What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-02-18 compared with 2021-02-26 · 189 added, 201 removed, 278 unchanged (58% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Registrant ’

s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

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Fourth Quarter

As a result of the COVID-19 pandemic, we are proactively managing cash flow and Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020.

The dividend suspension will result in approximately $10 million of annualized cash savings, which we expect to utilize for deleveraging and strengthening our balance sheet.

We are proactively managing cash flow and Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020.

The dividend suspension has resulted in approximately $10 million of annualized cash savings, which we are utilizing to deleverage and strengthen our balance sheet.

Future reinstatement of our dividend policy may be affected by, among other items, our views on potential future capital requirements, including those related to debt service requirements, research and development, investments and acquisitions, legal risks and stock repurchases.

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Issuer Purchases of Equity Securities

During the fourth quarter of 2020, we did not repurchase any equity securities.

On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase program.

This share repurchase program was effective as of November 2, 2021 and has no expiration date, and the timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.

Repurchases under this program will be made using our existing cash resources and may be commenced or suspended from time-to-time at our discretion without prior notice.

Repurchases may be made in the open market, through 10b5-1 programs, or in privately negotiated transactions at prevailing market rates in accordance with federal securities laws.

All such repurchased shares and related costs are held as treasury stock and accounted for at trade date using the cost method.

The total number of shares of common stock we purchased during the fiscal year ended December 25, 2021 was 206,572 shares.

Share repurchase activity during the fourth quarter of 2021 was as follows:

Total Number of

Shares Purchased

Value of Shares

as Part of Publicly

That May Yet Be

Purchased Under

Per Share (1)

The Programs (3)

(In Thousands except price per share)

Oct 24 - Nov 20, 2021

Nov 21 - Dec 25, 2021

The weighted average price paid per share of common stock does not include the cost of commissions.

The total purchase cost includes the cost of commissions.

On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase program.

This share repurchase program is effective as of November 2, 2021 and has no expiration date, and the timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.

Repurchases under this program will be made using our existing cash resources and may be commenced or suspended from time-to-time at our discretion without prior notice.

Repurchases may be made in the open market, through 10b5-1 programs, or in privately negotiated transactions at prevailing market rates in accordance with federal securities laws.

All such repurchased shares and related costs are held as treasury stock and accounted for at trade date using the cost method.

Equity Compensation Plan Information

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Comparative Stock Performance Graph

The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material”

or “filed”

The information contained in this Stock Performance Graph section shall not be deemed to be “

soliciting material ”

filed ”

with the SEC or subject to the liabilities of Section 18 of the Exchange Act except to the extent that Cohu specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

The graph below compares the cumulative total stockholder return on the common stock of Cohu for the last five fiscal years with the cumulative total return on custom Peer Group Indexes and a Nasdaq Global Select Market Index over the same period (assuming the investment of $100 in Cohu’s common stock, Peer Group Index and Nasdaq Global Select Market Index on December 31, 2016, and reinvestment of all dividends).

The custom Peer Group Index is comprised of the peer group companies associated with our performance stock units issued under our equity incentive plan.

The custom Peer Group Index is comprised of the peer group companies associated with our executive compensation plan.

This peer group is revised annually to reflect acquisitions and to include equivalent companies in the semiconductor equipment market to ensure a sufficiently large number of companies in the peer group composition to enable a meaningful comparison of our stock performance.

In 2020, the custom Peer Group Index was comprised of Advanced Energy Industries Inc., Axcelis Technologies Inc., Brooks Automation Inc., Cabot Microelectronics Corp, Cirrus Logic Inc., Entegris, Inc., FormFactor Inc., Kulicke and Soffa Industries Inc., MTS Systems Corporation, Novanta Inc, OSI Systems, Inc., Onto Innovation Inc.

(formerly Nanometrics Inc.), Photronics Inc., Synaptics, Ultra Clean Holdings Inc., and Veeco Instruments Inc.

In 2019, the custom Peer Group Index was comprised of Advanced Energy Industries Inc., Advantest Corp, ASM Pacific Technology Ltd, Axcelis Technologies Inc., BE Semiconductor Industries NV, Brooks Automation Inc., Cabot Microelectronics Corp, Camtek Ltd, Electro Scientific Industries Inc., FormFactor Inc., Kulicke and Soffa Industries Inc., Micronics Japan Co Ltd, MKS Instruments Inc., Nanometrics Inc., Photronics Inc., Rudolph Technologies Inc., Teradyne Inc., Ultra Clean Holdings Inc., and Veeco Instruments Inc.

(includes Ultratech through acquisition).

In 2021, the custom Peer Group Index was comprised of Advanced Energy Industries, Inc., Axcelis Technologies, Inc., Azenta, Inc.

(formerly Brooks Automation, Inc.), CMC Materials, Inc.

(formerly Cabot Microelectronics Corp), Cirrus Logic, Inc., Entegris, Inc., FormFactor, Inc., Kulicke and Soffa Industries, Inc., Novanta, Inc., OSI Systems, Inc., Onto Innovation, Inc., Photronics, Inc., Synaptics, Inc., Ultra Clean Holdings, Inc., and Veeco Instruments, Inc.

In selecting our 2021 peer group the Compensation Committee of our Board of Directors considered competitive market data and an analysis prepared by Compensia and identified companies headquartered in the U.S.

in the semiconductor capital equipment and electronic capital equipment and instrumentation sectors that were comparable to us on the basis of revenue, our market capitalization, and that had similar scope of operations.

2019 Peer Group

2020 Peer Group

Selected Financial Data.

The following selected financial data should be read in conjunction with Cohu’s consolidated financial statements and notes thereto included in Part IV, Item 15(a) and with management’s discussion and analysis of financial condition and results of operations, included in Part II, Item 7.

On October 1, 2018, we completed the acquisition of Xcerra Corporation and the results of its operations have been included in our consolidated financial statements only since that date.

Due to the timing of the acquisition our results for 2018 only include Xcerra for the three months ended December 29, 2018.

Results for the periods ended December 26, 2020 and December 28, 2019 include Xcerra for the full twelve months.

Management determined that the fixtures services business, that was acquired as part of Xcerra, did not align with Cohu’s long-term strategic plan and management divested this portion of the business in February 2020.

As a result, the assets of our fixtures business are considered “held for sale”

as of December 28, 2019 and December 29, 2018 and the operations of our fixtures business are reported as “discontinued operations”

for the periods ended December 26, 2020, December 28, 2019 and December 29, 2018.

(in thousands, except per share data)

Consolidated statement of operations data:

Income (loss) from continuing operations

Net income (loss)

Net income (loss) attributable to noncontrolling interest

Net income (loss) attributable to Cohu

Income (loss) per share:

Income (loss) from continuing operations - basic

Income (loss) from continuing operations - diluted

Net income (loss) attributable to Cohu - basic

Net income (loss) attributable to Cohu - diluted

Cash dividends per share

Consolidated balance sheet data:

Total consolidated assets

Working capital

In 2020, total operating expenses related to the acquisition of Xcerra were as follows:

$11.3 million in restructuring charges comprised of $3.7 million of inventory end-of-manufacturing write-downs recorded in cost of sales related to Xcerra’s products, employee severance costs of $6.5 million and $1.1 million of other restructuring costs.

We also recorded $34.5 million for the amortization of acquisition-related intangibles.

Additionally, 2020 results include an impairment charge of $11.2 million related to in process research and development and a gain on sale of facilities totaling $4.5 million.

In 2019, total operating expenses related to the acquisition of Xcerra were as follows:

$16.2 million in restructuring charges comprised of $2.7 million of inventory end-of-manufacturing write-downs recorded in cost of sales related to Xcerra’s products, employee severance costs of $12.2 million and $1.3 million of other restructuring costs.

We also recorded $35.5 million for the amortization of acquisition-related intangibles and $0.4 million of merger related costs.

In 2018, total operating expenses related to the acquisition of Xcerra as follows:

$37.8 million in restructuring charges comprised of $19.1 million of inventory end-of-manufacturing write-downs recorded in cost of sales related to Xcerra’s products, employee severance costs of $17.8 million and $0.9 million of other restructuring costs.

We also recorded $13.1 million for the amortization of acquisition-related intangibles and $9.8 million of merger related costs.

Results for the years ended December 26, 2020, December 28, 2019, December 29, 2018 and December 30, 2017, include the impact from the Tax Act.

See Note 9, “Income Taxes”

in Part IV, Item 15(a) of this Form 10-K for additional information.

On January 4, 2017, we purchased Kita Manufacturing Co.

(“Kita”) and the results of its operations have been included in our consolidated financial statements since that date.

The year ended December 31, 2016 consists of 53 weeks.

All other years in the table above are comprised of 52 weeks.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW  

Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electromechanical system (MEMS) test modules, test contactors and thermal subsystems, semiconductor automated test equipment and bare board printed circuit board (PCB) test systems used by global semiconductor and electronics manufacturers and test subcontractors.

We have adopted the amendments to Items 301 and 302 of Regulation S-K contained in SEC Release No.

As a result, the disclosure previously provided in Part II, Item 6 is no longer required.

There were no retrospective changes to the Consolidated Statements of Operations for any quarters in the two most recent fiscal years that would require disclosure under Item 302, as amended.

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations.

Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electromechanical system (MEMS) test modules, test contactors and thermal subsystems, and semiconductor automated test equipment used by global semiconductor and electronics manufacturers and test subcontractors.

We offer a wide range of products and services and our revenue from capital equipment products is driven by the capital expenditure budgets and spending patterns of our customers, who often abruptly delay or accelerate purchases in reaction to variations in their business.

The level of capital expenditures by these companies depends on the current and anticipated market demand for semiconductor devices and printed circuit boards and the products that incorporate them.

Our consumable products are driven by the number of semiconductor devices and printed circuit boards that are tested and by the continuous introduction of new products and new technologies by our customers.

The level of capital expenditures by these companies depends on the current and anticipated market demand for semiconductor devices and the products that incorporate them.

Our consumable products are driven by the number of semiconductor devices that are tested and by the continuous introduction of new products and new technologies by our customers.

As a result, our consumable products provide a more stable recurring source of revenue and generally do not have the same degree of cyclicality as our capital equipment products.

For the year ended December 25, 2021, our net sales increased 39.5% year-over-year to $887.2 million.

Our consolidated net sales for the years ended December 26, 2020 and December 28, 2019, include Xcerra’s sales for the full year (all twelve months) totaling $331.2 million and $300.8 million, respectively.

The year ended December 29, 2018, includes Xcerra’s sales for the three months subsequent to the merger on October 1, 2018, which totaled $94.4 million.

In 2019 and 2020, the global semiconductor market was impacted by U.S.

and China trade tensions which impacted our customers’

In 2020, the global semiconductor market was affected by U.S.

and China trade tensions which impacted many of our customers’

ability to supply product to certain end users resulting in customer test cell utilization below levels that have historically triggered the need for additional capacity.

During the first half of 2020 our net sales were negatively impacted by movement control orders and the subsequent supply disruptions caused by the rapid and global spread of COVID-19 and weakness in the automotive market.

Demand for equipment used in testing mobility semiconductor applications, data centers and personal computers strengthened during the second half of 2020 driven by the launch and accelerated ramp of our RedDragon RF module for testing 5G, Wi-Fi 6 and Ultra-Wideband devices, and new customers for our Neon inspection platform.

We also began to see improved demand from semiconductor automotive and industrial customers and orders for PCB test equipment were at near record levels.

Based on improved business conditions, during the second half of 2020, we took action to reduce outstanding principal, by $36.4 million, under our Term Loan B debt associated with the financing of the Xcerra acquisition in October 2018.

While our total sales for the twelve months of 2020 were negatively impacted by the global economic downturn caused by the COVID-19 pandemic, we saw strong demand for our products in the second half of the year and our long-term market drivers and market strategy remain intact.

We are encouraged by positive order momentum across our main market segments, and customer traction with our new products going into 2021.

We remain optimistic about the long-term prospects for our business due to the increasing ubiquity of semiconductors, the future rollout of 5G networks, increasing semiconductor complexity, increasing quality demands from semiconductor customers, increasing test intensity and continued proliferation of electronics in a variety of products across the automotive, mobility and industrial markets.

We are focused on cross-selling opportunities and supporting our customers’

deployment of 5G RF capabilities on next generation smartphones and growing our sales to semiconductor and electronics manufacturers and test subcontractors.

Net sales during the first half of 2020 were also negatively impacted by the rapid and global spread of COVID-19 which led to supply disruptions impacting our ability to ship product.

During the second half of 2020, we began seeing strong demand for our products and that strength has continued through 2021.

During 2021 our net sales were favorably impacted by robust automotive demand, driven by xEV and ADAS technologies, strength in industrial markets, and continued mobility expansion with 5G proliferation.

Demand for equipment testing 5G, Wi-Fi 6 and Ultra-Wideband devices, data centers, personal computers and automotive semiconductor and sensors were at near record levels.

Based on improved business conditions, during 2021 we took actions to reduce outstanding principal under our Term Loan Credit Facility associated with the financing of the Xcerra acquisition in October 2018.

During the first quarter of 2021, using a portion of the proceeds from our underwritten follow-on public offering, we prepaid $100 million of the term loan and on June 30, 2021, utilizing a portion of the gross proceeds from the sale of the PCB Test business, we made an additional $100 million prepayment of the term loan.

Our long-term market drivers and market strategy remain intact and we are encouraged by demand across our main market segments, and customer traction with our new products.

Application of Critical Accounting Estimates and Policies

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revenue recognition, including the deferral of revenue on sales to customers, which impacts our results of operations;

estimation of valuation allowances and accrued liabilities, specifically product warranty, inventory reserves and allowance for bad debts, which impact gross margin or operating expenses;

estimation of valuation allowances and accrued liabilities, specifically inventory reserves, which impact gross margin or operating expenses;

the recognition and measurement of current and deferred income tax assets and liabilities, unrecognized tax benefits, the valuation allowance on deferred tax assets and accounting for the impact of the change to U.S.

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We recognize revenue when the obligations under the terms of a contract with our customers are satisfied;

generally, this occurs with the transfer of control of our systems, non-system products or services.

generally, this occurs with the transfer of control of our systems, non-system products or the completion of services.

In circumstances where control is not transferred until destination or acceptance, we defer revenue recognition until such events occur.

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Unsatisfied performance obligations primarily represent contracts for products with future delivery dates.

At December 26, 2020 and December 28, 2019 we had $17.1 million and $16.1 million of revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied), respectively.

At December 25, 2021, and December 26, 2020, we had $7.7 million and $8.3 million of revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) with expected durations of over one year, respectively.

As allowed under ASC 606, we have opted to not disclose unsatisfied performance obligations for contracts with original expected durations of less than one year.

We generally sell our equipment with a product warranty.

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While we believe that our allowance for credit losses is adequate and represents our best estimate of future losses we will continue to monitor customer liquidity and other economic conditions, including the impact of the COVID-19 pandemic, which may result in changes to our estimates.

We adopted Accounting Standards Update (“ASU”) 2016-13 , Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , on December 29, 2019 the first day of our fiscal 2020.

The ASU required a cumulative-effect adjustment to the statement of financial position as of the date of adoption.

Periods prior to the adoption that are presented for comparative purposes are not adjusted.

Based on our analysis of historical and anticipated collections of trade receivables, the impact of adoption of Topic 326 was insignificant.

The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality.

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Our gross deferred tax asset balance as of December 25, 2021, was approximately $103.3 million, with a valuation allowance of approximately $76.3 million.

The Tax Act was enacted on December 22, 2017.

The accounting for the tax effects of the enactment of the Tax Act was completed in 2018.

The accounting for the CARES Act, enacted on March 27, 2020, was incorporated in 2020.

The CARES Act, enacted on March 27, 2020, was incorporated in 2020.

See Note 9, “Income Taxes”, included in Part IV, Item 15(a) of this Form 10-K, which is incorporated herein by reference.

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An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available.

We have determined that our four identified operating segments are:

Test Handler Group (“THG”), Semiconductor Tester Group (“STG”), Interface Solutions Group (“ISG”) and PCB Test Group (“PTG”).

We have determined that our three identified operating segments are:

Test Handler Group (THG), Semiconductor Tester Group (STG) and Interface Solutions Group (ISG).

Our THG, STG and ISG operating segments qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided.

As a result, we report in two segments, Semiconductor Test & Inspection and PCB Test.

As a result, we report in one segment, Semiconductor Test and Inspection Equipment (“Semiconductor Test & Inspection”).

Prior to the sale of our PCB Test Group (PTG) on June 24, 2021, we reported in two segments, Semiconductor Test & Inspection and PCB Test Equipment (“PCB Test”).

Goodwill and Indefinite-Lived Intangibles, Other Intangible Assets and Long-lived Assets:

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For the twelve months ended December 26, 2020 total impairments recorded to IPR&D projects was $11.2 million.

The forecasts utilized in the interim impairment tests were based on known facts and circumstances.

We evaluate and consider recent events and uncertain items, as well as related potential implications, as part of our annual and interim assessments and incorporate them into the analyses as appropriate.

These facts and circumstances are subject to change and may not be the same as future analyses.

In a future period, should we again determine that an interim goodwill and indefinite-lived intangible asset impairment review is required we may be required to book additional impairment charges which could have a significant negative impact on our results of operations.

During the fourth quarter of 2021 we completed and transferred to developed technology our last remaining in-process technology project which was reviewed for impairment as part of this process.

Due to a change in forecasted results an impairment charge of $0.1 million was recorded.

Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable.

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Recent Transactions Impacting Results of Operations

On October 1, 2018 we completed our merger with Xcerra Corporation and the results of its operations have been included in our consolidated financial statements only since that date.

Due to the timing of the merger our results for 2018 only include Xcerra for the three months ended December 29, 2018 whereas the periods ended December 26, 2020 and December 28, 2019 include Xcerra for the full twelve months.

Previously, management determined that the fixtures services business, that was acquired as part of Xcerra, did not align with Cohu’s long-term strategic plan and management divested this portion of the business in February 2020.

On June 24, 2021, we completed the sale of our PCB Test business.

Due to the timing of the divestment of this business our results for 2021 include our PCB Test business for the six months ended June 24, 2021, whereas the periods ended December 26, 2020 and December 28, 2019 include this business for the full twelve months.

The assets of our fixtures business were considered “held for sale”

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Amortization of purchased intangible assets

Gain on sale of PCB Test business

Restructuring charges

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Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

in Part II, Item 7 in our 2019 Annual Report on Form 10-K, filed with the SEC on March 10, 2020, for comparative discussion of our fiscal years ended December 28, 2019 and December 29, 2018.

in Part II, Item 7 in our 2020 Annual Report on Form 10-K, filed with the SEC on February 26, 2021, for comparative discussion of our fiscal years ended December 26, 2020 and December 28, 2019.

2021 Compared to 2020

Cohu’s consolidated net sales increased 39.5% from $636.0 million in 2020 to $887.2 million in 2021.

During the first half of 2020, our net sales were impacted by disruptions caused by the COVID-19 pandemic and movement control orders which resulted in supply disruptions impacting our ability to ship product and were further impacted by reduced demand in the automotive segment.

In the second half of 2020 demand for equipment used in testing mobility semiconductor applications, data centers and personal computers strengthened driven by the launch and accelerated ramp of our RedDragon RF module for testing 5G, Wi-Fi 6 and Ultra-Wideband devices, and new customers for our Neon inspection platform.

We also began to see improved demand from semiconductor automotive and industrial customers, and orders for PCB test equipment were at near record levels.

In 2020, the global semiconductor market was impacted by U.S.

and China trade tensions which impacted our customers’

ability to supply product to certain end users.

During the first half of 2020 our net sales were also negatively impacted by the rapid and global spread of COVID-19 which led to supply disruptions impacting our ability to ship product.

While our total sales for fiscal year 2020 were negatively impacted by the global economic downturn caused by the COVID-19 pandemic, we began seeing strong demand for our products in the second half of 2020 and that strength has continued through 2021.

Demand for equipment testing 5G, Wi-Fi 6 and Ultra-Wideband devices, data centers, personal computers and automotive semiconductor and sensors were at near record levels.

Gross Margin (exclusive of amortization of acquisition-related intangible assets described below)

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Cost of sales consists primarily of the materials, assembly and test labor and overhead from operations.

Our gross margin can fluctuate due to a number of factors, including, but not limited to, the mix of products sold, product support costs, increases to inventory reserves, the sale of previously reserved inventory and utilization of manufacturing capacity.

Our gross margin, as a percentage of net sales, increased to 43.6% in 2021 from 42.7% in 2020.

Increased business volume in the second half of 2020 allowed us to better leverage our fixed costs helping to improve our gross margin over 2019.

Other items impacting our gross margin in 2020 are discussed below.

We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage forecasts ranging from one to three years.

Increased business volume in 2021 allowed us to better leverage our fixed costs helping to improve our gross margin over 2020.

Other items impacting our gross margin in 2021 and 2020 are discussed below.

We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage forecasts.

During 2021, we recorded net charges to cost of sales of approximately $7.1 million, for excess and obsolete inventory.

In addition to our normal excess and obsolete provision, as part of the integration and restructuring activities related to Xcerra we recorded $3.7 million of inventory related charges specifically related to the decision to end manufacturing of certain semiconductor test handler products.

In 2019, net charges to cost of sales were $4.1 million, for excess and obsolete inventory and we recorded $2.7 million of inventory related charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products.

In 2020, net charges to cost of sales for excess and obsolete inventory were $6.0 million and we recorded $3.7 million of inventory related charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products.

End manufacturing inventory charges related to semiconductor test handler products in 2021 were not significant.

We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are adequate to cover known exposures at December 25, 2021.

Reductions in customer forecasts, continued modifications to products, our failure to meet specifications or other customer requirements may result in additional charges to operations that could negatively impact our gross margin in future periods.

Our cost of sales was also impacted by the amortization of inventory step-up related to fair value adjustments to inventory acquired from Xcerra and during 2019, $6.0 million of inventory step-up costs were amortized.

All inventory step-up was fully amortized in in 2019 and there was no amortization in 2020.

Research and Development Expense (“R&D Expense”)

Research and Development Expense ( “

R&D Expense ”

R&D expense consists primarily of salaries and related costs of employees engaged in ongoing research, product design and development activities, costs of engineering materials and supplies and professional consulting expenses.

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R&D expense in 2021 was $92.0 million, or 10.4% of net sales, compared to $86.2 million, or 13.5% of net sales in 2020.

Despite increased business volume, R&D expense was essentially flat, year-over-year, as temporary salary reductions, decreased travel and other cost control measures implemented in response to the economic uncertainty caused by the COVID-19 pandemic allowed us to control costs in 2020.

Selling, General and Administrative Expense (“SG&A Expense”)

Increased R&D spending in 2021 was driven by higher labor and material costs associated with product development and the discontinuation of cost control measures implemented in the prior year.

During 2020, decreased travel and the implementation of temporary salary reductions and other cost control measures allowed us to control our costs in response to the economic uncertainty caused by the COVID-19 pandemic.

Selling, General and Administrative Expense ( “

SG&A Expense ”

SG&A expense consists primarily of salaries and benefit costs of employees, commission expense for independent sales representatives, product promotion and costs of professional services.

SG&A expense as a percentage of net sales decreased to 14.3% in 2021, from 20.3% in 2020, decreasing from $129.2 million in 2020 to $127.0 million in 2021.

Lower SG&A expense in 2020 was a result of temporary salary reductions, decreased travel and other cost control measures implemented in response to the economic uncertainty caused by the COVID-19 pandemic.

From time-to-time Cohu incurs costs specifically related to business acquisitions.

In 2019, we incurred acquisition costs totaling $0.4 million that were entirely comprised of professional service and other transaction related expenses associated with the merger of Xcerra.

No acquisition costs were incurred in 2020.

In 2020 and 2019, we recorded $0.1 million and $1.2 million of expense, respectively, related to a reduction of an indemnification receivable related to an uncertain tax position recorded in the acquisition of Ismeca Semiconductor Holdings SA (“Ismeca”) in 2013.

In connection with this reduction we also booked a corresponding amount as a credit to our income tax provision and, as a result, the impact of this reduction on net income was zero.

SG&A expense in 2021 was lower as a result of sale of our PCB Test business on June 24, 2021.

Our results for 2021 only include the results of our PCB Test business through that date which resulted in approximately $3.1 million in less expense in 2021.

This reduction was offset, in part, by the discontinuation of cost control measures implemented in the prior year.

Amortization of Purchased Intangible Assets

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Amortization of acquisition-related intangible assets was $35.4 million and $38.7 million for 2021 and 2020, respectively.

The decrease in expense recorded during the current year was a result of fluctuations in exchange rates.

The decrease in expense recorded during 2021 was a result of fluctuations in exchange rates and the sale of PCB Test business on June 24, 2021 as remaining purchased intangible assets that were being amortized were written-off as part of the sale.

Gain on sale of PCB Test Business

On June 24, 2021, we completed the divestment of our PCB Test business which resulted in a gain of $70.8 million in 2021.

As part of the transaction we also sold certain intellectual property held by our Semiconductor Test & Inspection segment that is utilized by the PCB Test business.

Our decision to sell this non-core business resulted from management’s determination that that they were no longer a fit within our organization.

Restructuring Charges

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Impairment Charges

During the first quarter of 2020, the volatility in Cohu’s stock price and the global economic downturn and business interruptions associated with the COVID-19 pandemic led us to determine that there was a triggering event related to goodwill within all of our identified reporting units and our indefinite-lived intangible assets.

We performed an interim assessment as of March 28, 2020 and determined that the fair values of our identified reporting units all exceeded their carrying values and concluded there was no impairment of goodwill within our reporting units.

Anticipated delays in customer adoption of certain new products under development as a result of the COVID-19 pandemic, changes to future project roadmap and an increase in the discount rate used in developing our interim fair value estimate resulted in a $3.9 million impairment to IPR&D as the carrying value exceeded fair value.

During the third quarter of 2020, we became aware of additional delays in customer adoption of certain new products under development as a result of the COVID-19 pandemic and customer product road map changes.

This change in facts led us to re-evaluate the fair value of these projects and we determined that the carrying value exceeded the fair value, and we recorded an additional $7.3 million impairment to IPR&D.

For the twelve months ended December 26, 2020, total impairments recorded to IPR&D projects was $11.2 million.

During 2020, the volatility in Cohu’s stock price and the global economic downturn and business interruptions associated with the COVID-19 pandemic led us to determine that there were triggering events related to our indefinite-lived intangible assets.

We performed interim impairment assessments during both the first and third quarters of 2020 and anticipated delays in customer adoption of certain new products under development as a result of the COVID-19 pandemic, changes to future project roadmap and an increase in the discount rate used in developing our interim fair value estimate led us to conclude that the carrying value of these assets exceeded their fair value.

For the twelve months ended December 26, 2020, total impairments recorded to IPR&D projects was $11.2 million.

During the fourth quarter of 2021 we completed and transferred to developed technology our last remaining in-process technology project which we tested for impairment as part of this process.

A change in forecasted results of this project led to an impairment charge of $0.1 million being recorded in the fourth quarter of 2021.

Gain on sale of facilities

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Interest expense was $6.4 million in 2021 compared to $13.8 million in 2020.

The year-over-year decrease in our interest expense resulted from a significant decrease in LIBOR and the reduction in the outstanding principal under our Term Loan B debt associated with the financing of the Xcerra acquisition.

Interest income was $0.2 million in 2020 as compared to $0.8 million in 2019.

The year-over-year decrease in our interest expense resulted from a significant decrease in the outstanding balance of our Term Loan Credit Facility and lower LIBOR rates.

Interest income was $0.2 million in both 2021 and 2020.

Foreign Transaction Gain (Loss) and Other

We have operations in foreign countries and conduct business in the local currency in these countries.

During 2020, the U.S.

Dollar weakened significantly against the Swiss Franc and Euro, which resulted in the recognition of $3.2 million in foreign currency losses, net of $0.8 million of gains generated by foreign currency forward contracts.

During the fourth quarter of 2020, we began entering into foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain U.S.

Starting in the fourth quarter of 2020, we began entering into foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain U.S.

Dollar denominated assets and liabilities at our subsidiaries whose functional currency is the local currency.

In 2019, we incurred an insignificant foreign currency transaction gain for the year.

During 2021, the U.S.

Dollar strengthened against the Swiss Franc, Euro and Japanese Yen resulting in foreign currency gains of $0.4 million, net of $3.4 million of losses generated by our foreign currency forward contracts.

In 2020, the U.S.

Dollar weakened significantly against the Swiss Franc and Euro, resulting in the recognition of $3.2 million in foreign currency losses, net of $0.8 million of gains generated by our foreign currency forward contracts.

See Note 7 “Derivative Financial Instruments”

in Part IV, Item 15(a) of this Form 10-K for additional information with respect to our foreign currency forward contracts.

The income tax provision (benefit) expressed as a percentage of pre-tax income or loss in 2020 and 2019 was 5.1% and (4.3)%, respectively.

The income tax provision (benefit) for the years ended December 26, 2020, and December 28, 2019 differs from the U.S.

federal statutory rate primarily due to changes in the valuation allowance on our deferred tax assets, foreign income taxed at different rates, releases from statute expirations, impact of the Tax Act and other factors.

The income tax provision expressed as a percentage of pre-tax income or loss in 2021 and 2020 was 13.0% and (5.1)%, respectively.

The income tax provision for the years ended December 25, 2021, and December 26, 2020 differs from the U.S.

federal statutory rate primarily due to realization of federal tax credits, tax exempt gains, stock-based compensation windfall, changes in the valuation allowance on our deferred tax assets, foreign income taxed at different rates, offset by GILTI, deemed dividend and other factors.

Companies are required to assess whether a valuation allowance should be recorded against their deferred tax assets (“DTAs”) based on the consideration of all available evidence, using a “more likely than not”

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We have evaluated our DTAs at each reporting period, including an assessment of our cumulative income or loss over the prior three-year period and future periods, to determine if a valuation allowance was required.

A significant negative factor in our assessment was Cohu’s three-year cumulative loss history at the end of various fiscal periods including 2020.

A significant negative factor in our assessment was Cohu’s three-year cumulative U.S.

loss history at the end of various fiscal periods including 2021.

As a result of our cumulative, three-year U.S.

GAAP pretax loss from continuing operations at the end of 2020, we were unable to conclude that it was “more likely than not”

GAAP pretax loss and excluding the one-time gain on the sale of PTG from our U.S.

continuing operations at the end of 2021, we were unable to conclude that it was “more likely than not”

that our U.S.

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Our valuation allowance on our DTAs at December 25, 2021, and December 26, 2020, was approximately $76.3 million and $86.1 million, respectively.

The remaining gross DTAs for which a valuation allowance was not recorded are realizable primarily through future reversals of existing taxable temporary differences and to a lesser extent future taxable income exclusive of reversing temporary differences and carryforwards.

The remaining gross DTAs for which a valuation allowance was not recorded are realizable primarily through future reversals of existing taxable temporary differences and to a lesser extent future taxable income in certain jurisdictions exclusive of reversing temporary differences and carryforwards.

As the realization of DTAs is determined by tax jurisdiction, the deferred tax liabilities recorded by our non-U.S.

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federal statutory rate and further explanation of our provision for income taxes, see Note 9, “Income Taxes”, included in Part IV, Item 15(a) of this Form 10-K, which is incorporated herein by reference.

Loss from Continuing Operations and Net Loss

As a result of the factors set forth above, our net loss from continuing operations and net loss was $13.8 million in 2020.

Net loss from continuing operations was $69.0 million in 2019 and, including the results of our discontinued operations which includes an impairment related to the disposal of our FSG segment, our net loss was $69.7 million.

Income (Loss) from Continuing Operations and Net Income (Loss)

As a result of the factors set forth above, our income from continuing operations and net income was $167.3 million in 2021.

Both our loss from continuing operations and net loss, which includes the results of our discontinued operations and a small gain recognized on the disposal of the segment, was $13.8 million in 2020.

LIQUIDITY AND CAPITAL RESOURCES

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We use cash to fund growth in our operating assets and to fund new products and product enhancements primarily through research and development.

On October 1, 2018, we entered into a bank credit agreement which provides for a $350.0 million seven-year Term Loan B facility and borrowed the full amount.

The Term Loan B facility matures on October 1, 2025.

These proceeds were used on October 1, 2018, together with our cash and cash equivalents, to finance the acquisition of Xcerra.

See Note 4 “Borrowings and Credit Agreements”

included in Part IV, Item 15(a) of this Form 10-K, which is incorporated herein by reference.

At December 26, 2020, our total indebtedness, net of discount and deferred financing costs, was $319.9 million, which included $301.1 million outstanding under the Term Loan B, $3.6 million outstanding under Kita’s term loans, $9.9 million outstanding under Cohu GmbH’s construction loans, and $5.3 million outstanding under Kita’s lines of credit.

As of December 25, 2021, $189.4 million or 49.9% of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries.

If these funds are needed for our operations in the U.S., we may be required to accrue and pay foreign withholding taxes if we repatriate these funds.

Except for working capital requirements in certain jurisdictions, we provide for all withholding and other residual taxes related to unremitted earnings of our foreign subsidiaries.

At December 25, 2021, our total indebtedness, net of discount and deferred financing costs, was $117.8 million, which included $101.6 million outstanding under the Term Loan Credit Facility, $3.1 million outstanding under Kita’s term loans, $10.0 million outstanding under Cohu GmbH’s construction loans, and $3.1 million outstanding under Kita’s lines of credit.

In March 2021, we closed an underwritten follow-on public offering totaling 5,692,500 shares of our common stock at $41.00 per share, raising net proceeds of approximately $223.1 million, after deducting underwriting discounts and commissions and offering expenses.

We used $100.0 million of the net proceeds of this offering to repay outstanding principal on our Term Loan Credit Facility and we intend to use the rest for general corporate purposes, including to fund future growth initiatives.

On June 30, 2021, we prepaid an additional $100.0 million of our Term Loan Credit Facility utilizing a portion of the net proceeds from the sale of our PCB Test business.

In the fourth quarter of 2021, we repurchased 206,572 shares of our outstanding common stock for $7.3 million to be held as treasury stock.

We believe that our sources of liquidity will be sufficient to satisfy our anticipated cash requirements through at least the next 12 months.

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under the heading “Liquidity and Capital Resources”

in our Annual Report on Form 10-K for the year ended December 28, 2019, filed with the SEC on March 10, 2020, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

in our Annual Report on Form 10-K for the year ended December 26, 2020, filed with the SEC on February 26, 2021, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

Working Capital:

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Working capital

As of December 26, 2020, $74.4 million of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries.

If these funds are needed for our operations in the U.S., we may be required to accrue and pay foreign withholding taxes if we repatriate these funds.

Except for working capital requirements in certain jurisdictions, we provide for all withholding and other residual taxes related to unremitted earnings of our foreign subsidiaries.

Beginning in 2018, earnings realized in foreign jurisdictions are subject to U.S.

taxes in accordance with the Tax Act.

Operating Activities:

Cash provided by operating activities consists of our net loss adjusted for non-cash expenses and changes in operating assets and liabilities.

These adjustments include impairment charges, depreciation expense on property, plant and equipment, share-based compensation expense, amortization of intangible assets, deferred income taxes, amortization of cloud-based software implementation costs, gain on extinguishment of debt, interest capitalized associated with cloud computing implementation, amortization of debt discounts and issuance costs and gains from sale of property, plant and equipment.

Cash provided by operating activities consists of our net income adjusted for non-cash expenses and changes in operating assets and liabilities.

These adjustments include impairment charges, depreciation expense on property, plant and equipment, share-based compensation expense, amortization of intangible assets, deferred income taxes, amortization of cloud-based software implementation costs, loss on extinguishment of debt, interest capitalized associated with cloud computing implementation, amortization of debt discounts and issuance costs and gains from the sale of our PCB Test business and property, plant and equipment.

Our net cash flows provided by operating activities in 2021 totaled $97.7 million compared to $49.7 million in 2020.

The increase in cash provided by operating activities in the current year was a result of an increase in current year net sales and the decrease in our net loss, but was also impacted by changes in current assets and liabilities which included increases in accounts receivable, inventory and accounts payable.

A significant increase in net sales in the fourth quarter of 2020 and the timing of the resulting cash conversion cycle drove the $20.2 million increase in accounts receivable.

The $15.0 million increase in inventory was driven by purchases from suppliers made to fulfill anticipated future shipments of products.

Increased business activities in the fourth quarter and the timing of payments to our suppliers resulted in the $15.1 million increase in accounts payable.

Cash provided by operating activities was also impacted by increases in accrued compensation, warranty and other liabilities which increased $4.7 million, driven primarily by increases in incentive compensation due to current year results.

Advance payments from customers related to equipment orders expected to be fulfilled during 2021 has resulted in a $2.2 million increase in customer advances.

Income taxes payable decreased $2.1 million a result of tax payments made in certain foreign jurisdictions.

Cash provided by operating activities in the current year was a result of an increase in current year net sales and net income as compared to a net loss in the prior year.

Cash provided by operating activities was also impacted by changes in current assets and liabilities which included increases in accounts receivable, inventory and accounts payable.

Net sales in the fourth quarter of 2021 and the timing of the resulting cash conversion cycle drove the $59.1 million increase in accounts receivable.

The $35.9 million increase in inventory was driven by purchases from suppliers made in the fourth quarter to fulfill anticipated future shipments of products and increased business activities, and the timing of payments to our suppliers resulted in the $17.3 million increase in accounts payable.

Deferred profit increased $4.7 million as a result of deferrals made in accordance with our revenue recognition policy.

Cash provided by operating activities was also impacted by increases in income taxes payable of $3.4 million a result of higher income tax to be paid in certain jurisdictions as a result of the increase in current year profitability, and advance payments from customers decreased $4.1 million as a result of product shipments during the current year.

Investing Activities:

Investing cash flows consist primarily of cash used for capital expenditures in support of our business, purchases of investments, proceeds from investment maturities, business acquisitions, asset disposals and business divestitures.

Our net cash used in investing activities in 2020 totaled $18.4 million.

Additions to property, plant and equipment in 2020 were $18.7 million and were made to support the operating and development activities of our Semiconductor Test & Inspection segment.

During 2020 we used $19.7 million in cash for purchases of short-term investments.

We invest our excess cash, in an attempt to seek the highest available return while preserving capital, in short-term investments since excess cash may be required for a business-related purpose.

Investing cash flows consist primarily of cash used for capital expenditures in support of our business, purchases of investments, business acquisitions and proceeds from investment maturities, asset disposals and business divestitures.

Our net cash provided by investing activities in 2021 totaled $39.9 million.

Net cash proceeds from the sale of our PCB Test business on June 24, 2021, were $120.9 million.

The decision to sell our PCB Test business resulted from Cohu management’s determination that this industry segment was not a fit within our organization and we could utilize the proceeds from the sale business to reduce outstanding debt and invest in growth opportunities in-line with our core business strategy.

During 2020 we generated cash totaling $17.0 million from the sale of land, buildings, and fixed assets as part of facility consolidation program and $3.0 million from the sale of our fixtures services business.

In 2021 we used $204.7 million in cash for purchases of short-term investments and generated $135.5 million from sales and maturities.

We invest our excess cash, in an attempt to seek the highest available return while preserving capital, in short-term investments since excess cash may be required for a business-related purpose.

Additions to property, plant and equipment in 2021 were $12.0 million and were made to support the operating and development activities of our Semiconductor Test & Inspection segment.

In 2020 we used $18.7 million for additions to property, plant and equipment and $19.7 million for purchases of short-term investments.

Financing Activities:

In fiscal 2020, our cash used in financing activities totaled $38.1 million.

During 2020, we paid dividends totaling $5.0 million, or $0.06 per common share.

As a result of the COVID-19 pandemic, we are proactively managing cash flow and Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020.

The dividend suspension will result in approximately $10 million of annualized cash savings, which we expect to utilize for deleveraging and strengthening our balance sheet.

Repayments of short-term borrowings and long-term debt during fiscal 2020 totaled $41.1 million and included a $35.4 million repurchase and retirement of our Term Loan B debt during the third and fourth quarters of 2020 made to deleverage our balance sheet.

We received proceeds under a revolving line of credit and construction loan totaling $5.9 million.

Financing cash flows consist primarily of net proceeds from the issuance of common stock from an underwritten public offering and under our stock option and employee stock purchase plans and repayments of debt, net of new borrowings.

In fiscal 2021, our cash provided by financing activities totaled $6.7 million.

In March 2021, we closed an underwritten public offering totaling 5,692,500 shares of our common stock at $41.00 per share, raising net proceeds of approximately $223.1 million, after deducting underwriting discounts and commissions and offering expenses.

Utilizing a portion of the gross proceeds from the sale of the PCB Test business, we made an additional $100.0 million prepayment of the Term Loan Credit Facility.

Repayments of short-term borrowings and long-term debt during 2021 totaled $206.1 million and included a $200.0 million prepayment of our Term Loan Credit Facility using proceeds from our underwritten public offering and the sale of our PCB Test business to deleverage our balance sheet as discussed above.

We received proceeds under a revolving line of credit and construction loan totaling $1.4 million in 2021 and $5.9 million in 2020.

Proceeds from the construction loan are being used to expand our facility in Kolbermoor, Germany, enabling us to consolidate the German operations of our Semiconductor Test & Inspection segment.

Proceeds from the revolving line of credit are being used to increase the manufacturing capacity of our Semiconductor Test & Inspection segment facility located in Osaka, Japan.

The amount and timing of funds received under these facilities is based on the current needs of these expansion plans.

We made payments totaling $7.3 million in the fourth quarter of 2021 for shares of our common stock repurchased under our share repurchase program to be held as treasury stock.

We issue restricted stock units, stock options and maintain an employee stock purchase plan as components of our overall employee compensation.

In 2021, cash used to settle the minimum statutory tax withholding requirements on behalf of our employees upon vesting of restricted and performance stock awards, net of proceeds from shares issued under our employee stock purchase plan and from the exercise of employee stock options was $4.4 million.

Net proceeds from the issuance of our common stock under our equity incentive and employee stock purchase plans, totaled $2.1 million during 2020.

We issue share-based awards and maintain an employee stock purchase plan as components of our overall employee compensation.

The increase in cash used to settle tax withholding requirements between 2021 and 2020 is directly correlated to the increase in Cohu’s stock price at the end of March year over year when the majority of awards vest.

Share Repurchase Program

On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase program.

This share repurchase program was effective as of November 2, 2021, and has no expiration date, and the timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.

Repurchases under this program will be made using our existing cash resources and may be commenced or suspended from time-to-time at our discretion without prior notice.

Repurchases may be made in the open market, through 10b5-1 programs, or in privately negotiated transactions at prevailing market rates in accordance with federal securities laws.

For the year ended December 25, 2021, we repurchased 206,572 shares of our common stock for $7.3 million to be held as treasury stock.

As of December 25, 2021, we may purchase up to $62.7 million of shares of our common stock under our share repurchase program.

Capital Resources

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Credit Agreement

On October 1, 2018, we entered into a Credit Agreement providing for a $350.0 million Credit Facility and borrowed the full amount to finance a portion of the Xcerra acquisition.

Loans under the Credit Facility amortize in equal quarterly installments of 0.25% of the original principal amount, with the balance payable at maturity.

All outstanding principal and interest in respect of the Credit Facility must be repaid on or before October 1, 2025.

The loans under the Term Loan Facility bear interest, at Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of 3.00%.

On October 1, 2018, we entered into a Credit Agreement providing for a $350.0 million Term Loan Credit Facility and borrowed the full amount to finance a portion of the Xcerra acquisition.

Loans under the Term Loan Credit Facility amortize in equal quarterly installments of 0.25% of the original principal amount, with the balance payable at maturity.

All outstanding principal and interest in respect of the Term Loan Credit Facility must be repaid on or before October 1, 2025.

The loans under the Term Loan Credit Facility bear interest, at Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of 3.00%.

At December 25, 2021, the outstanding loan balance, net of discount and deferred financing costs, was $101.6 million and $10.1 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

At December 26, 2020, the outstanding loan balance, net of discount and deferred financing costs, was $301.1 million and $2.4 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

As of December 25, 2021, the fair value of the debt was $102.7 million.

The measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of December 25, 2021 and is considered a Level 2 fair value measurement.

Under the terms of the Credit Agreement, the lender may accelerate the payment terms upon the occurrence of certain events of default set forth therein, which include:

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As of December 25, 2021, we believe no such events of default have occurred.

In the second half of 2020, we repurchased $36.4 million in principal of our Term Loan Facility for $35.4 million in cash.

During 2021, we prepaid $200.0 million in principal of our Term Loan Credit Facility for $200.0 million in cash.

We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $3.4 million reflected in other expense, net, in our consolidated statement of operations and a corresponding $3.4 million reduction in debt discounts and deferred financing costs in our consolidated balance sheets.

During 2020, we repurchased $36.4 million in principal of our Term Loan Credit Facility for $35.4 million in cash.

We accounted for the repurchase as a debt extinguishment, which resulted in a gain of $0.3 million reflected in other expense, net, in our consolidated statement of operations, as well as a $0.7 million reduction in debt discounts and deferred financing costs in our consolidated balance sheets.

After the repurchase, approximately $306.6 million in principal of the Term Loan Facility remains outstanding as of December 26, 2020.

Approximately $103.1 million in principal of the Term Loan Credit Facility remains outstanding as of December 25, 2021.

Kita Term Loans

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The term loans are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.

Xcerra Term Loan

As a result of our acquisition of Xcerra, we assumed a term loan related to the purchase of Xcerra’s facility in Rosenheim, Germany.

The loan was payable over 10 years at an annual interest rate of 2.35%.

Principal plus accrued interest was due quarterly over the duration of the term loan ending in March 2024.

At December 28, 2019, the outstanding loan balance was $1.5 million and $0.3 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

During the third quarter of 2020 the term loan was fully repaid using proceeds received from the sale of our facility located in Rosenheim, Germany.

Construction Loans

On July 26, 2019, one of our wholly owned subsidiaries located in Germany entered into two construction loans (“Loan Facilities”) with a German financial institution providing total borrowing of €8.6 million.

The Loan Facilities have 10-year and 15-year terms, which commenced on August 1, 2019, the initial draw-down date.

Additionally, on June 16, 2020, a third construction loan with the same financial institution was entered into providing total borrowing of €1.5 million.

This loan facility has a 10-year term, which has not commenced.

The Loan Facilities are being utilized to finance the expansion of our facility in Kolbermoor, Germany, enabling us to combine the operations of multiple subsidiaries in one location as part of our previously announced strategic restructuring program.

The Loan Facilities are secured by the land and the existing building on the site and bear interest at agreed upon rates based on separate €3.4 million, €5.2 million and €1.5 million facility amounts.

On August 1, 2019, the full €3.4 million was drawn under the first facility, which is payable over 10 years at an annual interest rate of 0.8%.

Interest only payments are required to be made each quarter starting in September 2019 with principal and interest payments due each quarter starting in the month of December 2021.

Principal repayments will be made over 8 years starting at the end of 2021.

Through December 26, 2020, we drew €4.9 million under the second facility, which is payable over 15 years at an annual interest rate of 1.05%.

Interest only payments are required to be made each month starting in December 2019 with principal and interest payments due each month starting in the month of May 2020.

Principal repayments will be made over 15 years starting at the end of May 2020.

As of December 26, 2020, €0.3 million had not been drawn under the second facility.

Through December 26, 2020, no amounts have been drawn under the third facility.

Future amounts, if drawn, will be payable over 10 years at an annual interest rate of 1.2%.

Interest payments are required to be made each month starting in the month following the first draw-down date with principal and interest payments due each month starting in the month of May 2021.

Principal repayments will be made over 10 years starting at the end of May 2021.

At December 26, 2020 and December 28, 2019, total outstanding borrowings under the Loan Facilities was $9.9 million and $5.5 million with $0.4 million and $0.3 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets based on contractual due dates, respectively.

In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series of construction loans (“Loan Facilities”) with a German financial institution providing it with total borrowings of up to €10.1 million.

The Loan Facilities are being utilized to finance the expansion of our facility in Kolbermoor, Germany and are secured by the land and the existing building on the site.

The Loan Facilities bear interest at agreed upon rates based on the facility amounts as discussed below.

The first facility totaling €3.4 million has been fully drawn and is payable over 10 years at a fixed annual interest rate of 0.8%.

Principal and interest payments are due each quarter over the duration of the facility ending in September 2029.

The second facility totaling €5.2 million has been fully drawn and is payable over 15 years at an annual interest rate of 1.05%, which is fixed until April 2027.

Principal and interest payments are due each month over the duration of the facility ending in January 2034.

The third facility totaling €1.5 million, of which €0.9 million is drawn, is payable over 10 years at an annual interest rate of 1.2%.

Principal and interest payments are due each month over the duration of the facility ending in May 2030.

At December 25, 2021, total outstanding borrowings under the Loan Facilities was $10.0 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets.

At December 26, 2020, total outstanding borrowings under the Loan Facilities was $9.9 million with $0.4 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets.

The loans are denominated in Euros and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.

The fair value of the debt approximates the carrying value at December 25, 2021.

Lines of Credit

As a result of our acquisition of Kita, we assumed a series of revolving credit facilities with various financial institutions in Japan.

The credit facilities renew monthly and provide Kita with access to working capital totaling up to $9.3 million.

The credit facilities renew monthly and provide Kita with access to working capital totaling up to 960 million Japanese Yen of which 350 million Japanese Yen is drawn.

At December 25, 2021, total borrowings outstanding under the revolving lines of credit were $3.1 million.

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The revolving lines of credit are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.

Our wholly owned Ismeca subsidiary has one available line of credit which provides it with borrowings of up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees.

Our wholly owned subsidiary in Switzerland has one available line of credit which provides it with borrowings of up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees.

At December 25, 2021 and December 26, 2020, no amounts were outstanding under this line of credit.

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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.

What changed 10-K

Item 5. Market for Registrant’s Common Equity