successfully complete the implementation of the new ERP system without experiencing difficulties. Any
disruptions, delays or deficiencies in the design and implementation or the ongoing maintenance of the new ERP system could
adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track
payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on
our financial and operating results, including reports required by the SEC, and otherwise operate our business. Additionally, if
we do not effectively implement the ERP system as planned or the system does not operate as intended, the effectiveness of our
internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.
Currency and Tax Risks
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
Because most of our foreign sales are denominated in U.S. dollar or Euro, an increase in value of the U.S. dollar or the Euro
against foreign currencies will make our products more expensive than those offered by some of our foreign competitors. In
addition, a weakening of the U.S. dollar against other currencies other than the Euro could make our costs in non-U.S. locations
more expensive to fund. Our ability to compete overseas may therefore be materially and adversely affected by the fluctuations
of the U.S. dollar or the Euro against other currencies.
Because nearly all of our business is conducted outside the U.S., we face exposure to adverse movements in foreign currency
exchange rates which could have a material adverse impact on our financial results and cash flows. Historically, our primary
exposures have related to net working capital exposures denominated in currencies other than the foreign subsidiaries'
functional currency, and remeasurement of our foreign subsidiaries' net monetary assets from the subsidiaries' local currency
into the subsidiaries' functional currency. In general, an increase in the value of the U.S. dollar could require certain of our
foreign subsidiaries to record translation and remeasurement gains. Conversely, a decrease in the value of the U.S. dollar could
require certain of our foreign subsidiaries to record losses on translation and remeasurement. An increase in the value of the
U.S. dollar could increase the cost to our customers of our products in those markets outside the U.S. where we sell in U.S.
dollars, and a weakened U.S. dollar could increase the cost of local operating expenses and procurement of raw materials, both
19
of which could have an adverse effect on our cash flows. Our primary exposures include the Singapore Dollar, Chinese Yuan,
Japanese Yen, Swiss Franc, Philippine Peso, Thai Baht, Taiwan Dollar, South Korean Won, Israeli Shekel and Euro. Although
we from time to time have entered into foreign exchange forward contracts to hedge certain foreign currency exposure of our
operating expenses, our attempts to hedge against these risks may not be successful and may result in a material adverse impact
on our financial results and cash flows.
Changes to our existing tax incentive in Singapore may materially reduce our reported results of operations in future
periods.
Our existing tax incentive, scheduled to expire in our fiscal 2025, allows certain classes of income to be subject to reduced
income tax rates in Singapore provided we meet certain employment and investment conditions. If we cannot, or elect not to,
comply with these conditions, we could be required to refund material tax benefits previously realized with respect to this tax
incentive. Subsequent renewals are at the discretion of the Singapore government and we may not be able to extend the tax
incentive arrangement beyond its expiration date or we may also elect not to renew this tax incentive arrangement. In the
absence of the tax incentive, the income tax rate in Singapore that would otherwise apply is 17%, which would result in a
significant increase in our provision for (benefit from) income taxes in future periods.
Changes in tax legislation could adversely impact our future profitability.
We are subject to income taxes in the U.S. and many foreign jurisdictions. Tax laws and regulations are continuously evolving
with corporate tax reform, base-erosion efforts, and increased transparency continuing to be high priorities in many tax
jurisdictions in which we operate. Although the timing and methods of implementation may vary, many countries, including
those in the Asia/Pacific region in which we have significant operations, have implemented, or are in the process of
implementing, legislation or practices inspired by the base erosion and profit shifting project undertaken by the Organization
for Economic Co-operation and Development ("OECD"). Also, while too early to predict the outcome, if the tax regulation
changes contemplated by the Biden administration and the recent OECD agreement on global minimum tax of 15% were to be
enacted, they could materially increase future tax expense. Further, the increased scrutiny on international tax and continuous
changes to countries’ tax legislation may also affect the policies and decisions of tax authorities with respect to certain income
tax and transfer pricing positions taken by the Company in prior or future periods. We continue to monitor new tax legislation
or other developments since significant changes in tax legislation, or in the interpretation of existing legislation, could
materially and adversely affect our financial condition and operating results.
Other changes in taxation could materially impact our future effective tax rate.
Additionally, our future effective tax rate could be affected by numerous other factors including higher or lower than anticipated
foreign earnings in various jurisdictions where we are subjected to tax rates that differ from the U.S. federal statutory tax rate,
by changes in the valuation allowances recorded against certain deferred tax balances, or by changes in accounting principles
and reporting requirements, or interpretations and application thereof. Changes in our assertion for foreign earnings
permanently or non-permanently reinvested as a result of changes in facts and circumstances and challenges by tax authorities
to our historic or future tax positions and transfer pricing policies could also significantly adversely impact our future effective
tax rate.
Risks Related to Our Shares and Corporate Law
We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common
shares.
We may from time to time issue additional equity securities or securities convertible into equity securities, which would result
in dilution of our existing shareholders' equity interests in us. Our board of directors has the authority to issue, without vote or
action of shareholders, preferred shares in one or more series, and has the ability to fix the rights, preferences, privileges and
restrictions of any such series. Any such series of preferred shares could contain dividend rights, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our
common shares. In addition, we are authorized to issue, without shareholder approval, up to an aggregate of 200 million
common shares, of which approximately 61.9 million shares were outstanding as of October 2, 2021. We are also authorized to
issue, without shareholder approval (except as required by the rules of the Nasdaq stock market), securities convertible into
either common shares or preferred shares. We may issue such shares in connection with financing transactions, joint ventures,
mergers and acquisitions or other purposes. In addition, our shareholders will experience additional dilution when performance
or restricted share units vest and settle, when we issue equity awards to our employees under our equity incentive plans, or
when we otherwise issue additional equity.
Anti-takeover provisions in our articles of incorporation and bylaws and under Pennsylvania law may discourage other
companies from attempting to acquire us.
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Some provisions of our articles of incorporation and bylaws as well as Pennsylvania law may discourage some transactions
where we would otherwise experience a fundamental change. For example, our articles of incorporation and bylaws contain
provisions that:
•
•
•
classify our board of directors into four classes, with one class being elected each year;
permit our board to issue “blank check” preferred shares without shareholder approval; and
prohibit us from engaging in some types of business combinations with a holder of 20% or more of our voting
securities without super-majority board or shareholder approval.
Further, under the Pennsylvania Business Corporation Law, because our shareholders approved bylaw provisions that provide
for a classified board of directors, shareholders may remove directors only for cause. These provisions and some other
provisions of the Pennsylvania Business Corporation Law could delay, defer or prevent us from experiencing a fundamental
change and may adversely affect our common shareholders' voting and other rights.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
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Item 2. PROPERTIES
The following table reflects our major facilities as of October 2, 2021:
Facility (1)
Approximate Size Function
Business Segment Lease Expiration Date
Singapore
221,000 sq. ft.
Corporate headquarters, manufacturing,
technology, sales and service center
Capital Equipment
November 2043 (2)
Suzhou, China
Eindhoven, The
Netherlands
Fort Washington,
Pennsylvania
Santa Ana,
California
Haifa, Israel
155,000 sq. ft.
116,000 sq. ft.
88,000 sq. ft.
65,000 sq. ft.
31,000 sq. ft.
Manufacturing, technology and shared
support services center
Manufacturing, technology, sales and
service center
Corporate headquarters, technology,
sales and service center
Technology, sales and service center
Manufacturing and technology center
APS
Capital Equipment
Capital Equipment
Capital Equipment
APS
Owned
September 2030 (3)
Owned
August 2036 (4)
October 2037 (5)
(1) Each of the facilities listed in this table is leased other than the facility in Suzhou, China and Fort Washington,
Pennsylvania
(2) Includes lease extension periods at the Company's option. Initial lease expires in November 2023.
(3) Includes lease extension periods at the Company's option. Initial lease expires in September 2025.
(4) Includes lease extension periods at the Company's option. Initial lease expires in August 2026.
(5) Includes lease extension periods at the Company's option. Initial lease expires in October 2027.
In addition, the Company rents space for sales support, customer support, services and administrative functions in China,
Germany, Japan, Malaysia, South Korea, Switzerland, Taiwan, Thailand, Vietnam and the Philippines. The Company believes
the facilities are generally in good condition and suitable to the extent of utilization needed.
Item 3. LEGAL PROCEEDINGS
From time to time, we may be a plaintiff or defendant in cases arising out of our business. We are party to ordinary, routine
litigation incidental to our business. We cannot be assured of the results of any pending or future litigation, but we do not
believe resolution of any currently pending matters will materially or adversely affect our business, financial condition or
operating results.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
22
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on The Nasdaq Global Market (“Nasdaq”) under the symbol “KLIC.” On November 12, 2021,
there were approximately 170 holders of record of the shares of outstanding common stock.
On August 26, 2021, May 28, 2021, March 5, 2021 and December 10, 2010, the Board of Directors declared a quarterly
dividend $0.14 per share of common stock. During the fiscal year ended October 2, 2021, the Company declared dividends of
$0.56 per share of common stock. The declaration of any future cash dividend is at the discretion of the Board of Directors and
will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other
factors, as well as a determination that such dividends are in the best interests of the Company's stockholders.
For the purpose of calculating the aggregate market value of shares of our common stock held by non-affiliates, as shown on
the cover page of this report, we have assumed all of our outstanding shares were held by non-affiliates except for shares held
by our directors and executive officers. However, this does not necessarily mean that all directors and executive officers of the
Company are, in fact, affiliates of the Company, or there are no other persons who may be deemed to be affiliates of the
Company. Further information concerning the beneficial ownership of our executive officers, directors and principal
shareholders will be included in our Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission on or about January 14, 2022.
Recent Sales of Unregistered Securities and Use of Proceeds
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes the repurchases of common stock during the three months ended October 2, 2021 (in
thousands, except per share amounts):
Period
July 4, 2021 to July 31, 2021
August 1, 2021 to September 4, 2021
September 5, 2021 to October 2, 2021
For the three months ended October 2, 2021
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
52.91
65.86
66.12
22 $
8 $
32 $
62
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar
Value of Shares That
May Yet Be
Purchased Under the
Plans or Programs (1)
134,579
134,038
131,961
22 $
8 $
32 $
62
(1) On August 15, 2017, the Company's Board of Directors authorized a program (the "Program") to repurchase up to
$100 million in total of the Company's common stock on or before August 1, 2020. In 2018 and 2019, the Board of
Directors increased the share repurchase authorization under the Program to $200 million and $300 million,
respectively. On July 3, 2020, the Board of Directors increased the share repurchase authorization under the
Company’s existing share repurchase program by an additional $100 million to $400 million, and extended its duration
through August 1, 2022. The Company may purchase shares of its common stock through open market and privately
negotiated transactions at prices deemed appropriate by management. The Company has entered into a written trading
plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be
suspended or discontinued at any time and will be funded using the Company's available cash, cash equivalents and
short-term investments. The timing and amount of repurchase transactions under the Program depend on market
conditions as well as corporate and regulatory considerations.
Item 6. [Reserved]
Not applicable.
23
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition to historical information, this filing contains statements relating to future events or our future results. These
statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section
27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and are subject to the safe harbor provisions created by statute. Such forward-looking
statements include, but are not limited to, statements with respect to our future revenue, increasing, continuing or
strengthening, or decreasing or weakening, demand for our products, replacement demand, our research and development
efforts, our ability to identify and realize new growth opportunities, our ability to control costs and our operational flexibility as
a result of (among other factors):
•
•
•
our expectations regarding the potential impacts on our business of the COVID-19 pandemic, including
supply chain disruptions, the economic and public health effects, and of governmental and other
responses to these impacts;
projected growth rates in the overall semiconductor industry, the semiconductor assembly equipment
market, and the market for semiconductor packaging materials; and
projected demand for ball bonder, wedge bonder, advanced packaging and electronic assembly
equipment and for tools, spare parts and services.
Generally, words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,”
“continue,” “goal” and “believe,” or the negative of or other variations on these and other similar expressions identify
forward-looking statements. These forward-looking statements are made only as of the date of this filing. We do not undertake
to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements are based on current expectations and involve risks and uncertainties. Our future results could
differ significantly from those expressed or implied by our forward-looking statements. These risks and uncertainties include,
without limitation, those described below and under the heading “Risk Factors” in this Annual Report on Form 10-K and our
other reports and registration statements filed from time to time with the Securities and Exchange Commission. This discussion
should be read in conjunction with our audited financial statements included in this Annual Report.
We operate in a rapidly changing and competitive environment. New risks emerge from time to time and it is not possible for us
to predict all risks that may affect us. Future events and actual results, performance and achievements could differ materially
from those set forth in, contemplated by or underlying the forward-looking statements, which speak only as of the date on which
they were made. Except as required by law, we assume no obligation to update or revise any forward-looking statement to
reflect actual results or changes in, or additions to, the factors affecting such forward-looking statements. Given those risks and
uncertainties, investors should not place undue reliance on forward-looking statements as predictions of actual results.
This section of this Form 10-K generally discusses fiscal 2021 and 2020 items and year-to-year comparisons between
fiscal 2021 and 2020. Discussions of fiscal 2019 items and year-to-year comparisons between fiscal 2020 and 2019 that are not
included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2020.
Our Management's Discussion and Analysis ("MD&A") is provided in addition to the accompanying consolidated financial
statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. The
MD&A is organized as follows:
• Overview: Introduction of our operations, key events, business environment, technology leadership, products and
services
• Critical Accounting Policies
• Recent Accounting Pronouncements
• Results of Operations
• Liquidity and Capital Resources
• Other Obligations and Contingent Payments
Overview
For an overview of our business, see "Part I – Item 1. – Business".
24
Critical Accounting Policies
The preparation of consolidated financial statements requires us to make assumptions, estimates and judgments that affect the
reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of contingent
assets and liabilities as of the date of the consolidated financial statements. On an ongoing basis, we evaluate estimates,
including, but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory, carrying value and
lives of fixed assets, goodwill and intangible assets, income taxes, equity-based compensation expense and warranties. We base
our estimates on historical experience and on various other assumptions that we believe to be reasonable. As a result, we make
judgments regarding the carrying values of our assets and liabilities that are not readily apparent from other sources.
Authoritative pronouncements, historical experience and assumptions are used as the basis for making estimates, and on an
ongoing basis, we evaluate these estimates. Actual results may differ from these estimates.
We believe the following critical accounting policies, which have been reviewed with the Audit Committee of our Board of
Directors, reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy
performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the
Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a
contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.
The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally
upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered
transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the
customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our
standard commercial terms and is not contingent upon resale of the products.
Our business is subject to contingencies related to customer orders, including:
• Right of Return: A large portion of our revenue comes from the sale of equipment used in the semiconductor assembly
process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally
maintained at low stock levels at the customer's facility. Customer returns have historically represented a very small
percentage of customer sales on an annual basis.
• Warranties: Our equipment is generally shipped with a one-year warranty against manufacturing defects. We establish
reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for
estimated warranty expense is based upon historical experience and management's estimate of future expenses,
including product parts replacement, freight charges and labor costs expected to be incurred to correct product failures
during the warranty period.
• Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In
certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in
accordance with customer specifications or when installed at the customer's facility. In such cases, if the terms of
acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon
shipment. If the terms of acceptance are satisfied at our customers' facilities, the revenue for the equipment will not be
recognized until acceptance, which is typically obtained after installation and testing, is received from the customer.
Service revenue is generally recognized over time as the services are performed.
The Company measures revenue based on the amount of consideration we expect to be entitled to in exchange for products or
services. Any variable consideration such as sales incentives are recognized as a reduction of net revenue at the time of revenue
recognition.
The length of time between invoicing and payment is not significant under our payment terms. In instances where the timing of
revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a
significant financing component. Shipping and handling costs billed to customers are recognized in net revenue.
Shipping and handling costs paid by the Company are included in cost of sales.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from our customers' failure to make required
payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make
25
payments, additional allowances may be required. We are subject to concentrations of customers and sales to a few geographic
locations, which could also impact the collectability of certain receivables. If global or regional economic conditions deteriorate
or political conditions were to change in some of the countries where we do business, it could have a significant impact on our
results of operations, and our ability to realize the full value of our accounts receivable.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. We generally provide reserves for
obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as 18 months
forecasted future consumption for equipment, 24 months forecasted future consumption for spare parts, and 12 months
forecasted future consumption for tools. Forecasted consumption is based upon internal projections, historical sales volumes,
customer order activity and a review of consumable inventory levels at customers' facilities. We communicate forecasts of our
future consumption to our suppliers and adjust commitments to those suppliers accordingly. If required, we reserve the
difference between the carrying value of our inventory and the lower of cost or net realizable value, based upon projections
about future consumption, and market conditions. If actual market conditions are less favorable than projections, additional
inventory reserves may be required.
Inventory reserve provision for certain subsidiaries is determined based on management's estimate of future consumption for
equipment and spare parts. This estimate is based on historical sales volumes, internal projections and market developments and
trends.
Accounting for Impairment of Goodwill
ASC No. 350, Intangibles-Goodwill and Other requires goodwill and other intangible assets with indefinite lives to be reviewed
for impairment annually, or more frequently if circumstances indicate a possible impairment. We assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after
assessing the qualitative factors, a company determines that it is not more likely than not that the fair value of a reporting unit is
less than its carrying value, then performing the impairment test is unnecessary. However, if a company concludes otherwise,
then it is required to perform the goodwill impairment test. The Company's impairment test is performed by comparing the fair
value of a reporting unit with its carrying value, and determining if the carrying amount exceeds its fair value.
As part of the annual evaluation, the Company performs an impairment test of its goodwill in the fourth quarter of each fiscal
year to coincide with the completion of its annual forecasting and refreshing of its business outlook processes. On an ongoing
basis, the Company monitors if a “triggering” event has occurred that may have the effect of reducing the fair value of a
reporting unit below its respective carrying value. Adverse changes in expected operating results and/or unfavorable changes in
other economic factors used to estimate fair values could result in a non-cash impairment charge in the future.
Impairment assessments inherently involve judgment as to the assumptions made about the expected future cash flows and the
impact of market conditions on those assumptions. Future events and changing market conditions may impact the assumptions
as to prices, costs, growth rates or other factors that may result in changes in the estimates of future cash flows. Although the
Company believes the assumptions that it has used in testing for impairment are reasonable, significant changes in any one of
the assumptions could produce a significantly different result. Indicators of potential impairment, including significant and
unforeseen customer losses, a significant adverse change in legal factors or in the business climate, a significant adverse action
or assessment by a regulator, a significant stock price decline or unanticipated competition, may lead the Company to perform
interim goodwill impairment assessments.
For further information on goodwill and other intangible assets, see Note 4 to our consolidated financial statements in Item 8.
Income Taxes
In accordance with ASC No. 740, Income Taxes, deferred income taxes are determined using the balance sheet method. The
Company records a valuation allowance to reduce its deferred tax assets to the amount expected, on a more likely than not
basis, to be realized. While the Company has considered future taxable income and ongoing tax planning strategies in assessing
the need for the valuation allowance, if it were to determine that it would be able to realize its deferred tax assets in the future
in excess of its net recorded amount, an adjustment to deferred tax assets would increase income in the period when such
determination is made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred
tax assets in the future, an adjustment to deferred tax assets would decrease income in the period when such determination is
made.
The Company determines the amount of unrecognized tax benefit with respect to uncertain tax positions taken or expected to
be taken on its income tax returns in accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”). Under
ASC 740.10, the Company utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition,
26
requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be
sustained upon examination solely based on its technical merit. Step two, or measurement, is based on the largest amount of
benefit, which is more likely than not to be realized on settlement with the taxing authority, including resolution of related
appeals or litigation processes, if any.
Equity-Based Compensation
The Company accounts for equity-based compensation under the provisions of ASC No. 718, Compensation - Stock
Compensation (“ASC 718”). ASC 718 requires the recognition of the fair value of the equity-based compensation in net
income. Compensation expense associated with Relative TSR Performance Share Units is determined using a Monte-Carlo
valuation model, and compensation expense associated with time-based and Growth Performance Share Units is determined
based on the number of shares granted and the fair value on the date of grant. See Note 11 to our consolidated financial
statements in Item 8 for a summary of the terms of these performance-based awards. The fair value of the Company's stock
option awards are estimated using a Black-Scholes option valuation model. The fair value of equity-based awards is amortized
over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the
adoption of ASC 718.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to our consolidated financial statements in Item 8 for a description of certain recent accounting pronouncements,
including the expected dates of adoption and effects on our consolidated results of operations and financial condition.
RESULTS OF OPERATIONS
Results of Operations for fiscal 2021 and 2020
The following table reflects our income from operations for fiscal 2021 and 2020:
(dollar amounts in thousands)
Net revenue
Cost of sales
Gross profit
Selling, general and administrative
Research and development
Operating expenses
Income from operations
Bookings and Backlog
$
Fiscal
2021
1,517,664 $
820,678
696,986
2020
623,176 $
325,201
297,975
147,061
137,478
284,539
116,007
123,459
239,466
$ Change
% Change
894,488
495,477
399,011
31,054
14,019
45,073
143.5 %
152.4 %
133.9 %
26.8 %
11.4 %
18.8 %
$
412,447 $
58,509 $
353,938
604.9 %
Our backlog consists of customer orders scheduled for shipment within the next twelve months. A booking is recorded when a
customer order is reviewed and it is determined that all specifications can be met, production (or service) can be scheduled, a
delivery date can be set, and the customer meets our credit requirements. We use bookings to evaluate the results of our
operations, generate future operating plans and assess the performance of our company. While we believe that this measure is
useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a
substitute for revenue recognized in accordance with GAAP. In addition, other companies, including companies in our industry,
may calculate bookings differently or not at all, which reduces its usefulness as a comparative measure. Reconciliation of
bookings to net revenue is not practicable. A majority of our orders are subject to cancellation or deferral by our customers with
limited or no penalties. Also, customer demand for our products can vary dramatically without prior notice. Because of the
volatility of customer demand, possibility of customer changes in delivery schedules or cancellations and potential delays in
product shipments, our backlog as of any particular date may not be indicative of net revenue for any succeeding period.
27
The following tables reflect our bookings and backlog for fiscal 2021 and 2020:
(in thousands)
Bookings
Fiscal
2021
2020
$
2,176,981 $
646,389
As of
(in thousands)
Backlog
The semiconductor industry is volatile and our operating results are adversely impacted by volatile worldwide economic
conditions. Though the semiconductor industry's cycle can be independent of the general economy, global economic conditions
may have a direct impact on demand for semiconductor units and ultimately demand for semiconductor capital equipment and
expendable tools. Accordingly, our business and financial performance is impacted, both positively and negatively, by
fluctuations in the macroeconomic environment. Our visibility into future demand is generally limited and forecasting is
difficult. There can be no assurances regarding levels of demand for our products and we believe historical industry-wide
volatility will persist.
October 3, 2020
October 2, 2021
787,241 $
$
127,924
The U.S. and several other countries have levied tariffs on certain goods. In particular, trade tensions between the U.S. and
China have been escalating since 2018, with U.S. tariffs on Chinese goods and retaliatory Chinese tariffs on U.S. goods. These
have resulted in uncertainties in the semiconductor, LED, memory and automotive markets. While the Company anticipates
long-term growth in semiconductor consumption, we observed trade-related adverse impacts in demand from China from the
fourth quarter of fiscal 2018 through fiscal 2020, and such impacts may arise again in fiscal 2022 and/or beyond.
Net Revenue
Our net revenues for fiscal 2021 increased as compared to our net revenues for fiscal 2020. The increase in net revenue is
primarily due to higher volume in both Capital Equipment and APS.
The following table reflects net revenue by business segment for fiscal 2021 and 2020:
(dollar amounts in
thousands)
Capital Equipment
APS
Total net revenue
Capital Equipment
$
$
Fiscal
2021
2020
$ Change
% Change
Net revenue
1,312,576
205,088
1,517,664
% of total net
revenue
86.5 % $
13.5 %
100.0 % $
Net revenue
462,059
161,117
623,176
% of total net
revenue
74.1 % $
25.9 %
100.0 % $
850,517
43,971
894,488
184.1 %
27.3 %
143.5 %
For fiscal 2021, the higher Capital Equipment net revenue as compared to fiscal 2020 was driven by growing demand in the
general semiconductor end market for consumer applications and 5G transition, automotive end market, memory end market
and in the LED end market for both the adoption of the advanced LED display and sequential improvements for general
lighting LED.
APS
For fiscal 2021, the higher APS net revenue as compared to fiscal 2020 was primarily due to higher volume in spares, services
and bonding tools.
28
Gross Profit Margin
The following table reflects gross profit as a percentage of net revenue by business segment for fiscal 2021 and 2020:
Capital Equipment
APS
Total gross margin
Capital Equipment
Fiscal
2021
2020
44.0 %
58.2 %
45.9 %
44.7 %
56.7 %
47.8 %
Basis point
change
(70)
150
(190)
For fiscal 2021, the lower Capital Equipment gross profit margin as compared to fiscal 2020 was primarily driven by an
increased gross margin in fiscal 2020 due to a warranty reserve revision, partially offset by more favorable product mix.
APS
For fiscal 2021, the higher APS gross profit margin as compared to fiscal 2020 was primarily driven by favorable product mix
in spares and services.
Income from Operations
For fiscal 2021, total income from operations was higher as compared to fiscal 2020. This was primarily due to increased
revenue in fiscal 2021, partially offset by higher operating expenses.
The following tables reflect income from operations by business segment for fiscal 2021 and 2020:
(dollar amounts in thousands)
Capital Equipment
APS
Total income from operations
Capital Equipment
Fiscal
2021
355,982 $
56,465
412,447 $
$
$
2020
$ Change
% Change
22,069 $
36,440
58,509 $
333,913
20,025
353,938
1,513.0 %
55.0 %
604.9 %
For fiscal 2021, the higher Capital Equipment income from operations as compared to fiscal 2020 was primarily due to higher
demand as explained under 'Net Revenue' above. This was partially offset by higher operating expenses as explained under
'Operating Expenses' below.
APS
For fiscal 2021, the higher APS income from operations as compared to fiscal 2020 was primarily due to higher demand as
explained under 'Net Revenue' above. This was partially offset by higher operating expenses as explained under 'Operating
Expenses' below.
Operating Expenses
The following table reflects operating expenses for fiscal 2021 and 2020:
(dollar amounts in thousands)
Selling, general and administrative
Research and development
Total
Fiscal
2021
147,061 $
137,478
284,539 $
$
$
2020
116,007 $
123,459 $
239,466 $
$ Change
% Change
31,054
14,019
45,073
26.8 %
11.4 %
18.8 %
29
Selling, General and Administrative (“SG&A”)
For fiscal 2021, the higher SG&A expenses as compared to fiscal 2020 were primarily due to $22.1 million higher staff costs
related to an increase in incentive compensation and headcount, and $9.5 million in sales representative commissions.
Research and Development (“R&D”)
For fiscal 2021, the higher R&D expenses as compared to fiscal 2020 were primarily due to higher staff costs related to an
increase in incentive compensation and headcount, and increased engineering services. These were partially offset by lower
spending on prototype materials.
Interest Income and Expense
The following table reflects interest income and interest expense for fiscal 2021 and 2020:
(dollar amounts in thousands)
Interest income
Interest expense
Interest income
Fiscal
2021
2020
$
$
2,321 $
(218) $
7,541 $
(1,716) $
$ Change
(5,220)
1,498
% Change
(69.2) %
(87.3) %
For fiscal 2021, the lower interest income as compared to fiscal 2020 was primarily due to lower weighted average interest rates
on cash, cash equivalents and short-term investments.
Interest expense
For fiscal 2021, the lower interest expense as compared to fiscal 2020 was primarily due to lower levels of average short-term
debt outstanding. Please refer to Note 10: Debt and Other Obligations to our consolidated financial statements in Item 8 for a
discussion of the Overdraft Facility.
Provision for Income Taxes
The following table reflects the provision for income taxes and the effective tax rate for fiscal 2021 and 2020:
(dollar amounts in thousands)
Provision for income taxes
Effective tax rate
Fiscal
$
2021
2020
47,295 $
11.4 %
11,998 $
18.6 %
Change
35,297
(7.2) %
For fiscal 2021, the effective tax rate differed from the U.S. federal statutory tax rate primarily due to tax benefits from tax
incentives, foreign earnings subject to a lower statutory tax rate than the U.S. federal statutory tax rate, tax credits generated
during the fiscal year, and the net release of valuation allowances recorded against certain loss and credit carryforwards,
partially offset by tax expense related to deemed income and undistributed foreign earnings.
For fiscal 2020, the effective tax rate differed from the U.S. federal statutory tax rate primarily due to tax benefits from tax
incentives, foreign earnings subject to a lower statutory tax rate than the U.S. federal statutory tax rate, and tax credits
generated during the fiscal year net of a $3.5 million out of period adjustment, partially offset by tax expense related to deemed
income, net increase of valuation allowances recorded against certain deferred tax assets, undistributed foreign earnings, and
other non-deductible items. The $3.5 million out of period adjustment was to correct previously unrecorded income tax expense
related to prior years jurisdictional adjustments. The Company determined that the out of period adjustment to the provision of
income taxes and income taxes payable was not material to its fiscal 2020 or prior period consolidated financial statements.
Please refer to Note 15: Income Taxes to our consolidated financial statements in Item 8.
30
LIQUIDITY AND CAPITAL RESOURCES
The following table reflects total cash, cash equivalents and short-term investments as of October 2, 2021 and October 3, 2020:
(dollar amounts in thousands)
Cash and cash equivalents
Short-term investments
Total cash, cash equivalents, and short-term investments
Percentage of total assets
$
$
October 2, 2021
October 3, 2020
Change
362,788 $
377,000
739,788 $
46.2 %
188,127 $
342,000
530,127 $
50.3 %
174,661
35,000
209,661
The following table reflects summary Consolidated Statement of Cash Flow information for fiscal 2021 and 2020:
As of
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
$
Changes in cash, and cash equivalents $
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period $
Fiscal
2021
300,032 $
(81,707)
(44,258)
594
174,661 $
188,127
362,788 $
2020
94,412
(125,957)
(145,809)
1,297
(176,057)
364,184
188,127
Fiscal 2021
Net cash provided by operating activities consisted of net income of $367.2 million, non-cash adjustments of $21.2 million and
a net unfavorable change in operating assets and liabilities of $88.3 million. The net change in operating assets and liabilities
was primarily driven by an increase in accounts and notes receivable of $221.9 million, inventories of $52.7 million, and
prepaid expenses and other current assets of $4.6 million. This was partially offset by an increase in accounts payable and
accrued expenses and other current liabilities of $182.0 million, and income tax payable of $7.7 million.
The increase in accounts payable and accrued expenses and other current liabilities was primarily due to higher purchases due
to higher manufacturing activities. The increase in inventories was due to increased manufacturing activities in fiscal 2021 in
response to increased sales. The increase in accounts receivable was due to higher sales.
The net cash used in investing activities was primarily due to net purchases of short-term investments of $35.0 million, the
Uniqarta acquisition of $26.3 million, and capital expenditures of $22.8 million, partially offset by proceeds from the sale of an
equity-method investment of $2.1 million.
The net cash used in financing activities was primarily due to dividend payments of $33.5 million, and common stock
repurchases of $10.4 million.
Fiscal 2020
Net cash provided by operating activities consisted of net income of $52.3 million, non-cash adjustments of $34.9 million and a
net favorable change in operating assets and liabilities of $7.2 million. The net change in operating assets and liabilities was
primarily driven by an increase in accounts payable and accrued expenses and other current liabilities of $38.1 million. This
was partially offset by an increase in inventories of $26.2 million, and prepaid expenses and other current assets of $3.6 million,
and an increase in accounts and notes receivable of $1.9 million.
The increase in accounts payable and accrued expenses and other current liabilities was primarily due to higher purchases due
to higher manufacturing activities. The increase in inventories was due to increased manufacturing activities in fiscal 2020 in
response to increased sales. The increase in accounts receivable was due to higher sales.
The net cash used in investing activities was primarily due to net purchases of short-term investments of $113.0 million, capital
expenditures of $11.7 million and an equity investment of $1.3 million.
The net cash used in financing activities was primarily due to a net repayment of short-term debt of $60.9 million, common
stock repurchases of $54.5 million, and dividend payments of $30.2 million.
31
Fiscal 2022 Liquidity and Capital Resource Outlook
We expect our fiscal 2022 capital expenditures to be between $38.0 million and $42.0 million. The actual amounts for fiscal
2022 will vary depending on market conditions. Expenditures are anticipated to be primarily used for R&D projects,
enhancements to our manufacturing operations, improvements to our information technology security, implementation of an
enterprise resource planning system and leasehold improvements for our facilities.
We believe that our existing cash and investments and anticipated cash flows from operations will be sufficient to meet our
liquidity and capital requirements for at least the next twelve months from the date of filing. Our liquidity is affected by many
factors, some based on normal operations of our business and others related to global economic conditions and industry
uncertainties, which we cannot predict. We also cannot predict economic conditions and industry downturns or the timing,
strength or duration of recoveries. We intend to continue to use our cash for working capital needs and for general corporate
purposes.
We may seek, as we believe appropriate, additional debt or equity financing which would provide capital for corporate
purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible
acquisitions and investments. The timing and amount of potential capital requirements cannot be determined at this time and
will depend on a number of factors, including our actual and projected demand for our products, semiconductor and
semiconductor capital equipment industry conditions, competitive factors, and the condition of financial markets.
As of October 2, 2021 and October 3, 2020, approximately $724.5 million and $492.0 million of cash, cash equivalents, and
short-term investments were held by the Company's foreign subsidiaries, respectively, with a large portion of the cash amounts
expected to be available for use in the U.S. without incurring additional U.S. income tax.
The Company’s international operations and capital requirements are funded primarily by cash generated by foreign operating
activities and cash held by foreign subsidiaries. Most of the Company's operations and liquidity needs are outside the U.S. In
fiscal 2021, the Company’s U.S. operations and capital requirements have been funded primarily by cash generated from
U.S. operating activities, repatriation of cash generated by foreign operating activities, and by a Facility Agreement with MUFG
Bank, Ltd. In the future, the Company may repatriate additional cash held by foreign subsidiaries that has already been subject
to U.S. tax. We believe these future repatriations of cash and our U.S. sources of cash and liquidity are sufficient to meet our
other business needs in the U.S. for the foreseeable future including funding of U.S. operations, capital expenditures, repayment
of outstanding balances under the Facility Agreement with MUFG Bank, Ltd., dividend program, and the share repurchase
program as approved by the Board of Directors. Should the Company’s U.S. cash needs exceed its funds generated by U.S. and
foreign operations due to changing business conditions or transactions outside the ordinary course, such as acquisitions of large
capital assets, businesses or any other capital appropriation in the U.S., the Company may require additional financing in
the U.S. In this event, the Company could seek U.S. borrowing alternatives.
Share Repurchase Program
On August 15, 2017, the Company's Board of Directors authorized the Program to repurchase up to $100 million of the
Company’s common stock on or before August 1, 2020. In 2018 and 2019, the Board of Directors increased the share
repurchase authorization under the Program to $200 million and $300 million, respectively. On July 3, 2020, the Board of
Directors increased the share repurchase authorization under the Company's existing share repurchase program by an additional
$100 million to $400 million, and extended its duration through August 1, 2022. The Company has entered into a written
trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be
suspended or discontinued at any time and is funded using the Company's available cash, cash equivalents and short-term
investments. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at
prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on
market conditions as well as corporate and regulatory considerations.
During the fiscal year ended October 2, 2021, the Company repurchased a total of approximately 215.0 thousand shares of
common stock at a cost of approximately $10.2 million. As of October 2, 2021, our remaining share repurchase authorization
under the Program was approximately $132.0 million.
Dividends
On August 26, 2021, May 28, 2021, March 5, 2021 and December 10, 2020, the Board of Directors declared a quarterly
dividend $0.14 per share of common stock. During the fiscal year ended October 2, 2021, the Company declared dividends of
$0.56 per share of common stock. The declaration of any future cash dividend is at the discretion of the Board of Directors and
will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other
factors, as well as a determination that such dividends are in the best interests of the Company's stockholders.
32
Other Obligations and Contingent Payments
In accordance with U.S. generally accepted accounting principles, certain obligations and commitments as of October 2, 2021
are appropriately not included in the Consolidated Balance Sheets and Statements of Operations in this Form 10-K. However,
because these obligations and commitments are entered into in the normal course of business and because they may have a
material impact on our liquidity, we have disclosed them in the table below.
Additionally, as of October 2, 2021, the Company had deferred tax liabilities of $32.8 million and unrecognized tax benefit
recorded within the income tax payable for uncertain tax positions of $15.0 million, including related accrued interest of $1.7
million. These amounts are not included in the contractual obligation table below because we are unable to reasonably estimate
the timing of these payments at this time.
The following table presents certain payments due by the Company under contractual obligations with minimum firm
commitments as of October 2, 2021:
Payments due in
(in thousands)
Inventory purchase obligations (1)
U.S. one-time transition tax payable (2)
(reflected on our Balance Sheets)
Total
Total
$ 591,845
Less than 1 year 1 - 3 years 3 - 5 years
591,845 $
— $
— $
60,870
$ 652,715 $
6,461
19,329
598,306 $ 19,329 $ 35,080 $
35,080
More than 5
years
—
—
—
(1) We order inventory components in the normal course of our business. A portion of these orders are non-cancellable and a
portion may have varying penalties and charges in the event of cancellation.
(2) Associated with the U.S. one-time transition tax on certain earnings and profits of our foreign subsidiaries in relation to the
U.S. Tax Cuts and Jobs Act of 2017.
Off-Balance Sheet Arrangements
Credit Facilities
On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility
Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company and one
of its subsidiaries with an overdraft facility of up to $150.0 million (the “Overdraft Facility”) for general corporate purposes.
Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days written demand by the Bank.
Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the overnight
U.S. Dollar LIBOR rate plus a margin of 1.5% per annum. The Overdraft Facility is an unsecured facility per the terms of the
Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation,
covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of two of its subsidiaries
(the "Subsidiaries"), or encumber its assets with material security interests (including any pledge of monies in the Subsidiaries'
cash deposit account with the Bank). The Facility Agreements also contain typical events of default, including, without
limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company and
any breach of a representation or warranty under the Facility Agreements. As of October 2, 2021, there were no outstanding
amounts under the Overdraft Facility.
As of October 2, 2021, other than the bank guarantee disclosed in Note 10, we did not have any other off-balance sheet
arrangements, such as contingent interests or obligations associated with variable interest entities.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our available-for-sale securities, if applicable, may consist of short-term investments in highly rated debt instruments of the
U.S. Government and its agencies, financial institutions, and corporations. We continually monitor our exposure to changes in
interest rates and credit ratings of issuers with respect to any available-for-sale securities and target an average life to maturity
of less than 18 months. Accordingly, we believe that the effects to us of changes in interest rates and credit ratings of issuers are
limited and would not have a material impact on our financial condition or results of operations.
33
Foreign Currency Risk
Our international operations are exposed to changes in foreign currency exchange rates due to transactions denominated in
currencies other than the location's functional currency. Our international operations are also exposed to foreign currency
fluctuations that impact the remeasurement of net monetary assets of those operations whose functional currency, the U.S.
dollar, differs from their respective local currencies, most notably in Israel, Singapore and Switzerland. Our U.S. operations
also have foreign currency exposure due to net monetary assets denominated in currencies other than the U.S. dollar. In addition
to net monetary remeasurement, we have exposures related to the translation of subsidiary financial statements from their
functional currency, the local currency, into its reporting currency, the U.S. dollar, most notably in the Netherlands, China,
Taiwan, Japan and Germany.
Based on our foreign currency exposure as of October 2, 2021, a 10.0% fluctuation could impact our financial position, results
of operations or cash flows by $2.0 to $3.0 million. Our attempts to hedge against these risks may not be successful and may
result in a material adverse impact on our financial results and cash flow.
We enter into foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated expenses
in the normal course of business and, accordingly, they are not speculative in nature. These instruments generally mature within
twelve months. We have foreign exchange forward contracts with a notional amount of $57.7 million outstanding as
of October 2, 2021.
34
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Kulicke and Soffa Industries, Inc. listed in the index appearing under Item 15(a)(1)
herein are filed as part of this Report under this Item 8.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Kulicke and Soffa Industries, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Kulicke and Soffa Industries, Inc. and its subsidiaries (the
“Company”) as of October 2, 2021 and October 3, 2020, and the related consolidated statements of operations, of
comprehensive income, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended
October 2, 2021, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the
period ended October 2, 2021 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of October 2, 2021, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of October 2, 2021 and October 3, 2020, and the results of its operations and its cash flows for each
of the three years in the period ended October 2, 2021 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of October 2, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (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
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated 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 consolidated
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 consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) 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
35
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) 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.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters 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.
Realizability of deferred income taxes
As described in Notes 1 and 15 to the consolidated financial statements, as of October 2, 2021, the Company's gross deferred
tax assets balance of $45.0 million was partially offset by valuation allowances of $34.1 million. The net release of valuation
allowances charged to the consolidated statement of operations during the year was $11.6 million. As disclosed, management
recorded a valuation allowance to reduce its deferred tax assets to the amount expected, on a more likely than not basis, to be
realized. Management has considered future taxable income in assessing the need for the valuation allowance.
The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets
is a critical audit matter are (i) our assessment that this is an area of significant judgment by management in determining the
realizability of deferred tax assets; and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures
to evaluate management's forecasted future taxable income for certain foreign jurisdictions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
realizability of deferred tax assets, including controls over management's process for developing forecasted future taxable
income for certain foreign jurisdictions. These procedures also included, among others, testing management's process for
determining the realizability of deferred tax assets for certain foreign jurisdictions, and evaluating management's forecasted
future taxable income for certain foreign jurisdictions, which considered (i) current and past results; (ii) consistency with
external market and industry data; (iii) availability of objectively verifiable data; (iv) a comparison of the prior year estimates to
actual results in the current year; and (v) whether these forecasts were consistent with evidence obtained in other areas of the
audit.
/s/ PricewaterhouseCoopers LLP
Singapore
November 18, 2021
We have served as the Company’s auditor since 2011.
36
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amount)
As of
October 2, 2021
October 3, 2020
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts and notes receivable, net of allowance for doubtful accounts of $687 and
$968, respectively
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Operating right-of-use assets
Goodwill
Intangible assets, net
Deferred tax assets
Equity investments
Other assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Operating lease liabilities
Accrued expenses and other current liabilities
Income taxes payable
Total current liabilities
Deferred tax liabilities
Income taxes payable
Operating lease liabilities
Other liabilities
TOTAL LIABILITIES
Commitments and contingent liabilities (Note 17)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value:
Authorized 5,000 shares; issued - none
Common stock, no par value:
Authorized 200,000 shares; issued 85,364 and 85,364 respectively; outstanding
61,931 and 61,558 shares, respectively
Treasury stock, at cost, 23,433 and 23,806 shares, respectively
Retained earnings
Accumulated other comprehensive loss
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
$
$
$
$
$
362,788 $
377,000
421,193
167,323
23,586
1,351,890
67,982
41,592
72,949
42,752
15,715
6,388
2,363
1,601,631 $
154,636
4,903
161,570
30,766
351,875
32,828
69,422
38,084
14,185
506,394 $
188,127
342,000
198,640
111,809
19,620
860,196
59,147
22,688
56,695
37,972
8,147
7,535
2,186
1,054,566
57,688
5,903
76,762
17,540
157,893
33,005
74,957
18,325
12,392
296,572
— $
—
550,117
(400,412)
948,554
(3,022)
1,095,237 $
1,601,631 $
539,213
(394,817)
616,119
(2,521)
757,994
1,054,566
The accompanying notes are an integral part of these consolidated financial statements.
37
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Net revenue
Cost of sales
Gross profit
Selling, general and administrative
Research and development
Operating expenses
Income from operations
Interest income
Interest expense
Income before income taxes
Provision for income taxes
Share of results of equity-method investee, net of tax
Net income
Net income per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
2021
$ 1,517,664 $
Fiscal
2020
623,176 $
325,201
297,975
116,007
123,459
239,466
58,509
7,541
(1,716)
64,334
11,998
36
52,300 $
2019
540,052
285,462
254,590
116,811
116,169
232,980
21,610
15,132
(2,055)
34,687
22,910
124
11,653
820,678
696,986
147,061
137,478
284,539
412,447
2,321
(218)
414,550
47,295
94
367,161 $
5.92 $
5.78 $
0.83 $
0.83 $
0.18
0.18
62,009
63,515
62,828
63,359
65,286
65,948
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
38
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income / (loss):
Foreign currency translation adjustment
Unrecognized actuarial (loss) / gain on pension plan, net of tax
Derivatives designated as hedging instruments:
Unrealized gain / (loss) on derivative instruments, net of tax
Reclassification adjustment for (gain)/ loss on derivative instruments
recognized, net of tax
Net (decrease) / increase from derivatives designated as hedging
instruments, net of tax
Total other comprehensive (loss) / income
2021
Fiscal
2020
2019
$
367,161 $
52,300 $
11,653
672
—
672
24
(1,197)
(1,173)
(501)
7,755
(1,490)
6,265
358
796
1,154
7,419
(6,534)
22
(6,512)
(741)
1,215
474
(6,038)
Comprehensive income
$
366,660 $
59,719 $
5,615
The accompanying notes are an integral part of these consolidated financial statements.
39
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
Retained
earnings
Accumulated Other
Comprehensive
(loss) / income
Shareholders'
Equity
(3,902) $
—
—
—
—
—
—
—
—
(6,038)
(6,038)
(9,940) $
—
—
—
—
—
—
—
7,419
7,419
(2,521) $
—
—
—
—
—
—
(501)
(501)
(3,022) $
880,207
834
(100,548)
14
—
13,498
534
(31,091)
11,653
(6,038)
5,615
769,063
850
(55,001)
—
14,169
(769)
(30,037)
52,300
7,419
59,719
757,994
818
(10,182)
—
14,673
(34,726)
367,161
(501)
366,660
1,095,237
Balances as of September 29, 2018
Issuance of stock for services rendered
Repurchase of common stock
Exercise of stock options
Issuance of shares for equity-based compensation
Equity-based compensation
Cumulative effect of accounting changes
Cash dividends declared
Components of comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income / (loss)
Balances as of September 28, 2019
Issuance of stock for services rendered
Repurchase of common stock
Issuance of shares for equity-based compensation
Equity-based compensation
Cumulative effect of accounting changes
Cash dividends declared
Components of comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Balances as of October 3, 2020
Issuance of stock for services rendered
Repurchase of common stock
Issuance of shares for equity-based compensation
Equity-based compensation
Cash dividend declared
Components of comprehensive income:
Treasury
Stock
Common Stock
Shares Amount
67,143 $ 519,244 $ (248,664) $
834
—
14
—
13,498
—
—
—
(100,548)
—
—
—
—
—
37
(4,676)
2
667
—
—
—
—
—
—
—
—
—
—
—
—
63,173 $ 533,590 $ (349,212) $
491
—
(9,037)
14,169
—
—
359
(55,001)
9,037
—
—
—
37
(2,486)
834
—
—
—
—
—
—
—
—
—
—
—
—
61,558 $ 539,213 $ (394,817) $
616
—
(4,385)
14,673
—
202
(10,182)
4,385
—
—
23
(215)
565
—
—
613,529 $
—
—
—
—
—
534
(31,091)
11,653
—
11,653
594,625 $
—
—
—
—
(769)
(30,037)
52,300
—
52,300
616,119 $
—
—
—
—
(34,726)
Net income
Other comprehensive gain
Total comprehensive income / (loss)
Balances as of October 2, 2021
—
—
—
61,931 $ 550,117 $ (400,412) $
The accompanying notes are an integral part of these consolidated financial statements.
367,161
—
367,161
948,554 $
—
—
—
—
—
—
40
KULICKE AND SOFFA INDUSTRIES, 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:
Depreciation and amortization
Equity-based compensation and employee benefits
Adjustment for doubtful accounts
Adjustment for inventory valuation
Change in the estimation of warranty reserve
Deferred taxes
Loss on disposal of property, plant and equipment
Gain on disposal of equity-method investments
Unrealized foreign currency translation
Share of results of equity-method investee
Changes in operating assets and liabilities:
Accounts and notes receivable
Inventory
Prepaid expenses and other current assets
Accounts payable, accrued expenses and other current liabilities
Income taxes payable
Other, net
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of equity investments
Purchase of short term investments
Maturity of short term investments
Disposal of equity-method investments
Net cash (used in) / provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on short term debt
Proceeds from exercise of common stock options
Payment for finance leases
Repurchase of common stock
Proceeds from short term debt
Common stock cash dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Changes in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2021
Fiscal
2020
2019
$ 367,161 $ 52,300 $ 11,653
19,810
15,491
(248)
(2,965)
—
(9,818)
259
(1,046)
(378)
94
19,739
15,019
371
4,170
(5,417)
(827)
953
—
874
36
(221,924)
(52,719)
(4,573)
181,960
7,686
1,242
300,032
(1,928)
(26,194)
(3,561)
38,148
(291)
1,020
94,412
20,304
14,332
212
2,657
—
8,825
20
—
(3,325)
124
47,395
24,105
(490)
(53,759)
(7,758)
1,672
65,967
(26,338)
(22,775)
291
—
(507,000)
472,000
2,115
(81,707)
—
(11,719)
50
(1,288)
(442,000)
329,000
—
(125,957)
—
(11,742)
210
(5,000)
(619,000)
683,000
—
47,468
(22,750)
—
(379)
(10,426)
22,750
(33,453)
(44,258)
594
174,661
188,127
(30,773)
14
—
(99,897)
90,904
(31,566)
(71,318)
919
43,036
321,148
$ 362,788 $ 188,127 $ 364,184
(147,143)
—
(123)
(54,549)
86,239
(30,233)
(145,809)
1,297
(176,057)
364,184
CASH PAID FOR:
Interest
Income taxes
The accompanying notes are an integral part of these consolidated financial statements.
218 $
$
1,634
$ 51,856 $ 13,271 $ 22,073
1,716 $
41
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
These consolidated financial statements include the accounts of Kulicke and Soffa Industries, Inc. and its subsidiaries (the
“Company”), with appropriate elimination of intercompany balances and transactions.
Fiscal Year
Each of the Company's first three fiscal quarters ends on the Saturday that is 13 weeks after the end of the immediately
preceding fiscal quarter. The fourth quarter of each fiscal year ends on the Saturday closest to September 30. In fiscal years
consisting of 53 weeks, the fourth quarter will consist of 14 weeks. The 2021, 2020, and 2019 fiscal years ended on October 2,
2021, October 3, 2020 and September 28, 2019, respectively.
Nature of Business
The Company designs, manufactures and sells capital equipment and tools as well as services, maintains, repairs and upgrades
equipment, all used to assemble semiconductor devices. The Company's operating results depend upon the capital and operating
expenditures of semiconductor device manufacturers, integrated device manufacturers, outsourced semiconductor assembly and
test providers (“OSATs”), and other electronics manufacturers, including automotive electronics suppliers, worldwide which, in
turn, depend on the current and anticipated market demand for semiconductors and products utilizing semiconductors. The
semiconductor industry is highly volatile and experiences downturns and slowdowns which can have a severe negative effect
on the semiconductor industry's demand for semiconductor capital equipment, including assembly equipment manufactured and
sold by the Company and, to a lesser extent, tools, including those sold by the Company. These downturns and slowdowns have
in the past adversely affected the Company's operating results. The Company believes such volatility will continue to
characterize the industry and the Company's operations in the future.
Use of Estimates
The preparation of consolidated financial statements requires management to make assumptions, estimates and judgments that
affect the reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of
contingent assets and liabilities as of the date of the consolidated financial statements. On an ongoing basis, management
evaluates estimates, including but not limited to, those related to accounts receivable, reserves for excess and obsolete
inventory, carrying value and lives of fixed assets, goodwill and intangible assets, the valuation estimates and assessment of
impairment and observable price adjustments, income taxes, equity-based compensation expense, and warranties. Management
bases its estimates on historical experience and on various other assumptions believed to be reasonable. As a result,
management makes judgments regarding the carrying values of the Company's assets and liabilities that are not readily apparent
from other sources. Authoritative pronouncements, historical experience and assumptions are used as the basis for making
estimates, and on an ongoing basis, management evaluates these estimates. Actual results may differ from these estimates.
Due to the coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial
markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or
judgments or a revision of the carrying value of its assets or liabilities as of October 2, 2021. While there was no material
impact to our consolidated financial statements as of and for the year ended October 2, 2021, these estimates may change, as
new events occur and additional information is obtained, as well as other factors related to COVID-19 that could result in
material impacts to our consolidated financial statements in future reporting periods.
The Company reviews its warranty reserve balances as part of its ongoing policy review. At the start of fiscal 2020, the
Company determined there was a need to obtain granular data given uncertainty in sales demand. Accordingly, the Company
commenced the collection of granular data over the four fiscal quarters in 2020 to establish a more precise estimate of its
warranty reserve. This collection was finalized and the information incorporated in the fourth quarter of fiscal 2020. This
resulted in a decrease to the reserve for warranty and an increase in net income by $5.4 million for the fiscal year 2020, as well
as an increase to net income per share, basic and diluted, by $0.09 and $0.09, respectively. For further information on warranty
reserve, see Notes 14 and 17 below.
Vulnerability to Certain Concentrations
Financial instruments which may subject the Company to concentrations of credit risk as of October 2, 2021 and October 3,
2020 consisted primarily of trade receivables. The Company manages credit risk associated with investments by investing its
excess cash in highly rated debt instruments of the U.S. government and its agencies, financial institutions, and corporations.
The Company has established investment guidelines relative to diversification and maturities designed to maintain safety and
liquidity. These guidelines are periodically reviewed and modified as appropriate. The Company does not have any exposure to
sub-prime financial instruments or auction rate securities.
42
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company's trade receivables result primarily from the sale of semiconductor equipment, related accessories and
replacement parts, and tools to a relatively small number of large manufacturers in a highly concentrated industry. Write-offs of
uncollectible accounts have historically not been material. The Company actively monitors its customers' financial strength to
reduce the risk of loss, including as a result of COVID-19.
The Company's products are complex and require raw materials, components and subassemblies having a high degree of
reliability, accuracy and performance. The Company relies on subcontractors to manufacture many of these components and
subassemblies and it relies on sole source suppliers for some important components and raw material inventory.
Foreign Currency Translation and Remeasurement
The majority of the Company's business is transacted in U.S. dollars; however, the functional currencies of some of the
Company's subsidiaries are their local currencies. In accordance with ASC No. 830, Foreign Currency Matters (“ASC 830”),
for a subsidiary of the Company that has a functional currency other than the U.S. dollar, gains and losses resulting from the
translation of the functional currency into U.S. dollars for financial statement presentation are not included in determining net
income, but are accumulated in the cumulative translation adjustment account as a separate component of shareholders' equity
(accumulated other comprehensive income / (loss)). The tax effect of currency translation adjustments related to unremitted
foreign earnings no longer deemed to be indefinitely reinvested outside the U.S. is reflected in the determination of the
Company's net income or other comprehensive income ("OCI"). Gains and losses resulting from foreign currency transactions
are included in the determination of net income.
The Company's operations are exposed to changes in foreign currency exchange rates due to transactions denominated in
currencies other than the location's functional currency. The Company is also exposed to foreign currency fluctuations that
impact the remeasurement of net monetary assets of those operations whose functional currency, the U.S. dollar, differs from
their respective local currencies, most notably in Israel, Singapore and Switzerland. In addition to net monetary remeasurement,
the Company has exposures related to the translation of subsidiary financial statements from their functional currency, the local
currency, into its reporting currency, the U.S. dollar, most notably in the Netherlands, China, Taiwan, Japan and Germany. The
Company's U.S. operations also have foreign currency exposure due to net monetary assets denominated in currencies other
than the U.S. dollar.
Derivative Financial Instruments
The Company’s primary objective for holding derivative financial instruments is to manage the fluctuation in foreign exchange
rates and accordingly is not speculative in nature. The Company’s international operations are exposed to changes in foreign
exchange rates as described above. The Company has established a program to monitor the forecasted transaction currency risk
to protect against foreign exchange rate volatility. Generally, the Company uses foreign exchange forward contracts in these
hedging programs. These instruments, which have maturities of up to twelve months, are recorded at fair value and are included
in prepaid expenses and other current assets, or accrued expenses and other current liabilities.
Our accounting policy for derivative financial instruments is based on whether they meet the criteria for designation as a cash
flow hedge. A designated hedge with exposure to variability in the functional currency equivalent of the future foreign currency
cash flows of a forecasted transaction is referred to as a cash flow hedge. The criteria for designating a derivative as a cash flow
hedge include the assessment of the instrument’s effectiveness in risk reduction, matching of the derivative instrument to its
underlying transaction, and the assessment of the probability that the underlying transaction will occur. For derivatives with
cash flow hedge accounting designation, we report the after-tax gain / (loss) from the effective portion of the hedge as a
component of accumulated other comprehensive income / (loss) and reclassify it into earnings in the same period in which the
hedged transaction affects earnings and in the same line item on the consolidated statement of operations as the impact of the
hedged transaction. Derivatives that we designate as cash flow hedges are classified in the consolidated statement of cash flows
in the same section as the underlying item, primarily within cash flows from operating activities.
The hedge effectiveness of these derivative instruments is evaluated by comparing the cumulative change in the fair value of
the hedge contract with the cumulative change in the fair value of the forecasted cash flows of the hedged item.
If a cash flow hedge is discontinued because it is no longer probable that the original hedged transaction will occur as
previously anticipated, the cumulative unrealized gain or loss on the related derivative is reclassified from accumulated other
comprehensive income / (loss) into earnings. Subsequent gain / (loss) on the related derivative instrument is recognized into
earnings in each period until the instrument matures, is terminated, is re-designated as a qualified cash flow hedge, or is sold.
Ineffective portions of cash flow hedges, as well as amounts excluded from the assessment of effectiveness, are recognized in
earnings.
43
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be
cash equivalents. Cash equivalents are measured at fair value based on Level 1 measurement, or quoted market prices, as
defined by ASC No. 820, Fair Value Measurements and Disclosures.
Equity Investments
The Company invests in equity securities in companies to promote business and strategic objectives. Equity investments are
measured and recorded as follows:
• Equity method investments are equity securities in investees that provide the Company with the ability to exercise
significant influence in which it lacks a controlling financial interest. Our proportionate share of the income or loss is
recognized on a one-quarter lag and is recorded as share of results of equity-method investee, net of tax.
• Non-marketable equity securities are equity securities without readily determinable fair value that are measured and
recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus
changes resulting from qualifying observable price changes.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from its customers' failure to make
required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of
their ability to make payments, including as a result of COVID-19, additional allowances may be required. If global or regional
economic conditions deteriorate or political conditions were to change in some of the countries where the Company does
business, including as a result of COVID-19, it could have a significant impact on the results of operations, and the Company's
ability to realize the full value of its accounts receivable.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. The Company generally provides
reserves for obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as 18
months forecasted future consumption for equipment, 24 months forecasted future consumption for spare parts, and 12 months
forecasted future consumption for tools. Forecasted consumption is based upon internal projections, historical sales volumes,
customer order activity and a review of consumable inventory levels at customers' facilities. The Company communicates
forecasts of its future consumption to its suppliers and adjusts commitments to those suppliers accordingly. If required, the
Company reserves the difference between the carrying value of its inventory and the lower of cost or net realizable value, based
upon projections about future consumption, and market conditions. If actual market conditions are less favorable than
projections, additional inventory reserves may be required.
Inventory reserve provision for certain subsidiaries is determined based on management's estimate of future consumption for
equipment and spare parts. This estimate is based on historical sales volumes, internal projections and market developments and
trends.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. The cost of additions and those improvements which increase the capacity or
lengthen the useful lives of assets are capitalized while repair and maintenance costs are expensed as incurred. Depreciation and
amortization are provided on a straight-line basis over the estimated useful lives as follows: buildings 25 years; machinery,
equipment, furniture and fittings 3 to 10 years; toolings 1 year; and leasehold improvements are based on the shorter of the life
of lease or life of asset. Purchased computer software costs related to business and financial systems are amortized over a five-
year period on a straight-line basis. Land is not depreciated.
Valuation of Long-Lived Assets
In accordance with ASC No. 360, Property, Plant & Equipment ("ASC 360"), the Company's definite lived intangible assets
and property, plant and equipment are tested for impairment based on undiscounted cash flows when triggering events occur,
and if impaired, written-down to fair value based on either discounted cash flows or appraised values. ASC 360 also provides a
single accounting model for long-lived assets to be disposed of by sale and establishes additional criteria that would have to be
met to classify an asset as held for sale. The carrying amount of an asset or asset group is not recoverable to the extent it
exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset
group. Estimates of future cash flows used to test the recoverability of a long-lived asset or asset group must incorporate the
entity's own assumptions about its use of the asset or asset group and must factor in all available evidence.
44
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
ASC 360 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that
their carrying amount may not be recoverable. Such events include significant under-performance relative to historical internal
forecasts or projected future operating results; significant changes in the manner of use of the assets; significant negative
industry or economic trends; or significant changes in market capitalization. During the fiscal years ended October 2, 2021 and
October 3, 2020, no "triggering" events occurred.
Accounting for Impairment of Goodwill
ASC No. 350, Intangibles - Goodwill and Other requires goodwill and other intangible assets with indefinite lives to be
reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment. We assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If,
after assessing the qualitative factors, a company determines that it is not more likely than not that the fair value of a reporting
unit is less than its carrying value, then performing the impairment test is unnecessary. However, if a company concludes
otherwise, then it is required to perform the goodwill impairment test. The Company's impairment test is performed by
comparing the fair value of a reporting unit with its carrying value, and determining if the carrying amount exceeds its fair
value.
As part of the annual evaluation, the Company performs an impairment test of its goodwill in the fourth quarter of each fiscal
year to coincide with the completion of its annual forecasting and refreshing of its business outlook processes. On an ongoing
basis, the Company monitors if a “triggering” event has occurred that may have the effect of reducing the fair value of a
reporting unit below its respective carrying value. Adverse changes in expected operating results and/or unfavorable changes in
other economic factors used to estimate fair values could result in a non-cash impairment charge in the future.
Impairment assessments inherently involve judgment as to the assumptions made about the expected future cash flows and the
impact of market conditions on those assumptions. Future events and changing market conditions may impact the assumptions
as to prices, costs, growth rates or other factors that may result in changes in the estimates of future cash flows. Although the
Company believes the assumptions that it has used in testing for impairment are reasonable, significant changes in any one of
the assumptions could produce a significantly different result. Indicators of potential impairment, including significant and
unforeseen customer losses, a significant adverse change in legal factors or in the business climate, a significant adverse action
or assessment by a regulator, a significant stock price decline or unanticipated competition may lead the Company to perform
interim goodwill impairment assessments.
For further information on goodwill and other intangible assets, see Note 4 below.
Revenue Recognition
In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy
performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the
Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a
contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.
The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally
upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered
transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the
customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our
standard commercial terms and is not contingent upon resale of the products.
Our business is subject to contingencies related to customer orders, including:
• Right of Return: A large portion of our revenue comes from the sale of equipment used in the semiconductor assembly
process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally
maintained at low stock levels at the customers' facility. Customer returns have historically represented a very small
percentage of customer sales on an annual basis.
• Warranties: Our equipment is generally shipped with a one-year warranty against manufacturing defects. We establish
reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for
estimated warranty expense is based upon historical experience and management's estimate of future expenses,
including product parts replacement, freight charges and labor costs expected to be incurred to correct product failures
during the warranty period.
• Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In
certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in
accordance with customer specifications or when installed at the customer's facility. In such cases, if the terms of
45
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon
shipment. If the terms of acceptance are satisfied at our customers' facilities, the revenue for the equipment will not be
recognized until acceptance, which is typically obtained after installation and testing, is received from the customer.
Service revenue is generally recognized over time as the services are performed. For fiscal 2021 and 2020, the service revenue
is not material.
The Company measures revenue based on the amount of consideration we expect to be entitled to in exchange for products or
services. Any variable consideration such as sales incentives are recognized as a reduction of net revenue at the time of revenue
recognition.
The length of time between invoicing and payment is not significant under our payment terms. In instances where the timing of
revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a
significant financing component. Shipping and handling costs billed to customers are recognized in net revenue.
Shipping and handling costs paid by the Company are included in cost of sales.
Research and Development
The Company charges research and development costs associated with the development of new products to expense when
incurred. In certain circumstances, pre-production machines that the Company intends to sell are carried as inventory until sold.
Income Taxes
In accordance with ASC No. 740, Income Taxes, deferred income taxes are determined using the balance sheet method. The
Company records a valuation allowance to reduce its deferred tax assets to the amount expected, on a more likely than not
basis, to be realized. While the Company has considered future taxable income and ongoing tax planning strategies in assessing
the need for the valuation allowance, if it were to determine that it would be able to realize its deferred tax assets in the future in
excess of its net recorded amount, an adjustment to deferred tax assets would increase income in the period when such
determination is made. Likewise, should the Company determine it would not be able to realize all or part of its deferred tax
assets in the future, an adjustment to deferred tax assets would decrease income in the period when such determination is made.
The Company determines the amount of unrecognized tax benefit with respect to uncertain tax positions taken or expected to be
taken on its income tax returns in accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”). Under ASC
740.10, the Company utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition, requires a
company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon
examination solely based on its technical merit. Step two, or measurement, is based on the largest amount of benefit, which is
more likely than not to be realized on settlement with the taxing authority, including resolution of related appeals or litigation
processes, if any.
Equity-Based Compensation
The Company accounts for equity-based compensation under the provisions of ASC No. 718, Compensation - Stock
Compensation (“ASC 718”). ASC 718 requires the recognition of the fair value of the equity-based compensation in net
income. Compensation expense associated with Relative TSR Performance Share Units is determined using a Monte-Carlo
valuation model, and compensation expense associated with time-based and Growth Performance Share Units is determined
based on the number of shares granted and the fair value on the date of grant. See Note 11 for a summary of the terms of these
performance-based awards. The fair value of the Company's stock option awards is estimated using a Black-Scholes option
valuation model. The fair value of equity-based awards is amortized over the vesting period of the award, and the Company
elected to use the straight-line method for awards granted after the adoption of ASC 718.
Earnings per Share
Earnings per share (“EPS”) are calculated in accordance with ASC No. 260, Earnings per Share. Basic EPS include only the
weighted average number of common shares outstanding during the period. Diluted EPS include the weighted average number
of common shares and the dilutive effect of stock options, restricted stock awards, performance share units and restricted share
units outstanding during the period, when such instruments are dilutive.
Accounting for Business Acquisitions
The Company accounts for business acquisitions in accordance with ASC No. 805, Business Combinations. The fair value of
the net assets acquired and the results of operations of the acquired businesses are included in the consolidated financial
statements from the acquisition date forward. The Company is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting
46
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
for, among other things, the fair value of acquired net operating assets, property, plant and equipment, deferred revenue,
intangible assets and related deferred income taxes, useful lives of property, plant and equipment, and amortizable lives of
acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities
assumed is recognized as goodwill. The valuation of these tangible and identifiable intangible assets and liabilities is subject to
further management review and may change materially between the preliminary allocation and end of the purchase price
allocation period.
Restructuring Charges
Restructuring charges may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs
due to exit activities. We recognize voluntary termination benefits when an employee accepts the offered benefit arrangement.
We recognize involuntary severance-related charges depending on whether the termination benefits are provided under an
ongoing benefit arrangement or under a one-time benefit arrangement. If the former, we recognize the charges once they are
probable and the amounts are estimable. If the latter, we recognize the charges once the benefits have been communicated to
employees.
Recent Accounting Pronouncements
Financial Instruments
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments. This ASU replaces the impairment methodology in current GAAP, which delays recognition of credit
losses until it is probable a loss has been incurred, with a methodology that reflects expected credit losses and requires
consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We adopted this
ASU in the first quarter of fiscal 2021. The adoption of this ASU did not have a material impact on our consolidated financial
statements.
Collaborative Arrangements
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808). This ASU clarifies that certain
transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative
arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration
received from a collaborative arrangement participant if the participant is not a customer. This ASU requires retrospective
adoption to the date we adopted ASC 606 by recognizing a cumulative-effect adjustment to the opening balance of retained
earnings of the earliest annual period presented. We adopted this ASU in the first quarter of fiscal 2021. The adoption of this
ASU did not have a material impact on our consolidated financial statements.
Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). The amendments in this ASU simplify the
accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarify and amend
existing guidance. This ASU will be effective for us in the first quarter of 2022. We do not expect the adoption of this ASU to
have a material impact on our consolidated financial statements.
47
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 2: BALANCE SHEET COMPONENTS
The following tables reflect the components of significant balance sheet accounts as of October 2, 2021 and October 3, 2020:
(in thousands)
Short term investments, available-for-sale(1)
Inventories, net:
Raw materials and supplies
Work in process
Finished goods
Inventory reserves
Property, plant and equipment, net:
Land
Buildings and building improvements
Leasehold improvements
Data processing equipment and software
Machinery, equipment, furniture and fixtures
Construction in progress
Accumulated depreciation
Accrued expenses and other current liabilities:
Accrued customer obligations (2)
Wages and benefits
Commissions and professional fees
Dividends payable
Severance
Other
As of
October 2, 2021
October 3, 2020
377,000 $
342,000
94,493 $
55,866
40,006
190,365
(23,042)
167,323 $
2,182 $
23,314
30,054
40,945
87,994
9,562
194,051
(126,069)
67,982 $
72,478 $
66,531
6,190
8,673
31
7,667
161,570 $
60,205
39,753
43,015
142,973
(31,164)
111,809
2,182
22,830
23,111
38,524
80,953
7,111
174,711
(115,564)
59,147
22,759
37,237
2,716
7,397
449
6,204
76,762
$
$
$
$
$
$
$
(1) All short-term investments were classified as available-for-sale and were measured at fair value based on Level 1
measurement, or quoted market prices, as defined by ASC 820. The Company did not recognize any realized gains or losses
on the sale of investments during the fiscal years ended 2021 and 2020.
(2) Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.
48
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 3: BUSINESS COMBINATIONS
Acquisition of Uniqarta
On January 19, 2021, Kulicke and Soffa Industries, Inc. entered into a Stock Purchase Agreement with Uniqarta, Inc.
("Uniqarta") and its equity holders to purchase all of Uniqarta's outstanding equity interests. Upon the closing of the
acquisition, Uniqarta became a wholly-owned subsidiary of the Company. Uniqarta is a developer of laser transfer technology
and the acquisition expands the Company's presence in the LED end market.
The purchase price consisted of $26.5 million in cash paid at closing. The acquisition of Uniqarta was accounted for in
accordance with ASC No. 805, Business Combinations, using the acquisition method.
The Company has estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on
information available. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further
management review and may change materially between the preliminary allocation and end of the purchase price allocation
period on January 19, 2022. Any changes in these estimates may have a material impact on our Consolidated Statements of
Operations or Consolidated Balance Sheets. At October 2, 2021, the Company held $3.5 million in escrow for a period up to
eighteen months from the acquisition date as security pending the completion of Uniqarta's obligations as seller under the
Agreement.
The following table summarizes the allocation of the assets acquired and liabilities assumed based on the fair values as of the
acquisition date:
(in thousands)
Accounts and other receivable
Prepaid expenses and other current assets
Property, plant and equipment, net
Goodwill
Intangible assets
Accounts payable
Accrued expenses and other current liabilities
Deferred tax liabilities
Total purchase price, net of cash acquired
January 19, 2021
$
$
7
6
539
16,799
11,200
(77)
(98)
(2,038)
26,338
Tangible net assets (liabilities) were valued at their respective carrying amounts, which the Company believes approximate their
current fair values at the acquisition date.
The valuation of identifiable intangible assets acquired, representing in-process research and development ("IPR&D") and
others, reflects management’s estimates based on, among other factors, the use of an established valuation method. The
intangible assets are valued using a cost replacement method. The IPR&D intangible asset of $9.0 million is not amortized, but
rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project
is completed, abandoned, or transferred to a third party. The other intangible assets acquired of $2.2 million are amortized over
the period of estimated benefit using the straight-line method and the estimated useful life of six years. The straight-line method
of amortization represents the Company's best estimate of the distribution of the economic value of the identifiable intangible
assets. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible
assets acquired and includes the value of expected future cash flows of Uniqarta from expected synergies with our other
affiliates and other unidentifiable intangible assets. None of the goodwill recorded as part of the acquisition will be deductible
for income tax purposes.
In connection with the acquisition of Uniqarta, the Company recorded deferred tax liabilities primarily relating to the acquired
intangible assets, which are partially offset by the acquired tax attributes. The acquired tax attributes are comprised of net
operating losses and research and development credits.
For the year ended October 2, 2021, the acquired business contributed a net loss of $0.2 million.
During fiscal 2021, the Company incurred $1.7 million of expenses related to the acquisition, which is included within selling,
general and administrative expense in the Consolidated Statements of Operations.
49
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following unaudited pro forma information presents the combined results of operations as if the acquisition had been
completed on September 29, 2019, the beginning of the comparable prior annual reporting period. The unaudited pro forma
results include: (i) amortization associated with preliminary estimates for the acquired intangible assets; and (ii) the associated
tax impact on the unaudited pro forma adjustments.
The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the
incremental costs incurred in integrating the two companies. Accordingly, these unaudited pro forma results are presented for
informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company
would have been if the acquisition had occurred at the beginning of the periods presented, nor are they indicative of future
results of operations:
(in thousands)
Net revenue
Net income
Fiscal
2021
1,517,664 $
368,546
2020
623,176
49,766
$
NOTE 4: GOODWILL AND INTANGIBLE ASSETS
Goodwill
Intangible assets classified as goodwill are not amortized. The goodwill established in connection with our acquisitions
represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and
recognized individually. The goodwill also includes the value of expected future cash flows from the acquisitions, expected
synergies with our other affiliates and other unidentifiable intangible assets. The Company performs an annual impairment test
of its goodwill during the fourth quarter of each fiscal year, which coincides with the completion of its annual forecasting and
refreshing of business outlook process.
The Company performed its annual impairment test in the fourth quarter of fiscal 2021 and concluded that no impairment
charge was required. Any future adverse changes in expected operating results and/or unfavorable changes in other economic
factors used to estimate fair values could result in a noncash impairment in the future.
During the fiscal year ended October 2, 2021, the Company reviewed qualitative factors to ascertain if a "triggering" event may
have taken place that may have the effect of reducing the fair value of the reporting unit below its carrying value and concluded
that no triggering event had occurred. While we have concluded that a triggering event did not occur during the fiscal year
ended October 2, 2021, a prolonged COVID-19 pandemic could impact the results of operations due to changes to assumptions
utilized in the determination of the estimated fair values of the reporting units that could be significant enough to trigger an
impairment. Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our
products. The discount rate utilized in our valuation model could also be impacted by changes in the underlying interest rates
and risk premiums included in the determination of the cost of capital.
The following table summarizes the Company's recorded goodwill by reportable segments as of October 2, 2021 and October 3,
2020:
(in thousands)
Balance at October 3, 2020
Acquired in business combination
Other
Balance at October 2, 2021
During the quarter ended April 3, 2021, the Company recorded goodwill relating to the acquisition of Uniqarta. For further
information on the acquisition of Uniqarta, please refer to Note 3.
Capital Equipment
30,274
16,799
(512)
46,561
26,421
—
(33)
26,388
56,695
16,799
(545)
72,949
Total
APS
Intangible Assets
Intangible assets with determinable lives are amortized over their estimated useful lives. The Company's intangible assets
consist primarily of developed technology, customer relationships, in-process research and development, and trade and brand
names.
50
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table reflects net intangible assets as of October 2, 2021 and October 3, 2020:
(dollar amounts in thousands)
Developed technology
Accumulated amortization
Net developed technology
Customer relationships
Accumulated amortization
Net customer relationships
In-process research and development
Accumulated amortization
Net in-process research and development
Trade and brand name
Accumulated amortization
Net trade and brand name
Other intangible assets
Accumulated amortization
Net other intangible assets
Net intangible assets
As of
October 3, 2020
Average estimated
useful lives (in years)
7.0 to 15.0
October 2, 2021
$
$
$
90,427 $
(58,494) $
31,933 $
91,044
(54,293)
36,751
$
$
$
$
$
$
$
$
$
$
$
$
$
36,114 $
(36,114) $
— $
8,795 $
— $
8,795 $
7,374 $
(7,275) $
99 $
4,700 $
(2,775) $
1,925 $
42,752 $
36,307
(35,587)
720
—
—
—
7,404
(6,903)
501
2,500
(2,500)
—
37,972
5.0 to 6.0
N.A.
7.0 to 8.0
1.9 to 6.0
The following table reflects estimated annual amortization expense related to intangible assets as of October 2, 2021:
(in thousands)
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027 and thereafter
Total amortization expense
As of
October 2, 2021
6,357
6,258
6,258
6,258
6,258
11,363
42,752
$
$
$
$
$
$
$
51
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5: CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. In general,
these investments are free of trading restrictions.
Cash, cash equivalents and short-term investments consisted of the following as of October 2, 2021:
(dollar amounts in thousands)
Current assets:
Cash
Cash equivalents:
Money market funds (1)
Time deposits (2)
Total cash and cash equivalents
Short-term investments (2):
Time deposits
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated Fair
Value
$
269,201 $
93,598
7
362,806 $
377,000 $
377,000 $
$
$
$
— $
—
—
— $
— $
— $
— $
269,201
(18)
—
(18) $
93,580
7
362,788
— $
— $
377,000
377,000
Total short-term investments
Total cash, cash equivalents, and short-term
investments
739,788
(1) The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they
739,806 $
(18) $
— $
$
were classified as Level 1 assets in the fair value hierarchy.
(2) Fair value approximates cost basis.
Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of October 3, 2020:
(dollar amounts in thousands)
Current assets:
Cash
Cash equivalents:
Money market funds (1)
Time deposits (2)
Total cash and cash equivalents
Short-term investments (2):
Time deposits
Deposits (3)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated Fair
Value
$
42,997 $
105,133
40,007
188,137 $
243,000 $
99,000
342,000 $
$
$
$
— $
—
—
— $
— $
—
— $
— $
42,997
(10)
—
(10) $
— $
—
— $
105,123
40,007
188,127
243,000
99,000
342,000
Total short-term investments
Total cash, cash equivalents, restricted cash and
short-term investments
530,127
(1) The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they
530,137 $
(10) $
— $
$
were classified as Level 1 assets in the fair value hierarchy.
(2) Fair value approximates cost basis.
(3) Represents deposits that require a notice period of three months for withdrawal.
52
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 6: EQUITY INVESTMENTS
Equity investments consisted of the following as of October 2, 2021 and October 3, 2020:
(in thousands)
Non-marketable equity securities
Equity method investments(1)
Total
As of
October 2, 2021
October 3, 2020
$
$
6,388 $
—
6,388 $
6,321
1,214
7,535
(1) On March 5, 2021, the Company executed an agreement to sell its interest in an equity method investment. A gain of
$1.0 million was recognized in selling, general and administrative expense in the Consolidated Statements of Operations.
NOTE 7: FAIR VALUE MEASUREMENTS
Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for
identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either
directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities (referred to as Level 3).
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
We measure certain financial assets and liabilities at fair value on a recurring basis. There were no transfers between fair value
measurement levels during the fiscal year ended October 2, 2021.
Fair Value Measurements on a Nonrecurring Basis
Our non-financial assets such as intangible assets and property, plant and equipment are carried at cost unless impairment is
deemed to have occurred. Our equity method investments are recorded at fair value only if an impairment is recognized.
Fair Value of Financial Instruments
Amounts reported as accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses
approximate fair value.
NOTE 8: DERIVATIVE FINANCIAL INSTRUMENTS
The Company’s international operations are exposed to changes in foreign exchange rates due to transactions denominated in
currencies other than U.S. dollars. Most of the Company’s revenue and cost of materials are transacted in U.S. dollars.
However, a significant amount of the Company’s operating expenses is denominated in foreign currencies, primarily in
Singapore.
The foreign currency exposure of our operating expenses is generally hedged with foreign exchange forward contracts. The
Company’s foreign exchange risk management programs include using foreign exchange forward contracts with cash flow
hedge accounting designation to hedge exposures to the variability in the U.S. dollar equivalent of forecasted non-U.S. dollar-
denominated operating expenses. These instruments generally mature within twelve months. For these derivatives, we report
the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income
(loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings and in
the same line item on the Consolidated Statements of Operations as the impact of the hedged transaction.
53
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair value of derivative instruments on our Consolidated Balance Sheet as of October 2, 2021 and October 3, 2020 is as
follows:
(in thousands)
As of
October 2, 2021
October 3, 2020
Notional
Amount
Fair Value
Liability
Derivatives(1)
Notional
Amount
Fair Value Asset
Derivatives(2)
Derivatives designated as hedging instruments:
557
Foreign exchange forward contracts (3)
Total derivatives
557
(1) The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and
37,264 $
37,264 $
57,682 $
57,682 $
(616) $
(616) $
$
$
other current liabilities on our Consolidated Balance Sheet.
(2) The fair value of derivative assets is measured using level 2 fair value inputs and is included in prepaid expenses and other
current assets on our Consolidated Balance Sheet.
(3) Hedged amounts expected to be recognized into earnings within the next twelve months.
The effect of derivative instruments designated as cash flow hedges in our Consolidated Statements of Operations for the fiscal
year ended October 2, 2021 and October 3, 2020 was as follows:
(in thousands)
Foreign exchange forward contract in cash flow hedging relationships:
Net gain recognized in OCI, net of tax(1)
Net gain/ (loss) reclassified from accumulated OCI into earnings, net of tax(2)
(1) Net change in the fair value of the effective portion classified in OCI.
(2) Effective portion classified as selling, general and administrative expense.
Fiscal
2021
2020
$
$
24 $
1,197 $
358
(796)
NOTE 9: LEASES
We have entered into various non-cancellable operating and finance lease agreements for certain of our offices, manufacturing,
technology, sales support and service centers, equipment, and vehicles. We determine if an arrangement is a lease, or contains a
lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the
underlying asset is made available for use by the lessor. Our lease terms may include one or more options to extend the lease
terms, for periods from one year to 20 years, when it is reasonably certain that we will exercise that option. As of October 2,
2021, three options to extend the lease were recognized as right-of-use ("ROU") assets, and lease liabilities. We have lease
agreements with lease and non-lease components, and non-lease components are accounted for separately and not included in
our leased assets and corresponding liabilities. We have elected not to present short-term leases on the Consolidated Balance
Sheets as these leases have a lease term of 12 months or less at lease inception.
Operating leases are included in operating ROU assets, current and non-current operating lease liabilities, and finance leases are
included in property, plant and equipment, accrued expenses and other current liabilities, and other liabilities on the
Consolidated Balance Sheets. As of October 2, 2021, our finance leases are not material.
The following table shows the components of lease expense:
(in thousands)
Fiscal
2021
2020
6,942
Operating lease expense (1)
(1) Operating lease expense includes short-term lease expense, which is immaterial for the fiscal year ended October 2, 2021.
7,629
$
The following table shows the cash flows arising from lease transactions. Cash payments related to short-term leases are not
included in the measurement of operating and finance lease liabilities, and, as such, are excluded from the amounts below:
54
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands)
Fiscal
2021
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases
$
7,211 $
6,296
The following table shows the weighted-average lease terms and discount rates for operating leases:
Operating leases:
Weighted-average remaining lease term (in years):
Weighted-average discount rate:
Fiscal
2021
2020
9.6
5.8 %
4.5
4.8 %
Future lease payments, excluding short-term leases, as of October 2, 2021, are detailed as follows:
(in thousands)
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027 and thereafter
Total minimum lease payments
Less: Interest
Present value of lease obligations
Less: Current portion
Long-term portion of lease obligations
Operating leases
7,249
6,621
6,224
5,903
5,085
26,372
57,454
14,467
42,987
4,903
38,084
$
$
NOTE 10: DEBT AND OTHER OBLIGATIONS
Bank Guarantees
On November 22, 2013, the Company obtained a $5.0 million credit facility with Citibank in connection with the issuance of
bank guarantees for operational purposes. As of October 2, 2021 and October 3, 2020, the outstanding amount was $3.0 million
and $3.3 million respectively.
Credit Facilities
On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility
Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company and one
of its subsidiaries with an overdraft facility of up to $150 million (the “Overdraft Facility”) for general corporate purposes.
Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days' written demand by the Bank.
Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the overnight
U.S. Dollar LIBOR rate plus a margin of 1.5% per annum. The Overdraft Facility is an unsecured facility per the terms of the
Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation,
covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of two of its subsidiaries
(the "Subsidiaries"), or encumber its assets with material security interests (including any pledge of monies in the Subsidiaries’
cash deposit account with the Bank). The Facility Agreements also contain typical events of default, including, without
limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company and
any breach of a representation or warranty under the Facility Agreements. As of October 2, 2021, there were no outstanding
amounts under the Overdraft Facility.
55
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 11: SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS
401(k) Retirement Income Plans
The Company has a 401(k) retirement plan (the “Plan”) for eligible U.S. employees. The Plan allows for employee
contributions and matching Company contributions from 4% to 6% based upon terms and conditions of the 401(k) Plan.
The following table reflects the Company’s contributions to the Plan during fiscal 2021 and 2020:
(in thousands)
Cash
Share Repurchase Program
Fiscal
2021
2020
$
1,780 $
1,514
On August 15, 2017, the Company's Board of Directors authorized a program (the "Program") to repurchase up to $100 million
of the Company’s common stock on or before August 1, 2020. In 2018 and 2019, the Board of Directors increased the share
repurchase authorization under the Program to $200 million and $300 million, respectively. On July 3, 2020, the Board of
Directors increased the share repurchase authorization under the Company's existing share repurchase program by an additional
$100 million to $400 million, and extended its duration through August 1, 2022. The Company has entered into a written
trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be
suspended or discontinued at any time and is funded using the Company's available cash, cash equivalents and short-term
investments. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at
prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on
market conditions as well as corporate and regulatory considerations.
During the fiscal year ended October 2, 2021, the Company repurchased a total of approximately 215.0 thousand shares of
common stock at a cost of approximately $10.2 million. The share repurchases were recorded in the periods they were delivered
and accounted for as treasury stock in the Company’s Consolidated Balance Sheets. The Company records treasury stock
purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in
excess of the acquisition cost are credited to additional paid-in capital. If the Company reissues treasury stock at an amount
below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover
the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings. As of
October 2, 2021, our remaining share repurchase authorization under the Program was approximately $132.0 million.
Dividends
On August 26, 2021, May 28, 2021, March 5, 2021 and December 10, 2020, the Board of Directors declared a quarterly
dividend $0.14 per share of common stock. During the fiscal year ended October 2, 2021, the Company declared dividends of
$0.56 per share of common stock. The declaration of any future cash dividend is at the discretion of the Board of Directors and
will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other
factors, as well as a determination that such dividends are in the best interests of the Company's stockholders.
Accumulated Other Comprehensive Income
The following table reflects accumulated other comprehensive loss reflected on the Consolidated Balance Sheets as of
October 2, 2021 and October 3, 2020:
(in thousands)
Gain from foreign currency translation adjustments
Unrecognized actuarial loss on pension plan, net of tax
Unrealized (loss) / gain on hedging
Accumulated other comprehensive loss
Equity-Based Compensation
56
As of
October 2, 2021
October 3, 2020
$
$
682 $
(3,088)
(616)
(3,022) $
10
(3,088)
557
(2,521)
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company has a stockholder-approved equity-based compensation plan, the 2021 Omnibus Incentive Plan (the “Plan”) from
which employees and directors receive grants. As of October 2, 2021, 3.8 million shares of common stock are available for
grant to the Company's employees and directors under the Plan.
• Relative TSR Performance Share Units ("Relative TSR PSUs") entitle the employee to receive common shares of the
Company on the award vesting date, typically the third anniversary of the grant date (or as soon as administratively
practicable if later), if market performance objectives which measure relative total shareholder return (“TSR”) are
attained. Relative TSR is calculated based upon the 90-calendar day average price at the end of the performance period
of the Company's stock as compared to specific peer companies that comprise the GICS (45301020) Semiconductor
Index. TSR is measured for the Company and each peer company over a performance period, which is generally three
years. Vesting percentages range from 0% to 200% of awards granted. The provisions of the Relative TSR PSUs are
reflected in the grant date fair value of the award; therefore, compensation expense is recognized regardless of whether
the market condition is ultimately satisfied. Compensation expense is reversed if the award is forfeited prior to the
vesting date.
• Revenue Growth Performance Share Units (“Growth PSUs”) entitle the employee to receive common shares of the
Company on the award vesting date, typically the third anniversary of the grant date (or as soon as administratively
practicable if later), based on organic revenue growth objectives and relative growth performance against named
competitors as set by the Management Development and Compensation Committee (“MDCC”) of the Company's
Board of Directors. Organic revenue growth is calculated by averaging revenue growth (net of revenues from
acquisitions) over a performance period, which is generally three years. Revenues from acquisitions will be included
in the calculation after four fiscal quarters after acquisition. Any portion of the grant that does not meet the revenue
growth objectives and relative growth performance is forfeited. Vesting percentages range from 0% to 200% of awards
granted.
•
In general, stock options and Time-based Restricted Share Units ("Time-based RSUs") awarded to employees vest
ratably over a three-year period on the anniversary of the grant date provided the employee remains employed by the
Company. The Company follows the non-substantive vesting method for stock options and recognizes compensation
expense immediately for awards granted to retirement eligible employees, or over the period from the grant date to the
date retirement eligibility is achieved.
Equity-based compensation expense recognized in the Consolidated Statements of Operations for fiscal 2021, 2020, and 2019
was based upon awards ultimately expected to vest, with forfeiture accounted for when they occur.
The following table reflects total equity-based compensation expense, which includes Relative TSR PSUs, Time-based RSUs,
Growth PSUs, and common stock, included in the Consolidated Statements of Operations for fiscal 2021, 2020, and 2019:
(in thousands)
Cost of sales
Selling, general and administrative
Research and development
Total equity-based compensation expense
2021
828 $
10,998
3,676
15,502 $
$
$
Fiscal
2020
744 $
11,071
3,204
15,019 $
2019
632
10,503
3,197
14,332
The following table reflects equity-based compensation expense, by type of award, for fiscal 2021, 2020, and 2019:
2021
3,916 $
10,314
444
828
15,502 $
$
$
Fiscal
2020
3,266 $
9,519
1,384
850
15,019 $
2019
4,220
8,603
675
834
14,332
(in thousands)
Relative TSR PSUs
Time-based RSUs
Growth PSUs
Common stock
Total equity-based compensation expense
Equity-Based Compensation: Relative TSR PSUs
57
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table reflects Relative TSR PSUs activity for fiscal 2021, 2020, and 2019:
Number of shares
(in thousands)
Unrecognized
compensation
expense (in
thousands)
Average remaining
service period (in
years)
Weighted average
grant date fair value
per share
Relative TSR PSUs outstanding as of
September 29, 2018
Granted
Forfeited or expired
Vested
Relative TSR PSUs outstanding as of
September 28, 2019
Granted
Forfeited or expired
Vested
Relative TSR PSUs outstanding as of
October 3, 2020
Granted
Forfeited or expired
Vested
Relative TSR PSUs outstanding as of
October 2, 2021
539 $
166
(27)
(117)
561 $
162
(52)
(268)
403 $
155
(6)
(108)
444 $
4,629
4,136
4,198
1.1
$
0.9
$
1.1
$
23.15
28.80
28.21
4,455
1.1
The following table reflects the assumptions used to calculate compensation expense related to the Company’s Relative TSR
PSUs issued during fiscal 2021, 2020, and 2019:
Grant price
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
$
2021
23.88 $
2.01 %
45.15 %
0.21 %
Fiscal
2020
22.95 $
2.09 %
36.29 %
1.49 %
2019
20.87
2.30 %
34.20 %
2.92 %
Equity-Based Compensation: Time-based RSUs
The following table reflects Time-based RSUs activity for fiscal 2021, 2020, and 2019:
58
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Time-based RSUs outstanding as of
September 29, 2018
Granted
Forfeited or expired
Vested
Time-based RSUs outstanding as of
September 28, 2019
Granted
Forfeited or expired
Vested
Time-based RSUs outstanding as of
October 3, 2020
Granted
Forfeited or expired
Vested
Time-based RSUs outstanding as of
October 2, 2021
Number of shares
(in thousands)
910 $
521
(42)
(442)
947 $
490
(80)
(569)
788 $
486
(24)
(333)
917 $
Unrecognized
compensation
expense (in
thousands)
9,038
10,555
10,480
Average remaining
service period (in
years)
Weighted average
grant date fair value
per share
1.4
$
1.4
$
1.6
$
20.95
22.93
24.34
11,420
1.4
Equity-Based Compensation: Growth PSUs
The following table reflects Growth PSUs activity for fiscal 2021, 2020, and 2019:
Number of shares
(in thousands)
Unrecognized
compensation
expense (in
thousands)
Average remaining
service period (in
years)
Weighted average
grant date fair value
per share
Special/Growth PSUs outstanding as of
September 29, 2018
Granted
Forfeited or expired
Vested
Special/Growth PSUs outstanding as of
September 28, 2019
Granted
Forfeited or expired
Vested
Special/Growth PSUs outstanding as of
October 3, 2020
Granted
Forfeited or expired
Vested
Special/Growth PSUs outstanding as of
October 2, 2021
46 $
55
(4)
—
97 $
80
(22)
(4)
151 $
52
(34)
(17)
152 $
702
1,128
1,252
2.1
$
1.6
$
1.1
$
21.07
23.65
24.01
1,247
1.0
The following table reflects employee stock option activity for fiscal 2021, 2020, and 2019:
59
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Average
remaining
contractual
life (in years)
Aggregate
intrinsic value
(in thousands)
Number of
shares (in
thousands)
$
24
Options outstanding as of September 29, 2018
Exercised
Forfeited or expired
Options outstanding as of September 28, 2019
Exercised
Forfeited or expired
Options outstanding as of October 3, 2020
Exercised
Forfeited or expired
Options outstanding as of October 2, 2021
Options vested and expected to vest as of October 2, 2021
Options exercisable as of October 2, 2021
—
In the money exercisable options as of October 2, 2021
Intrinsic value of stock options exercised is determined by calculating the difference between the market value of the
Company's stock price at the time an option is exercised and the exercise price, multiplied by the number of shares.
2 $
(2) $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
—
— $
— $
—
—
—
—
—
$
$
$
Weighted
average
exercise price
8.64
8.64
—
—
—
—
—
—
—
—
—
—
As of October 2, 2021, there were no unvested employee stock options.
Equity-Based Compensation: Non-Employee Directors
The 2021 Equity Plan provides for the grant of common shares to each non-employee director upon initial election to the board
and on the first business day of each calendar quarter while serving on the board. The grant to a non-employee director upon
initial election to the board is that number of common shares closest in value to, without exceeding, $120,000. The quarterly
grant to a non-employee director upon the first business day of each calendar quarter is that number of common shares closest
in value to, without exceeding, $39,500.
The following table reflects shares of common stock issued to non-employee directors and the corresponding fair value for
fiscal 2021, 2020, and 2019:
(in thousands)
Number of common shares issued
Fair value based upon market price at time of issue
Pension Plan
2021
Fiscal
2020
$
22
828 $
37
850 $
2019
37
834
The following table reflects the Company's defined benefits pension obligations, mainly in Switzerland and Taiwan, as of
October 2, 2021 and October 3, 2020:
As of
October 2, 2021
October 3, 2020
$
3,534 $
1,443
3,572
1,333
(in thousands)
Switzerland pension obligation
Taiwan pension obligation
Other Plans
60
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Some of the Company's other foreign subsidiaries have retirement plans that are integrated with and supplement the benefits
provided by laws of the various countries. These other plans are not required to report nor do they determine the actuarial
present value of accumulated benefits or net assets available for plan benefits as they are defined contribution plans.
NOTE 12: REVENUE AND CONTRACT LIABILITIES
The Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our
products or services to customers. In general, the Company generates revenue from product sales, either directly to customers
or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the
customer or distributor and their ability to pay. Service revenue is generally recognized over time as the services are performed.
For the fiscal years ended October 2, 2021, and October 3, 2020, service revenue is not material. Please refer to Note 1: Basis
of Presentation- Revenue Recognition, for additional disclosure on the Company's revenue recognition policy.
The Company reports revenue based on our reportable segments. The Company believes that reporting revenue on this basis
provides information about how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by
economic factors. Please refer to Note 16: Segment Information, for disclosure of revenue by segment.
Contract Liabilities
Our contract liabilities are primarily related to payments received in advance of satisfying performance obligations, and are
reported in the accompanying Consolidated Balance Sheets within accrued expenses and other current liabilities.
Contract liabilities increase as a result of receiving new advance payments from customers and decrease as revenue is
recognized from product sales under advance payment arrangements upon satisfying the performance obligations.
The following table shows the changes in contract liability balances during the fiscal year ended October 2, 2021 and
October 3, 2020:
(in thousands)
Contract liabilities, beginning of period
Revenue recognized
Additions
Contract liabilities, end of period
NOTE 13: EARNINGS PER SHARE
Fiscal
2021
2020
$
$
2,958 $
(59,368)
72,006
15,596 $
1,896
(25,207)
26,269
2,958
Basic income per share is calculated using the weighted average number of shares of common stock outstanding during the
period. Stock options and restricted stock are included in the calculation of diluted earnings per share, except when their effect
would be anti-dilutive.
The following table reflects a reconciliation of the shares used in the basic and diluted net income per share computation for
fiscal 2021, 2020, and 2019:
61
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands, except per share)
2021
Fiscal
2020
2019
Basic
Diluted
Basic
Diluted
Basic
Diluted
NUMERATOR:
Net income
DENOMINATOR:
Weighted average shares outstanding -
Basic
Dilutive effect of Equity Plans
Weighted average shares outstanding -
Diluted
EPS:
Net income per share - Basic
Effect of dilutive shares
Net income per share - Diluted
$ 367,161 $ 367,161 $
52,300 $
52,300 $
11,653 $
11,653
62,009
62,828
62,009
1,506
63,515
62,828
531
63,359
65,286
65,286
662
65,948
$
5.92 $
$
$
5.92 $
(0.14)
5.78
0.83 $
$
$
0.83 $
—
0.83
0.18 $
$
$
0.18
—
0.18
NOTE 14: OTHER FINANCIAL DATA
The following table reflects other financial data for fiscal 2021, 2020, and 2019:
(in thousands)
Incentive compensation expense
Warranty and retrofit expense
NOTE 15: INCOME TAXES
$
2021
39,779 $
22,068
Fiscal
2020
18,524 $
8,692
2019
423
13,030
The following table reflects U.S. and foreign income (loss) before income taxes for fiscal 2021, 2020, and 2019:
(in thousands)
United States
Foreign
Income before income taxes
2021
(8,853) $
423,403
414,550 $
$
$
Fiscal
2020
(14,909) $
79,243
64,334 $
2019
(14,125)
48,812
34,687
The following table reflects the current and deferred components of provision for (benefit from) income taxes for fiscal 2021,
2020, and 2019:
62
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Provision for income taxes
2021
Fiscal
2020
2019
$
$
26,563 $
261
30,771
(2,979)
—
(7,321)
47,295 $
5,129 $
89
6,508
(690)
—
962
11,998 $
6,580
214
6,384
2,959
—
6,773
22,910
The following table reconciles the provision for (benefit from) income taxes with the expected income tax provision computed
based on the applicable U.S. federal statutory tax rate for fiscal 2021, 2020, and 2019:
(dollar amounts in thousands)
Expected income tax provision based on the U.S. federal statutory tax rate
Effect of earnings of foreign subsidiaries subject to different tax rates
Benefit from tax incentives
Benefit from research and development tax credits
Benefit from foreign tax credits
U.S. one-time transition tax
Remeasurement of deferred taxes
Valuation allowance
Foreign operations (Deemed income, taxes on undistributed foreign earnings,
and withholding taxes)
Unrecognized tax benefit
Non-deductible items
Other, net
Provision for income taxes
Effective tax rate
$
$
2021
86,915 $
(15,028)
(45,501)
(2,705)
(20,281)
—
—
(11,620)
52,414
(180)
113
3,168
47,295 $
11.4 %
Fiscal
2020
13,510 $
(1,634)
(6,781)
(2,915)
(1,701)
—
(145)
1,224
8,886
285
1,232
37
11,998 $
18.6 %
2019
7,284
(4,335)
(5,084)
(3,041)
(22,744)
9,369
5,480
25,289
8,578
156
2,248
(290)
22,910
66.0 %
In fiscal 2021, the Company recorded tax expense primarily from domestic and foreign operations, deemed income, and
undistributed foreign earnings, partially offset by tax benefits from tax incentives, tax credits and the net release of valuation
allowances recorded against certain loss and credit carryforwards.
In fiscal 2020, the Company recorded tax expense primarily from domestic and foreign operations, deemed income,
undistributed foreign earnings, the net increase of valuation allowances recorded against certain loss and credit carryforwards,
and non-deductible expenses, partially offset by tax benefits from tax incentives and net tax credits, inclusive of an out of
period adjustment of $3.5 million to correct previously unrecorded income tax expense related to prior years jurisdictional
adjustments. The Company determined that the out of period adjustment to the provision for income taxes and income taxes
payable was not material to its fiscal 2020 or prior period consolidated financial statements.
As of October 2, 2021, a large portion of the Company’s undistributed foreign earnings are not considered to be indefinitely
reinvested outside the U.S. and are expected to be available for use in the U.S. without incurring additional U.S. income tax.
Further, we operate in a number of foreign jurisdictions, including Singapore, where we have a tax incentive that allows for a
reduced tax rate on certain classes of income, provided the Company meets certain employment and investment conditions
through the expiration date in fiscal 2025. In fiscal 2021, 2020, and 2019, the tax incentive arrangement helped to reduce the
Company’s provision for income taxes by $45.5 million or $0.72 per share, $6.8 million or $0.11 per share and $5.0 million or
$0.08 per share, respectively.
63
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table reflects deferred tax balances based on the tax effects of cumulative temporary differences for fiscal 2021
and 2020:
(in thousands)
Accruals and reserves
Tax credit carryforwards (1)
Net operating loss carryforwards
Gross deferred tax assets
Valuation allowance (1)
Deferred tax assets, net of valuation allowance
Taxes on undistributed foreign earnings (1)
Fixed and intangible assets
Deferred tax liabilities
Net deferred tax liabilities
Reported as
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
Fiscal
2021
2020
11,890 $
4,230
28,913
45,033 $
(34,095) $
10,938 $
(28,516) $
465
(28,051) $
(17,113) $
7,631
6,124
37,921
51,676
(46,561)
5,115
(25,676)
(4,297)
(29,973)
(24,858)
15,715 $
(32,828)
(17,113) $
8,147
(33,005)
(24,858)
$
$
$
$
$
$
$
$
$
(1) Certain balances in fiscal 2020 relating to foreign tax credits on undistributed foreign earnings and related valuation
allowances have been reclassified to conform to the current period presentation. These reclassifications have no impact to the
consolidated financial statements in fiscal 2020.
As of October 2, 2021, the Company has foreign net operating loss carryforwards of $72.8 million, state net operating loss
carryforwards of $104.4 million, and U.S. federal and state tax credit carryforwards of $6.8 million that can be used to offset
future income tax obligations. These net operating loss and tax credit carryforwards can be utilized prior to their expiration
dates in fiscal years 2022 through 2039, except for certain credits and foreign net operating losses that can be carried forward
indefinitely. The Company has recorded valuation allowances against certain foreign and state net operating loss carryforwards
and state tax credits which are expected to expire unutilized.
The following table reconciles the beginning and ending balances of the Company's unrecognized tax benefit, excluding related
accrued interest and penalties, for fiscal 2021, 2020, and 2019:
(in thousands)
Unrecognized tax benefit, beginning of year
Additions for tax positions, current year
Reductions for tax positions, prior year
Unrecognized tax benefit, end of year
2021
13,064 $
4,003
(2,145)
14,922 $
$
$
Fiscal
2020
12,925 $
537
(398)
13,064 $
2019
13,038
410
(523)
12,925
The Company recognizes interest and penalties related to potential income tax liabilities as a component of unrecognized tax
benefit and in provision for income taxes. The amount of interest and penalties related to unrecognized tax benefit recorded in
fiscal 2021 provision for income taxes is not material. As of October 2, 2021, the Company has recognized $1.7 million of
accrued interest and penalties related to unrecognized tax benefit within the income tax payable for uncertain tax positions and
approximately $15.2 million of unrecognized tax benefit, including related interest and penalties, that if recognized, would
impact the Company's effective tax rate.
It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will
increase or decrease during the next 12 months due to the expected lapse of statutes of limitation and/or settlements of tax
examinations. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions,
we cannot practicably estimate the financial outcomes of these examinations.
64
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company files a U.S. federal income tax return, as well as income tax returns in various state and foreign jurisdictions. For
U.S. federal income tax returns purposes, tax years from fiscal 2018 remain subject to examination. For most state tax returns,
tax years following fiscal 2002 remain subject to examination as a result of the generation of net operating loss carryforwards.
In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these
jurisdictions vary from jurisdiction to jurisdiction and range from 4 to 6 years. The Company's tax returns are currently under
examination by tax authorities in multiple state and foreign jurisdictions. The Company believes that adequate provisions have
been made for any adjustments that may result from the examination.
NOTE 16: SEGMENT INFORMATION
Reportable segments are defined as components of an enterprise that engage in business activities for which discrete financial
information is available and regularly reviewed by the chief operating decision maker (the "CODM") in deciding how to
allocate resources and assess performance. The Company's Chief Executive Officer is the CODM. The CODM does not review
discrete asset information. The Company operates two reportable segments consisting of: (1) Capital Equipment; and (2)
Aftermarket Products and Services ("APS").
The following table reflects operating information by segment for fiscal 2021, 2020, and 2019:
Fiscal
2020
$
2019
2021
(in thousands)
Net revenue:
Capital Equipment
APS
Net revenue
Income from operations:
Capital Equipment
APS
Income from operations
We have considered: (1) information that is regularly reviewed by our CODM as defined by the authoritative guidance on
segment reporting, in evaluating financial performance and (2) other financial data, including information that we include in our
earnings releases but which is not included in our financial statements, to disaggregate revenues by end markets served. The
principal category we use to disaggregate revenues is by the end markets served in the Capital Equipment segment.
1,312,576 $
205,088
1,517,664
355,982
56,465
412,447 $
462,059 $
161,117
623,176
22,069
36,440
58,509 $
386,820
153,232
540,052
(12,577)
34,187
21,610
$
The following table reflects net revenue by Capital Equipment end markets served for fiscal 2021, 2020, and 2019
(in thousands)
General Semiconductor (1)
Automotive & Industrial
LED
Memory
Total Capital Equipment revenue
2021
928,259 $
129,817
187,568
66,932
1,312,576 $
$
$
Fiscal
2020
290,220 $
60,169
76,574
35,096
462,059 $
2019
209,885
77,365
56,138
43,432
386,820
(1) The Company noted a growing portion of the general semiconductor and LED end market is increasing in complexity and
driving more capital intensity, therefore demanding more advanced packaging solutions. This has reduced the relevance of the
advanced packaging end market. In view of this, sales previously defined as advanced packaging will be primarily categorized
within the general semiconductor end market.
The following tables reflect capital expenditures, depreciation and amortization expense by segment for fiscal 2021, 2020, and
2019.
65
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands)
Capital expenditures:
Capital Equipment
APS
Capital expenditures
(in thousands)
Depreciation expense:
Capital Equipment
APS
Depreciation expense
(in thousands)
Amortization expense:
Capital Equipment
APS
Amortization expense
Geographical information
2021
Fiscal
2020
2019
15,257 $
7,298
22,555 $
5,798 $
8,716
14,514 $
5,380
6,449
11,829
2021
Fiscal
2020
2019
6,938 $
6,898
13,836 $
6,360 $
6,008
12,368 $
7,584
5,308
12,892
2021
Fiscal
2020
2019
3,584 $
2,390
5,974 $
4,255 $
3,116
7,371 $
3,977
3,435
7,412
$
$
$
$
$
$
The following tables reflect destination sales to unaffiliated customers by country and long-lived assets by country for fiscal
2021, 2020, and 2019:
(in thousands)
Destination sales to unaffiliated customers:
China
Taiwan
Hong Kong
Malaysia
Korea
United States
Vietnam
Thailand
Philippines
Japan
All other
Total destination sales to unaffiliated customers
$
$
2021
Fiscal
2020
2019
843,470 $
275,251
82,436
70,253
58,308
54,353
36,469
24,448
17,651
11,850
43,175
1,517,664 $
321,294 $
64,373
43,288
40,641
30,848
36,186
8,699
9,389
9,439
9,150
49,869
623,176 $
252,179
63,440
12,096
41,568
15,236
36,393
10,978
9,941
12,057
10,341
75,823
540,052
66
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands)
Long-lived assets:
Singapore
United States (1)
China (1)
Israel (1)
All other (1)
Total long-lived assets
2021
Fiscal
2020
2019
$
$
40,470 $
32,684
25,386
8,597
11,187
118,324 $
16,499 $
29,291
24,899
8,829
12,038
91,556 $
25,620
24,597
18,818
6,760
5,318
81,113
(1) Certain balances in fiscal 2020 and 2019 relating to long-lived assets by country have been revised to exclude deferred tax
asset balances. The previously included balances are not material and there is no impact to the Consolidated Balance Sheets in
fiscal 2020 and 2019.
NOTE 17: COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS
Warranty Expense
The Company's equipment is generally shipped with a one-year warranty against manufacturing defects. The Company
establishes reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for
estimated warranty expense is based upon historical experience and management's estimate of future warranty costs, including
product part replacement, freight charges and related labor costs expected to be incurred to correct product failures during the
warranty period.
The following table reflects the reserve for product warranty activity for fiscal 2021, 2020, and 2019:
(in thousands)
Reserve for warranty, beginning of period
Provision for warranty
Changes in the estimation of warranty reserve
Utilization of reserve
Reserve for warranty, end of period
2021
9,576 $
18,889
—
(11,504)
16,961 $
$
$
Fiscal
2020
14,185 $
14,004
(5,417)
(13,196)
9,576 $
2019
14,474
12,140
—
(12,429)
14,185
For the change in estimation of warranty reserve, see Note 1 for details.
Other Commitments and Contingencies
The following table reflects obligations not reflected on the Consolidated Balance Sheet as of October 2, 2021:
(in thousands)
Inventory purchase obligation (1)
Total
2022
Payments due by fiscal year
2024
2025
2023
Thereafter
$ 591,845 $ 591,845 $
— $
— $
— $
—
(1) The Company orders inventory components in the normal course of its business. A portion of these orders are non-
cancelable and a portion may have varying penalties and charges in the event of cancellation.
From time to time, the Company is party to or the target of lawsuits, claims, investigations and proceedings, including for
personal injury, intellectual property, commercial, contract, and employment matters, which are handled and defended in the
ordinary course of business. The Company accrues a contingent loss liability for such matters when it is probable that a liability
has been incurred and the amount can be reasonably estimated. When a single amount cannot be reasonably estimated but the
cost can be estimated within a range, the Company accrues the minimum amount. The Company expenses legal costs, including
those expected to be incurred in connection with a loss contingency, as incurred.
Concentrations
67
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following tables reflect significant customer concentrations as a percentage of net revenue for fiscal 2021, 2020, and 2019:
ASE Technology Holding
* Represents less than 10% of total net revenue
2021
17.4 %
Fiscal
2020
2019
*
*
The following table reflects significant customer concentrations as a percentage of total accounts receivable as of October 2,
2021 and October 3, 2020:
Tianshui Huatian Technology Co., Ltd
Haoseng Industrial Co., Ltd (1)
Forehope Electronic Co., Ltd
Regent Manner Limited
* Represents less than 10% of total accounts receivable
(1) Distributor of the Company's products
As of
October 2, 2021
October 3, 2020
18.2 %
14.3 %
*
*
*
*
20.0 %
10.3 %
68
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures as of October 2, 2021. Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that, as of October 2, 2021 our disclosure controls and procedures were effective in
providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
Management’s Report on Internal Control Over Financial Reporting
The management of Kulicke and Soffa Industries, Inc. (the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of
1934, as amended. The 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 in the United States of America.
The Company's internal control over financial reporting includes those policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles; provide reasonable assurance that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and 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.
Management evaluated the effectiveness of the Company's internal control over financial reporting as of October 2, 2021. In
making this assessment, management used the framework established in Internal Control-Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management's assessment included an
evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our
internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of the
Company's Board of Directors.
Based on that assessment, management has concluded that, as of October 2, 2021, the Company's internal control over financial
reporting was effective.
The effectiveness of the Company's internal control over financial reporting as of October 2, 2021 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report, which appears in Part II,
Item 8 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There has been no change in the Company's internal control over financial reporting during the three months ended October 2,
2021, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial
reporting.
Item 9B. OTHER INFORMATION
None.
69
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
70
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by Item 401 of Regulation S-K with respect to the directors and executive officers will appear under the
heading “ITEM 1—ELECTION OF DIRECTORS” in the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders, which information is incorporated herein by reference. The other information required by Item 401 of Regulation
S-K will appear under the heading “CORPORATE GOVERNANCE” in the Company's Proxy Statement for the 2022 Annual
Meeting of Shareholders, which information is incorporated herein by reference.
The information required by Item 405 of Regulation S-K will appear under the heading “CORPORATE GOVERNANCE—
Section 16(a) Beneficial Ownership Reporting Compliance” in the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders, which information is incorporated herein by reference.
The information required by Item 406 of Regulation S-K will appear under the heading “CORPORATE GOVERNANCE—
Code of Ethics” in the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders, which information is
incorporated herein by reference.
The information required by Item 407(c)(3) of Regulation will appear under the headings “CORPORATE GOVERNANCE—
Nominating and Governance Committee” and “Shareholder Proposals” in the Company's Proxy Statement for the 2022 Annual
Meeting of Shareholders, which information is incorporated herein by reference.
The information required by Items 407(d)(4) and (d)(5) of Regulation S-K will appear under the heading “CORPORATE
GOVERNANCE—Audit Committee” in the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders, which
information is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K will appear under the heading “COMPENSATION OF EXECUTIVE
OFFICERS,” in the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders, which information is
incorporated herein by reference.
The information required by Item 407(e)(4) of Regulation S-K will appear under the heading “CORPORATE
GOVERNANCE—Management Development and Compensation Committee Interlocks and Insider Participation” in the
Company's Proxy Statement for the 2022 Annual Meeting of Shareholders, which information is incorporated herein by
reference.
The information required by Item 407(e)(5) of Regulation S-K will appear under the heading “MANAGEMENT
DEVELOPMENT AND COMPENSATION COMMITTEE REPORT” in the Company's Proxy Statement for the 2022 Annual
Meeting of Shareholders, which information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required under Item 403 of Regulation S-K concerning security ownership of certain beneficial owners and
management will appear under the headings “CORPORATE GOVERNANCE—Security Ownership Of Certain Beneficial
Owners” and “CORPORATE GOVERNANCE—SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND
EXECUTIVE OFFICERS”, in the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders, which
information is incorporated herein by reference.
The information required by Item 201(d) of Regulation S-K relating to securities authorized for issuance under equity
compensation plans is included under the heading “EQUITY COMPENSATION PLAN INFORMATION” in the Company's
Proxy Statement for the 2022 Annual Meeting of Shareholders, which is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 404 of Regulation S-K will appear under the heading “CORPORATE GOVERNANCE—
Certain Relationships and Related Transactions” in the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders, which information is incorporated herein by reference.
71
The information required by Section 407(a) of Regulation S-K will appear under the heading “CORPORATE
GOVERNANCE—Board Matters” in the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders, which
information is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required hereunder will appear under the heading “AUDIT AND RELATED FEES” in the Company's Proxy
Statement for the 2022 Annual Meeting of Shareholders, which information is incorporated herein by reference.
72
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
Part IV
(1)
Financial Statements - Kulicke and Soffa Industries, Inc.:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of October 2, 2021 and October 3, 2020
Consolidated Statements of Operations for fiscal 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for fiscal 2021, 2020 and 2019
Consolidated Statements of Changes in Shareholders' Equity for fiscal 2021, 2020 and 2019
Consolidated Statements of Cash Flows for fiscal 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the required information is
shown in the Consolidated Financial Statements or notes thereto.
(3) Exhibits:
See "Exhibit Index" within Item 15 below.
Page
35
37
38
39
40
41
42
74
74
73
KULICKE AND SOFFA INDUSTRIES, INC.
Schedule II-Valuation and Qualifying Accounts
(in thousands)
Fiscal 2021:
Beginning
of period
Charged to
Costs and
Expenses
Other
Additions
Other
Deductions
End of
period
Allowance for doubtful accounts $
968
Inventory reserve
$
31,163
Valuation allowance for deferred
taxes
$
46,561
Fiscal 2020:
Allowance for doubtful accounts $
597
Inventory reserve
$
29,313
Valuation allowance for deferred
taxes
$
58,411
Fiscal 2019:
Allowance for doubtful accounts $
385
Inventory reserve
$
26,889
Valuation allowance for deferred
taxes
$
37,249
$
$
$
$
$
$
$
$
$
(248)
(2,965)
$
$
—
—
$
$
(33) (1) $
687
(5,156) (2) $
23,042
—
$
—
$ (12,466) (4) $
34,095
371
4,170
$
$
—
—
$
$
— (1) $
968
(2,320) (2) $
31,163
6,887 (3) $
—
$ (18,737) (5) $
46,561
212
2,657
$
$
—
—
$
$
— (1) $
597
(233) (2) $
29,313
—
$
21,162 (3) $
—
$
58,411
(1) Represents write-offs of specific accounts receivable.
(2) Sale or scrap of previously reserved inventory.
(3) Reflects the net increase in the valuation allowance primarily associated with the Company's U.S. and foreign tax
credits, U.S. and foreign net operating losses and other deferred tax assets.
(4) Reflects the net decrease in the valuation allowance primarily associated with the Company's utilization of certain
foreign net operating losses for which a valuation allowance had previously been recorded, partially offset by an
increase for U.S. and foreign tax credits, U.S. and foreign net operating losses and other deferred tax assets.
(5) Refer to Note 15: Income Taxes to our consolidated financial statements in Item 8 for disclosure on the
reclassification.
EXHIBIT INDEX
74
EXHIBIT
NUMBER
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
ITEM
The Company's Amended and Restated Articles of Incorporation, dated December 5, 2007, is
incorporated herein by reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 29, 2007, SEC file number 000-00121.
The Company's Amended and Restated By-Laws, dated October 22, 2015, is incorporated herein by
reference to Exhibit 3(ii) to the Company's Current Report on Form 8-K dated October 22, 2015.
Specimen Common Share Certificate of Kulicke and Soffa Industries Inc., is incorporated herein by
reference to Exhibit 4 to the Company's Form-8A12G/A dated September 11, 1995, SEC file number
000-00121.
Description of the Company's securities.
Kulicke & Soffa Industries, Inc. Executive Severance Pay Plan, dated as of August 9, 2011, is
incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
August 12, 2011.*
Kulicke & Soffa Industries, Inc. Officer Severance Pay Plan, dated as of August 9, 2011, is incorporated
herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on August 12,
2011.*
Form of Change of Control Agreement, is incorporated herein by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K filed on August 12, 2011.*
Form of Director Indemnification Agreement is incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on October 10, 2013.*
Lease Agreement between DBS Trustee Limited, as trustee of Mapletree Industrial Trust, and the
Kulicke & Soffa Pte. Ltd, dated December 1, 2013, is incorporated herein by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K filed on December 5, 2013.
Lease Agreement Variation Letter between DBS Trustee Limited, as trustee of Mapletree Industrial
Trust, and the Kulicke & Soffa Pte. Ltd, dated December 1, 2013, is incorporated herein by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 5, 2013.
Form of Officer Indemnification Agreement is incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on December 11, 2013.*
Share Sale and Purchase Agreement between Kulicke & Soffa Holdings, B.V. and Assembléon Holding
B.V., dated December 29, 2014, incorporated herein by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended December 27, 2014.
Offer Letter between Kulicke and Soffa Industries, Inc. and Fusen Chen dated October 3, 2016,
incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on
October 3, 2016.*
2017 Equity Plan is incorporated herein by reference to Appendix A to the Company's Proxy Statement
on Schedule 14A for the annual meeting of shareholders on March 14, 2017.*
Form of Performance Share Unit Award Agreement regarding the 2017 Equity Plan is incorporated
herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on November
6, 2017.
Form of Restricted Share Unit Award Agreement regarding the 2017 Equity Plan is incorporated herein
by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on November 6, 2017.
The Company's 2021 Omnibus Incentive Plan is incorporated herein by reference to the Company's
Proxy Statement on Schedule 14A for the annual meeting of shareholders on March 4, 2021
Form of CEO Performance Share Unit Award Agreement (Growth PSUs) regarding the 2021 Omnibus
Incentive Plan.
Form of Executive Performance Share Unit Award Agreement (Growth PSUs) regarding the 2021
Omnibus Incentive Plan.
Form of CEO Performance Share Unit Award Agreement (Relative TSR) regarding the 2021 Omnibus
Incentive Plan.
Form of Executive Performance Share Unit Award Agreement (Relative TSR) regarding the 2021
Omnibus Incentive Plan.
Form of Restricted Stock Unit Award Agreement regarding the 2021 Omnibus Incentive Plan.
75
10.19
21.1
23.1
31.1
31.2
32.1
32.2
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Incentive Compensation Plan FY2021
Subsidiaries of the Company.
Consent of PricewaterhouseCoopers LLP (Independent Registered Public Accounting Firm).
Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to
Rule 13a-14(a) or Rule 15d-14(a).
Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to
Rule 13a-14(a) or Rule 15d-14(a).
Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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 in Inline XBRL and contained in Exhibit 101).
* Indicates a management contract or compensatory plan or arrangement
** Copies of certain instruments defining the rights of holders of certain of our long-term debt are not filed
herewith. We hereby agree to furnish a copy of any such instrument to the SEC upon request.
Item 16. Form 10-K Summary
None.
76
SIGNATURES
Pursuant to the requirements 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.
KULICKE AND SOFFA INDUSTRIES, INC.
By:
/s/ FUSEN CHEN
Fusen Chen
President and Chief Executive Officer
Dated: November 18, 2021
Signature
Title
Date
November 18, 2021
President and Chief Executive Officer
(Principal Executive Officer)
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
November 18, 2021
Director
November 18, 2021
/s/ FUSEN CHEN
Fusen Chen
/s/ LESTER WONG
Lester Wong
/s/ JON A. OLSON
Jon A. Olson
/s/ GREGORY F. MILZCIK
Director
November 18, 2021
Gregory F. Milzcik
/s/ CHIN HU LIM
Chin Hu Lim
/s/ JEFF RICHARDSON
David J. Richardson
/s/ MUI SUNG YEO
Mui Sung Yeo
/s/ PETER T. KONG
Peter T. Kong
Director
Director
Director
Director
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
77
STOCK PERFORMANCE GRAPH
The graph set forth below compares, for fiscal years 2017 through 2021, the yearly change in the
cumulative total returns to holders of common shares of the Company with the cumulative total return of a
peer group selected by the Company and of the NASDAQ Composite Index. The peer group is focused on
companies that manufacture equipment and materials similar to the equipment and materials manufactured
by the Company, and is composed, in part, by reference to peer group lists that the Company believes are
commonly used by institutional investors and financial research analysts when evaluating Company
performance. The Company believes that the peer group provides a useful reference point for investors
when evaluating Company performance across the semiconductor assembly equipment industry business
cycle. The peer group is composed of ASM Pacific Technology Ltd., BE Semiconductor Industries, N.V.,
Brooks Automation Inc., Cohu, Inc., KLA Corp., LAM Research Corp., Teradyne Inc. and Veeco
Instruments Inc. The graph assumes that the value of the investment in the relevant stock or index was
$100 at October 1, 2016 and that all dividends were reinvested. Total returns are calculated based on the
Kulicke & Soffa Industries, Inc. fiscal year calendar. For purposes of the peer group index, the peer group
companies have been weighted based upon their relative market capitalization. The closing sale price of
the Company’s common shares as of October 2, 2021 was $58.67.
78
COMPANY INFORMATION
As of December 2021
Corporate Locations
Additional Information
Principal Executive Offices
Independent Accountants
Kulicke and Soffa Industries, Inc.
23A Serangoon North Avenue 5
#01-01
Singapore 554369
Kulicke and Soffa Industries, Inc.
1005 Virginia Drive
Fort Washington, Pa 19034
Technology Centers
Berg, Switzerland
Eindhoven, Netherlands
Haifa, Israel
Fort Washington, Pennsylvania
Santa Ana, California
Singapore
Suzhou, China
Equipment Manufacturing Facilities
Eindhoven, Netherlands
Santa Ana, California
Singapore
Expendable Tools Manufacturing
Facilities
Haifa, Israel
Suzhou, China
PricewaterhouseCoopers, LLP
Singapore
Registrar and Transfer Agent
American Stock Transfer & Trust
6201 15th Avenue
Brooklyn, New York 11219
800-937-5449
NASDAQ Symbol: KLIC
Supplemental Investor Information
An electronic copy of the 2021 Annual
Report, Proxy Statement, SEC filings
and supplemental investor information
are available in the Investor section of
the Company’s corporate website at
investor.kns.com.
For additional information please
contact:
Investor Relations
+1-215-784-7500
investor@kns.com
79
Leadership Team
EXECUTIVE LEADERSHIP
BOARD OF DIRECTORS
Fusen E. Chen
President & Chief Executive Officer
Chan Pin Chong
Executive Vice President & General
Manager, Products & Solutions
Lester Wong
Senior Vice President & Chief
Financial Officer
Nelson Wong
Senior Vice President, Global Sales
& Supply Chain
Bob Chylak
Vice President, Central Engineering
& Chief Technology Officer
Stephen Drake
Vice President, Legal Affairs &
General Counsel
Meng Kwong Han
Vice President & General Manager,
Aftermarket Products & Services
Cheam Tong Liang
Vice President, Corporate Strategy
Lisa Lim
Vice President, Global Human
Resources
Eugene Tan
Vice President, Equipment
Manufacturing Operations
& Quality
Peter T. Kong
Chairman of the Board
Kulicke & Soffa Industries, Inc.
Retired President
Global Components
Arrow Electronics, Inc.
Fusen E. Chen
President & Chief Executive Officer
Kulicke & Soffa Industries, Inc.
Lim Chin Hu
Non-Executive Director
Singapore Exchange Ltd.
Non-Executive Director
Singapore Technologies
Engineering, Ltd.
Non-Executive Director
Citibank Singapore Ltd.
Gregory F. Milzcik
Retired President &
Chief Executive Officer
Barnes Group Inc.
Jon A. OIson
Retired CFO
Xilinx, Inc.
Non-Executive Director
Xilinx, Inc.
Non-Executive Director
Rocket Lab USA, Inc.
Jeffrey Richardson
Chairman of the Board
Lattice Semiconductor
Corporation
Non-Executive Director
Ambarella, Inc.
Non-Executive Director
Graphcore
Yeo Mui Sung
Former Chief Financial Officer
Mediacorp Pte.
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