What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-02-17 compared with 2022-02-18 · 100 added, 120 removed, 347 unchanged (39% of the section changed)

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This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Cash dividends, per share, declared in 2021 and 2020 were as follows:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

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

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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.

On October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase program.

This share repurchase program was effective as of November 2, 2021 and has no expiration date.

The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.

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

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(in thousands except price per share)

Sep 25, 2022 - Oct 22, 2022

Oct 23, 2022 - Nov 19, 2022

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

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

On October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase program.

This share repurchase program is effective as of November 2, 2021 and has no expiration date.

The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.

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

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The graph below compares the cumulative total stockholder return on the common stock of Cohu for the last five fiscal years with the cumulative total return on custom Peer Group Indexes and a Nasdaq Global Select Market Index over the same period (assuming the investment of $100 in Cohu’s common stock, Peer Group Index and Nasdaq Global Select Market Index on December 30, 2017, and reinvestment of all dividends).

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

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

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

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

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

The custom Peer Group Indexes are comprised of companies within our industry and are utilized in our executive compensation planning process.

This peer group is revised annually to reflect acquisitions and to include comparable companies in the semiconductor equipment market to ensure a sufficient number of companies in the peer group composition to enable a meaningful comparison and benchmarking.

In 2022, the custom peer group was comprised of Advanced Energy Industries, Inc., Alpha & Omega Semiconductor Limited, Axcelis Technologies, Inc., Badger Meter, Inc., Cirrus Logic, Inc., FormFactor, Inc., Harmonic Inc., Ichor Holdings Ltd., Kulicke and Soffa Industries, Inc., MACOM Technology Solutions Holdings, Inc., MaxLinear, Inc., National Instruments Corporation, Novanta, Inc., Onto Innovation, OSI Systems, Inc., Photronics, Inc., Smart Global Holdings, Inc., Ultra Clean Holdings, Inc.

and Veeco Instruments, Inc.

In selecting our 2022 peer group the Compensation Committee of our Board of Directors considered competitive market data and an analysis prepared by Compensia and identified companies headquartered in the U.S.

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

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

(formerly Brooks Automation, Inc.), Cirrus Logic, Inc., Entegris, Inc., FormFactor, Inc., Kulicke and Soffa Industries, Inc., Novanta, Inc., OSI Systems, Inc., Onto Innovation, Inc., Photronics, Inc., Synaptics, Inc., Ultra Clean Holdings, Inc.

and Veeco Instruments, Inc.

2021 Peer Group

2022 Peer Group

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

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

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

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

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

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

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

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

and China trade tensions which impacted many of our customers’

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

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

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

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

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

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

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

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

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

For the year ended December 31, 2022, our net sales decreased 8.4% year-over-year to $812.8 million.

Although customer test cell utilization rates remain high and we continue to benefit from robust demand for semiconductor test equipment, as compared to the prior year, our net sales declined during 2022 due to lower demand for mobility and 5G-related products as well as the divestiture of our PCB Test business, which contributed $26.8 million in sales during 2021 through its disposition on June 24, 2021.

Over the past twelve months, consolidated net sales benefitted from growth in our semiconductor test business, and we saw improvements in gross margin due to favorable product mix, and increased insourcing of contactor manufacturing.

Also, price increases offset cost increases in our supply chain.

Based on the strength of current business conditions and the results from our operations, we have continued to take actions to reduce outstanding principal under our Term Loan Credit Facility through voluntary prepayments and we have also repurchased 1,767,070 shares of our common stock for $50.7 million during 2022.

We continue to focus on building a well-balanced and resilient business model.

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

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

Application of Critical Accounting Estimates and Policies

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the assessment of recoverability of long-lived and indefinite-lived assets including goodwill and other intangible assets, which primarily impacts gross margin or operating expenses if we are required to record impairments of assets or accelerate their depreciation.

the valuation and recognition of share-based compensation, which impacts gross margin, research and development expense, and selling, general and administrative expense.

Below, we discuss these policies further, as well as the estimates and judgments involved.

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At December 31, 2022, and December 25, 2021, we had $7.1 million and $7.7 million of revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) with expected durations of over one year, respectively.

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

As allowed under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we have opted to not disclose unsatisfied performance obligations for contracts with original expected durations of less than one year.

We generally sell our equipment with a product warranty.

The product warranty provides assurance to customers that delivered products are as specified in the contract (an “assurance-type warranty”).

Therefore, we account for such product warranties under ASC 460, Guarantees ( “

ASC 460 ”

) , and not as a separate performance obligation.

Therefore, we account for such product warranties under ASC Topic 460, Guarantees (“ASC 460”), and not as a separate performance obligation.

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

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

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

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

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We must make significant judgments to determine the provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits and any valuation allowance to be recorded against deferred tax assets.

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

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

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

Our gross deferred tax asset balance as of December 31, 2022, was approximately $114.5 million, with a valuation allowance of approximately $89.2 million.

During December 2022, the Organization for Economic Cooperation and Development (OECD) announced that it has reached agreement among its 136-member countries that certain multinational enterprises will be subject to a global minimum tax rate of 15%, also known as Pillar Two.

South Korea became the first country to enact such global minimum tax rules, which will be effective for fiscal years beginning on or after January 1, 2024.

These specific actions did not impact our consolidated financial statements in 2022, however, many more countries are expected to issue laws and regulations to conform with this guidance soon.

We will continue to monitor the pertinent law changes and regulations to determine the impact they would have on our operating and financial results.

Segment Information:

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We have determined that our three identified operating segments are:

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

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

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

As a result, we report in one segment, Semiconductor Test 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”).

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

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

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If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the fair value of the reporting unit and it’s carrying value of goodwill.

We estimated the fair values of our reporting units 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.

We estimated the fair values of our reporting units using a weighting of the income and market approaches.

Under the income approach, we use a discounted cash flow methodology to derive an indication of value, which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others.

For the market approach, we use the guideline public company method.

Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance metrics of the reporting unit being tested, in order to obtain an indication of value.

We then apply a 50/50 weighting to the indicated values from the income and market approaches to derive the fair values of the reporting units.

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

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Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable.

For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows.

For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted future cash flows.

We measure the impairment loss based on the difference between the carrying amount and estimated fair value.

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

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

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

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

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

as of December 26, 2020 and the operating results of our fixtures business are presented as “discontinued operations”

The operating results of our fixtures business are presented as “discontinued operations”

for the periods ended December 31, 2022, December 25, 2021 and December 26, 2020.

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Gain on sale of facilities

Income (loss) from operations

Income from operations

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

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2022 Compared to 2021

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

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

and China trade tensions which impacted our customers’

ability to supply product to certain end users.

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

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

Cohu’s consolidated net sales decreased 8.4% from $887.2 million in 2021 to $812.8 million in 2022.

During 2022, although customer test cell utilization rates remained high and we continued to benefit from robust demand for semiconductor test equipment, as compared to 2021, net sales declined due to lower demand for mobility and 5G-related products as well as the divestiture of our PCB Test business, which contributed $26.8 million in sales during 2021 through its disposition on June 24, 2021.

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

Gross margin consists of net sales less cost of sales (excluding the impact of amortization of developed technology and backlog).

Gross margin consists of net sales less cost of sales (excluding the impact of amortization of developed technology).

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

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Our gross margin, as a percentage of net sales, increased to 47.2% in 2022 from 43.6% in 2021.

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

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

During 2022 our gross margin improved compared to 2021 due to favorable product mix, increased insourcing of contactor manufacturing and foreign currency fluctuations.

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

During 2022, we recorded net charges to cost of sales of approximately $7.2 million for excess and obsolete inventory.

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

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

In 2021, net charges to cost of sales for excess and obsolete inventory were $7.1 million.

We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are adequate to cover known exposures at December 31, 2022.

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R&D expense in 2022 was $92.6 million, or 11.4% of net sales, compared to $92.0 million, or 10.4% of net sales in 2021.

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

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

R&D expense in 2021 includes the results of our PCB Test business, which incurred $1.5 million of costs prior to its disposition on June 24, 2021.

During 2022 R&D expense increased due to higher spending on labor and materials associated with product development.

Selling, General and Administrative Expense ( “

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

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

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

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

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

SG&A expense as a percentage of net sales increased to 16.2% in 2022, from 14.3% in 2021, increasing from $127.0 million in 2021 to $131.4 million in 2022.

SG&A expense in 2021 includes the results of our PCB Test business, which incurred $3.3 million of SG&A expense prior to its disposition on June 24, 2021.

During 2022 SG&A expense has increased due to higher labor and professional services costs.

Amortization of Purchased Intangible Assets

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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.

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

Restructuring Charges

Subsequent to the merger with Xcerra in the fourth quarter 2018, we began a strategic restructuring program designed to reposition our organization and improve our cost structure as part of our targeted integration plan regarding Xcerra.

In connection with the integration plan, we recorded restructuring charges, exclusive of the inventory related charges described above, totaling $1.8 million and $7.6 million in 2021 and 2020, respectively.

In connection with the integration plan, we recorded restructuring charges totaling $0.6 million and $1.8 million in 2022 and 2021, respectively.

The decrease in expense year-over-year is a result of fewer activities under the restructuring projects.

See Note 4, “Restructuring Charges”

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Impairment Charges

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

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

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

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

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

Gain on sale of facilities

As part of our previously announced Xcerra integration plan we implemented certain facility consolidation actions.

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

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

Interest Expense and Income

Interest expense was $4.2 million in 2022 compared to $6.4 million in 2021.

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

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

The year-over-year decrease in our interest expense resulted from a reduction in the outstanding balance of our Term Loan Credit Facility.

Interest income was $4.0 million and $0.2 million in 2022 and 2021, respectively.

The increase in interest income year-over-year is a result of increased investments and higher rates.

Foreign Transaction Gain (Loss) and Other

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

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

During 2021, the U.S.

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

In 2020, the U.S.

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

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

During both 2022 and 2021, the U.S.

Dollar strengthened against the Swiss Franc, Euro and Japanese Yen resulting in foreign currency gains.

During 2022 we recognized gains of $1.6 million, net of $5.4 million of losses generated by our foreign currency forward contracts and in 2021 we recognized gains of $0.4 million, net of $3.4 million of losses generated by our foreign currency forward contracts.

See Note 7 “Derivative Financial Instruments”

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The income tax provision expressed as a percentage of pre-tax income or loss in 2022 and 2021 was 23.6% and 13.0%, respectively.

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

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

The increase in the provision for income taxes from 2021 to 2022 is primarily related to the changes in our jurisdictional mix of income, offset by lower GILTI inclusion and foreign tax withholdings and other factors.

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

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

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

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

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

GAAP pretax loss 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.

DTAs would be realized.

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.

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

Based on the evidence available including a lack of sustainable earnings and history of expiring unused NOLs, and tax credits, we continue to maintain our judgement that a previously recorded valuation allowance against substantially of our net deferred tax assets in the United States is still required.

If a change in judgement regarding this valuation allowance were to occur in the future, we will record a potentially material deferred tax benefit, which could result in a favorable impact on the effective tax rate in that period.

Our valuation allowance on our DTAs at December 31, 2022, and December 25, 2021, was approximately $89.2 million and $76.3 million, respectively.

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

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.

For a full reconciliation of our effective tax rate to the U.S.

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

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

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

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

As a result of the factors set forth above, our net income was $96.8 million in 2022 and $167.3 million in 2021.

LIQUIDITY AND CAPITAL RESOURCES

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

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

In 2022, we repurchased 1,767,070 shares of our outstanding common stock for $50.7 million to be held as treasury stock.

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

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Our net cash flows provided by operating activities in 2022 totaled $112.9 million compared to $97.9 million in 2021.

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

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

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

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

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

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

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

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

The timing of payments to our suppliers resulted in the $33.1 million decrease in accounts payable, and net sales in the fourth quarter of 2022 and the timing of the resulting cash conversion cycle drove the $12.5 million decrease in accounts receivable.

Deferred profit decreased $5.0 million as a result of the recognition of revenue that had been previously deferred in accordance with our revenue recognition policy, and accrued compensation, warranty and other liabilities decreased $4.0 million due to lower business volume resulting in lower rates of accrual.

Cash provided by operating activities was also impacted by increases in income taxes payable of $20.9 million a result of higher income tax to be paid in certain jurisdictions.

During 2022, inventories increased $18.5 million due to purchases from suppliers made in the fourth quarter to fulfill anticipated future shipments of product, and other current assets increased $16.2 million due to income tax prepayments and supplier advance deposits for inventory that will be received over the next twelve months.

Investing Activities:

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

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

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

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

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

Our net cash used in investing activities in 2022 totaled $67.9 million.

In 2022 we used $208.9 million in cash for purchases of short-term investments and generated $155.4 million from sales and maturities.

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

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

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

Additions to property, plant and equipment in 2022 were $14.8 million and were made to support our operating and development activities.

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

In 2021 we used $12.0 million for additions to property, plant and equipment and we used $204.7 million in cash for purchases of short-term investments and generated $135.5 million from sales and maturities.

Our net cash provided by investing activities in 2021 also included the net cash proceeds of $120.9 million from the sale of our PCB Test business on June 24, 2021.

Financing Activities:

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

In fiscal 2022, our cash used in financing activities totaled $91.1 million.

In fiscal 2021, our cash provided by financing activities totaled $6.5 million.

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

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

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

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

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

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

Repayments of short-term borrowings and long-term debt during 2022 totaled $38.2 million, which includes $31.7 million of cash prepayments of our Term Loan Credit Facility.

During 2021 our repayments totaled $206.1 million and included $200.0 million of cash prepayments of our Term Loan Credit Facility using proceeds from our underwritten public offering and the sale of our PCB Test business to deleverage our balance sheet.

In 2021, we received proceeds under a revolving line of credit and construction loan totaling $1.4 million.

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

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

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

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

During 2022 and 2021, we made payments totaling $50.7 million and $7.3 million, respectively for shares of our common stock repurchased under our share repurchase program to be held as treasury stock.

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

In 2022, cash used to settle the minimum statutory tax withholding requirements on behalf of our employees upon vesting of restricted and performance stock awards, net of proceeds from shares issued under our employee stock purchase plan and from the exercise of employee stock options was $2.0 million.

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

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

In 2021, net cash used to settle the minimum statutory tax withholding requirements on behalf of our employees totaled $4.4 million.

The decrease in cash used to settle tax withholding requirements between 2022 and 2021 is directly correlated to the decrease in Cohu’s stock price at the end of March year over year when the majority of awards vest.

Share Repurchase Program

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

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

On October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase program.

This share repurchase program was effective as of November 2, 2021, and has no expiration date.

The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors.

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

18 unchanged sentences

During 2022, we prepaid $31.8 million in principal of our Term Loan Credit Facility for $31.7 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.

We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $0.3 million reflected in our consolidated statement of operations and a $0.4 million reduction in debt discounts and deferred financing costs in our consolidated balance sheets.

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

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

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

Approximately $67.0 million in principal of the Term Loan Credit Facility remains outstanding as of December 31, 2022.

Kita Term Loans

12 unchanged sentences

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%.

The third facility totaling €0.9 million has been fully drawn and is payable over 10 years at an annual interest rate of 1.2%.

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

24 unchanged sentences

Finance leases

Bank term loans principal and interest

Bank term loans

principal and interest

Revolving credit facilities

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity