What changed in this filing

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Item 9A. Controls and Procedures

2022-02-18 compared with 2021-02-26 · 441 added, 723 removed, 1620 unchanged (42% of the section changed)

2 unchanged sentences

Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of December 25, 2021, the end of the period covered by this annual report.

Changes in Internal Control over Financial Reporting - During the three months ended December 26, 2020, certain of our wholly owned subsidiaries implemented an integrated finance/accounting and manufacturing software system.

The implementations involved changes in systems that included internal controls, and accordingly, these changes have required changes to our system of internal controls.

We reviewed the systems as they were being implemented and the controls affected by the implementation of the new systems and made appropriate changes to affected internal controls during the implementation process.

We believe that the controls as modified are appropriate and functioning effectively.

This change was not in response to any identified deficiency or weakness in our internal control over financial reporting.

Other than those described above, there have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Changes in Internal Control over Financial Reporting - There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 25, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management ’

31 unchanged sentences

Other Information.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance.

22 unchanged sentences

The following consolidated financial statements of Cohu, Inc., including the report thereon of Ernst & Young LLP, are included in this Annual Report on Form 10-K beginning on page 47:

Consolidated Balance Sheets at December 26, 2020 and December 28, 2019

Consolidated Statements of Operations for each of the three years in the period ended December 26, 2020

Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended December 26, 2020

Consolidated Statements of Stockholders’

Equity for each of the three years in the period ended December 26, 2020

Consolidated Statements of Cash Flows for each of the three years in the period ended December 26, 2020

Consolidated Balance Sheets at  December 25, 2021 and December 26, 2020

Consolidated Statements of Operations for each of the three  years in the period ended December 25, 2021

Consolidated Statements of Comprehensive Income (Loss) for each of the three  years in the period ended December 25, 2021

Consolidated Statements of Stockholders’ Equity for each of  the three years in the period ended December 25, 2021

Consolidated Statements of Cash Flows for each of the three  years in the period ended December 25, 2021

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Financial Statement Schedule

Schedule II –

Valuation and Qualifying Accounts

Schedule II – Valuation and Qualifying Accounts

All other financial statement schedules have been omitted because the required information is not applicable or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.

9 unchanged sentences

89,704  

20,669  

Accounts receivable, net

7 unchanged sentences

Other current assets

Assets held for sale

Current assets of discontinued operations (Note 14)

Total current assets

14 unchanged sentences

29,203  

Noncurrent assets of discontinued operations (Note 14)

$ 1,259,044  

6 unchanged sentences

Current installments of long-term debt

11,338  

Accounts payable

3 unchanged sentences

14,410  

12,160  

Accrued compensation and benefits

3 unchanged sentences

Deferred profit

13,208  

Income taxes payable

2 unchanged sentences

30,275  

Current liabilities of discontinued operations (Note 14)

Total current liabilities

1 unchanged sentence

174,453  

Long-term debt

Other accrued liabilities

Noncurrent income tax liabilities

Accrued retirement benefits

18,037  

3 unchanged sentences

28,816  

Long-term lease liabilities

Long-term debt

103,393  

311,551  

Accrued retirement benefits

Long-term lease liabilities

22,040  

25,787  

Noncurrent income tax liabilities

Other accrued liabilities

Noncurrent liabilities of discontinued operations (Note 14)

Stockholders' equity:

8 unchanged sentences

448,194  

Treasury stock, at cost;

207 shares in 2021 and 0 shares in 2020

( 7,324 )  

Retained earnings

11 unchanged sentences

(in thousands, except per share amounts)

$ 887,214  

18 unchanged sentences

39,590  

Restructuring charges (Note 5)

Gain on sale of PCB Test business (2)

( 70,815 )  

Restructuring charges (Note 4)

13,484  

3 unchanged sentences

( 4,495 )  

685,696  

10 unchanged sentences

( 3,170 )  

Gain on extinguishment of debt

Loss from continuing operations before taxes

Gain (loss) on extinguishment of debt

( 3,411 )  

Income (loss) from continuing operations before taxes

192,344  

( 13,177 )  

Income tax provision (benefit)

25,019  

Loss from continuing operations

Income (loss) from continuing operations

167,325  

1 unchanged sentence

Income (loss) from discontinued operations, net of tax

( 697 )  

Net income (loss)

$ 167,325  

$ ( 13,801 )  

Net income (loss) attributable to noncontrolling interest

Net loss attributable to Cohu

Net income attributable to noncontrolling interest

Net income (loss) attributable to Cohu

$ 167,325  

$ ( 13,801 )  

Income (loss) per share:

Loss from continuing operations before noncontrolling interest

Income (loss) from continuing operations

$ 3.53  

1 unchanged sentence

Income (loss) from discontinued operations

( 0.01 )  

Net income (loss) attributable to noncontrolling interest

Net loss attributable to Cohu

Net income attributable to noncontrolling interest

 Net income (loss) attributable to Cohu  

$ 3.53  

$ ( 0.33 )  

Loss from continuing operations before noncontrolling interest

Income (loss) from continuing operations

$ 3.45  

1 unchanged sentence

Income (loss) from discontinued operations

( 0.01 )  

Net income (loss) attributable to noncontrolling interest

Net loss attributable to Cohu

Net income attributable to noncontrolling interest

Net income (loss) attributable to Cohu  

$ 3.45  

$ ( 0.33 )  

Weighted average shares used in computing

Weighted average shares used in computing income (loss) per share:

47,409  

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Excludes amortization of $27,508, $29,510, and $30,126 for the years ended December 25, 2021, December 26, 2020, and December 28, 2019, respectively.

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

The divestment of this business did not qualify for presentation as discontinued operations and the results of the PCB Test business are included in continuing operations for all periods presented.

See Note 14, “Business Divestitures and Discontinued Operations”

for additional information on this transaction and financial statement presentation.

The accompanying notes are an integral part of these statements.

1 unchanged sentence

(in thousands)

$ ( 13,801 )  

$ ( 69,692 )  

Income (loss) from continuing operations before noncontrolling interest

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to Cohu

( 13,801 )  

( 69,700 )  

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

27,321  

( 7,522 )  

Adjustments related to postretirement benefits

( 628 )  

Change in unrealized gain/loss on investments

Reclassification due to sale of PCB Test business

Other comprehensive income (loss), net of tax

29,704  

( 8,150 )  

Other comprehensive income (loss) attributable to noncontrolling interest

Other comprehensive loss attributable to noncontrolling interest

Other comprehensive income (loss) attributable to Cohu

29,704  

( 8,146 )  

Comprehensive income (loss)

15,903  

( 77,842 )  

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income attributable to noncontrolling interest

Comprehensive income (loss) attributable to Cohu

$ 15,903  

$ ( 77,846 )  

The accompanying notes are an integral part of these statements.

4 unchanged sentences

Balance at December 29, 2018

$ 28,489  

$ 127,663  

$ 150,726  

$ ( 17,787 )  

$ 289,091  

Cumulative effect of accounting change (a)

( 32,424 )  

Changes in cumulative translation adjustment

( 8,905 )  

Adjustments related to postretirement benefits, net of tax

Changes in unrealized gains and losses on investments, net of tax

Cash dividends - $0.24 per share

( 7,689 )  

Exercise of stock options

1 unchanged sentence

Shares issued for restricted stock units vested

( 541 )  

Repurchase and retirement of stock

( 195 )  

( 11,405 )  

Noncontrolling interest

( 299 )  

Share-based compensation expense

18,280  

Shares issued for acquisition of Xcerra

11,776  

283,642  

295,418  

Divestiture of interest in consolidated entity

Balance at December 28, 2019

40,763  

419,690  

111,670  

( 25,880 )  

( 299 )  

545,944  

Cumulative effect of accounting change (b)

10,352  

( 69,692 )  

Changes in cumulative translation adjustment

( 7,522 )  

Adjustments related to postretirement benefits, net of tax

( 628 )  

Cash dividends - $0.06 per share

( 9,866 )  

Exercise of stock options

1 unchanged sentence

Shares issued for restricted stock units vested

( 599 )  

Repurchase and retirement of stock

( 196 )  

( 2,575 )  

Noncontrolling interest

( 53 )  

Share-based compensation expense

14,148  

Divestiture of interest in consolidated entity

Balance at December 26, 2020

41,395  

433,190  

42,517  

( 34,030 )  

483,072  

( 13,801 )  

Common stock repurchases

Changes in cumulative translation adjustment

27,321  

Adjustments related to postretirement benefits, net of tax

Cash dividends - $ 0.06 per share

( 2,486 )  

Changes in unrealized gains and losses on investments, net of tax

Exercise of stock options

1 unchanged sentence

Shares issued for restricted stock units vested

( 660 )  

Repurchase and retirement of stock

( 209 )  

( 2,597 )  

Impact of sale of PCB Test business

Share-based compensation expense

14,234  

Sale of common stock, net of issuance costs

Balance at December 25, 2021

$ 42,190  

$ 448,194  

$ 26,230  

$ ( 4,326 )  

$ 512,288  

Cumulative effect of accounting change relates to our adoption of ASU 2016-02.

Please refer to Note 1 of the Consolidated Financial Statements for further detail on the adoption of this accounting standard.

The accompanying notes are an integral part of these statements.

2 unchanged sentences

Cash flows from operating activities:

Net loss attributable to Cohu

Net income (loss) attributable to Cohu

$ 167,325  

$ ( 13,801 )  

Net income (loss) from noncontrolling interest

Adjustments to reconcile net loss to net cash provided by operating activities:

(Gain) loss on disposal of discontinued operations (Note 14)

Net income from noncontrolling interest

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

(Gain) loss on business divestitures

( 70,815 )  

( 35 )  

Interest capitalized associated with cloud computing implementation

2 unchanged sentences

Gain on divestiture of consolidated entity

( 149 )  

Gain on extinguishment of debt

(Gain) loss on extinguishment of debt

( 268 )  

10 unchanged sentences

Amortization of inventory step-up and inventory related charges

24,179  

Amortization of debt discounts and issuance costs

Accrued retiree benefits

Deferred income taxes

( 500 )  

Deferred income taxes

( 5,305 )  

Adjustment to contingent consideration liability

Changes in other assets

4 unchanged sentences

Changes in other accrued liabilities

Changes in current assets and liabilities, excluding effects from acquisitions and divestitures:

( 416 )  

Changes in current assets and liabilities, excluding effects from divestitures:

Customer advances

( 4,090 )  

Accounts receivable

11,548  

Accounts receivable  

( 59,123 )  

( 20,210 )  

Accrued compensation, warranty and other liabilities

21,150  

( 35,864 )  

( 14,982 )  

Accrued compensation, warranty and other liabilities

Accounts payable

3 unchanged sentences

Other current assets

( 5,996 )  

Income taxes payable

( 2,089 )  

( 10,719 )  

Operating lease right-of-use assets

6 unchanged sentences

17,269  

Cash flows from investing activities, excluding effects from acquisitions and divestitures:

Cash flows from investing activities:

Purchases of property, plant and equipment

6 unchanged sentences

( 19,703 )  

Payment for purchase of Xcerra, net of cash received

Sales and maturities of short-term investments

135,549  

Net cash received from sale of fixtures services business

Net cash used in investing activities

Cash received from disposition of business, net of cash paid

120,886  

Net cash provided by (used in) investing activities

39,893  

( 18,363 )  

Cash flows from financing activities:

1 unchanged sentence

( 4,971 )  

( 9,827 )  

Proceeds from revolving line of credit and construction loans

4 unchanged sentences

( 4,390 )  

Proceeds from Term Loan B

348,250  

Payment of debt issuance costs

Payment of contingent consideration

Net cash provided by (used in) financing activities

Acquisition of treasury stock

( 7,324 )  

Proceeds received from issuance of common stock, net of fees

223,119  

Net cash provided by (used in) financing activities

( 38,072 )  

4 unchanged sentences

( 6,572 )  

30,635  

Cash and cash equivalents at beginning of year

7 unchanged sentences

Cash held by discontinued operations (Note 14)

( 736 )  

Cash and cash equivalents at end of year from continuing operations

11 unchanged sentences

$ 14,846  

Dividends declared but not yet paid

$ 2,484  

$ 2,445  

Property, plant and equipment purchases included in accounts payable

3 unchanged sentences

$ 1,635  

The accompanying notes are an integral part of these statements.

$ 1,050  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 .     

Summary of Significant Accounting Policies

10 unchanged sentences

Our fiscal years ended on December 26, 2020, and December 28, 2019, each consisted of 52 weeks.

Certain prior year balances within property, plant and equipment disclosures have been reclassified to conform to the current year’s presentation.

Such reclassifications did not affect the consolidated financial statements as previously reported.

Principles of Consolidation for Variable Interest Entities –

3 unchanged sentences

Divestment of our ownership in ALBS resulted in a gain of $ 0.1  million which is included in restructuring charges for the year ended December 28, 2019.

Discontinued Operations –

On October 1, 2018, we acquired a fixtures services business as part of our acquisition of Xcerra.

Our management determined that this business did not align with Cohu’s core business and was not a strategic fit within our organization.

As a result, the fixtures services business was marketed for sale shortly after the acquisition and the assets of our fixtures business were considered “held for sale”

and the operations of our fixtures business are considered “discontinued operations”.

In February 2020, we completed the sale of this business.

See Note 14, “Discontinued Operations”

Business Divestitures and Discontinued Operations –

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

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

In February 2020, we divested our fixtures services business.

Our decision to sell these non-core businesses and assets resulted from management’s determination that that they were not a fit within the core business of our organization which is delivering leading-edge solutions for the manufacturing of semiconductors through back-end semiconductor equipment and services.

Unless otherwise indicated, all amounts herein relate to continuing operations.

For financial statement purposes, only the results of operations of our fixtures services business have been segregated from those of continuing operations and have been presented in our consolidated financial statements as discontinued operations for all periods presented.

See Note 14, “

Business Divestitures and Discontinued Operations ”

for additional information.

6 unchanged sentences

For the years ended December 25, 2021, December 26, 2020 and December 28, 2019, approximately 180,000 , 113,000 and 422,000 shares, respectively, of our common stock were excluded from the computation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the denominators used in computing basic and diluted income (loss) per share:

8 unchanged sentences

41,159  

Cohu has utilized the “control number”

For the years ended December 26, 2020, and December 28, 2019, Cohu has utilized the “control number”

concept in the computation of diluted earnings per share to determine whether potential common stock instruments are dilutive.

4 unchanged sentences

Investments with maturities greater than three months are classified as short-term investments.

All of our short-term investments are classified as available-for-sale and are reported at fair value, with any unrealized gains and losses, net of tax, recorded in the statement of comprehensive income (loss).

All of our short-term investments in debt securities are classified as available-for-sale and are reported at fair value, with any unrealized gains and losses, net of tax, recorded in the statement of comprehensive income (loss).

We manage our cash equivalents and short-term investments as a single portfolio of highly marketable securities.

1 unchanged sentence

Accordingly, investments with contractual maturities greater than one year have been classified as current assets in the accompanying consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments –

3 unchanged sentences

We invest in a variety of financial instruments and, by policy, limit the amount of credit exposure with any one issuer.

We adopted 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.

Our trade accounts receivable are presented net of allowance for credit losses, which were insignificant at December 26, 2020 and December 28, 2019.

Our trade accounts receivable are presented net of an allowance for credit losses, which is determined in accordance with the guidance provided by ASC Topic 326, Financial Instruments-Credit Losses (“ASC 326”

Our customers include semiconductor manufacturers and semiconductor test subcontractors throughout many areas of the world.

3 unchanged sentences

Cost includes labor, material and overhead costs.

Determining market value of inventories involves numerous estimates and judgments including projecting average selling prices and sales volumes for future periods and costs to complete and dispose of inventory.

Determining the net realizable value of inventories involves numerous estimates and judgments including projecting average selling prices and sales volumes for future periods and costs to complete and dispose of inventory.

As a result of these analyses, we record a charge to cost of sales in advance of the period when the inventory is sold when estimated market values are below our costs.

Charges to cost of sales for excess and obsolete inventories totaled $ 7.1  million in 2021.

Included in this amount is $ 2.1  million of inventory charges related to the decision to end manufacturing of certain of our semiconductor test handler products associated with the integration of Xcerra.

Charges to cost of sales for excess and obsolete inventories totaled $ 4.8  million in 2019.

Included in this amount is $ 0.7  million of inventory charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products.

Charges to cost of sales for excess and obsolete inventories totaled $ 10.8  million in 2018.

Included in this amount is $ 9.4  million of inventory charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products.

Included in this amount are inventory charges related to the decision to end manufacturing of certain of our semiconductor test handler products associated with the integration of Xcerra which were not significant in 2021.

Charges to cost of sales for excess and obsolete inventories totaled $ 8.1  million in 2020 and included $ 2.1  million of inventory charges related to the decision to end manufacturing of certain of our semiconductor test handler products associated with the integration of Xcerra.

Charges to cost of sales for excess and obsolete inventories totaled $ 4.8  million in 2019 and included $ 0.7  million of inventory charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories by category were as follows (in thousands) :

16 unchanged sentences

During 2020, we completed the sales of our facilities located in Rosenheim, Germany and Penang, Malaysia which resulted in a gain of $ 4.5  million.

Our facility in in Penang Malaysia, was presented as held for sale for the year ended December 28, 2019.

Property, Plant and Equipment –

Depreciation and amortization of property, plant and equipment, both owned and under financing lease, is calculated principally on the straight-line method based on estimated useful lives of thirty to forty years for buildings, five to fifteen years for building improvements, three to ten years for machinery, equipment and software and the lease life for financing leases.

Depreciation and amortization of property, plant and equipment, both owned and under financing lease, is calculated principally on the straight‑line method based on estimated useful lives of thirty to forty years for buildings, five to fifteen years for building improvements, three to ten years for machinery, equipment and software and the lease life for financing leases.

Land is not depreciated.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment, at cost, consisted of the following (in thousands) :

2 unchanged sentences

$ 8,141  

Buildings and building improvements 

31,711  

10 unchanged sentences

$ 66,916  

Includes assets under financing leases acquired with Xcerra totaling $ 2.6 million as of December 28, 2019.

Depreciation expense was $ 13.2  million in 2021, $ 14.0  million in 2020 and $ 19.3  million in 2019.

The decrease in depreciation expense recognized in 2020 was a result of assets becoming fully depreciated and facility sales.

The decrease in depreciation expense recognized in 2021 and 2020 compared to 2019 was a result of assets becoming fully depreciated and facility sales.

Cloud Computing Implementation Costs –

We have capitalized certain costs associated with the implementation of our new cloud-based Enterprise Resource Planning (“ERP”) system in accordance with ASU 2018 - 15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350 - 40 ) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

We have capitalized certain costs associated with the implementation of our new cloud-based Enterprise Resource Planning (“ERP”) system in accordance with ASC Topic 350, Intangibles —

Goodwill and Other , (“ASC 350”

Capitalized costs include only external direct costs of materials and services consumed in developing the system and interest costs incurred, when material, while developing the system.

Total unamortized capitalized cloud computing implementation costs totaled $ 13.5  million and $ 10.3  million at December 26, 2020 and December 28, 2019, respectively.

These amounts are recorded within other assets in our consolidated balance sheets and the year-over-year increase is due to costs capitalized in the current year.

We began amortizing some of these costs when our new ERP system was placed into service during the first quarter of 2020.

Implementation costs are amortized using the straight-line method over seven years and we recorded $ 1.2  million in amortization expense during the year ended December 26, 2020.

Total unamortized capitalized cloud computing implementation costs totaled $ 13.5  million at both December 25, 2021 and December 26, 2020.

These amounts are recorded within other assets in our consolidated balance sheets and the consistency year-over-year was due to new costs capitalized in 2021, being on pace with increased amortization as development was completed.

Implementation costs are amortized using the straight-line method over seven years and we recorded $ 1.6  million and $ 1.2  million in amortization expense during the years ended December 25, 2021 and December 26, 2020, respectively.

Segment Information –

2 unchanged sentences

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 and Inspection Equipment (“Semiconductor Test & Inspection”) and PCB Test Equipment (“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”).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill, Purchased Intangible Assets and Other Long-lived Assets  –

We evaluate goodwill for impairment annually and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable.

We test goodwill for impairment by comparing the book value of net assets to the fair value of the reporting units.

If the fair value is determined to be less than the book value, an impairment charge is recognized as the amount by which the carrying amount of goodwill exceeds the reporting unit's fair value, not to exceed the carrying amount of goodwill.

We evaluate goodwill and other indefinite-lived intangible assets, which are solely comprised of in-process research and development (“IPR&D”), for impairment annually and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable.

We test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting unit or, in the case of in-process research and development, to the fair value of the asset.

If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the fair value of the reporting unit and its carrying value, not to exceed the carrying value of goodwill.

We estimated the fair values of our reporting units primarily using the income approach valuation methodology that includes the discounted cash flow method, taking into consideration the market approach and certain market multiples as a validation of the values derived using the discounted cash flow methodology.

Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on customer forecasts, industry trade organization data and general economic conditions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.

We conduct our annual impairment test as of October 1st of each year, and have determined there was no impairment as of October 

20 unchanged sentences

Where applicable, associated interest and penalties have also been recognized and recorded, net of federal and state tax benefits, in income tax expense.

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.

We recognized deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Valuation allowances are established for those jurisdictions when necessary to reduce deferred tax assets to the amounts that are more likely than not to be realized in the future.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contingencies and Litigation –

2 unchanged sentences

Leases –

We adopted ASU 2016 - 02, Leases (Topic 842 ) , as of December 30, 2018, using the optional transition method which allowed us to record existing leases at adoption and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We had previously recorded a sale and operating leaseback transaction in accordance with Topic 840 and as a result of the adoption of the new standard, recognized $ 10.2  million of deferred gain as an adjustment to retained earnings.

In addition, we had previously recognized assets and liabilities related to a build-to-suit designation under Topic 840 and, as a result of the adoption of the new standard, derecognized assets and liabilities of $ 0.5  million and $ 0.6  million, respectively, with the difference recorded as an adjustment to retained earnings.

The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, was recorded as an adjustment to retained earnings.

We determine if a contract contains a lease at inception.

1 unchanged sentence

Finance leases are included in property, plant and equipment, other current accrued liabilities, and long-term lease liabilities on our consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the adoption date or the commencement date for leases entered into after the adoption date.

14 unchanged sentences

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.

8 unchanged sentences

For arrangements containing multiple performance obligations, the revenue relating to the undelivered performance obligation is deferred using the relative standalone selling price method utilizing estimated sales prices until satisfaction of the deferred performance obligation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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) for contracts with original expected durations of over one year, respectively.

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

We generally sell our equipment with a product warranty.

3 unchanged sentences

) , and not as a separate performance obligation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The transaction price reflects our expectations about the consideration we will be entitled to receive from the customer and may include fixed or variable amounts.

27 unchanged sentences

33,293  

25,928  

Non-systems-PCB Test

14 unchanged sentences

These costs are recognized when management has committed to a restructuring plan and the severance costs are probable and estimable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Issuance Costs –

We capitalize costs related to the issuance of debt.

Debt issuance costs directly related to our Term Loan B are presented within noncurrent liabilities as a reduction of long-term debt in our consolidated balance sheets.

Debt issuance costs directly related to our Term Loan Credit Facility are presented within noncurrent liabilities as a reduction of long-term debt in our consolidated balance sheets.

The amortization of such costs is recognized as interest expense using the effective interest method over the term of the respective debt issue.

Amortization related to deferred debt issuance costs and original discount costs was $ 1.2  million, $ 1.1  million and insignificant for the years ended December 26, 2020, December 28, 2019 and December 29, 2018, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization related to deferred debt issuance costs and original discount costs was $ 0.6  million, $ 1.2  million and $ 1.1  million for the years ended December 25, 2021, December 26, 2020 and December 28, 2019, respectively.

Share-based Compensation –

8 unchanged sentences

Gains and losses on foreign currency transactions are recognized as incurred.

During the year ended December 26, 2020, in our consolidated statement of operations we recognized foreign exchange losses totaling $ 3.2  million.

During the years ended December 28, 2019 and December 29, 2018, foreign exchange gains were insignificant and $ 1.7  million, respectively.

During the year ended December 25, 2021, in our consolidated statement of operations we recognized foreign exchange gains totaling $ 0.4  million.

During the years ended December 26, 2020 and December 28, 2019, we recognized a foreign exchange loss of $ 3.2  million and an insignificant gain, respectively.

Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue and expenses are translated using the average exchange rate for the period.

9 unchanged sentences

Accumulated Other Comprehensive Loss –

Our accumulated other comprehensive loss totaled approximately $ 4.3  million at December 26, 2020, and $ 34.0  million at December 28, 2019, and was attributed to, net of income taxes where applicable:

foreign currency adjustments resulting from the translation of certain accounts into U.S.

Our accumulated other comprehensive loss totaled approximately $ 27.3  million at December 25, 2021, and $ 4.3  million at December 26, 2020, and was attributed to, net of income taxes where applicable, foreign currency adjustments resulting from the translation of certain accounts into U.S.

Dollars and adjustments to accumulated postretirement benefit obligations.

Dollar weakened relative to certain foreign currencies in countries where we have operations as of December 26, 2020, compared to December 28, 2019 and consequently, our accumulated other comprehensive loss decreased by $ 27.3  million.

Dollar strengthened relative to certain foreign currencies in countries where we have operations as of December 25, 2021, compared to December 26, 2020 and consequently, our accumulated other comprehensive loss increased by $ 23.0  million.

In the previous year, the U.S.

Dollar strengthened relative to certain foreign currencies in countries where we have operations and, as a result, our accumulated other comprehensive loss increased by $ 7.5  million.

Dollar weakened relative to certain foreign currencies in countries where we have operations and, as a result, our accumulated other comprehensive loss decreased by $ 27.3  million.

Reclassification adjustments from accumulated other comprehensive loss during 2021 and 2020 were not significant.

Additional information related to accumulated other comprehensive loss, on an after-tax basis is included in Note 15, “

Accumulated Other Comprehensive Loss ”.

Accumulated Other Comprehensive Income (Loss) ”.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements –

In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments-Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments .

ASU 2016 - 13 was subsequently amended by ASU 2019 - 04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses , ASU 2019 - 05, Financial Instruments-Credit Losses (Topic 326 ):

Targeted Transition Relief , ASU 2019 - 10, Financial Instruments—Credit Losses (Topic 326 ), Derivatives and Hedging (Topic 815 ), and Leases (Topic 842 ):

Effective Dates and ASU 2019 - 11 , Codification Improvements to Topic 326, Financial Instruments—Credit Losses .

ASU 2016 - 13, as amended, affects trade receivables, financial assets and certain other instruments that are not measured at fair value through net income.

The adoption of ASU 2016 - 13 did not have a material impact on our consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In August 2018, the FASB issued ASU 2018 - 13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which improves fair value disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’

specific requirements and adding relevant disclosure requirements.

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

Early adoption is permitted, and an entity can choose to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date.

The adoption of ASU 2018 - 13 did not have a material impact on our disclosures.

In August 2018, the FASB issued ASU 2018 - 14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans , which improves defined benefit disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’

specific requirements and adding relevant disclosure requirements.

The amendments in this ASU are required to be applied on a retrospective basis to all periods presented.

Adoption of ASU 2018 - 14 resulted in the elimination of disclosures regarding the effects of a one -percentage-point change in the assumed health care cost trend rates on the aggregate projected service and interest cost and accumulated postretirement benefit obligation;

and the addition of disclosures explaining the reasons for significant gains and losses related to the change in benefit obligations for the period.

See Note 6, “Employee Benefit Plans”

for further discussion of our defined benefit pension plans.

In December 2019, the FASB issued ASU No.

2019 - 12, Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by eliminating certain exceptions for investments, intraperiod allocations and interim calculations.

The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The amendments did not create new accounting requirements.

We adopted the standard as of December 29, 2019.

The adoption of this standard did not have a significant impact on our consolidated financial statements.

All accounting pronouncements adopted during the current year were not material.

Recently Issued Accounting Pronouncements –

In March 2020, the FASB issued ASU 2020 - 04, Reference Rate Reform (Topic 848 ):

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020 - 04, Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform.

4 unchanged sentences

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

2 .     

Business Acquisitions

On October 1, 2018, pursuant to the Agreement and Plan of Merger dated as of May 7, 2018, we merged with Xcerra, a Massachusetts-based company.

At the time of the merger each share of Xcerra common stock issued and outstanding immediately (other than dissenting shares and shares held by Cohu, Xcerra or any direct or indirect wholly owned subsidiary of Cohu or Xcerra), were converted into the right to receive, in the aggregate for all shares of Xcerra common stock, consideration totaling $ 794.4  million.

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.

Xcerra was comprised of four businesses in the semiconductor and electronics manufacturing test markets:

atg-Luther & Maelzer, Everett Charles Technologies, LTX-Credence and Multitest.

The acquisition of Xcerra was a strategic transaction to expand our total available market, extend our market leadership and broaden our product offerings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cohu financed the merger, including all related fees and expenses, with the following:

$ 160.5  million cash from our combined balance sheets;

The incurrence of $ 350.0  million from the Credit Facility, as defined below;

The issuance of 11,776,149 shares of Cohu common stock;

The issuance of 529,995 assumed RSUs to Xcerra employees, of which $ 0.8  million of the fair value of the assumed RSUs was attributed to pre-merger services.

On October 1, 2018, Cohu entered into a credit agreement with Cohu, as borrower, certain of its subsidiaries as guarantor subsidiaries, the financial institutions party thereto from time to time as lenders, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, providing for a $ 350.0 million Credit Facility (the “Credit Facility”), and borrowed the full amount.

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

Subject to certain exceptions and thresholds, the Credit Facility will also require mandatory prepayments in connection with (i) excess cash flow, (ii) non-ordinary course asset sales and other dispositions and (iii) the issuance of certain debt obligations, among other things.

Cohu has the right to prepay loans under the Credit Agreement in whole or in part at any time, without premium or penalty.

Amounts repaid in respect of loans under the Credit Facility may not be reborrowed.

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 %.

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

the failure of Cohu to make timely payments of amounts due under the Credit Agreement, the failure of Cohu to adhere to the representations and covenants set forth in the Credit Agreement or to provide required notices, upon the event that related collateral agreements become ineffective, upon the event that certain legal judgments are entered against Cohu, the insolvency of Cohu, or upon the change of control of Cohu.

The acquisition method of accounting is based on ASC 805, Business Combinations (“ASC 805”

), and uses the fair value concepts defined in ASC 820, Fair Value Measurement (“ASC 820”

The purchase price allocation described herein contains adjustments made during the post-acquisition measurement period, which were made as a result of obtaining new facts and circumstances related to certain assets acquired and liabilities assumed as of the date of acquisition.

The net impact of the measurement period adjustments was offset against goodwill.

The acquisition was nontaxable to Cohu and certain of the assets acquired, including goodwill and intangibles, will not be deductible for tax purposes.

The acquired assets and liabilities of Xcerra were recorded at their respective fair values including an amount for goodwill which represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired, and is attributable primarily to expected synergies, economies of scale and the assembled workforce of Xcerra.

Goodwill has been allocated to our THG, STG, ISG and PTG operating segments.

We recorded a $ 19.6  million step-up of inventory to its fair value as of the acquisition date based on the valuation which was fully amortized to cost of sales as of December 28, 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The allocation of the intangible assets subject to amortization is as follows ( in thousands ):

Developed technology

$ 194,600  

Customer relationships

65,890  

In-process research and development

36,360  

Product backlog

Trademarks and trade names

16,800  

Favorable leases

Total intangible assets

$ 321,160  

Acquired intangible assets reported above are being amortized using the straight-line method over their estimated useful lives which approximates the pattern of how the economic benefit is expected to be used.

This includes amounts allocated to customer relationships because of anticipated high customer retention rates that are common in the semiconductor capital equipment industry.

The value assigned to developed technology was determined by using the multi-period excess earnings method under the income approach.

Developed technology, which comprises products that have reached technological feasibility, includes the products in Xcerra’s product line.

The revenue estimates used to value the developed technology were based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by Xcerra and competitors.

The estimated cash flows were based on revenues for the developed technology net of operating expenses and net of contributory asset charges.

The discount rate utilized to discount the net cash flows of the developed technology to present value was based on the risk associated with the respective cash flows taking into consideration the perceived risk of the technology relative to the other acquired assets, the weighted average cost of capital, the internal rate of return, and the weighted average return on assets.

The value assigned to customer relationships was determined by using the with and without method under the income approach, which analyzes the difference in discounted cash flows generated with the customer relationships in place compared to the discounted cash flows generated without the customer relationships in place.

In-process research and development (“IPR&D”) represents the estimated fair value assigned to research and development projects acquired in a business combination that have not been completed at the date of acquisition and which have no alternative future use.

IPR&D is initially accounted for as an indefinite-lived intangible asset.

Once a project reaches technological feasibility amounts capitalized related to the project are reclassified to developed technology and the intangible asset begins to be amortized over its estimated useful life.

For the IPR&D, additional research and development will be required to assess technological feasibility.

The value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of October 1, 2018, using the income approach to discount back to present value the cash flows attributable to the backlog.

The value assigned to trademarks and trade names was estimated using the relief-from-royalty method of the income approach.

This approach is based on the assumption that in lieu of ownership, a company would be willing to pay a royalty in order to exploit the related benefits of this intangible asset.

In our estimate of the fair value of Xcerra’s net assets, Cohu identified leases that appear to be at both favorable and unfavorable rates compared to current market rates.

As a result, Cohu has recorded both favorable and unfavorable lease assets, which are being amortized to rent expense over the terms of the related lease.

As of December 29, 2018, favorable leases were reclassified from intangible assets, net to operating lease right of use assets as a result of our adoption of ASU 2016 - 2, Leases (Topic 842 ) .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Purchased Intangible Assets

6 unchanged sentences

$ 238,669  

( 983 )  

Impairments (1)

( 715 )  

Impact of currency exchange

5 unchanged sentences

252,304  

Impact of currency exchange

Sale of PCB Test Business (1)

( 21,899 )  

Impact of currency exchange

( 10,933 )  

2 unchanged sentences

$ 219,791  

$ 252,304  

Impairment of goodwill associated with our FSG segment that is presented as discontinued operations.

This amount was not pushed down in the consolidated financial statements and was included within the balance of our Semiconductor Test & Inspection segment.

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

See Note 14, “

Business Divestitures and Discontinued Operations ” for additional information.

Purchased intangible assets, subject to amortization, are as follows (in thousands) :

20 unchanged sentences

$ 112,412  

The table above excludes $ 7.8  million and $ 20.8  million of in-process technology in 2020 and 2019, respectively, which has an indefinite life and is subject to impairment or future amortization as developed technology when the projects are completed.

During the current year $ 1.8  million of in-process technology was completed and transferred to developed technology and began being amortized.

Changes in the carrying values of purchased intangible assets presented above are a result of the impact of fluctuation in currency exchange rates.

The table above excludes $ 7.8  million of in-process technology in 2020, which has an indefinite life and is subject to impairment or future amortization as developed technology when the projects are completed.

During 2021 all remaining in-process technology was completed and transferred to developed technology and began being amortized.

Changes in the carrying values of purchased intangible assets presented above are a result of the impact of fluctuation in currency exchange rates and the sale of our PCB Test business.

We evaluate goodwill and other indefinite-lived intangible assets for impairment annually and when an event occurs, or circumstances change that indicate that the carrying value may not be recoverable.

1 unchanged sentence

Other events and changes in circumstances may also require goodwill and our indefinite-lived intangible assets to be tested for impairment between annual measurement dates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As noted above, 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.

Amortization expense related to purchased intangible assets was approximately $ 35.4  million in 2021, $ 38.7  million in 2020 and $ 39.6  million in 2019.

15 unchanged sentences

Bank term loans-Kita

Bank term loan-Xcerra

Construction loan-Cohu GmbH

10,045  

Lines of credit

8 unchanged sentences

$ 311,551  

The debt principal payments, excluding financing lease obligations, for the next five years and thereafter are as follows:

(in thousands)

The debt principal payments, excluding financing lease obligations, for the next five years and thereafter are as follows (in thousands) :

$ 14,795  

2 unchanged sentences

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.

2 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 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

As a result of our acquisition of Kita, we assumed term loans from a series of Japanese financial institutions primarily related to the expansion of Kita’s facility in Osaka, Japan.

We have a series of term loans with Japanese financial institutions primarily related to the expansion of our facility in Osaka, Japan.

The loans are collateralized by the facility and land, carry interest rates ranging from 0.05 % to 0.43 %, and expire at various dates through 2034.

At December 25, 2021, the outstanding loan balance was $ 3.1  million and $ 0.2  million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

At December 26, 2020, the outstanding loan balance was $ 3.6  million and $ 0.3  million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

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

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

Construction Loan s

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Construction Loans

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

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

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

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

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

The second facility totaling €

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

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

The third facility totaling €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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

As these credit facility agreements renew monthly, they have been included in short-term borrowings in our consolidated balance sheet.

As these credit facility agreements renew monthly, they have been included in short-term borrowings in our consolidated balance sheets.

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

Our wholly owned Ismeca subsidiary has one available line of credit which provides it with borrowings of up to a total of 2.0  million Swiss Francs.

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

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

5 .     

Restructuring Charges

Subsequent to the acquisition of Xcerra, during the fourth quarter of 2018, we began a strategic restructuring program designed to reposition our organization and improve our cost structure as part of our targeted integration plan regarding the recently acquired Xcerra (“Integration Program”).

See Note 2, “Business Acquisitions, Goodwill and Purchased Intangible Assets”

for additional information regarding this transaction.

As part of the Integration Program we consolidated our global handler and contactor manufacturing operations and closed our manufacturing operations in Penang, Malaysia and Fontana, California in 2019.

In the second quarter of 2019, we began the Integration Program of our German operations and entered a social plan with the German labor organization representing certain of the employees of our wholly owned subsidiary, Multitest elektronische Systeme GmbH.

In 2019, we began the Integration Program of our German operations and entered a social plan with the German labor organization representing certain of the employees of our wholly owned subsidiary, Multitest elektronische Systeme GmbH.

During the fourth quarter of 2020 we implemented a voluntary program and termination agreements with certain employees of our wholly owned subsidiary, Cohu GmbH.

These programs will collectively reduce headcount, enable us to consolidate the facilities of our multiple operations located near Kolbermoor and Rosenheim, Germany, as well as transition certain manufacturing to other lower cost regions.

The facility consolidations and reduction in force programs are being implemented as part of a comprehensive review of our operations and are intended to streamline and reduce our operating cost structure and capitalize on acquisition synergies.

These programs collectively reduced headcount, enabled us to consolidate the facilities of our multiple operations located near Kolbermoor and Rosenheim, Germany, as well as transitioned certain manufacturing to other lower cost regions.

The facility consolidations and reduction in force programs were implemented as part of a comprehensive review of our operations and are intended to streamline and reduce our operating cost structure and capitalize on acquisition synergies.

As a result of the activities described above, we recognized total pretax charges of $ 1.3  million, $ 11.4  million and $ 16.2  million for the years ended December 25, 2021, December 26, 2020 and December 28, 2019, respectively, that are within the scope of ASC 420, Exit or Disposal Cost Obligations (“ASC 420”

Severance and other separation payments made to certain executive officers of Xcerra related to change-in-control with double trigger provisions in their existing employment agreements totaled $ 6.9  million in the year ended December 29, 2018.

Additionally, in the year ended December 29, 2018, we incurred $ 8.2  million of compensation costs related to the acceleration of RSUs held by certain executive officers and the Board of Directors of Xcerra because of the change in control.

This non-cash expense is included in restructuring in our consolidated statements of operations.

All costs of the Integration Program were, and are expected to be, incurred by our Semiconductor Test & Inspection segment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Charges related to the Integration Program for the years ended December 25, 2021, December 26, 2020 and December 28, 2019, were as follows (in thousands):

4 unchanged sentences

$ 12,170  

Inventory related charges

Inventory related charges (adjustments)

( 558 )  

5 unchanged sentences

Other restructuring costs include expenses for professional fees associated with employee severance, impairments of fixed assets and facility closure costs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the activity within the restructuring related accounts for the Integration Program during the years ended December 25, 2021 and December 26, 2020 (in thousands) :

Employee Severance

Other Exit Costs

2 unchanged sentences

Costs accrued

12,170  

13,484  

Amounts paid or charged

2 unchanged sentences

Impact of currency exchange

( 51 )  

Balance, December 26, 2020

4 unchanged sentences

Impact of currency exchange

Balance, December 26, 2020

( 94 )  

$ 5,826  

Balance, December 25, 2021

At December 25, 2021, our total accrual for restructuring related items is reflected within current liabilities in our consolidated balance sheets as these amounts are expected to be paid out in 2022.

1 unchanged sentence

All amounts accrued related to inventory will remain in our consolidated balance sheet until it is scrapped.

     Employee Benefit Plans

Financial Instruments Measured at Fair Value

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities.

We do not hold investment securities for trading purposes.

All short-term investments in debt securities are classified as available-for-sale and recorded at fair value.

Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

Gains and losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value.

Factors that could indicate an impairment exists include, but are not limited to earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset.

Gross realized gains and losses on sales of short-term investments are included in interest income.

Realized gains and losses for the periods presented were not significant.

Investments that we have classified as short-term, by security type, are as follows (in thousands) :

At December 25, 2021

Corporate debt securities (2)

$ 84,060  

$ 84,031  

treasury securities

Bank certificates of deposit

Foreign government security

$ 89,738  

$ 89,704  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 26, 2020

Corporate debt securities (2)

$ 14,943  

$ 14,944  

treasury securities

Government-sponsored enterprise securities

Bank certificates of deposit

Foreign government security

$ 20,668  

$ 20,669  

As of December 25, 2021, the cost and fair value of investments with loss positions were approximately $ 57.0  million.

We evaluated the nature of these investments, credit worthiness of the issuer and the duration of these impairments to determine if an other-than-temporary decline in fair value had occurred and concluded that these losses were temporary and we have the ability and intent to hold these investments to maturity.

As of December 26, 2020, the cost and fair value of investments with loss positions were approximately $ 8.7  million.

Corporate debt securities include investments in financial and other corporate institutions.

No single issuer represents a significant portion of the total corporate debt securities portfolio.

Effective maturities of short-term investments at December 25, 2021, were as follows:

(in thousands)

Due in one year or less

$ 83,429  

$ 83,408  

Due after one year through three years

$ 89,738  

$ 89,704  

Accounting standards pertaining to fair value measurements establish a three -tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

These tiers include:

Level 1, defined as observable inputs such as quoted prices in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable;

and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1.

When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information.

The following table summarizes, by major security type, our financial instruments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands) :

Fair value measurements at December 25, 2021 using:

Total estimated

$ 195,297  

Money market funds

92,400  

Foreign government security

Corporate debt securities

86,535  

treasury securities

Bank certificates of deposit

$ 195,297  

$ 184,608  

$ 379,905  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value measurements at December 26, 2020 using:

Total estimated

$ 128,874  

Money market funds

19,734  

Corporate debt securities

15,694  

treasury securities

Government-sponsored enterprise securities

Foreign government security

Bank certificates of deposit

$ 128,874  

$ 41,153  

$ 170,027  

Employee Benefit Plans

Defined Contribution Retirement Plans –

Cohu and Xcerra each maintained defined contribution 401 (k) retirement savings plans covering all their respective salaried and hourly U.S.

At the beginning of 2020 the legacy Xcerra plan were merged into Cohu’s.

At the beginning of 2020 the legacy Xcerra plan was merged into Cohu’s.

Participation is voluntary and participants’

1 unchanged sentence

Participants in the Cohu plan receive matching contributions of 50 % up to 8 % of salary contributed, subject to various statutory limits.

In 2020 and 2019 we made matching contributions to the plan of $ 2.3  million and $ 2.0  million, respectively.

In 2018 we made contributions to the plan of $ 1.1  million, which includes matching contributions to the Xcerra 401 (k) plan from October 1 through December 29, 2018.

In 2021, 2020 and 2019 we made matching contributions to the plan of $ 2.4  million, $ 2.3  million and $ 2.0  million, respectively.

Defined Benefit Retirement Plans –

As a result of our acquisition of Ismeca in 2013, we took over the Ismeca Europe Semiconductor BVG Pension Plan in Switzerland (“the Swiss Plan”) and the following discussion relates solely to the Swiss Plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Some of our employees located in Europe and Asia participate in defined benefit retirement plans.

Our largest defined benefit retirement plan is the Ismeca Europe Semiconductor BVG Pension Plan which covers our employees in Switzerland (“the Swiss Plan”) and the following discussion relates solely to the Swiss Plan.

Net periodic benefit cost of the Swiss Plan was as follows:

1 unchanged sentence

$ 1,223  

$ 1,310  

Interest cost

6 unchanged sentences

$ 1,019  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the projected benefit obligation, the fair value of plan assets, the funded status and the liability we have recorded in our consolidated balance sheets related to the Swiss Plan:

6 unchanged sentences

( 61 )  

Actuarial gain (loss)

Actuarial gain

Participant contributions

2 unchanged sentences

Foreign currency exchange adjustment

( 3,010 )  

Benefit obligation at end of year

11 unchanged sentences

Foreign currency exchange adjustment

( 613 )  

Fair value of plan assets at end of year

4 unchanged sentences

At December 25, 2021 and December 26, 2020, the Swiss Plan’s net liability is included in noncurrent accrued retirement benefits.

Amounts recognized in accumulated other comprehensive loss net of tax related to the Swiss Plan consisted of an unrecognized net actuarial loss totaling $ 1.3 million at December 26, 2020, and $ 4.1 million at December 28, 2019.

Actuarial gain of $ 1.9 million for the year ended December 26, 2020, was primarily due to plan experience.

The actuarial loss of $ 1.5 million for the year ended December 28, 2019, was due to assumption changes, partially offset by plan experience.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in accumulated other comprehensive loss net of tax related to the Swiss Plan consisted of an unrecognized net actuarial gain totaling $ 0.9 million at December 25, 2021, and net actuarial loss of $ 1.3 million at December 26, 2020.

Actuarial gains of $ 1.2  million and $ 1.9  million for the years ended December 25, 2021 and December 26, 2020 respectively were primarily due to plan experience.

Weighted-average actuarial assumptions used to determine the projected benefit obligation under the Swiss Plan are as follows:

19 unchanged sentences

We determine the fair value of the plan assets based on information provided by the collective fund, through review of the collective fund’s annual financial statements.

See Note 7, “Financial Instruments Measured at Fair Value”

See Note 5, “

Financial Instruments Measured at Fair Value ”

for additional information on the three -tier fair value hierarchy.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We maintain other defined benefit plans for employees located outside the U.S.

2 unchanged sentences

We provide post-retirement health benefits to certain executives and directors under a noncontributory plan.

The net periodic benefit cost was $ 0.1  million in 2020, 2019, and 2018.

The net periodic benefit cost was insignificant in 2021 and $ 0.1  million in 2020, and 2019.

We fund benefits as costs are incurred and as a result there are no plan assets.

22 unchanged sentences

$ ( 2,097 )  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation –

20 unchanged sentences

We have historically issued new shares of Cohu common stock upon share option exercise.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2021, 2020 and 2019 no stock options were granted and the activity under our share-based compensation plans was as follows:

(in thousands, except per share data)

Outstanding, beginning of year

$ 10.27  

$ 10.22  

$ 10.20  

Outstanding and exercisable, beginning of year

$ 10.01  

4 unchanged sentences

( 101 )  

Outstanding, end of year

$ 10.95  

1 unchanged sentence

$ 9.82  

Options exercisable at year end

Outstanding and exercisable, end of year

$ 9.44  

6 unchanged sentences

Options Exercisable

Exercise Prices

$ 9.44 - $ 10.54  

$ 9.50  

$ 10.55 - $ 10.58  

$ 10.58  

$ 10.59 - $ 12.58  

$ 12.44  

Exercise Price

$ 9.44  

7 unchanged sentences

As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding at December 25, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted stock unit activity under our share-based compensation plans was as follows:

23 unchanged sentences

$ 17.05  

RSUs granted in 2018 in the table above include the issuance of 529,995 assumed RSUs to Xcerra employees, based on a conversion formula.

Equity-Based Performance Stock Units –

8 unchanged sentences

New shares of our common stock will be issued on the date the PSUs vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PSU activity under our share-based compensation plans was as follows:

18 unchanged sentences

$ 11.35  

$ 10.69  

Outstanding, end of year

16 unchanged sentences

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

All awards granted in 2020 exclude the assumption of dividend payments and the estimated fair value awards granted in prior years, when dividends were being paid, are unchanged.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All awards granted in 2021 and 2020 exclude the assumption of dividend payments and the estimated fair value awards granted in prior years, when dividends were paid, are unchanged.

The following weighted average assumptions were used to value share-based awards granted:

31 unchanged sentences

We account for forfeitures of plan-based awards as they occur.

Share based compensation for the year ended December 29, 2018, excludes $ 8.2  million of compensation recorded related to the acceleration of RSU awards held by certain executive officers and the Board of Directors of Xcerra because of the change in control.

At December 25, 2021, we had approximately $ 19.5  million of pre-tax unrecognized compensation cost related to unvested restricted stock units and performance stock units which is expected to be recognized over a weighted-average period of approximately 2.3  years.

Financial Instruments Measured at Fair Value

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities.

We do not hold investment securities for trading purposes.

All short-term investments, which are comprised entirely of short-term debt securities, are classified as available-for-sale and recorded at fair value.

Gross realized gains and losses on sales of short-term investments are included in interest income.

Realized gains and losses for the periods presented were not significant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investments that we have classified as short-term, by security type, are as follows (in thousands) :

At December 26, 2020

Corporate debt securities (2)

$ 14,943  

$ 14,944  

treasury securities

Government-sponsored enterprise securities

Bank certificates of deposit

Foreign government security

$ 20,668  

$ 20,669  

At December 28, 2019

Foreign government security

As of December 26, 2020, the cost and fair value of investments with loss positions were approximately $ 8.7  million.

As of December 28, 2019, we had no investments with loss positions.

Corporate debt securities include investments in financial and other corporate institutions.

No single issuer represents a significant portion of the total corporate debt securities portfolio.

Effective maturities of short-term investments at December 26, 2020, were as follows:

(in thousands)

Due in one year or less

$ 20,668  

$ 20,669  

Accounting standards pertaining to fair value measurements establish a three -tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

These tiers include:

Level 1, defined as observable inputs such as quoted prices in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable;

and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1.

When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information.

Fair value measurements at December 26, 2020 using:

Total Estimated

$ 128,874  

Money market funds

19,734  

Foreign government security

Corporate debt securities

15,694  

treasury securities

Government-sponsored enterprise securities

Bank certificates of deposit

$ 128,874  

$ 41,153  

$ 170,027  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value measurements at December 28, 2019 using:

Total Estimated

$ 147,523  

Money market funds

Foreign government security

$ 147,523  

$ 8,575  

$ 156,098  

     Derivative Financial Instruments

Foreign Exchange Derivative Contracts

We operate and sell our products in various global markets and, as a result, we are exposed to changes in foreign currency exchange rates.

In the fourth quarter of 2020, we began utilizing foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities.

In the fourth quarter of 2020, we began utilizing foreign currency forward contracts to offset against future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities.

Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts to mitigate the risks and volatility associated with foreign currency transaction gains or losses.

8 unchanged sentences

(Local Currency)

Contract Amount (U.S.

Contract Amount

30,185  

2 unchanged sentences

20,800  

$ 55,000  

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that utilize observable market inputs.

7 unchanged sentences

Foreign transaction gain (loss)

$ ( 3,428 )  

Common Stock Issuance

On March 8, 2021, we closed an underwritten follow-on public offering of 4,950,000 shares of our common stock at $ 41.00 per share.

As part of the transaction, the underwriters were also granted a 30 -day option to purchase up to an aggregate of 742,500 additional shares of common stock to cover over-allotments which was exercised in full on March 11, 2021.

The offering, and the follow-on option to sell additional shares, resulted in net proceeds, after deducting underwriting discounts and commissions and offering expenses, of approximately $ 223.1  million.

All of the shares were sold pursuant to an effective shelf registration statement previously filed with the SEC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Income Taxes

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.

Significant components of the provision (benefit) for income taxes for continuing operations are as follows:

(in thousands)

$ 1,103  

22,862  

Total current

4 unchanged sentences

$ 25,019  

$ ( 3,082 )  

Income (loss) before income taxes from continuing operations consisted of the following:

6 unchanged sentences

$ ( 13,177 )  

The Tax Act was enacted on December 22, 2017, and introduced significant changes to U.S.

income tax law.

Effective in 2018, the Tax Act reduced the U.S.

statutory tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and related-party payments, which are referred to as the global intangible low-taxed income (“GILTI”) tax and the base erosion and anti-abuse tax, respectively.

In addition, in 2017 we were subject to a one -time transition tax on accumulated foreign subsidiary earnings not previously subject to U.S.

The Tax Act also repealed the alternative minimum tax (AMT) effective January 1, 2018, and made changes to net operating loss provisions, expensing of certain assets and capitalization of research and development expense with such changes effective for 2018 and later years.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 30, 2017 by applying the guidance in SAB 118 because we had not completed our accounting for these effects.

During 2018, we completed the accounting for these effects.

Except as described below under “One-time transition tax”, due to the valuation allowance against our deferred tax assets, there was no net change made in 2018 to our 2017 enactment-date provisional income tax.

Under GAAP, we are allowed to make an accounting policy election to either (i) treat taxes due on future U.S.

inclusions in taxable income related to GILTI as a current-period expense when incurred or (ii) factor such amounts into a company’s measurement of its deferred taxes.

We have elected to account for GILTI as a period cost.

One-time transition tax

The Tax Act required us to pay U.S.

income taxes on accumulated foreign subsidiary earnings not previously subject to U.S.

income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings.

Foreign tax credits and net operating losses may be used to reduce this tax which is referred to as a transition or deemed repatriation tax.

In 2017 we recorded a provisional amount for our one -time transition tax liability of $ 16.6  million and used foreign tax credits and net operating losses to fully offset this liability.

In 2018 the IRS and U.S.

Treasury issued Notice 2018 - 29 that addresses certain aspects of the calculation of the transition tax (“Notice 2018 - 29”

Application of Notice 2018 - 29 resulted in an increase to our transition tax liability of approximately $ 5.1  million that was fully offset by net operating losses resulting in no net increase to income tax expense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax effects

The Tax Act reduces the U.S.

statutory tax rate from 35% to 21% for years after 2017.

Accordingly, we remeasured our deferred taxes as of December 30, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized.

We recognized a deferred tax benefit of $ 4.0  million in 2017, net of a reduction in the related valuation allowance, to reflect the reduced U.S.

tax rate and other effects of the Tax Act including the change in the life of NOL carryforwards from 20 years to indefinite.

Beginning in 2018, the Tax Act provides a 100% deduction for dividends received from 10 -percent owned foreign corporations by U.S.

corporate shareholders, subject to a one -year holding period.

Although dividend income is now exempt from U.S.

federal tax in the hands of U.S.

corporate shareholders, we must still apply the guidance of ASC 740 - 30 - 25 - 18 to account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S.

subsidiaries.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes.

33 unchanged sentences

$ ( 21,125 )  

The components of total net deferred tax assets (liabilities), net of valuation allowances, as shown in our consolidated balance sheets are as follows:

(in thousands)

Other assets (long-term)

$ 4,762  

$ 5,716  

Long-term deferred income tax liabilities

( 25,887 )  

Net deferred tax liabilities

$ ( 21,125 )  

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

6 unchanged sentences

We have evaluated our DTAs 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 loss history incurred at our U.S.

operations 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.

1 unchanged sentence

We will evaluate the realizability of our DTAs at the end of each quarterly reporting period in 2022 and should circumstances change it is possible an additional valuation allowance will be recorded or the remaining valuation allowance, or a portion thereof, will be reversed in a future period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

subsidiaries were not a source of taxable income in assessing the realization of our DTAs in the U.S.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The CARES Act was signed into law on March 27, 2020.

The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL”) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163 (j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions.

Due to our overall loss position in the US, the CARES Act did not have a significant impact on Company’s financial position or statement of operations.

Due to our overall loss position in the U.S.

during the last five years, the CARES Act did not have a significant impact on Company’s financial position or statement of operations.

The reconciliation of income tax computed at the U.S.

5 unchanged sentences

$ ( 2,757 )  

Impact of Tax Act, before reduction in valuation allowance

State income taxes, net of federal tax benefit

( 1,160 )  

( 1,097 )  

Settlements, adjustments and releases from statute expirations

1 unchanged sentence

( 118 )  

Federal tax credits

Federal R&D credits

( 943 )  

1 unchanged sentence

Stock-based compensation

Executive compensation limited by Section 162(m)

( 4,802 )  

Excess executive compensation

Change in valuation allowance

1 unchanged sentence

( 1,691 )  

Non-deductible transaction related costs

Deemed dividend

11,270  

Exemption of PTG gain

( 12,378 )  

Dividend, net of foreign tax credits

GILTI, net of foreign tax credits

Foreign rate differential

2 unchanged sentences

$ 25,019  

At December 26, 2020, including carryforwards from the Xcerra acquisition as described below, we had federal, state and foreign net operating loss carryforwards of approximately $ 200.9  million, $ 130.1  million and $ 22.5  million, respectively, that expire in various tax years beginning in 2021 through 2040 or have no expiration date.

An accounting policy may be selected to either (i) treat taxes due on future U.S.

inclusions in taxable income related to global intangible low-taxed income (“GILTI”) as a current-period expense when incurred or (ii) factor such amounts into a company’s measurement of its deferred taxes.

We have elected to account for GILTI as a period cost.

At December 25, 2021, we had federal, state and foreign net operating loss carryforwards of approximately $ 160.5  million, $ 135.3  million and $ 9.6  million, respectively, that expire in various tax years beginning in 2022 through 2040 or have no expiration date.

We also have federal and state tax credit carryforwards at December 25, 2021 of approximately $ 6.8  million and $ 30.9  million, respectively, certain of which expire in various tax years beginning in 2022 through 2040 or have no expiration date.

The federal and state loss and credit carryforwards are subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code and applicable state tax law.

We believe the state tax credit is not likely to be realized in the foreseeable future.

We have completed a Section 

382 and 383 analysis of the Internal Revenue Code and applicable state law, regarding the limitation of its net operating loss and business tax credit carryforwards as of December 26, 2020.

382 and 383 analysis of the Internal Revenue Code and applicable state law, regarding the limitation of its net operating loss and business tax credit carryforwards through October 1, 2018.

As a result of the analysis, we concluded that the acquisition of Xcerra on October 1, 2018, triggered a limitation in the utilization of Xcerra’s net operating loss and research credit carryforwards.

We reduced our deferred tax assets related to the Xcerra U.S.

net operating loss and credit carryforwards that are anticipated to expire unused as a result of ownership changes.

These tax attributes have been excluded from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on the income tax provision or effective tax rate.

We’ve also analyzed and determined that there were no subsequent ownership changes during the three -year period ending December 25, 2021.

We will continue to assess the realizability of these carryforwards in subsequent periods.

11 unchanged sentences

Additions for tax positions of current year

Additions (reductions) for tax positions of prior years

Reductions for tax positions of prior years

( 83 )  

3 unchanged sentences

( 304 )  

Additions related to Xcerra acquisition

24,524  

Reductions due to settlements

( 1,134 )  

( 30 )  

Foreign exchange rate impact

5 unchanged sentences

tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately $ 5.3  million ($ 5.9  million at December 26, 2020 and $ 7.0 million at December 28, 2019) would result in a reduction in our income tax expense and effective tax rate.

It is reasonably possible that our gross unrecognized tax benefits as of December 26, 2020, could decrease in 2021 by approximately $ 0.6  million as a result of the expiration of certain statutes of limitations.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

1 unchanged sentence

2021, and December 26, 2020, respectively.

Interest expense, net of accrued interest reversed, was $( 0.3 ) million in 2020, $( 0.3 ) million in 2019 and $ 0.6  million in 2018.

Interest expense, net of accrued interest reversed, was $( 0.2 ) million in 2021 and $( 0.3 ) million in both 2020 and 2019.

federal and state income tax returns for years after 2017 and 2016, respectively, remain open to examination, subject to the statute of limitations.

2 unchanged sentences

In the foreign countries where we have significant operations these time periods generally range from four to ten years after the year for which the tax return is due or the tax is assessed.

While the examination of several of our German subsidiaries income tax returns for 2012 through 2017 were concluded in 2020, our other German subsidiaries income tax returns for 2015 to 2017 are currently under routine examination by tax authorities in Germany.

Similarly, our Philippines subsidiary income tax return for 2017 is currently under routine examination by the Bureau of Internal Revenue, and the audit for the 2018 income tax year was concluded in 2020.

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.

We conduct business globally and as a result, Cohu or one or more of its subsidiaries files income tax returns in the US and various state and foreign jurisdictions.

In the normal course of business, we are subject to examinations by taxing authorities throughout the world and are currently under examination in Germany and Malaysia.

We believe our financial statement accruals for income taxes are appropriate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 unchanged sentences

We 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.

(in thousands)

6 unchanged sentences

50,767  

42,451  

Total consolidated net sales for reportable segments

6 unchanged sentences

$ ( 2,497 )  

$ 2,489  

Profit (loss) for reportable segments

4 unchanged sentences

( 4,384 )  

Gain on sale of PCB Test business

70,815  

Interest expense

3 unchanged sentences

Gain on extinguishment of debt

Loss from continuing operations before taxes

( 3,411 )  

Profit (loss) from continuing operations before taxes

$ 192,344  

$ ( 13,177 )  

(in thousands)

25 unchanged sentences

56,938  

57,762  

Total assets for reportable segments

13 unchanged sentences

During the last three years, the following customers of our Semiconductor Test & Inspection segment that comprised 10% or greater of our consolidated net sales were as follows:

Analog Devices

14.1 %  

*No single customer exceeded 10% of consolidated net sales for the years ended December 26, 2020 and December 29, 2018.

No customer of our PCB Test segment exceeded 10% of consolidated net sales for the years ended December 26, 2020, December 28, 2019 and December 29, 2018.

* Less than 10% of consolidated net sales.

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

Prior to this, no customer of our PCB Test segment exceeded 10% of consolidated net sales for the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

Net sales to customers, attributed to countries based on product shipment destination, were as follows:

3 unchanged sentences

$ 118,213  

United States

155,070  

7 unchanged sentences

61,826  

United States

77,495  

11 unchanged sentences

Property, plant and equipment:

United States

$ 18,375  

$ 17,800  

United States

17,419  

1 unchanged sentence

11,156  

13,231  

10,384  

Rest of the world

14 unchanged sentences

$ 485,989  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We lease certain of our facilities, equipment and vehicles under non-cancelable operating and finance leases.

4 unchanged sentences

We sublease certain leased assets to third parties, mainly as a result of unused space in our facilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases was as follows:

27 unchanged sentences

Finance leases

Finance lease assets are recorded net of accumulated amortization of $ 48,000 and $ 0.1 million in 2020 and 2019, respectively.

( 1 ) Finance lease assets are recorded net of accumulated amortization of $ 0.1 million in 2021 and 2020.

The components of lease expense were as follows:

13 unchanged sentences

$ 10,605  

Operating lease cost excludes impairment expense of $ 0.2 million related to the write-down of the Fontana facility right-of-use asset recognized in 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease payments at December 25, 2021, are as follows:

2 unchanged sentences

$ 6,511  

11,942  

Total lease payments

5 unchanged sentences

$ 27,093  

Excludes sublease income of $ 0.1 million in 2021.

( 1 ) Excludes sublease income of $0.1 million in 2022 and 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to leases was as follows:

22 unchanged sentences

Warranty accruals

13,389  

Warranty payments

1 unchanged sentence

( 5,946 )  

Warranty liability assumed

Warranty liability transferred

( 945 )  

Ending balance

3 unchanged sentences

Accrued warranty amounts expected to be incurred after one year are included in noncurrent other accrued liabilities in the consolidated balance sheet.

These amounts totaled $ 0.3  million at both December 26, 2020 and December 28, 2019.

These amounts totaled $ 1.1  million and $ 0.3  million at December 25, 2021 and December 26, 2020, respectively.

Business Divestitures and Discontinued Operations

PCB Test Equipment Business

On June 24, 2021, we completed the sale of our PCB Test Equipment (“PCB Test”) business, which represented our PCB Test reportable segment.

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

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

We received gross proceeds of $ 125.1  million, subject to certain closing adjustments.

The sale generated a $ 70.8  million pre-tax gain on sale of business, which was recorded in our consolidated statements of operations for the twelve months ended December 25, 2021.

As a result of the closing of the transaction, we derecognized net assets of $ 48.2  million, including goodwill of $ 21.9  million and intangible assets of $ 14.8  million.

We evaluated the guidance in ASC 205 - 20, Presentation of Financial Statements –

Discontinued Operations , and determined that the divestment of our PCB Test business does not represent a strategic shift as the divestiture will not have a major effect on Cohu’s operations and financial results and, as a result, it is not presented as discontinued operations in any periods presented.

Subsequent to the sale of our PCB Test business, we have one reportable segment, Semiconductor Test & Inspection.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Discontinued Operations

Fixtures Services Business (“FSG”)

Fixtures Services Business ( “

On October 1, 2018, we acquired a fixtures services business as part of Xcerra.

At the time of the acquisition our management determined that this business did not align with Cohu’s core business and was not a strategic fit within our organization.

As a result, the fixtures services business was marketed for sale since we acquired Xcerra on October 1, 2018 and it has been presented as discontinued operations.

The fixtures services business was marketed for sale since we acquired Xcerra on October 1, 2018 and it has been presented as discontinued operations as it met the held for sale criteria.

For financial statement purposes, the results of operations for this business have been segregated from those of continuing operations and are presented in our consolidated financial statements as discontinued operations for all periods presented.

1 unchanged sentence

We completed the sale of this business in February 2020 which resulted in an immaterial gain that that was recorded in our statement of operations for the twelve months ended December 26, 2020, as noted below.

Balance sheet information for our fixtures services business presented as discontinued operations is summarized as follows (in thousands) :

Accounts receivable, net

Other current assets

Total current assets

Property, plant and equipment, net

Other noncurrent assets

$ 3,618  

Other accrued current liabilities

Total current liabilities

Noncurrent liabilities

Total liabilities

Operating results of our discontinued operations are summarized as follows (in thousands) :

$ 6,136  

$ 1,593  

Operating income

Loss from impairment of FSG

( 1,086 )  

Gain on sale of FSG

Income (loss) before taxes

( 608 )  

Income tax provision

Income (loss), net of tax

$ ( 697 )  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Loss

Components of other comprehensive loss, on an after-tax basis, were as follows:

Accumulated Other Comprehensive Income (Loss)

Components of other comprehensive income (loss), on an after-tax basis, were as follows:

(in thousands)

Before Tax amount

Tax (Expense) Benefit

Net of Tax Amount

Year ended December 28, 2019

3 unchanged sentences

( 856 )  

Change in unrealized gain/loss on investments

Other comprehensive income (loss)

$ ( 8,378 )  

$ ( 60 )  

Year ended December 26, 2020

1 unchanged sentence

$ 27,321  

Adjustments related to postretirement benefits

2 unchanged sentences

$ 29,920  

$ ( 216 )  

$ 29,704  

Year ended December 25, 2021

4 unchanged sentences

( 318 )  

Other comprehensive income (loss)

Change in unrealized gain/loss on investments

( 67 )  

Reclassification due to sale of PBC Test Business

( 2,515 )  

Other comprehensive income (loss)

$ ( 22,521 )  

Components of accumulated other comprehensive loss, net of tax, at the end of each period are as follows:

$ ( 415 )  

Components of accumulated other comprehensive income (loss), net of tax, at the end of each period are as follows:

(in thousands)

2 unchanged sentences

Accumulated net adjustments related to postretirement benefits

Accumulated net unrealized gain/loss on investments

( 67 )  

Accumulated reclassification due to sale of PBC Test Business

( 2,515 )  

Total accumulated other comprehensive loss

$ ( 27,262 )  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

At December 25, 2021, certain of our cash and short-term investments were held and managed by BlackRock, Inc.

which owns 15.2 % of our outstanding common stock as reported in its Form 13 -G filing made with the Securities and Exchange Commission on January 26, 2021.

As part of Xcerra, we gained ownership interests in two companies that supply components and provide services to wholly owned subsidiaries of Xcerra.

Multitest elektronische Systeme GmbH and atg-Luther & Maelzer GmbH of FTZ Fraes-und Technologiezentrum GmbH Frasdorf (“FTZ”) and ETZ Elektrisches Testzentrum fuer Leiterplatten GmbH (“ETZ”), respectively.

FTZ, based in Germany, provides milling services and ETZ, which is also based in Germany, provides certain component parts.

These investments are accounted for under the equity method and are not material to our consolidated balance sheets.

During 2020, 2019 and 2018, purchases of products from FTZ and ETZ were not material.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quarterly Financial Data (Unaudited)

(in thousands, except per share data)

$ 138,921  

$ 144,084  

$ 150,647  

$ 202,355  

$ 636,007  

$ 147,809  

$ 150,011  

$ 143,498  

$ 142,011  

$ 583,329  

Cost of sales:

$ 82,837  

$ 83,127  

$ 87,147  

$ 111,114  

$ 364,225  

$ 93,394  

$ 87,605  

$ 84,565  

$ 87,936  

$ 353,500  

Income (loss) from continuing operations

$ ( 17,318 )  

$ ( 4,740 )  

$ ( 6,646 )  

$ 14,861  

$ ( 22,851 )  

$ ( 19,383 )  

$ ( 10,480 )  

$ ( 16,281 )  

Net income (loss)

$ ( 17,276 )  

$ ( 4,740 )  

$ ( 6,646 )  

$ 14,861  

$ ( 22,687 )  

$ ( 19,359 )  

$ ( 10,326 )  

$ ( 17,320 )  

Net income (loss) attributable to Cohu

$ ( 17,276 )  

$ ( 4,740 )  

$ ( 6,646 )  

$ 14,861  

$ ( 22,643 )  

$ ( 19,323 )  

$ ( 10,468 )  

$ ( 17,266 )  

Income (loss) per share attributable to Cohu (c):

Income (loss) from continuing operations

$ ( 0.42 )  

$ ( 0.11 )  

$ ( 0.16 )  

$ 0.35  

$ ( 0.56 )  

$ ( 0.47 )  

$ ( 0.25 )  

$ ( 0.39 )  

Net income (loss)

$ ( 0.42 )  

$ ( 0.11 )  

$ ( 0.16 )  

$ 0.35  

$ ( 0.55 )  

$ ( 0.47 )  

$ ( 0.25 )  

$ ( 0.42 )  

Income (loss) from continuing operations

$ ( 0.42 )  

$ ( 0.11 )  

$ ( 0.16 )  

$ 0.34  

$ ( 0.56 )  

$ ( 0.47 )  

$ ( 0.25 )  

$ ( 0.39 )  

Net income (loss)

$ ( 0.42 )  

$ ( 0.11 )  

$ ( 0.16 )  

$ 0.34  

$ ( 0.55 )  

$ ( 0.47 )  

$ ( 0.25 )  

$ ( 0.42 )  

All quarters presented above were comprised of 13 weeks.

Cost of sales is shown exclusive of the amortization of purchased intangible assets.

The sum of the four quarters may not agree to the year total due to rounding or losses within a quarter and the inclusion or exclusion of common stock equivalents.

which owns 15.1 % of our outstanding common stock as reported in its Form 13 -G/A filing made with the Securities and Exchange Commission on January 27, 2022.

We have an ownership interest in Fraes-und Technologiezentrum GmbH Frasdorf (“FTZ”), a company based in Germany that provides milling services to one of our wholly owned subsidiaries.

This investment is accounted for under the equity method and is not material to our consolidated balance sheets.

During 2021, 2020 and 2019, purchases of products from FTZ were not material.

We also had an ownership interest in ETZ Elektrisches Testzentrum fuer Leiterplatten GmbH (“ETZ”) which provided our PCB Test business, atg-Luther & Maelzer GmbH, with certain component parts.

Our ownership interest in ETZ was transferred on June 24, 2021 as part of the sale of the PCB Test business and ETZ is no longer a related party.

During 2021, 2020 and 2019, purchases of products from ETZ, when it was a related party, were not material.

Report of Independent Registered Public Accounting Firm

4 unchanged sentences

equity, and cash flows for each of the three years in the period ended December 25, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 26, 2020, and December 28, 2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 26, 2020, in conformity with U.S.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 25, 2021 and December 26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2021, in conformity with U.S.

generally accepted accounting principles.

12 unchanged sentences

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of inventories

Description of

Description of the Matter

As of December 25, 2021, the Company’s consolidated inventories balance was $161.1 million.

3 unchanged sentences

In particular, the excess and obsolete inventory calculations are sensitive to significant assumptions, including product life cycles, historical usage, expected future usage and on-hand quantities of individual materials.

Addressed the

Matter in Our

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory valuation process, including management's assessment of the assumptions stated above and data underlying the excess and obsolete inventory valuation.

1 unchanged sentence

We evaluated adjustments to inventory reserves for specific product life cycles, compared the balance of on-hand inventories to usage forecasts and historical usage, and assessed the historical accuracy of management’s estimates by performing a retrospective analysis comparing prior period forecasted demand to actual historical sales.

Impairment evaluation of goodwill and indefinite-lived intangible assets

Description of

As of December 26, 2020, the Company’s goodwill balance was $252.3 million and indefinite-lived intangibles balance, consisting of in-process research and development (IPR&D), was $7.8 million.

As described in Note 1 to the consolidated financial statements, goodwill and indefinite-lived intangibles are evaluated by the Company for impairment annually and when an event occurs, or circumstances change that indicate that the carrying value may not be recoverable.

Goodwill is tested for impairment at the reporting unit level.

Auditing management’s impairment tests was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units for goodwill and the fair value of IPR&D assets.

For goodwill, significant assumptions used in management’s evaluation included revenue and margin forecasts, the selection of the discount rates, and the estimation of the long-term growth rates.

For IPR&D assets, significant assumptions used in management’s evaluation included estimated revenues from the products, royalty rates, and discount rates.

These assumptions are affected by expectations about future market or economic conditions that materially impact the fair value of the reporting units and the IPR&D assets.

Addressed the

Matter in Our

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and indefinite-lived intangible asset impairment review processes.

For example, we tested controls over the quantitative impairment analyses of goodwill and IPR&D, including management’s review of the prospective financial information, valuation models and underlying assumptions used to develop such estimates.

Our audit procedures included, among others, evaluating the Company’s valuation methodology used, evaluating the prospective financial information utilized in the valuations, evaluating the Company’s estimates relating to the development of its IPR&D assets, and involving our valuation specialists to assist in testing certain significant assumptions described above, such as discount rates and long-term growth rates.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses on significant assumptions to evaluate the changes in the fair value that would result from changes in the assumptions.

/s/ Ernst & Young LLP

70 unchanged sentences

Severance Agreement, dated September 8, 2020, between the Company and Luis A.

Müller incorporated herein by reference to Exhibit 10.4 from the Cohu, Inc.

ller incorporated herein by reference to Exhibit 10.4 from the Cohu, Inc.

Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *

9 unchanged sentences

Change in Control Agreement, dated September 8, 2020, between the Company and Luis A.

Müller incorporated herein by reference to Exhibit 10.8 from the Cohu, Inc.

ller incorporated herein by reference to Exhibit 10.8 from the Cohu, Inc.

Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *

Settlement Agreement regarding employment, dated October 27, 2020, between the Company and Pascal Rond é

incorporated herein by reference to Exhibit 10.9 from the Cohu, Inc.

Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 *

Share and Asset Purchase Agreement, dated May 10, 2021, by and among Cohu, Inc., Cohu Semiconductor Test GmbH, Credence International Ltd.

(BVI), Xcerra Corporation, Everett Charles Tech, Inc., KOGNITEC Vertrieb & Service GmbH, Mycronic AB and Mycronic, Inc.

incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc.

Current Report on Form 8-K filed with the Securities and Exchange Commission on May 13, 2021

Subsidiaries of Cohu, Inc.

8 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Jeffrey D.

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Taxonomy Extension Schema Document

3 unchanged sentences

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management contract or compensatory plan or arrangement

Form 10-K Summary.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 18, 2022

 /s/ Luis A.

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature  

Chairman of the Board,

 /s/ James A.

Chairperson of the Board,

February 18, 2022

 /s/ Luis A.

President and Chief Executive Officer, Director

1 unchanged sentence

(Principal Executive Officer)

/s/ Jeffrey D.

Vice President, Finance and CFO

1 unchanged sentence

(Principal Financial and Accounting Officer)

/s/ William E.

February 18, 2022

/s/ Steven J.

February 18, 2022

/s/ Andrew M.

February 18, 2022

 /s/ Lynne J.

February 18, 2022

 /s/ Yon Y.

February 18, 2022

 /s/ Nina L.

February 18, 2022

4 unchanged sentences

$ ( 28 )  

$ ( 109 )  

Year ended December 26, 2020

2 unchanged sentences

Year ended December 25, 2021

$ ( 1 ) (1)  

$ ( 41 )  

Reserve for excess and obsolete inventories:

19 unchanged sentences

( 1 ) Changes in reserve balances resulting from foreign currency impact and reclassifications from other reserves.

( 2 ) Reductions not charged to expense includes $ 2.2 million transferred as part of the sale of our PCB Test business.

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 9A. Controls and Procedures