−Removed: Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electromechanical system (MEMS) test modules, test contactors, thermal sub-systems, semiconductor automated test equipment and bare board PCB test systems used by global semiconductor and electronics manufacturers and semiconductor test subcontractors.
+Added: Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electromechanical system (“MEMS”) test modules, test contactors, thermal sub-systems and semiconductor automated test equipment used by global semiconductor and electronics manufacturers and semiconductor test subcontractors.
We offer a wide range of products and services, and revenue from our capital equipment products is driven by the capital expenditure budgets and spending patterns of our customers, who often delay or accelerate purchases in reaction to variations in their business.
−Removed: The level of capital expenditures by these companies depends on the current and anticipated market demand for semiconductor devices and PCBs and the products that incorporate them.
−Removed: Our recurring revenues are driven by an increase in the number of semiconductor devices and PCBs that are tested and by the continuous introduction of new products and technologies by our customers.
−Removed: On October 1, 2018, we acquired Xcerra Corporation (“Xcerra”), a Massachusetts-based company.
−Removed: Xcerra, formerly known as LTX-Credence Corporation, is a global provider of test and handling capital equipment, interface products and related services to the semiconductor and electronics manufacturing industries.
−Removed: Xcerra operated in semiconductor and electronics manufacturing test markets through its atg-Luther & Maelzer, Everett Charles Technologies (ECT), LTX-Credence and Multitest businesses.
−Removed: The acquisition of Xcerra extended Cohu’s market position in the test handler and test contactor markets and expanded Cohu’s addressable market with our entry into semiconductor automated test equipment (ATE) and bare board PCB test.
−Removed: The results of Xcerra’s operations have been included in our consolidated results since October 1, 2018.
−Removed: As a result of the timing of the acquisition, our fiscal 2020 and 2019 results include Xcerra for the entire year whereas fiscal 2018 amounts only include Xcerra for the three months ended December 29, 2018.
−Removed: This acquisition helped transform our business into a broader semiconductor test, inspection and test handling market leader with greater scale, diversification and market opportunities.
−Removed: Management previously determined that Xcerra’s fixtures services business did not align with Cohu’s long-term strategic plan and engaged in a process to divest this portion of the business.
−Removed: As a result, as of December 28, 2019 and December 29, 2018, the assets of our fixtures business are considered “held for sale”
−Removed: and the operations of our fixtures business were presented as “discontinued operations”.
−Removed: This business was sold in February 2020.
+Added: The level of capital expenditures by these companies depends on the current and anticipated market demand for semiconductor devices and the products that incorporate them.
+Added: Our recurring revenues are driven by an increase in the number of semiconductor devices that are tested and by the continuous introduction of new products and technologies by our customers.
+Added: On June 24, 2021, we completed the sale of our PCB Test Equipment (“PCB Test”) business, which represented our PCB Test reportable segment.
+Added: As part of the transaction we also sold certain intellectual property held by our Semiconductor Test & Inspection segment that is utilized by the PCB Test business.
+Added: Our decision to sell this non-core business resulted from management’s determination that that they were no longer a fit within our organization.
+Added: We evaluated the guidance in Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements –
+Added: Discontinued Operations , and determined that the divestment of our PCB Test business does not represent a strategic shift as the divestiture will not have a major effect on Cohu’s operations and financial results and, as a result, it is not presented as discontinued operations in any periods presented.
Unless otherwise noted, all amounts presented are from continuing operations.
−Removed: We have determined that we have two reportable segments, Semiconductor Test and Inspection Equipment (“Semiconductor Test & Inspection”) and PCB Test Equipment (“PCB Test”).
+Added: We have determined that we have one reportable segment, Semiconductor Test and Inspection Equipment (“Semiconductor Test & Inspection”).
+Added: Prior to the sale of our PCB Test Group (“PTG”) on June 24, 2021, we reported in two segments, Semiconductor Test & Inspection and PCB Test Equipment.
Financial information on our reportable segments for each of the last three years is included in Note 10, “Segment and Geographic Information”
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Semiconductor Test.
−Removed: Semiconductor ATE (Automated Test Equipment) is used both for wafer level and device package testing.
−Removed: Our semiconductor ATE solutions consist primarily of two platforms focused on the system on a chip (SoC) device market.
−Removed: The Diamond series platform, which includes the flagship Diamondx test system, offers high-density instrumentation for low-cost testing of microcontrollers, application specific standard products (ASSP), power management, display drivers, sensors and other mixed signal devices.
+Added: Semiconductor Automated Test Equipment (“ATE”) is used both for wafer level and device package testing.
+Added: Our semiconductor ATE solutions consist primarily of two platforms focused on the system on a chip (“SoC”) device market.
+Added: The Diamond series platform, which includes the flagship Diamond x test system, offers high-density instrumentation for low-cost testing of microcontrollers, application specific standard products (“ASSP”), power management, display drivers, sensors and other mixed signal devices.
The PAx series of testers is focused primarily on the RF Front End IC and Module market.
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Interface Products are included in our recurring revenues.
+Added: Data Analytics.
+Added: Our data analytics product, DI-Core, is a comprehensive software suite used to optimize Cohu equipment performance.
+Added: DI-Core provides real-time online performance monitoring and process control to improve utilization, manages preventative and predictive maintenance to improve overall equipment efficiency, links semiconductor tester, handler and test contactor data for intelligence and extended device tracking, and provides a knowledge database and unified reports for quickly identifying issues and retaining historical performance data.
Spares and Kits.
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We also provide training on the maintenance and operation of our systems as well as application, data management software and consulting services on our products.
−Removed: Our InSight test cell enterprise software platform provides our customers with a centralized data management system to monitor equipment performance.
Services are included in our recurring revenues.
−Removed: Bare Board PCB Test Systems.
−Removed: Bare board PCB test systems are used to test pre-assembly printed circuit boards.
−Removed: Our PCB test systems include flying probe testers, which are used to test low-volume, highly complex circuit boards and do not require the use of a separate test fixture, as well as universal grid testers, which require the use of a custom test fixture and are well-suited for circuit boards in high volume manufacturing.
Sales by Product Line
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Semiconductor test & inspection systems (including kits)
−Removed: Interface products, spares, kits (not as part of systems sales) and services
+Added: Recurring revenues (1)
PCB test systems
+Added: (1) Recurring revenues include interface products, spares, kits (not as part of system sales) and services
Our customers include semiconductor integrated device manufacturers, fabless design houses, PCB manufacturers, and test subcontractors throughout the world.
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During the last three years, customers of our Semiconductor Test & Inspection segment that comprised 10% or greater of our consolidated net sales were as follows:
−Removed: *No single customer exceeded 10% of consolidated net sales for the years ended December 26, 2020 and December 29, 2018.
−Removed: No customer of our PCB Test segment exceeded 10% of consolidated net sales for the years ended December 26, 2020, December 28, 2019 or December 29, 2018.
+Added: Analog Devices
+Added: * Less than 10% of consolidated net sales.
The loss of, or a significant reduction in, orders by these or other significant customers, including reductions due to market, economic or competitive conditions or the outsourcing of final integrated circuit test to subcontractors that are not our customers would adversely affect our financial condition and results of operations.
+Added: On June 24, 2021, we completed the divestment of our PCB Test business.
+Added: No customer of our PCB Test segment exceeded 10% of consolidated net sales for the years ended December 25, 2021, December 26, 2020 or December 28, 2019.
Additional financial information on revenues from external customers by geographic area for each of the last three years is included in Note 10, “Segment and Geographic Information”
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In geographic areas where we believe there is sufficient sales potential, we generally employ our own personnel.
−Removed: Our United States, (U.S.) sales offices are located in Poway and Milpitas, California, Lincoln, Rhode Island and Norwood, Massachusetts.
−Removed: Our European sales offices are located in Wertheim and Kolbermoor, Germany;
+Added: Our United States (U.S.) sales offices are located in Poway and Milpitas, California, St.
+Added: Paul, Minnesota, Lincoln, Rhode Island and Norwood, Massachusetts.
+Added: Our European sales offices are located in Kolbermoor, Germany;
Grenoble, France;
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We operate in Asia with sales and service offices in Singapore, Malaysia, Thailand, Philippines, Taiwan, China, South Korea and Japan.
−Removed: The semiconductor equipment and PCB test industries are intensely competitive and are characterized by rapid technological change and demanding worldwide service requirements.
+Added: The semiconductor equipment industry is intensely competitive and is characterized by rapid technological change and demanding worldwide service requirements.
Significant competitive factors include product performance, price, reliability, lead-time, customer support and installed base of products.
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While we are among the leading worldwide suppliers of test contactors, this market is fragmented with a large number of global and local competitors.
−Removed: Further, the PCB test industry is characterized by significant Asia-based competition and intense price competition.
To remain competitive within the industries we serve, we believe we will require significant financial resources to offer a broad range of products, maintain localized customer support and service centers worldwide and to invest in research and development of new products.
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Lincoln, Rhode Island (connectors);
−Removed: Osaka, Japan (probe pins);
−Removed: and Wertheim, Germany (bare board PCB test systems).
+Added: and Osaka, Japan (probe pins).
We outsource the manufacturing of many of our semiconductor automated test equipment products to Jabil Circuit, Inc.’s facility in Penang, Malaysia.
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Many of the components and subassemblies we utilize are standard products, although some items are made to our specifications.
−Removed: Certain components are obtained or are available from a limited number of suppliers.
+Added: Certain components are obtained or are available from a limited number of suppliers or may be sole sourced.
We seek to reduce our dependence on sole and limited source suppliers, however in some cases the complete or partial loss of certain of these sources could have a material adverse effect on our operations while we attempt to locate and qualify replacement suppliers.
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Our total research and development expense was $92.0 million in 2021, $86.2 million in 2020 and $86.1 million in 2019.
−Removed: The increase in research and development expense in 2019 was primarily associated with the acquisition of Xcerra on October 1, 2018.
−Removed: Incremental research and development expense directly attributed to Xcerra in 2020, 2019 and 2018 was $44.2 million, $45.4 million and $11.5 million, respectively.
We work closely with our customers to make improvements to our existing products and in the development of new products.
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Historically, the semiconductor industry has been seasonal with recurring periods of oversupply and excess capacity, which often have had a significant effect on the semiconductor industry’s demand for capital equipment, including equipment of the type we manufacture and market.
−Removed: We anticipate that the markets for newer generations of semiconductors and semiconductor equipment will be subject to similar cycles and severe downturns.
−Removed: Any significant reductions in capital equipment investment by semiconductor integrated device manufacturers and test subcontractors will materially and adversely affect our business, financial position and results of operations.
−Removed: See the risk factor entitled “The semiconductor industry we serve is seasonal, volatile and unpredictable.”
−Removed: Executive Officers of the Registrant
+Added: We anticipate that the markets for newer generations of semiconductors and semiconductor equipment will be subject to similar cycles.
+Added: See the risk factor entitled “The semiconductor industry we serve is seasonal, volatile and unpredictable, and increased cyclicality could have an adverse impact on our sales and gross margin.”
+Added: Information About Our Executive Officers
The following sets forth the names, ages, positions and offices held by all executive officers of Cohu as of February 10, 2022.
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Müller spent nine years at Teradyne Inc., where he held management positions in engineering and business development.
+Added: Müller also serves as a director for Celestica Inc., a solutions-based company providing design, manufacturing and hardware platform and supply chain solutions.
Mr. Jones joined Cohu’s Delta Design subsidiary in July 2005 as Vice President Finance and Controller.
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Lawee joined Cohu in May 2019 as Vice President and General Manager of Cohu’s Semiconductor Test Group and subsequently promoted to Senior Vice President and General Manager on February 9, 2021.
−Removed: Lawee has more than 25 years of experience in multiple management positions at both semiconductor and test instrumentation companies.
+Added: Lawee has more than twenty-five years of experience in multiple management positions at both semiconductor and test instrumentation companies.
Between 2009 and 2019, he served in multiple General Manager and Senior Director roles at Analog Devices, with responsibilities spanning Interface, Isolation and Precision Converter semiconductor franchises, as well as Business Unit responsibility for semiconductors sold into the Energy market.
Prior to that, Mr.
−Removed: Lawee spent 15 years working in a variety of product, marketing and engineering management roles at Teradyne’s semiconductor test division.
+Added: Lawee spent fifteen years working in a variety of product, marketing and engineering management roles at Teradyne’s semiconductor test division.
Governmental Regulations
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Human Capital Management
−Removed: Cohu is a global supplier of semiconductor test and inspection handlers, MEMS test modules, test contactors, thermal sub-systems, semiconductor automated test equipment and bare board PCB test systems used by global semiconductor and electronics manufacturers and semiconductor test subcontractors.
+Added: Cohu is a global supplier of semiconductor test and inspection handlers, MEMS test modules, test contactors, thermal sub-systems and semiconductor automated test equipment used by global semiconductor and electronics manufacturers and semiconductor test subcontractors.
We believe that the daily commitment and dedication of our workforce in meeting our customers’
needs is one of the significant contributors to our success as an organization.
−Removed: To ensure we maintain our position as a global leader in the semiconductor test space, we are committed to providing a safe and positive work environment for our employees that emphasizes learning and professional development, respect for individuals and ethical conduct, and that is facilitated by a direct management-employee engagement model.
+Added: To ensure we maintain our position as a global leader in the semiconductor test and inspection space, we are committed to providing a safe and positive work environment for our employees that emphasizes learning and professional development, respect for individuals and ethical conduct, and that is facilitated by a direct management-employee engagement model.
Diversity, Inclusion, and Non-discrimination
1 unchanged sentence
We strive to maintain workplaces that are free from discrimination or harassment based on race, color, religion, gender, gender identity or gender expression, national origin or ancestry, age, disability, veteran status, military service, sexual orientation, genetic information, and any other protected category recognized under applicable laws.
−Removed: Cohu is committed to respecting and protecting all human rights including those of women and minority groups.
+Added: We believe that a diverse workforce is critical to our success, and we continue to focus on the hiring, retention and advancement of women and underrepresented populations.
+Added: We are committed to respecting and protecting the human rights of all our employees.
As of December 25, 2021, we had approximately 3,240 employees, including approximately 165 temporary employees, in 24 countries.
−Removed: Approximately 22% of our employees are located in the Americas, 19% are located in EMEA (Europe, the Middle East and Africa) and 59% are located in China and Asia Pacific.
+Added: Approximately 21% of our employees are located in the Americas, 14% are located in EMEA (Europe, the Middle East and Africa) and 65% are located in Asia Pacific.
Our employee headcount has fluctuated in the last five years primarily due to the volatile and unpredictable business conditions in the semiconductor equipment industry and has also been impacted by acquisitions and divestitures.
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and most locations in Asia are not covered by collective bargaining agreements.
−Removed: However, certain employees at our operations in Germany are represented by works councils and employees in La Chaux-de-Fonds, Switzerland are members of the microtechnology and Swiss watch trade union.
+Added: However, certain employees at our operation in Germany are represented by a works council and employees in La Chaux-de-Fonds, Switzerland are members of the microtechnology and Swiss watch trade union.
The Collective Bargaining Agreement of “Metallurgie (ingenieurs et cadres)”
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Our ultimate goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety programs.
−Removed: We provide protective equipment (e.g.
−Removed: eye protection, masks and gloves) as required by applicable standards and as appropriate given employee job duties.
−Removed: During fiscal 2020, in response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees, our subcontractors and our customers.
−Removed: These protocols include complying with social distancing, enhanced hygiene and other health and safety standards as required by federal, state and local government agencies, and taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
+Added: We provide protective equipment (e.g., eye protection, masks and gloves) as required by applicable standards and as appropriate given employee job duties.
+Added: In response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees, our subcontractors and our customers.
+Added: These protocols include complying with physical distancing, enhanced hygiene and other health and safety standards as required by federal, state and local government agencies, and taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
In addition, we modified the way we conduct many aspects of our business to reduce the number of in-person interactions.
For example, we significantly expanded the use of virtual interactions in all aspects of our business, including customer facing activities.
−Removed: Many of our administrative and operational functions during this time have required modification as well, including most of our workforce working remotely.
+Added: Many of our administrative and operational functions during this time have required modification as well, including segments of our workforce working remotely.
Compensation and Benefits
19 unchanged sentences
Our Code of Business Conduct and Ethics and other documents related to our corporate governance are also posted on our web site at https://cohu.gcs-web.com/corporate-governance/documents-charters .
−Removed: When required by the rules of the Nasdaq Stock Market, LLC, or Nasdaq, or the Securities and Exchange Commission, or SEC, we will disclose any future amendment to, or waiver of, any provision of the code of conduct for our chief executive officer and principal financial officer or any member or members of our board of directors on our website within four business days following the date of such amendment or waiver.
+Added: When required by the rules of the Nasdaq Stock Market, LLC (“Nasdaq”), or the Securities and Exchange Commission (“SEC”), we will disclose any future amendment to, or waiver of, any provision of the code of conduct for our chief executive officer and principal financial officer or any member or members of our board of directors on our website within four business days following the date of such amendment or waiver.
Information contained on our web site is not deemed part of this report.
−Removed: Item 1A.
Risk Factors.
−Removed: In addition to the other information in this Annual Report on Form 10-K, you should carefully consider the risk factors discussed in this Annual Report on Form 10-K in evaluating Cohu and our business (the “risk factors”).
−Removed: Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result.
+Added: In addition to the other information in this Annual Report on Form 10-K, you should carefully consider the risk factors discussed in this Annual Report on Form 10-K in evaluating Cohu and our business (the “
+Added: risk factors ”
+Added: Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any adverse impacts on the global business and economic environment as a result.
If any of the identified risks actually occur, our business, financial condition and results of operations could be materially adversely affected, the trading price of our common stock could decline, and you may lose all or part of your investment in our common stock.
4 unchanged sentences
The following is a summary of the principal factors that make an investment in our securities speculative or risky, all of which are more fully described below.
−Removed: This summary should be read in conjunction with the “Risk Factors”
+Added: This summary should be read in conjunction with the full “Risk Factors”
described below and should not be relied upon as a complete summary of the material risks facing our business.
−Removed: Risks Relating to Our Business Operations and Industry
+Added: Risks Relating to the COVID-19 Pandemic
The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations.
+Added: The COVID-19 pandemic has impacted, and is expected to continue to negatively impact, the operations of our key suppliers, customers and other business partners.
+Added: Risks Relating to Our Business Operations and Industry
We are making investments in new products and product enhancements, which may adversely affect our operating results;
these investments may not be commercially successful.
−Removed: We are exposed to the risks of operating a global business.
We have manufacturing operations in Asia.
Any failure to effectively manage multiple manufacturing sites and to secure raw materials meeting our quality, cost and other requirements, or failures by our suppliers to perform, could harm our sales, service levels and reputation.
+Added: A failure to perform or unexpected downtime experienced by our sole contract manufacturer for certain semiconductor automated test equipment could adversely impact our operations.
Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations.
−Removed: The semiconductor industry we serve is seasonal, volatile and unpredictable.
−Removed: The semiconductor equipment and printed circuit board (“PCB”) test industries are intensely competitive.
+Added: We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and packaging materials, components and subassemblies, labor and distribution costs, which may impact our financial condition or results of operations.
+Added: The semiconductor industry we serve is seasonal, volatile and unpredictable, and increased cyclicality could have an adverse impact on our sales and gross margin.
+Added: The semiconductor equipment industry is intensely competitive.
Semiconductor equipment is subject to rapid technological change, product introductions and transitions which may result in inventory write-offs, and our new product development involves numerous risks and uncertainties.
1 unchanged sentence
A limited number of customers account for a substantial percentage of our net sales.
−Removed: A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are subject to economic and political instability and we compete against a number of Asia-based test contactor, test handler, automated test equipment and PCB test suppliers.
+Added: A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are subject to economic and political instability and we compete against a number of Asia-based test contactor, test handler and automated test equipment suppliers.
+Added: Risks Associated with Operating a Global Business
+Added: We are exposed to the risks of operating in certain foreign locations from where Cohu manufactures certain products, and supports our sales and services to the global semiconductor industry.
+Added: Increasingly restrictive trade and export regulations may materially harm and limit Cohu’s business and ability to sell its products.
Risks Relating to our Indebtedness, Financing and Future Access to Capital
−Removed: The incurrence of substantial indebtedness in connection with our financing of the Xcerra acquisition may have an adverse impact on Cohu’s liquidity, limit Cohu’s flexibility in responding to other business opportunities and increase Cohu’s vulnerability to adverse economic and industry conditions.
−Removed: Our Credit Agreement contains various representations and negative covenants that limit, subject to certain exceptions and baskets, our ability and/or our subsidiaries’
−Removed: ability to enter into financing and other transactions relating to our assets.
−Removed: Cohu has total consolidated debt of $319.9 million as of December 26, 2020 and because of such high debt levels we may not be able to service our debt obligations in accordance with their terms;
+Added: The remaining indebtedness in connection with our financing of the Xcerra acquisition may have an adverse impact on Cohu’s liquidity, limit Cohu’s flexibility in responding to other business opportunities and increase Cohu’s vulnerability to adverse economic and industry conditions;
the Tax Cuts and Jobs Act severely limits the deductibility of interest expense.
−Removed: The issuance of shares of our common stock in connection with any future offerings of securities by us, will dilute our shareholders’
−Removed: ownership interest in the company.
Risks Relating to Acquisitions and Other Strategic Transactions
−Removed: We are exposed to other risks associated with other acquisitions, investments and divestitures.
−Removed: We expect to continue to evaluate and pursue divestitures of non-core assets.
+Added: We are exposed to other risks associated with additional potential acquisitions, investments and divestitures such as integration difficulties, disruption to our core business, dilution of stockholder value, and diversion of management attention.
Risks Relating to Owning Our Stock
−Removed: Our financial and operating results may vary and fall below analysts’
−Removed: estimates, or credit rating agencies may change their ratings on Cohu, any of which may cause the price of our common stock to decline or make it difficult to obtain other financing.
+Added: Our financial and operating results may vary and fall below analysts’ estimates, or credit rating agencies may change their ratings on Cohu, any of which may cause the price of our common stock to decline or make it difficult to obtain other financing.
+Added: We have experienced significant volatility in our stock price.
Risks Relating to Regulatory Matters
−Removed: Global economic and political conditions, including trade tariffs and export restrictions, have impacted our business and may continue to have an impact on our business and financial condition.
−Removed: Risks Relating to Cybersecurity, the Economy, and Litigation
−Removed: Our business and operations could suffer in the event of cybersecurity breaches.
+Added: There may be changes in, and uncertainty with respect to, legislation, regulation and governmental policy in the United States.
+Added: Risks Relating to Cybersecurity, Intellectual Property and Litigation
+Added: Our business and operations could suffer in the event of cybersecurity breaches within our operational systems or products.
For a more complete discussion of the material risks facing our business, see below.
−Removed: Risks Relating to Our Business Operations and Industry
+Added: Risks Relating to the COVID-19 Pandemic
The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations.
The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations.
−Removed: As the COVID-19 virus has spread rapidly and globally, from March 2020 and continuing to the present, authorities have implemented numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, including in all of the jurisdictions where we operate.
+Added: As the COVID-19 virus has spread rapidly and globally, from March 2020 and continuing to the present, with subsequent variants emerging, authorities have implemented numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, vaccine mandates, and shutdowns, including at various times in all of the jurisdictions where we operate.
These measures have adversely impacted, and are continuing to adversely impact, our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.
−Removed: We have significant operations in the U.S., Germany, Switzerland, Malaysia, Japan and the Philippines, and each of these countries has been significantly affected by the COVID-19 outbreak.
+Added: We have significant operations in the U.S., Germany, Switzerland, Malaysia, Japan and the Philippines, and each of these countries has been significantly affected, and remain affected, by the COVID-19 outbreak.
During the COVID-19 pandemic, it has been common for restrictions to be implemented, relaxed and then implemented again with little or no notice, which adversely impacts our ability to accurately predict our future revenue and budget future expenses and is disruptive to our operations.
5 unchanged sentences
rapid changes to business, political or regulatory conditions affecting the semiconductor equipment industry and the overall global economy;
−Removed: availability of employees and lost employee productivity;
+Added: availability of employees, increased sick time and lost employee productivity;
risks associated with, at times, temporarily housing employees in our Malaysia and Philippines factories;
6 unchanged sentences
other actions of our customers, suppliers and competitors which may be sudden and inconsistent with our expectations;
−Removed: higher shipping and logistics costs;
+Added: higher shipping, trucking and logistics costs;
higher component costs;
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Any of the foregoing COVID-19 driven impacts may have a material adverse effect on our financial condition and results of operations, and may also have the effect of increasing the likelihood and/or magnitude of other risks described in these risk factors.
−Removed: We continuously monitor the pandemic but cannot predict its future course or impacts.
+Added: With each successive COVID-19 surge, we believe the risks of material adverse business disruption increase.
+Added: We continuously monitor and react to the pandemic but cannot predict its future course or impacts.
+Added: The COVID-19 pandemic has impacted, and is expected to continue to negatively impact, the operations of our key suppliers, customers, and other business partners.
+Added: The extent to which the COVID-19 pandemic may impact the operations of our critical suppliers, business partners and customers could result in disruptions to our global supply chains.
+Added: We may obtain certain components and materials used in our products from a limited group of suppliers, and in some cases alternative sources for certain components are not readily available.
+Added: We have had certain suppliers temporarily suspend operations during the COVID-19 pandemic and have been able to work around such disruptions;
+Added: however, we may not be successful in addressing future disruptions.
+Added: The COVID-19 pandemic may heighten the risks posed by our dependence upon sole or limited source suppliers to the extent that the pandemic could disrupt the operations of one or more of these suppliers, potentially impacting our suppliers’
+Added: ability to maintain manufacturing operations at existing levels, and resulting in our inability to adequately obtain key components or materials, causing delayed deliveries or unsatisfactory component quality for our customers as we look to engage and qualify alternative suppliers (see risk factor entitled “
+Added: Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations ”).
+Added: Risks Relating to Our Business Operations and Industry
We are making investments in new products and product enhancements, which may adversely affect our operating results;
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There can be no assurance that other new products we develop will be accepted in the marketplace or generate material revenues for us.
−Removed: We are exposed to the risks of operating a global business.
−Removed: We are a global corporation with offices and subsidiaries in certain foreign locations to manufacture our products, support our sales and services to the global semiconductor industry and, as such, we face risks in doing business abroad.
−Removed: For example, while our corporate headquarters are located in California, additional key engineering, sales, and administrative personnel are located in China, Germany, Japan, Malaysia, Philippines, Singapore, Switzerland, Taiwan and elsewhere in the U.S., and our manufacturing operations are primarily located in Germany, Japan, Malaysia, Philippines and the U.S.
−Removed: Certain aspects inherent in transacting business internationally could negatively impact our operating results, including:
−Removed: costs and difficulties in staffing and managing international operations;
−Removed: legislative or regulatory requirements and potential changes in or interpretations of requirements in the United States and in the countries in which we manufacture or sell our products;
−Removed: trade restrictions, including treaty changes, sanctions and the suspension of export licenses;
−Removed: compliance with and changes in import/export tariffs and regulations;
−Removed: complex labor laws and privacy regulations;
−Removed: difficulties in adequately supervising employees widely distributed around the world (including due to implementing remote work arrangements in response to the COVID-19 pandemic);
−Removed: difficulties in enforcing contractual and intellectual property rights;
−Removed: longer payment cycles;
−Removed: health epidemics, such as the COVID-19 pandemic;
−Removed: local and global political and economic conditions, including ongoing uncertainty surrounding the COVID-19 pandemic and its implications;
−Removed: natural disasters and geopolitical instability;
−Removed: varied environmental laws and regulations at each of our principal locations;
−Removed: complex tax laws and potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double taxation;”
−Removed: fluctuations in foreign currency exchange rates against the U.S.
−Removed: Dollar, which can affect demand for our products and increase our costs.
−Removed: Additionally, managing geographically dispersed operations presents difficult challenges associated with organizational alignment and infrastructure, communications and information technology, inventory control, customer relationship management, terrorist threats and related security matters and cultural diversities.
−Removed: If we are unsuccessful in managing such operations effectively, our business and results of operations will be adversely affected.
−Removed: We continue to monitor global privacy laws and legislation to determine its impact on our business.
−Removed: We do not sell to consumers nor process individual credit card information, but do maintain certain personally identifiable information on our employees.
−Removed: Such employee information may be subject to the EU General Data Protection Regulation and the recently effective California Consumer Protection Act.
−Removed: We believe that we have implemented reasonable procedures and internal controls in compliance with these laws, but should such actions be insufficient, we may be subject to regulatory investigations, fines and legal costs.
−Removed: If one or more of these risks occurs, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results will suffer.
We have manufacturing operations in Asia.
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Failure to effectively manage our manufacturing and our relationships with our suppliers could have a material adverse effect on our business and results of operations.
+Added: A failure to perform or unexpected downtime experienced by our sole contract manufacturer for certain semiconductor test systems could adversely impact our operations.
+Added: We depend upon Jabil Manufacturing Co, (“Jabil”) to manufacture most of our semiconductor test systems from its facility located in Malaysia.
+Added: In the event that Jabil was unable to meet Cohu’s current delivery schedule for semiconductor test systems, or if Jabil experienced unexpected downtime, we may not be able to sell, or have significant delays, in fulfilling our customer orders.
+Added: If we experienced significant delays or disruptions with Jabil, it would take us significant time to ramp up a new manufacturer for our semiconductor test products, either in-house or with another contract manufacturer.
Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations.
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On occasion, we have experienced problems in obtaining adequate and reliable quantities of various parts and components from certain key or sole source suppliers.
−Removed: Our results of operations may be materially and adversely impacted if we do not receive sufficient parts to meet our requirements in a timely and cost-effective manner.
−Removed: The semiconductor industry we serve is seasonal, volatile and unpredictable.
+Added: For example, at the beginning of 2022, we are experiencing supply constraints and delays in accessing certain specialty semiconductors necessary for the production of test instruments for our semiconductor ATE products.
+Added: If we cannot quickly resolve these constraints, our revenue and overall gross margin will be adversely impacted beginning in first quarter 2022.
+Added: More broadly, our results of operations may be materially and adversely impacted if we do not receive sufficient parts to meet our requirements in a timely and cost-effective manner.
+Added: We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and packaging materials, components and subassemblies, labor and distribution costs, which may impact our financial condition or results of operations.
+Added: As a global manufacturer, we rely on raw materials, packaging materials, direct labor, energy, a large network of suppliers, distribution resources and transportation providers.
+Added: In 2021 and the early part of 2022, the costs of raw materials, packaging materials, labor, energy, components and subassemblies, transportation and other inputs necessary for the production and distribution of our products have increased.
+Added: Since the onset of the COVID-19 pandemic, we have seen a dramatic increase in freight and shipping costs.
+Added: The foregoing price fluctuations are driven by factors beyond our control.
+Added: Although we are unable to predict the longer-term impacts, we expect the pressures of input cost inflation to continue into 2022.
+Added: Attempts to offset these cost pressures, such as through product price increases, or attempting to reduce operating costs elsewhere, may not be successful.
+Added: Higher product prices may result in reductions in sales volume.
+Added: Customers may be less willing to pay a price differential for our products and may purchase lower-priced competitive offerings or may delay some purchases altogether.
+Added: To the extent that price increases are not otherwise offset, and/or if they result in decreases in sales volume, our business, financial condition or operating results may be adversely affected.
+Added: The semiconductor industry we serve is seasonal, volatile and unpredictable, and increased cyclicality could have an adverse impact on our sales and gross margin.
Visibility into our markets is limited.
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We anticipate that the markets for newer generations of semiconductors and semiconductor equipment will also be subject to similar cycles and severe downturns.
−Removed: Any significant reductions in capital equipment investment by semiconductor integrated device manufacturers and test subcontractors will materially and adversely affect our business, financial position and results of operations.
+Added: Any significant reductions in capital equipment investment by semiconductor integrated device manufacturers and test subcontractors will materially and adversely affect our business, financial position, including the level of product sales and overall gross margin, and results of operations.
In addition, the seasonal, volatile and unpredictable nature of semiconductor equipment demand has in the past and may in the future expose us to significant excess and obsolete and lower of cost or net realizable value inventory write-offs and reserve requirements.
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Abrupt, unexpected and severe demand changes have occurred in the past and are expected to reoccur in the future within our industry.
−Removed: The semiconductor equipment and PCB test industries are intensely competitive.
+Added: Since the onset of the COVID-19 pandemic, in particular, we have seen demand fluctuations in our test handler group (“THG”) and semiconductor test group (“STG”) businesses.
+Added: Our recent sales, in particular during the second and third quarters of 2021, became more weighted toward THG and less toward STG products, which had a material negative impact on our gross margins.
+Added: Although the company continues to take actions to reduce expenses and improve overall operational efficiency, such actions may not be sufficient to fully offset any gross margin impacts.
+Added: We cannot predict when and to what extent sales among our businesses may normalize or change in the future, or when and to what extent gross margins may improve in the future.
+Added: The semiconductor equipment industry is intensely competitive.
The industries we serve are intensely competitive, and we face substantial competition from numerous companies throughout the world.
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Future competition may include companies that do not currently supply test handlers.
−Removed: Similarly, the PCB test industry is characterized by significant Asia-based competition and intense price competition.
−Removed: Some of our competitors are part of larger corporations that have substantially greater financial, engineering, manufacturing and customer support capabilities and provide more extensive product offerings.
In addition, there are emerging companies that provide or may provide innovative technology incorporated in products that may compete successfully against our products.
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If we are unable to reduce the cost of our existing products and successfully introduce new lower cost products, then we expect that these competitive conditions would negatively impact our gross margin and operating results in the foreseeable future.
−Removed: We have increased investments in our test contactor business and announced significant growth targets for the business over the next several years, but due to weak market conditions we did not achieve our growth goals in 2019 and 2020.
−Removed: The test contactor market is fragmented, with many entrenched regional players, and subject to intense price competition and high localized customer support requirements.
+Added: We have increased investments in our test contactor business and targeted significant growth opportunities.
+Added: However, the test contactor market is fragmented, with many entrenched regional players, and subject to intense price competition and high localized customer support requirements.
We believe that customer support and responsiveness and an ability to consistently meet tight deadlines is critical to our success.
−Removed: If we are unable to reduce the cost of our test contactor products, while also meeting customer support requirements and deadlines, then we expect that these competitive conditions would negatively impact our test contactor operating results and impede us from achieving our test contactor sales goals.
+Added: If we are unable to continue to reduce the cost of our test contactor products, while also meeting customer support requirements and deadlines, then we expect that these competitive conditions would negatively impact our test contactor operating results and impede us from achieving our test contactor sales goals.
In addition, with the Xcerra acquisition, Cohu entered the automated test equipment (“ATE”) market.
−Removed: Our ability to increase our ATE sales will depend, in part, on our ability to obtain orders from new customers.
+Added: Our ability to increase ATE sales will depend, in part, on our ability to win new customers.
Semiconductor and electronics manufacturers typically select a particular vendor’s product for testing new generations of a device and make substantial investments to develop related test program applications and interfaces.
Once a manufacturer has selected an ATE vendor for a new generation of a device, that manufacturer is more likely to purchase systems from that vendor for that generation of the device, and, possibly, subsequent generations of that device as well.
−Removed: Cohu has a niche position and relatively low share in the ATE market, and this market is primarily driven by two larger companies with significantly more resources to invest into the ATE market.
+Added: Cohu has a niche position and relatively low share in the ATE market, which is primarily driven by two larger companies with significantly more resources to invest into the ATE market.
Therefore, the opportunities to obtain orders from new customers or existing customers may be limited, which may impair our ability to grow our ATE revenue.
+Added: We also believe that our niche position results in greater sales cyclicality versus larger more diversified ATE vendors and Cohu experienced such adverse cyclicality in 2021.
These factors may materially and adversely affect our current and future target markets and our ability to compete successfully in those markets.
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Sudden changes in demand for semiconductor equipment commonly occur, and have a significant impact on our operations, and such changes in demand (up or down) are difficult to predict and proactively plan for.
−Removed: We have in the past and may in the future experience difficulties, particularly in manufacturing, in training and recruiting the large number of additions to our workforce.
+Added: We have in the past and may in the future experience difficulties, particularly in manufacturing, and with training and recruiting large numbers of additions to our workforce.
The volatility in headcount and business levels, combined with the seasonal nature of the semiconductor industry, may require that we invest substantial amounts in new operational and financial systems, procedures and controls.
−Removed: We may not be able to successfully adjust our systems, facilities and production capacity to meet our customers’
+Added: We may not be able to timely or successfully adjust our systems, facilities and production capacity to meet our customers’
changing requirements.
Any inability to meet such requirements will have an adverse impact on our business, financial position and results of operations.
−Removed: Sudden demand changes (as, for example, we experienced in 2019 and 2020) in business conditions, positive or negative, are common in our industry but the timing of such changes is very difficult to predict.
+Added: Sudden demand changes in business conditions, positive or negative, are common in our industry but the timing of such changes is very difficult to predict.
A limited number of customers account for a substantial percentage of our net sales.
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Furthermore, the concentration of our revenues in a limited number of large customers is likely to cause significant fluctuations in our future annual and quarterly operating results.
−Removed: A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are subject to economic and political instability and we compete against a number of Asia-based test contactor, test handler, automated test equipment and PCB test suppliers.
+Added: A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are subject to economic and political instability and we compete against a number of Asia-based test contactor, test handler and automated test equipment suppliers.
The majority of our export sales are made to destinations in Asia.
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In addition, we face intense competition from a number of Asian suppliers that have certain advantages over United States (U.S.) suppliers, including us.
−Removed: These advantages include, among other things, proximity to customers, lower cost structures, a willingness to compete solely on price, favorable tariffs and affiliation with significantly larger organizations.
+Added: These advantages include, among other things, proximity to customers, lower cost structures, a willingness to compete solely on price, favorable tariffs and other government preferences, and affiliation with significantly larger organizations.
In addition, changes in the amount or price of semiconductors produced in Asia could impact the profitability or capital equipment spending programs of our foreign and domestic customers.
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Our customers’
−Removed: selection processes typically are lengthy and can require us to incur significant sales, service and engineering resources, and regularly to provide the customer evaluation systems for several months at no charge, in pursuit of a single customer opportunity.
+Added: selection processes typically are lengthy and can require us to incur significant sales, service and engineering resources, and to provide the customer evaluation systems for several months at no charge, in pursuit of a single customer opportunity.
We may not win the competitive selection process and may never generate any revenue despite incurring such expenditures.
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In addition, quality issues can impair our relationships with new or existing customers and adversely affect our reputation, which could lead to a material adverse effect on our operating results.
−Removed: Our global Enterprise Resource Management (“ERP”) upgrade may adversely affect our business and results of operations or the effectiveness of internal controls over financial reporting.
−Removed: We are in final development stages of a phased global replacement of our existing ERP solution and launched the first phase of such new ERP solution in first and fourth quarter 2020.
−Removed: The second phase and rollout is planned throughout 2021.
−Removed: The new solution is being developed as an enterprise solution in partnership with a leading provider of ERP tools.
−Removed: Additional investments in enterprise tools that focus on product life-cycle management, our customer experience, and supply chain management are in process to support our growing business.
−Removed: These implementations are extremely complex and time-consuming projects that involve substantial expenditures on software and implementation activities.
−Removed: If we do not effectively implement the system or if the system does not operate as intended, it could result in the loss or corruption of data, delayed order processing and shipments and increased costs.
−Removed: It could also adversely affect our financial reporting systems and our ability to produce financial reports and process transactions, the effectiveness of internal controls over financial reporting, and our business, financial condition, results of operations and cash flows.
The loss of key personnel could adversely impact our business.
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Lincoln, Rhode Island;
−Removed: Kolbermoor and Wertheim, Germany;
+Added: Kolbermoor, Germany;
La Chaux-de-Fonds, Switzerland and Osaka, Japan areas, where the majority of our engineering personnel are located, is high and we have had difficulty in recruiting prospective employees from other locations.
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Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current position, or by our inability to attract and retain skilled employees.
−Removed: Third parties may violate our proprietary rights or accuse us of infringing upon their proprietary rights.
−Removed: We rely on patent, copyright, trademark and trade secret laws to establish and maintain proprietary rights in our technology and products.
−Removed: Any of our proprietary rights may expire due to patent life, or be challenged, invalidated or circumvented.
−Removed: In addition, from time-to-time, we receive notices from third parties regarding patent or copyright claims.
−Removed: Any such claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses.
−Removed: In the event of a successful claim of infringement against us and our failure or inability to license the infringed technology or to substitute similar non-infringing technology, our business, financial condition and results of operations could be adversely affected.
−Removed: We are also subject to the theft and misappropriation of intellectual property by others, including incidents relating to former employees.
−Removed: We believe we are taking reasonable actions to protect and improve our security, through strengthened IT infrastructure and internal controls, but if these actions are not successful our business could be adversely affected.
+Added: Risks Associated with Operating a Global Business
+Added: We are exposed to the risks of operating in certain foreign locations where Cohu manufactures certain products and supports our sales and services to the global semiconductor industry.
+Added: We are a global corporation with offices and subsidiaries in certain foreign locations to manufacture our products and support our sales and services to the global semiconductor industry.
+Added: As such, we face risks in doing business globally.
+Added: For example, while our corporate headquarters are located in California, additional key engineering, sales, and administrative personnel are located in China, Germany, Japan, Malaysia, Philippines, Singapore, Switzerland, Taiwan and elsewhere in the U.S., and our manufacturing operations are primarily located in Germany, Japan, Malaysia, Philippines and the U.S.
+Added: Certain aspects inherent in transacting business internationally could negatively impact our operating results, including:
+Added: costs and difficulties in staffing and managing international operations;
+Added: legislative or regulatory requirements and potential changes in, or interpretations of, requirements in the United States and in the countries in which we manufacture or sell our products;
+Added: trade restrictions, including treaty changes, sanctions and the suspension of export licenses;
+Added: compliance with and changes in import/export tariffs and regulations;
+Added: complex labor laws and privacy regulations;
+Added: difficulties in adequately supervising employees widely distributed around the world (including due to implementing remote work arrangements in response to the COVID-19 pandemic);
+Added: difficulties in enforcing contractual and intellectual property rights;
+Added: longer payment cycles and receivable collections;
+Added: health epidemics, such as the COVID-19 pandemic;
+Added: local and global political and economic conditions, including ongoing uncertainty surrounding the COVID-19 pandemic and its implications;
+Added: natural disasters and other climate risks and geopolitical instability;
+Added: varied environmental laws and regulations at each of our principal locations;
+Added: complex tax laws and potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double taxation;” and
+Added: fluctuations in foreign currency exchange rates against the U.S.
+Added: Dollar, which can affect demand for our products and increase our costs.
+Added: Additionally, managing geographically dispersed operations presents difficult challenges associated with organizational alignment and infrastructure, communications and information technology, inventory control, customer relationship management, terrorist threats and related security matters and cultural diversities.
+Added: If we are unsuccessful in managing such operations effectively, our business and results of operations will be adversely affected.
+Added: We continue to monitor global privacy laws and legislation to determine its impact on our business.
+Added: We do not sell to consumers nor process individual credit card information, but do maintain certain personally identifiable information on our employees.
+Added: Such employee information may be subject to the EU General Data Protection Regulation and the recently effective California Consumer Protection Act.
+Added: We believe that we have implemented reasonable procedures and internal controls in compliance with these laws, but should such actions be insufficient, we may be subject to regulatory investigations, fines and legal costs.
+Added: If one or more of these risks occurs, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results will suffer.
+Added: Geopolitical instability in locations critical to Cohu and its customers ’
+Added: business, manufacturing, and engineering operations may adversely impact our operations and sales.
+Added: An increase in geopolitical tensions in Asia, particularly in the Taiwan Strait, could disrupt existing semiconductor chip manufacturing and increase the prospect of an interruption to the semiconductor chip supply across the world.
+Added: A setback to the current state of relative peace and stability in the region could compromise existing semiconductor chip production and have downstream implications for our company.
+Added: The world’s largest semiconductor chip manufacturer is located in Taiwan and is a top supplier for many U.S.
+Added: companies, many of which are part of the company’s customer base.
+Added: Further, recent geopolitical tensions between Ukraine and Russia could adversely impact the supply chain in this region, particularly with respect to critical materials and metals, such as palladium which is used in our interface products as well as in semiconductors.
+Added: Any interruption to semiconductor chip supply and its related impact to the company’s customers, or any disruption in our supply chain, could result in an adverse impact to our financial results.
+Added: Global economic and political conditions, including trade tariffs and exchange rates, have impacted our business and may continue to have an impact on our business and financial conditions that we currently cannot predict.
+Added: In fiscal year 2021, 91% of our revenue was from products shipped to customer locations outside the United States.
+Added: We also purchase a significant portion of components and subassemblies from suppliers outside the United States.
+Added: Additionally, a significant portion of our facilities are located outside the United States, including China, Germany, France, Italy, Japan, Malaysia, Philippines, Singapore, Switzerland and Taiwan.
+Added: Given our extensive global operations, we are subject to immediate impacts from any changing tariff or export regulations (see risk factor entitled “
+Added: Increasingly restrictive trade and export regulations may materially harm Cohu ’
+Added: s business and ability to sell its products without limitations ”).
+Added: It remains our plan to continue our international growth.
+Added: We have business operations within the jurisdictions listed above, and while we report our financial results in U.S.
+Added: dollars, we incur certain costs in other currencies.
+Added: As a result, the company holds exposure to fluctuations in currency exchange rates, and significant fluctuations in exchange rates between the U.S.
+Added: dollar and foreign currencies may adversely affect our revenues and earnings, despite actions we take to minimize those currency exposures.
+Added: Additionally, engaging in foreign currency contracts to minimize such currency exposure could result in additional costs and risks that could adversely affect our financial condition and results of operations.
+Added: The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales.
+Added: Our corporate headquarters is located in San Diego, California, our Asian sales and service headquarters are located in Singapore and Taiwan, and the majority of our sales are made to destinations in Asia.
+Added: In addition, we have Asia-based manufacturing plants in Malaysia, Philippines and Japan.
+Added: These regions are known for being vulnerable to natural disasters and other risks, such as earthquakes, tsunamis, fires and floods, volcanic eruptions, and geopolitical risks, which at times have disrupted the local economies.
+Added: For example, a significant earthquake or tsunami could materially affect operating results.
+Added: Although we believe that we carry reasonable and appropriate business insurance, we may not be insured for certain losses and business interruptions of this kind, or for geopolitical or terrorism impacts, and presently have very limited redundant, multiple site capacity in the event of a disaster.
+Added: In the event of such disaster, our business would materially suffer.
+Added: Our business could also be adversely affected by the effects of a widespread outbreak of contagious diseases, and has been and is continuing to be adversely affected by the COVID-19 global pandemic (see risk factor entitled “
+Added: The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations ”).
+Added: Our business could be materially and adversely affected by climate change and related matters.
+Added: We analyze climate change risks in two separate categories:
+Added: transition risks and physical risks.
+Added: Transition risks are those risks relating to the transition of the global economy to a focus on more climate-friendly technologies.
+Added: This transition could have adverse financial impacts on us in several ways.
+Added: For instance, more stringent environmental policies or regulations could lead to increased expenses relating to green-house gas emissions or other emissions that could increase our operating costs.
+Added: Enhanced emissions-reporting or shifting technology could require us to write off or impair assets or retire existing assets early.
+Added: Increased environmental mandates could also increase our exposure to litigation.
+Added: We could be required to incur increased costs and significant capital investment to transition to lower emissions technologies.
+Added: In addition, overall market shifts could increase costs of our raw materials and cause unexpected shifts in energy costs.
+Added: Focus on sustainability has increased, and the company or its industry could be stigmatized as not friendly to the environment, which could adversely affect our reputation and our business, including due to difficulties in employee hiring and retention and our ability to access capital.
+Added: Any of these matters could materially and adversely affect our business, financial condition or results of operations.
+Added: Physical risks from climate change that could affect our business include acute weather events such as floods, tornadoes or other severe weather and ongoing changes such as rising temperatures or extreme variability in weather patterns.
+Added: These events could lead to increased capital costs from damage to our facilities, increased insurance premiums or reduced revenue from decreased production capacity based on supply chain interruptions.
+Added: Any of these events could have a material adverse effect on our business, financial condition or results of operations (see risk factor entitled “
+Added: The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales ”
+Added: Increasingly restrictive trade and export regulations may materially harm and limit Cohu ’
+Added: s business and ability to sell its products.
+Added: There have been significant changes in U.S.
+Added: export regulations relating to China since 2019.
+Added: Such changes included restrictions on exports to certain China-domiciled entities including Huawei and broader definitions and restrictions on “military end users”
+Added: and “uses.”
+Added: Despite an ongoing material adverse impact on direct and indirect Huawei sales, we have not seen any overall material impact to our business from the foregoing restrictions.
+Added: However, we believe that these collective export restrictions and the ongoing unpredictability of U.S.-China trade relations have encouraged China-based companies to actively seek to obtain a greater supply of similar or substitute products from our foreign competitors that are not subject to these restrictions, thereby decreasing our long-term competitiveness as a supplier to China-based companies.
+Added: Recent history indicates that the U.S.
+Added: government may impose other new export restrictions, or tariffs, and have done so within the past year as the U.S.
+Added: Department of Commerce Bureau of Industry and Security has included additional China-based entities to its restricted entities list.
+Added: Such ongoing restrictions with little or no prior notice will impact our ability (or our customers’
+Added: ability) to sell and ship products to China-based companies and any such additional restrictions may have an adverse effect on our business, results of operations, or financial condition.
Risks Relating to our Indebtedness, Financing and Future Access to Capital
−Removed: The incurrence of substantial indebtedness in connection with our financing of the Xcerra acquisition may have an adverse impact on Cohu’s liquidity, limit Cohu’s flexibility in responding to other business opportunities and increase Cohu’s vulnerability to adverse economic and industry conditions.
−Removed: In connection with the Xcerra acquisition, Cohu entered into a term loan facility, with an aggregate principal amount of $350.0 million (the “Debt Financing”
+Added: The remaining indebtedness in connection with our financing of the Xcerra acquisition may have an adverse impact on Cohu ’
+Added: s liquidity, limit Cohu ’
+Added: s flexibility in responding to other business opportunities and increase Cohu ’
+Added: s vulnerability to adverse economic and industry conditions;
+Added: the Tax Cuts and Jobs Act severely limits the deductibility of interest expense.
+Added: In connection with the Xcerra acquisition in 2018, Cohu entered into a term loan facility, with an aggregate principal amount of $350.0 million (the “Debt Financing”
or “Credit Agreement”).
−Removed: Such indebtedness has reduced Cohu’s liquidity and has caused Cohu to place more reliance on cash generated from operations to pay principal and interest on Cohu’s debt, thereby reducing the availability of Cohu’s cash flow for working capital and capital expenditure needs or to pursue other potential strategic plans.
+Added: The remaining indebtedness of approximately $103 million may reduce Cohu’s liquidity and cause Cohu to place more reliance on cash generated from operations to pay principal and interest on Cohu’s debt, thereby reducing the availability of Cohu’s cash flow for working capital and capital expenditure needs or to pursue other potential strategic plans.
+Added: The Federal Reserve has signaled its intention to raise interest rates in 2022, and with a variable interest rate on its remaining indebtedness, Cohu would incur an increase in interest expenses.
In addition, our indebtedness may make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby making it more difficult for us to satisfy our obligations.
−Removed: During the second half of 2020, Cohu took action to reduce outstanding principal under its Debt Financing;
−Removed: however, Cohu gives no future assurance as to if, when or how much any subsequent voluntary principal reductions may be.
+Added: In 2021, Cohu continued to take steps to reduce outstanding principal under its Debt Financing;
+Added: however, Cohu gives no assurance as to if, when or how much any subsequent voluntary principal reductions may be.
If we fail to make required debt payments, or if we fail to comply with financial or other covenants in our Credit Agreement, we would be in default under the agreement.
+Added: Furthermore, the Tax Cuts and Jobs Act (“Tax Act”) limits the deductibility of interest expense in a given year to 30% of adjusted taxable income, as defined;
+Added: the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act temporarily increased this limitation to 50% for 2019 and 2020.
+Added: This resulted in the inability of Cohu to utilize a substantial portion of its interest expense deductions in 2018 and 2019.
+Added: We were able to fully deduct the interest expense in 2020 plus the disallowed amounts carried over from 2018 and 2019, however, the Tax Acts may continue to impact our ability to utilize future deductions.
Our Credit Agreement contains various representations and negative covenants that limit, subject to certain exceptions and baskets, our ability and/or our subsidiaries ’
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enter into agreements that restrict distributions from our subsidiaries;
−Removed: create or permit restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us or to guarantee our debt, limit our or any of our subsidiaries’
−Removed: ability to create liens, or that require the grant of a lien to secure an obligation if a lien is granted to secure another obligation;
+Added: create or permit restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us or to guarantee our debt, limit our or any of our subsidiaries’ ability to create liens, or that require the grant of a lien to secure an obligation if a lien is granted to secure another obligation;
sell assets and capital stock of our subsidiaries;
enter into certain transactions with affiliates;
−Removed: sell, transfer, license, lease or dispose of our or our subsidiaries’
+Added: sell, transfer, license, lease or dispose of our or our subsidiaries’ assets;
dissolve, liquidate, consolidate or merge with or into, or sell substantially all the assets of us and our subsidiaries, taken as a whole, to, another person.
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In addition, our obligations under the Credit Agreement are secured, on a first-priority basis, and such security interests could be enforced in the event of default by the collateral agent for the Credit Agreement.
−Removed: Changes in the method of determining the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates.
−Removed: Interest rates under our Credit Agreement are calculated using LIBOR.
−Removed: On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021 and it is unclear whether new methods of calculating LIBOR will be established.
−Removed: If LIBOR ceases to exist after 2021, a comparable or successor reference rate must be negotiated and agreed among the Administrative Agent, Cohu and certain lenders under the Credit Agreement.
−Removed: Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S.
−Removed: dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by treasury securities.
−Removed: It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere.
−Removed: To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows.
−Removed: Cohu has total consolidated debt of $319.9  million as of December 26, 2020 and because of such high debt levels we may not be able to service our debt obligations in accordance with their terms;
−Removed: the Tax Cuts and Jobs Act severely limits the deductibility of interest expense.
−Removed: Cohu’s ability to meet its expense and debt service obligations contained in the Debt Financing agreements will depend on Cohu’s future performance, which will be affected by financial, business, economic and other factors, including potential changes in industry conditions, industry supply and demand balance, customer preferences, the success of Cohu’s products, pressure from competitors, new product innovation and overall business execution.
−Removed: In addition, Cohu is subject to interest rate risks, and continuing increases in interest rates will increase Cohu’s debt service obligations.
−Removed: If Cohu is ever unable to meet its debt service obligations or fail to comply with the covenants contained in the agreements governing its indebtedness, Cohu may be required to refinance all or part of its debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue Cohu Common Stock or other equity securities.
−Removed: Cohu may not be able to, at any given time, refinance its debt, sell assets, incur additional indebtedness or issue equity securities on terms acceptable to Cohu, in amounts sufficient to meet Cohu’s needs or at all.
−Removed: If Cohu is able to raise additional funds through the issuance of equity or equity-linked securities, such issuance would also result in dilution to Cohu’s stockholders.
−Removed: Cohu’s inability to service its debt obligations or refinance its debt could have a material adverse effect on its business, financial conditions or operating results.
−Removed: In addition, Cohu’s debt obligations may limit its ability to make required investments in capacity, technology or other areas of its business, which could have a material adverse effect on its business, financial conditions or operating results.
−Removed: Furthermore, the Tax Cuts and Jobs Act ("Tax Act") limits the deductibility of interest expense in a given year to 30% of adjusted taxable income, as defined;
−Removed: the Coronavirus Aid, Relief, and Economic Security ("CARES") Act temporarily increased this limitation to 50% for 2019 and 2020.
−Removed: This resulted in the inability of Cohu to utilize a substantial portion of its interest expense deductions in 2018 and 2019.
−Removed: We were able to fully deduct the interest expense in 2020 plus the disallowed amounts carried over from 2018 and 2019, however, the Tax Acts may continue to impact our ability to utilize future deductions.
Due to the nature of our business, we need continued access to capital, which if not available to us or if not available on favorable terms, could harm our ability to operate or expand our business.
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We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities will provide sufficient resources to meet our working capital and cash requirements for at least the next twelve months;
−Removed: however, a material adverse impact from COVID-19 or a desire to reduce our outstanding indebtedness could result in a need to raise additional capital.
+Added: however, a material adverse impact on our business from unforeseen events or a desire to reduce our outstanding indebtedness could result in a need to raise additional capital.
Alternatively, we could decide to raise capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions.
In the event we are required, or elect, to raise additional funds, we may be unable to do so on favorable terms, or at all, and may incur expenses in raising the additional funds and increase our interest rate exposure, and any future indebtedness could adversely affect our operating results and severely limit our ability to plan for, or react to, changes in our business or industry.
−Removed: Further, under our Credit Agreement, we are significantly limited by financial and other negative covenants in our credit arrangements, including limitations on our borrowing of additional funds and issuing dividends.
+Added: Further, under our Credit Agreement, we are limited by financial and other negative covenants in our credit arrangements, including limitations on our borrowing of additional funds and issuing dividends.
If we cannot raise funds on acceptable terms, we may not be able to take advantage of future opportunities or respond to competitive pressures or unanticipated requirements.
Any inability to raise additional capital when required could have an adverse effect on our business and operating results.
−Removed: The issuance of shares of our common stock in connection with any future offerings of securities by us, will dilute our shareholders’
−Removed: ownership interest in the company.
−Removed: We may seek additional financing in the future to meet our capital needs, to repay outstanding indebtedness under our existing Credit Agreement or to meet our strategic initiatives or operating activities.
−Removed: We have in the past issued common stock as acquisition consideration.
−Removed: For example, the Xcerra acquisition was financed in part by the issuance of additional shares of our common stock to shareholders of Xcerra, comprising approximately 11.8 million shares of common stock, or approximately 29% of our issued and outstanding shares of common stock immediately after completing the transaction.
−Removed: We may determine to utilize common stock as acquisition consideration, issue convertible debt, or pursue a follow-on equity offering to raise capital for debt reduction or for other general corporate purposes, at any time in the future.
−Removed: Any issuances of additional shares of our common stock would dilute shareholders’
−Removed: ownership interest in our company, and shareholders would have a proportionately reduced ownership and voting interest in our company as a result of equity issuance.
−Removed: If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants.
−Removed: Additionally, our ability to make scheduled payments or refinance our obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and financial, business and other factors beyond our control.
Risks Relating to Acquisitions and Other Strategic Transactions
−Removed: Because a significant portion of Cohu’s total assets are represented by goodwill, which is subject to mandatory impairment evaluation, and other intangibles, Cohu could be required to write off some or all of this goodwill and other intangibles, which may adversely affect the combined company’s financial condition and results of operations.
+Added: Because a significant portion of Cohu ’
+Added: s total assets are represented by goodwill, which is subject to mandatory impairment evaluation, and other intangibles, Cohu could be required to write off some or all of this goodwill and other intangibles, which may adversely affect the combined company ’
+Added: s financial condition and results of operations.
Cohu accounted for the acquisition of Xcerra using the purchase method of accounting.
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32% of Cohu’s total assets is comprised of goodwill and other intangibles, of which approximately $219.8 million is allocated to goodwill.
−Removed: In accordance with Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other , goodwill and certain other intangible assets with indefinite useful lives are not amortized but are reviewed at least annually for impairment, or more frequently if there are indications of impairment.
+Added: In accordance with ASC 350, Intangibles - Goodwill and Other , goodwill and certain other intangible assets with indefinite useful lives are not amortized but are reviewed at least annually for impairment, or more frequently if there are indications of impairment.
Significant declines in the price of Cohu’s common stock could increase the risk of an impairment.
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Such adjustment would result in a charge to operating income in that period.
−Removed: For example, in first quarter 2020, and again in third quarter 2020, Cohu recorded impairment charges of approximately $3.9 million and $7.3 million, respectively, to adjust in-process research and development (“IPR&D”) assets obtained in the acquisition of Xcerra to their current fair value.
+Added: For example, in 2020 and 2021, Cohu recorded impairment charges of approximately $11.2 million and $0.1 million, respectively, to adjust in-process research and development (“IPR&D”) assets obtained in the acquisition of Xcerra to their current fair value.
There can be no assurance that there will not be further adjustments for impairment in future periods.
−Removed: We are exposed to other risks associated with other acquisitions, investments and divestitures.
+Added: We are exposed to other risks associated with additional potential acquisitions, investments and divestitures such as integration difficulties, disruption to our core business, dilution of stockholder value, and diversion of management attention.
As part of our business strategy, we will continue to regularly evaluate investments in, or acquisitions of, complementary businesses, joint ventures, services and technologies, and we expect that periodically we will continue to make such investments and acquisitions in the future.
−Removed: For example, we acquired Xcerra Corporation in 2018 for total consideration of approximately $794.4 million.
Acquisitions and investments involve numerous risks, including, but not limited to:
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If we finance acquisitions or investments by issuing equity-linked (such as convertible debt) or equity securities, our existing stockholders may be diluted which would likely affect the market price of our stock.
−Removed: For example, the Xcerra acquisition resulted in significant dilution as it was financed, in part, by the issuance of approximately 11.8 million shares of common stock, or approximately 29% of our issued and outstanding shares of common stock immediately after completing the transaction.
Mergers, acquisitions and investments are inherently risky and the inability to effectively manage these risks could materially and adversely affect our business, financial condition and results of operations.
−Removed: We expect to continue to evaluate and pursue divestitures of non-core assets
−Removed: Further, as a strategy to pay down our long-term debt, we expect to continue to evaluate and pursue divestitures of assets that management determines to be non-core to our overall business strategy.
−Removed: Any such divestitures may distract Cohu’s management team, disrupt employees, may not yield attractive valuations, may incur material restructuring and transaction expenses and tax obligations, and may otherwise be unsuccessful.
−Removed: Divestitures may also involve warranties, indemnification or covenants that could restrict our business or result in litigation, additional expenses or liabilities.
−Removed: In addition, discontinuing product categories, even categories that we consider non-strategic, reduces the size and diversification of our business and causes us to be more dependent on a smaller number of product categories.
Risks Relating to Owning Our Stock
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This could cause the market price of our stock to decline, perhaps significantly.
−Removed: In addition, as a result of the Credit Facility, we maintain credit ratings with Moody’s Investors Service, Inc.
+Added: In addition, as a result of the Term Loan Credit Facility, we maintain credit ratings with Moody’s Investors Service, Inc.
(“Moody’s”) and S&P Global Ratings (“S&P”).
−Removed: The current Moody’s and S&P issuer credit ratings for Cohu are B2 and B-, respectively.
−Removed: Any future downgrade of Cohu’s credit ratings or rating outlooks may materially and adversely affect the market price of our equity and the availability, cost or interest rate of other credit or financing.
+Added: Any downgrades of Cohu’s credit ratings or rating outlooks, if and when they were to occur, may materially and adversely affect the market price of our equity and the availability, cost or interest rate of other credit or financing.
Cohu’s current credit ratings are considered non-investment grade and make it more costly (as compared to investment grade borrowers) for Cohu or its subsidiaries to borrow money or enter into new credit facilities and to raise certain other types of capital and/or complete additional financings.
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During the three-year period ended December 25, 2021, the price of our common stock has ranged from $51.86 to $8.89.
−Removed: The price of our stock may be more volatile than the stock of other companies due to, among other factors, the unpredictable, volatile and seasonal nature of the semiconductor industry, our significant customer concentration, intense competition in the test contactor, test handler, automated test equipment and PCB test industry, our limited backlog, our debt levels and high leverage, and our relatively low daily stock trading volume.
+Added: The price of our stock may be more volatile than the stock of other companies due to, among other factors, the unpredictable, volatile and seasonal nature of the semiconductor industry, our significant customer concentration, intense competition in the test contactor, test handler, automated test equipment industry, our limited backlog, our debt levels, and our relatively low daily stock trading volume.
The market price of our common stock is likely to continue to fluctuate significantly in the future, including fluctuations related and unrelated to our performance.
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Also, perceived company underperformance could attract shareholder activism and such activities could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, divert the attention of management or result in other short-term focused corporate actions, any of which could have an adverse effect on our business or stock price.
+Added: The issuance of shares of our common stock in connection with any future offerings of securities by us, will dilute our shareholders ’
+Added: ownership interest in the company.
+Added: We may seek additional financing in the future to meet our capital needs, to repay outstanding indebtedness under our existing Credit Agreement or to meet our strategic initiatives or operating activities.
+Added: We have in the past issued common stock as acquisition consideration and for general corporate purposes.
+Added: For example, most recently, in March 2021, we issued 5,692,500 additional shares of our common stock in an underwritten follow-on public offering, an increase of 13.4% of outstanding shares of common stock.
+Added: We may determine to utilize common stock as acquisition consideration, issue convertible debt, or pursue another follow-on equity offering to raise capital for debt reduction or for other general corporate purposes, at any time in the future.
+Added: Any issuances of additional shares of our common stock would dilute shareholders’
+Added: ownership interest in our company, and shareholders would have a proportionately reduced ownership and voting interest in our company as a result of equity issuance.
+Added: If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants.
+Added: Additionally, our ability to make scheduled payments or refinance our obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and financial, business and other factors beyond our control.
Provisions of our certificate of incorporation and bylaws and Delaware law may make a takeover of Cohu more difficult.
There are provisions in our basic corporate documents and under Delaware law that could discourage, delay or prevent a change in control, even if a change in control may be regarded as beneficial to some or all of our stockholders.
+Added: Cohu ’
+Added: s stock repurchase program may not have an impact that is fully reflected in the current stock valuation.
+Added: Effective November 2, 2021, a $70 million share repurchase program was authorized by our Board of Directors.
+Added: The stock repurchase program was authorized to potentially offset dilution from equity issuances under Cohu’s equity incentive plans and because the Board believes that, for reasons unrelated to the company’s performance, the trading price of Cohu’s common stock from time to time may not be reflective of the true value of the company.
+Added: Any repurchases have been and may be made in the future using our existing cash resources.
+Added: The company gives no assurances as to when, how much and for what duration stock repurchases may be made.
+Added: However, stock repurchases may adversely affect the company if the economy turns downward, due to the existing COVID-19 pandemic or for other reasons, as it could leave the company limited in its ability to obtain cash necessary for ongoing operations or potential acquisition targets.
+Added: Further, as stock may be repurchased, given the volatility of our stock price, we may repurchase stock at prices which, in hindsight, are materially higher than the subsequent price of our stock.
Risks Relating to Regulatory Matters
There may be changes in, and uncertainty with respect to, legislation, regulation and governmental policy in the United States.
−Removed: The change in administration in the United States in January 2021 may result in changes to, and uncertainty with respect to, legislation, regulation and government policy.
−Removed: Specific legislative and regulatory proposals that could have a material impact on us include, but are not limited to, infrastructure renewal programs, modifications to international trade policy, increased duties, tariffs or other export restrictions, public company reporting requirements, environmental regulation, corporate tax legislation, new employment and privacy laws, and antitrust enforcement.
+Added: Specific legislative and regulatory proposals that could have a material impact on us include, but are not limited to, infrastructure renewal programs, modifications to international trade policy, increased duties, tariffs or other export restrictions, public company reporting requirements, climate change and environmental regulation, corporate tax legislation, new employment and privacy laws, and antitrust enforcement.
Unanticipated changes in our tax provisions, enactment of new tax laws, or exposure to additional income tax liabilities could affect our profitability.
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Our German subsidiaries income tax returns for 2015 to 2017, and our Philippines subsidiary income tax return for 2017 are currently under routine examination by tax authorities in their respective countries.
−Removed: Subsequent to December 26, 2020, we were notified by the taxing authority in Malaysia of its intent to perform an audit for 2014 to 2019 for one of our Malaysian subsidiaries.
+Added: During 2021, we were notified by the taxing authority in Malaysia of its intent to perform an audit for 2014 to 2019 for one of our Malaysian subsidiaries.
We may be subject to ongoing tax examinations in various jurisdictions.
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Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.
−Removed: Although we have implemented policies and procedures designed to ensure compliance with these laws, there can be no assurance that our employees, contractors or agents will not violate our policies, or that our policies will be effective in preventing all potential violations.
+Added: Although we have implemented policies and procedures designed to ensure compliance with these laws, there can be no assurances that our employees, contractors or agents will not violate our policies, or that our policies will be effective in preventing all potential violations.
Any such violations could include prohibitions on our ability to offer our products and services to one or more countries, and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.
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Securities and Exchange Commission has adopted disclosure rules for companies that use conflict minerals in their products, with substantial supply chain verification requirements if the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries.
−Removed: These new rules and verification requirements impose additional costs on us and on our suppliers and may limit the sources or increase the cost of materials used in our products.
+Added: These rules and verification requirements impose additional costs on us and on our suppliers and may limit the sources or increase the cost of materials used in our products.
Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers that could place us at a competitive disadvantage, and our reputation may be harmed.
−Removed: Global economic and political conditions, including trade tariffs and export restrictions, have impacted our business and may continue to have an impact on our business and financial condition.
−Removed: In fiscal year 2020, 83% of our revenue was from products shipped to customer locations outside the United States.
−Removed: We also purchase a significant portion of components and subassemblies from suppliers outside the United States.
−Removed: Additionally, a significant portion of our facilities are located outside the United States, including China, Germany, Japan, Malaysia, Philippines, Singapore, Switzerland and Taiwan.
−Removed: There have been significant changes in U.S.
−Removed: export regulations relating to China since 2019.
−Removed: In May 2019, the Bureau of Industry and Security (“BIS”) of the U.S.
−Removed: Department of Commerce added Huawei to the BIS’s Entity List, which imposes limitations on the supply of certain U.S.
−Removed: items and product support to Huawei (all references to Huawei include its wholly-owned subsidiary HiSilicon).
−Removed: Subsequently, in May 2020 and August 2020, BIS announced rules which amended the foreign-produced direct product rule and the Entity List to target Huawei’s acquisition of Huawei-designed and subsequently third-party semiconductors that are the direct product of certain U.S.-origin software and technology.
−Removed: Also, as of June 2020, the BIS requires exporters to obtain a license for specified items if at the time of the export they had knowledge that the item was intended to support Chinese “military end users,”
−Removed: in addition to “military end uses.”
−Removed: Cohu has evaluated the foregoing regulations, and at this time, despite an ongoing material adverse impact on direct and indirect Huawei sales, we have not seen any overall material impact to our business.
−Removed: However, we believe that these collective export restrictions and the ongoing unpredictability of U.S.-China trade relations have encouraged China-based companies to actively seek to obtain a greater supply of similar or substitute products from our foreign competitors that are not subject to these restrictions, thereby decreasing our long-term competitiveness as a supplier to China-based companies.
−Removed: Recent history indicates that the U.S.
−Removed: government may impose other new export restrictions, or tariffs, without prior notice impacting our ability (or our customers’
−Removed: ability) to sell and ship products to China-based companies and any such additional restrictions may have an adverse effect on our business, results of operations, or financial condition.
−Removed: In addition, the change in administration in the United States in January 2021 may result in changes to, and uncertainty with respect to, trade tariffs and export restrictions.
−Removed: Any such changes may have a further adverse effect on our business, results of operations, or financial condition.
Any failure to comply with environmental laws and regulations could subject us to significant fines and liabilities, and new laws and regulations (such as involving climate change) or changes in regulatory interpretation or enforcement could make compliance more difficult and costly.
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We could incur substantial costs, including cleanup costs, civil or criminal fines or sanctions and third-party claims for property damage or personal injury, as a result of violations of or liabilities under environmental laws and regulations or non-compliance with the environmental permits required at our facilities.
−Removed: In addition, new regulations or public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs, and may require us to make additional investments in facilities and equipment.
+Added: In addition, new regulations or shareholder or other public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs, and may require us to make additional investments in facilities and equipment.
As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.
−Removed: Risks Relating to Cybersecurity, the Economy, and Litigation
−Removed: Our business and operations could suffer in the event of cybersecurity breaches.
+Added: Risks Relating to Cybersecurity, Intellectual Property and Litigation
+Added: Our business and operations could suffer in the event of cybersecurity breaches within our operational systems or products.
Attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated and are sometimes successful.
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confidential information, we may incur liability as a result.
−Removed: Further, in late 2020, a global cyberbreach, widely reported as the “SolarWinds”
−Removed: hack, occurred and caused significant disruption at one of our suppliers and as a result created delays in our operation.
−Removed: Any future attacks that disrupt our IT systems, or those of our suppliers, could impact our sales, financial results and stock price.
+Added: Any future attacks, similar to the “SolarWinds”
+Added: hack that occurred in 2020, which may disrupt our IT systems, or those of our suppliers, could impact our sales, financial results and stock price.
In response to these risks, we expect to continue to devote additional resources to the security of our information technology systems.
−Removed: The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales.
−Removed: Our corporate headquarters is located in San Diego, California, our Asian sales and service headquarters are located in Singapore and Taiwan, and the majority of our sales are made to destinations in Asia.
−Removed: In addition, we have Asia-based manufacturing plants in Malaysia, Philippines and Japan.
−Removed: These regions are known for being vulnerable to natural disasters and other risks, such as earthquakes, tsunamis, fires and floods, volcanic eruptions, and geopolitical risks, which at times have disrupted the local economies.
−Removed: For example, a significant earthquake or tsunami could materially affect operating results.
−Removed: We are not insured for most losses and business interruptions of this kind, or for geopolitical or terrorism impacts, and presently have limited redundant, multiple site capacity in the event of a disaster.
−Removed: In the event of such disaster, our business would materially suffer.
−Removed: Our business could also be adversely affected by the effects of a widespread outbreak of contagious diseases, and has been and is continuing to be adversely affected by the COVID-19 global pandemic (see risk factor entitled “The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations ”).
−Removed: Global economic conditions may have an impact on our business and financial condition in ways that we currently cannot predict.
−Removed: Our operations and financial results depend on worldwide economic conditions and their impact on levels of business spending.
−Removed: Continued uncertainties may reduce future sales of our products and services.
−Removed: While we believe we have a strong customer base and have experienced strong collections in the past, if the current market conditions deteriorate, we may experience increased collection times and greater write-offs, either of which could have a material adverse effect on our cash flow.
−Removed: In addition, the tightening of credit markets and concerns regarding the availability of credit may make it more difficult for our customers to raise capital, whether debt or equity, to finance their purchases of capital equipment, including the products we sell.
−Removed: Delays in our customers’
−Removed: ability to obtain such financing, or the unavailability of such financing would adversely affect our product sales and revenues and therefore harm our business and operating results.
−Removed: Possible import, export, tariff and other trade barriers, which could be imposed by Asia, the United States, other countries or the European Union might also have a material adverse effect on our operating results.
−Removed: We cannot predict the timing, duration of or effect on our business of an economic slowdown or the timing or strength of a subsequent recovery.
−Removed: We may become subject to litigation or regulatory proceedings that could have an adverse effect on our business.
−Removed: From time to time, we may be subject to litigation or other administrative, regulatory or governmental proceedings, including tax audits and resulting claims that could require significant management time and resources and cause us to incur expenses and, in the event of an adverse decision, pay damages or incur costs in an amount that could have a material adverse effect on our financial position or results of operations.
+Added: Third parties may violate our proprietary rights and we may incur litigation costs to protect our proprietary rights.
+Added: We rely on patent, copyright, trademark and trade secret laws to establish and maintain proprietary rights in our technology and products.
+Added: Any of our proprietary rights may expire due to patent life, or be challenged, invalidated or circumvented.
+Added: We are also subject to the theft and misappropriation of our intellectual property by others, including incidents relating to former employees.
+Added: Additionally, instances where we identify third parties potentially infringing on our proprietary rights may require our further investigation that could be time-consuming and costly.
+Added: We believe that our company is taking reasonable actions to protect and continuously improve our security, through strengthened IT infrastructure and internal controls, but if these actions are not successful our business could be adversely affected.
+Added: Other parties may claim that we are infringing upon their intellectual property rights, and we could suffer litigation or licensing costs, and be prohibited from selling our products.
+Added: We may receive notice from third parties regarding patent or copyright claims of potential infringement by our company.
+Added: Any such claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert management’s attention and resources, and cause us to incur significant expenses.
+Added: In the event of a successful claim of infringement against us, it may be costly for us to obtain licensing rights, or we may fail to obtain licensing rights or have an inability to license the infringed technology.
+Added: Additionally, we may not be able to timely acquire or develop similar non-infringing technology, which may require us to change our products or processes.
+Added: In each of these instances, our business, financial condition and results of operations could be adversely affected.
Unresolved Staff Comments.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.