What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-17 compared with 2022-02-18 · 286 added, 333 removed, 1728 unchanged (26% of the section changed)

14 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 25, 2021 and December 26, 2020, and the related consolidated statements of operations, comprehensive income (loss), stockholders’

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and December 25, 2021, and the related consolidated statements of operations, comprehensive income, stockholders’

equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) and our report dated February 17, 2023, expressed an unqualified opinion thereon.

15 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Ernst & Young LLP

San Diego, California

4 unchanged sentences

Directors, Executive Officers and Corporate Governance.

The information under the heading “Executive Officers of the Registrant”

The information under the heading “Information About Our Executive Officers”

in Part I, Item 1 of this Form 10-K is incorporated by reference in this section.

20 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 46:

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

Description Page Number

Consolidated Balance Sheets at December 31, 2022 and December 25, 2021 45

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2022 46

Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2022 47

Consolidated Statements of Stockholders’

Equity for each of the three years in the period ended December 31, 2022 48

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2022 49

Notes to Consolidated Financial Statements 50

1 unchanged sentence

Financial Statement Schedule

Schedule II – Valuation and Qualifying Accounts

Schedule II –

Valuation and Qualifying Accounts 85

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.

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(in thousands, except par value)

ASSETS  

Current assets:

43 unchanged sentences

Customer advances

14,410  

Accrued compensation and benefits

5 unchanged sentences

Income taxes payable

26,648  

Other accrued liabilities

70 unchanged sentences

Restructuring charges (Note 4)

13,484  

Impairment charges

2 unchanged sentences

687,218  

685,696  

632,747  

Income from operations

125,557  

Income (loss) from operations

201,518  

5 unchanged sentences

Foreign transaction gain (loss)

( 3,170 )  

Gain (loss) on extinguishment of debt

( 312 )  

( 3,411 )  

Income (loss) from continuing operations before taxes

1 unchanged sentence

192,344  

Income tax provision (benefit)

Income tax provision

29,868  

25,019  

Income (loss) from continuing operations

1 unchanged sentence

167,325  

Income (loss) from discontinued operations, net of tax

Income from discontinued operations, net of tax

Net income (loss)

1 unchanged sentence

$ 167,325  

Net income attributable to noncontrolling interest

Net income (loss) attributable to Cohu

$ 167,325  

$ ( 13,801 )  

Income (loss) per share:

2 unchanged sentences

$ 3.53  

Income (loss) from discontinued operations

Net income attributable to noncontrolling interest

 Net income (loss) attributable to Cohu  

Income from discontinued operations

Net income (loss)

$ 2.01  

4 unchanged sentences

$ 3.45  

Income (loss) from discontinued operations

Net income attributable to noncontrolling interest

Net income (loss) attributable to Cohu  

Income from discontinued operations

Net income (loss)

$ 1.98  

14 unchanged sentences

The accompanying notes are an integral part of these statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to Cohu

Other comprehensive income (loss), net of tax

4 unchanged sentences

Other comprehensive income (loss), net of tax

Other comprehensive loss attributable to noncontrolling interest

Other comprehensive income (loss) attributable to Cohu

Comprehensive income (loss)

Comprehensive income attributable to noncontrolling interest

Comprehensive income (loss) attributable to Cohu

Comprehensive income

The accompanying notes are an integral part of these statements.

2 unchanged sentences

comprehensive

Noncontrolling

Balance at December 28, 2019

Cumulative effect of accounting change (a)

$ 41,395  

$ 433,190  

$ 42,517  

$ ( 34,030 )  

$ 483,072  

( 13,801 )  

Changes in cumulative translation adjustment

27,321  

Adjustments related to postretirement benefits, net of tax

Cash dividends - $ 0.06 per share

( 2,486 )  

Exercise of stock options

1 unchanged sentence

Shares issued for restricted stock units vested

( 660 )  

Repurchase and retirement of stock

Noncontrolling interest

( 209 )  

( 2,597 )  

Share-based compensation expense

Divestiture of interest in consolidated entity

14,234  

Balance at December 26, 2020

42,190  

448,194  

26,230  

( 4,326 )  

512,288  

Common stock repurchases

( 7,324 )  

167,325  

Changes in cumulative translation adjustment

( 22,956 )  

Adjustments related to postretirement benefits, net of tax

Cash dividends - $0.06 per share

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

( 67 )  

Exercise of stock options

1 unchanged sentence

Shares issued for restricted stock units vested

( 704 )  

Repurchase and retirement of stock

( 242 )  

( 10,222 )  

Impact of sale of PCB Test business

( 2,515 )  

Share-based compensation expense

14,420  

Sale of common stock, net of issuance costs

217,426  

223,119  

Balance at December 25, 2021

48,756  

674,777  

193,555  

( 27,262 )  

( 7,324 )  

882,502  

Common stock repurchases

( 50,719 )  

96,847  

Changes in cumulative translation adjustment

( 17,950 )  

Adjustments related to postretirement benefits, net of tax

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

( 694 )  

Exercise of stock options

1 unchanged sentence

Shares issued for restricted stock units vested

( 529 )  

Repurchase and retirement of stock

Impact of sale of PCB Test business

( 182 )  

( 5,523 )  

Share-based compensation expense

Sale of common stock, net of issuance costs

14,918  

Balance at December 31, 2022

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

$ 49,276  

$ 687,218  

$ 290,402  

$ ( 40,012 )  

$ ( 58,043 )  

$ 928,841  

The accompanying notes are an integral part of these statements.

2 unchanged sentences

Cash flows from operating activities:

Net income (loss) attributable to Cohu

$ 167,325  

$ ( 13,801 )  

Net income from noncontrolling interest

Net income (loss)

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

( 91 )  

( 124 )  

Gain on divestiture of consolidated entity

Net accretion on investments

(Gain) loss on extinguishment of debt

( 268 )  

Impairment charges related to indefinite lived intangibles

11,249  

Depreciation and amortization

48,568  

52,746  

58,871  

Share-based compensation expense including restructuring charges

13,792  

14,234  

14,148  

Amortization of inventory step-up and inventory related charges

Share-based compensation expense

Inventory related charges

Amortization of debt discounts and issuance costs

Accrued retiree benefits

( 500 )  

Deferred income taxes

( 5,305 )  

Changes in other assets

( 1,652 )  

Amortization of cloud-based software implementation costs

(Gain) loss from sale of property, plant and equipment

( 4,170 )  

Changes in other accrued liabilities

( 416 )  

Operating lease right-of-use assets

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

Customer advances

( 4,090 )  

11,548  

Accounts receivable  

( 59,123 )  

( 20,210 )  

21,150  

( 35,864 )  

( 14,982 )  

Accounts receivable

Accrued compensation, warranty and other liabilities

Accounts payable

17,316  

15,058  

Deferred profit

1 unchanged sentence

Income taxes payable

( 2,089 )  

Operating lease right-of-use assets

Current and long-term operating lease liabilities

( 6,852 )  

( 6,437 )  

Net cash provided by operating activities

97,729  

49,734  

17,269  

Cash flows from investing activities:

Purchases of property, plant and equipment

( 12,000 )  

( 18,660 )  

Net cash received from sale of land, facility and assets

17,025  

Purchases of short-term investments

( 204,699 )  

( 19,703 )  

Sales and maturities of short-term investments

135,549  

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:

Cash dividends paid

( 4,971 )  

Proceeds from revolving line of credit and construction loans

Repayments of long-term debt

( 206,069 )  

( 41,056 )  

Net issuance (repurchases) of stock, including awards settled in cash

( 4,390 )  

Payments on current and long-term finance lease liabilities

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 )  

Effect of exchange rate changes on cash and cash equivalents

( 3,491 )  

Net increase (decrease) in cash and cash equivalents

140,843  

( 6,572 )  

Cash and cash equivalents at beginning of year

149,358  

155,930  

164,921  

Cash and cash equivalents at end of year

290,201  

149,358  

155,930  

Cash held by discontinued operations (Note 14)

Cash and cash equivalents at end of year from continuing operations

$ 290,201  

$ 149,358  

$ 155,194  

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$ 22,717  

$ 5,772  

$ 14,942  

Cash paid for interest

$ 6,253  

$ 16,324  

$ 14,846  

Property, plant and equipment purchases included in accounts payable

$ 1,063  

$ 1,601  

Inventory capitalized as capital assets

$ 1,635  

$ 1,050  

The accompanying notes are an integral part of these statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 unchanged sentences

and the “Company”), through our wholly owned subsidiaries, is a provider of semiconductor test equipment and services.

Our consolidated financial statements include the accounts of Cohu and our wholly owned subsidiaries and variable interest entities (“VIEs”) for which we are the primary beneficiary.

Our consolidated financial statements include the accounts of Cohu and our wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

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Our fiscal years ended on December 25, 2021, and December 26, 2020, 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 –

We follow ASC Topic 810 - 10 - 15 guidance with respect to accounting for VIEs.

On December 28, 2019, we divested our entire 20 % interest in ALBS Solutions Sdn Bhd (“ALBS”), our only VIE.

As a result of the divestment, we no longer had a controlling interest in ALBS and stopped consolidating ALBS as of that date.

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.

Business Divestitures and Discontinued Operations –

14 unchanged sentences

For purposes of computing diluted income (loss) per share, stock options with exercise prices that exceed the average fair market value of our common stock for the period are excluded.

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

For the years ended December 31, 2022, December 25, 2021 and December 26, 2020, approximately 261,000 , 180,000 , and 113,000 shares, respectively, of potentially issuable shares of our common stock were excluded from the computation.

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

8 unchanged sentences

41,854  

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

For the year ended December 26, 2020, Cohu has utilized the “control number”

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

1 unchanged sentence

The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents and Short-term Investments –

12 unchanged sentences

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 at December 25, 2021, 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 regarding expected credit losses.

While we believe that our allowance for credit losses is adequate and represents our best estimate at December 31, 2022, we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates regarding expected credit losses.

Inventories –

3 unchanged sentences

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 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 $ 7.2  million and $ 7.1  million in 2022 and 2021, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories by category were as follows (in thousands) :

19 unchanged sentences

Land is not depreciated.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

16 unchanged sentences

Depreciation expense was $ 12.8  million in 2022, $ 13.2  million in 2021 and $ 14.0  million in 2020.

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

The decrease in depreciation expense recognized is a result of assets becoming fully depreciated.

Cloud Computing Implementation Costs –

2 unchanged sentences

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 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.

Total unamortized capitalized cloud computing implementation costs totaled $ 14.7  million and $ 13.5  million at December 31, 2022 and December 25, 2021, respectively.

These amounts are recorded within other assets in our consolidated balance sheets.

During the fourth quarter of 2022 the final phase of ERP system development was completed.

Implementation costs are amortized using the straight-line method over seven years and we recorded $ 2.1  million and $ 1.6  million in amortization expense during the years ended December 31, 2022 and December 25, 2021, respectively.

4 unchanged sentences

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”).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As a result, we report in one segment, Semiconductor Test & Inspection.

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

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

2 unchanged sentences

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.

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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

24 unchanged sentences

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 –

5 unchanged sentences

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

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.

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 of January 1, 2019, or the commencement date for leases entered into after the adoption date.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rates for the remaining lease terms based on the information available at the adoption date or commencement date in determining the present value of future payments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The operating lease ROU asset also includes any lease payments made, lease incentives, favorable and unfavorable lease terms recognized in business acquisitions and excludes initial direct costs incurred and variable lease payments.

3 unchanged sentences

Rent expense for minimum payments under operating leases is recognized on a straight-line basis over the term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet but recognized in our consolidated statements of operations on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet but recognized in our consolidated statements of operations on a straight-line basis over the lease term.

We account for lease and non-lease components as a single lease component and include both in our calculation of the ROU assets and lease liabilities.

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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.

3 unchanged sentences

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 ”

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

), 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

3 unchanged sentences

$ 636,007  

$ 583,329  

Advertising Costs –

1 unchanged sentence

Restructuring Costs –

We record restructuring activities including costs for one -time termination benefits in accordance with ASC Topic 420 (“ASC 420”

), Exit or Disposal Cost Obligations.

We record restructuring activities including costs for one -time termination benefits in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”

The timing of recognition for severance costs accounted for under ASC 420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits.

3 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.

We defer costs related to the issuance of debt.

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.

1 unchanged sentence

Amortization related to deferred debt issuance costs and original discount costs was $ 0.3  million, $ 0.6  million and $ 1.2  million for the years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation –

We measure and recognize all share-based compensation under the fair value method.

Our estimate of share-based compensation expense requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options) and related tax effects.

Our estimate of share-based compensation expense requires a number of assumptions including our stock price volatility, employee exercise patterns (expected life of the options) and related tax effects.

The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

5 unchanged sentences

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

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.

During the years ended December 31, 2022 and December 25, 2021, in our consolidated statement of operations we recognized foreign exchange gains totaling $ 1.6  million and $ 0.4  million, respectively.

During the year ended December 26, 2020, we recognized a foreign exchange loss of $3.2  million.

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.

10 unchanged sentences

Our accumulated other comprehensive loss totaled approximately $ 40.0  million at December 31, 2022, and $ 27.3  million at December 25, 2021, 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 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 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.

Dollars, changes in unrealized gains and losses on investments and adjustments to accumulated postretirement benefit obligations.

Dollar strengthened relative to certain foreign currencies in countries where we have operations as of December 25, 2021 and continued to strengthen as of December 31, 2022 and consequently, our accumulated other comprehensive loss attributed to foreign currency translation adjustments increased by $ 23.0  million and $ 18.0  million during the years ended December 25, 2021 and December 31, 2022, respectively.

Reclassification adjustments from accumulated other comprehensive loss during 2022 and 2021 were not significant.

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

Accumulated Other Comprehensive Income (Loss) ”.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income ”.

Recent Accounting Pronouncements

7 unchanged sentences

ASU 2020 - 04 was effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022.

In December 2022, the FASB issued ASU 2022 - 06, Reference Rate Reform (Topic 848 ):

Deferral of the Sunset Date of Topic 848 , to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Goodwill and Purchased Intangible Assets

6 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  

Sale of PCB Test Business (1)

( 21,899 )  

Impact of currency exchange

28 unchanged sentences

$ 138,912  

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.

We completed our required annual goodwill and indefinite-lived intangible impairment testing as of October 1, 2021, the first day of our fourth quarter and concluded there were no impairments of goodwill within our reporting units or our indefinite-lived intangible assets at that time.

We completed our required annual goodwill impairment testing as of October 1, 2022, the first day of our fourth quarter and concluded there were no impairments of goodwill within our reporting units or our indefinite-lived intangible assets at that time.

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.

We performed an interim assessment as of March 28, 2020 and concluded there was no impairment of goodwill within our reporting units.

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

During the third quarter of 2020, we became aware of additional delays in customer adoption of these new products under development leading us to re-evaluate the fair value of these projects and we determined that the carrying value exceeded the fair value and, as a result, we recorded an additional $ 7.3  million impairment to IPR&D.

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

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.

During the fourth quarter of 2021 we completed and transferred to developed technology an 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.

6 unchanged sentences

and thereafter $ 14.8  million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Borrowings and Credit Agreements

33 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 31, 2022 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:

2 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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Kita Term Loans

2 unchanged sentences

At December 31, 2022, the outstanding loan balance was $ 2.5  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.

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.

The fair value of the debt approximates the carrying value at December 31, 2022.

1 unchanged sentence

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.

In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series of 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 %.

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.

2 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.

3 unchanged sentences

The fair value of the debt approximates the carrying value at December 31, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lines of Credit

6 unchanged sentences

At December 31, 2022, and December 25, 2021, no amounts were outstanding under this line of credit.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring Charges

5 unchanged sentences

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”

As a result of the activities described above, we recognized total pretax charges of $ 0.2  million, $ 1.3  million and $ 11.4  million for the years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively, that are within the scope of ASC 420.

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

7 unchanged sentences

( 454 )  

Other restructuring costs

( 558 )  

Other restructuring costs

$ 1,265  

2 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 31, 2022 and December 25, 2021 (in thousands) :

8 unchanged sentences

Impact of currency exchange

( 94 )  

Balance, December 25, 2021

4 unchanged sentences

Impact of currency exchange

( 94 )  

Balance, December 31, 2022

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.

The estimated costs associated with the employee severance and facility consolidation actions will be paid predominantly in cash.

At December 31, 2022, we have no accrual for restructuring.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments Measured at Fair Value

13 unchanged sentences

treasury securities

34,614  

34,197  

Bank certificates of deposit

36,500  

36,479  

Asset-backed securities

12,727  

12,658  

Foreign government security

1 unchanged sentence

$ 143,235  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 25, 2021

3 unchanged sentences

treasury securities

Government-sponsored enterprise securities

Bank certificates of deposit

2 unchanged sentences

$ 89,704  

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

As of December 31, 2022, the cost and fair value of investments with loss positions were approximately $ 86.3  million and $ 85.5  million, respectively.

As of December 25, 2021, the cost and fair value of investments with loss positions was 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.

8 unchanged sentences

30,552  

$ 143,952  

$ 143,235  

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

5 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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) :

3 unchanged sentences

$ 190,371  

Corporate debt securities

69,753  

Money market funds

1 unchanged sentence

40,290  

Foreign government security

Corporate debt securities

Bank certificates of deposit

37,480  

1 unchanged sentence

treasury securities

Bank certificates of deposit

34,196  

Asset-backed securities

12,658  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12,658  

Foreign government security

$ 190,371  

$ 195,205  

$ 385,576  

Fair value measurements at December 25, 2021 using:

9 unchanged sentences

treasury securities

Government-sponsored enterprise securities

Foreign government security

5 unchanged sentences

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 was merged into Cohu’s.

Cohu maintains a defined contribution 401 (k) retirement savings plan covering all salaried and hourly U.S.

Participation is voluntary and participants’

13 unchanged sentences

( 128 )  

Net periodic costs

( 487 )  

Net periodic costs

$ 1,228  

34 unchanged sentences

At December 31, 2022 and December 25, 2021, 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 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.

Amounts recognized in accumulated other comprehensive loss net of tax related to the Swiss Plan consisted of an unrecognized net actuarial gains totaling $ 6.8 million and $ 0.9 million at December 31, 2022 and December 25, 2021, respectively.

Actuarial gains of $ 6.0  million and $ 1.2  million for the years ended December 31, 2022 and December 25, 2021, respectively, were due to assumption changes as well as plan experience.

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

27 unchanged sentences

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

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

The net periodic benefit cost was $ 0.1  million in both 2022 and 2020 and was insignificant in 2021.

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

The weighted average discount rate used in determining the accumulated post-retirement benefit obligation was 4.9 % in 2022, 2.5 % in 2021 and 2.1 % in 2020.

The annual rates of increase of the cost of health benefits was assumed to be 6.6 % in 2022.

This rate was then assumed to decrease 0.28 % per year to 4.4 % in 2030 and remain level thereafter.

The annual rates of increase of the cost of health benefits was assumed to be 6.8 % and 7.2 % in 2023 for pre- 65 participants and post- 65 participants, respectively.

This rate was then assumed to decrease 0.27 % per year and 0.31 % per year for pre- 65 participants and post- 65 participants, respectively, to 4.4 % in 2032 and remain level thereafter.

Contributions to the post-retirement health benefit plan are expected to total $ 0.1 million in 

33 unchanged sentences

2021 - 161,351 and 2020 - 242,633.

At December 25, 2021, there were 507,353  shares reserved for issuance under the Plan.

Stock Options –

At December 25, 2021, a total of 1,375,536  shares were available for future equity grants under the Cohu, Inc.

2005 Equity Incentive Plan (“the 2005 Plan”).

At December 31, 2022, there were 346,498  shares available for issuance under the Plan.

Employee Stock Benefit Plans –

Our 2005 Equity Incentive Plan ( “2005 Plan”) is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests.

Awards that may be granted under the program include, but are not limited to, non-qualified and incentive stock options, restricted stock units, and performance stock units.

We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of restricted stock units, and performance stock units with newly issued common shares.

At December 31, 2022, there were 914,705 shares available for future equity grants under the 2005 Plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

Under the 2005 Plan stock options may be granted to employees, consultants and outside directors to purchase a fixed number of shares of our common stock at prices not less than 100 % of the fair market value at the date of grant.

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2022, 2021 and 2020 no stock options were granted and the activity under our share-based compensation plans was as follows:

13 unchanged sentences

$ 10.01  

$ 10.27  

The aggregate intrinsic value of options exercised was $ 0.2  million in 2022, $ 8.4  million in 2021, and $ 1.3  million in 2020.

At December 25, 2021, the aggregate intrinsic value of options outstanding, vested and expected to vest and exercisable was $ 0.4  million.

Information about stock options outstanding at December 25, 2021 is as follows (options in thousands) :

Options Outstanding

Options Exercisable

Exercise Price

$ 9.44  

Restricted Stock Units –

At December 31, 2022, we had no stock options exercisable and outstanding.

Restricted Stock Units

Under our equity incentive plans, restricted stock units (“RSUs”) may be granted to employees, consultants and outside directors.

28 unchanged sentences

$ 15.16  

Equity-Based Performance Stock Units –

Equity-Based Performance Stock Units

We grant performance stock units (“PSUs”) to certain senior executives as a part of our long-term equity compensation program.

45 unchanged sentences

Share-based compensation expense related to restricted stock unit awards is calculated based on the market price of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock unit.

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.

Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020.

All awards granted in 2022, 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.

48 unchanged sentences

(Local Currency)

Contract Amount

Contract Amount (U.S.

81,677  

13 unchanged sentences

$ ( 5,356 )  

$ ( 3,428 )  

Common Stock Issuance

3 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share Repurchase Program

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

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, 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.

2 unchanged sentences

For the year ended December 31, 2022, we repurchased 1,767,070 shares of our common stock for $ 50.7  million to be held as treasury stock.

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

As of December 31, 2022, we may purchase up to $ 82.0  million of shares of our common stock under our share repurchase program.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 4, 2022, our stockholders approved an amendment to Cohu’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 60,000,000 to 90,000,000 shares.

Accordingly, on May 5, 2022, we filed with the Secretary of State of the State of Delaware an Amended and Restated Certificate of Incorporation implementing the approved changes (the “Restated Certificate”), and the Restated Certificate was effective as of that date.

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

2 unchanged sentences

$ 1,103  

31,307  

22,862  

Total current

1 unchanged sentence

24,066  

( 3,495 )  

Total deferred

1 unchanged sentence

$ 29,868  

$ 25,019  

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

6 unchanged sentences

$ 126,715  

$ 192,344  

Deferred tax effects

14 unchanged sentences

31,264  

Capitalized R&D

19,819  

Accrued employee benefits

36 unchanged sentences

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified.

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 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 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.

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.

We have evaluated our DTAs each reporting period, including an assessment of taxable income in prior carryback years, future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and prudent and feasible tax planning strategies that we would be willing to undertake to prevent a deferred tax asset from otherwise expiring.

The assessment regarding whether a valuation allowance is required or whether a change in judgement regarding the valuation allowance has occurred also considers all available positive and negative evidence, including but not limited to:

Nature, frequency, and severity of cumulative losses in recent years

Duration of statutory carryforward and carryback periods

Statutory limitations against utilization of tax attribute carryforwards against taxable income

Historical experience with tax attributes expiring unused

Near- and medium-term financial outlook

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 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 weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.

Accordingly, it is generally difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years.

We use the actual results for the last two years and current year results as the primary measure of cumulative losses in recent years.

The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events recognized in the financial statements or tax returns and future profitability.

The recognition of deferred tax assets represents our best estimate of those future events.

Changes in the current estimates, due to unanticipated events or otherwise, could have a material effect on our results of operations and financial condition.

In certain tax jurisdictions, our analysis indicates that it has cumulative losses in recent years.

This is considered significant negative evidence, which is objective and veritable and, therefore, difficult to overcome.

However, the cumulative loss position is not solely determinative and, accordingly, we consider all other available positive and negative evidence in this analysis.

Based on the evidence available including a lack of sustainable earnings and history of expiring unused NOLs, and tax credits, we continue to maintain the judgement that a previously recorded valuation allowance against substantially all 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 reconciliation of income tax computed at the U.S.

9 unchanged sentences

( 787 )  

( 118 )  

Federal R&D credits

3 unchanged sentences

( 572 )  

( 4,802 )  

Excess executive compensation

2 unchanged sentences

( 9,882 )  

11,270  

Exemption of PTG gain

6 unchanged sentences

( 4,897 )  

$ 29,868  

$ 25,019  

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

2 unchanged sentences

At December 31, 2022, we had federal, state and foreign net operating loss carryforwards of approximately $ 140.0  million, $ 113.9  million and $ 9.0  million, respectively, that expire in various tax years beginning in 2023 through 2041 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 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 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’ve also analyzed and determined that there were no subsequent ownership changes during the three -year period ending December 25, 2021.

We also have federal and state tax credit carryforwards at December 31, 2022 of approximately $ 3.7  million and $ 32.9 million, respectively, certain of which expire in various tax years beginning in 2023 through 2041 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 laws.

We analyzed and determined that there were no ownership changes during the three -year period ending December 31, 2022.

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

Future changes in the ownership of Cohu could further limit the utilization of these carryforwards.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have certain tax holidays with respect to our operations in Malaysia and the Philippines.

These holidays require compliance with certain conditions and expire at various dates through 2027.

The impact of these holidays was an increase in net income of approximately $ 4.5  million or $ 0.09  per share in 2021, $ 3.6  million, or $ 0.09  per share, in 2020 and $ 2.1  million, or $ 0.05  per share, in fiscal 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The impact of these holidays was an increase in net income of approximately $ 4.5  million or $ 0.09  per share in both 2022 and 2021, and $ 3.6  million, or $ 0.09  per share, in fiscal 2020.

A reconciliation of our gross unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

12 unchanged sentences

Reductions due to settlements

( 1,134 )  

Foreign exchange rate impact

( 151 )  

Balance at end of year

7 unchanged sentences

2022, and December 25, 2021, respectively.

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

Interest expense, net of accrued interest reversed, was $( 0.1 ) million in 2022, $( 0.2 ) million in 2021 and $( 0.3 ) million in 2020.

federal and state income tax returns for years after 2018 and 2017, respectively, remain open to examination, subject to the statute of limitations.

3 unchanged sentences

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.

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

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

1 unchanged sentence

Segment and Geographic Information

We applied the provisions of ASC Topic 280, Segment Reporting , (“ASC 280”

), which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue.

We applied the provisions of ASC 280, which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue.

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 three identified operating segments are:

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

THG, STG and 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.

As a result, we report in one segment, Semiconductor Test & Inspection.

All amounts presented in our consolidated balance sheet as of December 31, 2022, and our consolidated statement of operations for the twelve months ended December 31, 2022, represents the financial position and results of our remaining reportable segment.

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

(in thousands)

5 unchanged sentences

50,767  

42,451  

Total consolidated net sales for reportable segments

1 unchanged sentence

$ 636,007  

$ 583,329  

Segment profit (loss) before tax:

1 unchanged sentence

$ 138,026  

$ ( 2,497 )  

Profit (loss) for reportable segments

Profit for reportable segments

141,933  

2 unchanged sentences

( 10,819 )  

( 4,384 )  

Gain on sale of PCB Test business

2 unchanged sentences

( 6,413 )  

( 13,759 )  

Interest income

3 unchanged sentences

$ 192,344  

$ ( 13,177 )  

(in thousands)

3 unchanged sentences

$ 51,548  

$ 56,621  

Total depreciation and amortization

1 unchanged sentence

$ 52,746  

$ 58,871  

Capital expenditures by segment:

2 unchanged sentences

$ 18,616  

$ 17,831  

Total consolidated capital expenditures

1 unchanged sentence

$ 18,660  

$ 18,000  

(in thousands)

3 unchanged sentences

66,826  

$ 998,756  

66,826  

56,938  

Total assets for reportable segments

1,034,854  

1,055,694  

Corporate, principally cash and investments

55,492  

18,398  

Discontinued operations

1 unchanged sentence

$ 1,090,346  

$ 1,077,710  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

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.

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

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

9 unchanged sentences

57,893  

United States

79,093  

1 unchanged sentence

108,694  

United States

59,835  

71 unchanged sentences

Finance leases

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

Finance lease assets are recorded net of accumulated amortization of $ 0.2 million and $ 0.1 million in 2022 and 2021, respectively.

The components of lease expense were as follows:

24 unchanged sentences

$ 24,185  

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

37 unchanged sentences

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.

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

3 unchanged sentences

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 –

We evaluated the guidance in ASC Topic 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

Fixtures Services Business ( “

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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.

During the fourth quarter of 2019, we recorded a charge of $ 1.1  million to impair goodwill and purchased intangible assets associated with this operating segment as the estimated fair value less cost to sell exceeded the carrying value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

$ 6,136  

Operating income

Loss from impairment of FSG

Gain on sale of FSG

Income (loss) before taxes

Income before taxes

Income tax provision

Income (loss), net of tax

Income, net of tax

Accumulated Other Comprehensive Income (Loss)

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$ 27,321  

Adjustments related to postretirement benefits

( 216 )  

Other comprehensive income (loss)

Other comprehensive income

$ 29,920  

$ ( 216 )  

$ 29,704  

Year ended December 25, 2021

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( 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 loss

$ ( 22,521 )  

$ ( 415 )  

Year ended December 31, 2022

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$ ( 17,991 )  

$ ( 97 )  

Adjustments related to postretirement benefits

( 796 )  

Change in unrealized gain/loss on investments

$ 5,894  

Reclassification due to sale of PBC Test Business

Change in unrealized gain/loss on investments

( 694 )  

Other comprehensive income (loss)

Other comprehensive loss

$ ( 11,995 )  

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Accumulated net adjustments related to postretirement benefits

$ 1,153  

Accumulated net unrealized gain/loss on investments

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Accumulated reclassification due to sale of PBC Test Business

( 2,515 )  

Total accumulated other comprehensive loss

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

Subsequent Event

On January 30, 2023, we completed the acquisition of all the outstanding membership units of MCT Worldwide, LLC.

(“MCT”), pursuant to a membership unit purchase agreement dated January 30, 2023, by and among MCT Worldwide, LLC, Arise Acquisition Co., LLC, The Seaport Group LLC Profit Sharing Plan, and Delta Design, Inc., a wholly owned subsidiary of Cohu (“the Acquisition”).

MCT is a U.S.

based company with a principal manufacturing site in Penang Malaysia.

MCT provides automated solutions for the semiconductor industry and designs, manufactures, markets, services and distributes strip test handlers, film frame handlers and laser mark handlers.

On January 30, 2023, we made a cash payment totaling $ 28.0  million for MCT.

The Acquisition is a cash free debt free transaction and is subject to a working capital adjustment for the difference between the actual and estimated net working capital.

In connection with the Acquisition, we incurred approximately $ 0.1  million in acquisition-related costs, which were expensed as selling, general and administrative costs during the year ended December 31, 2022.

Additional acquisition-related costs will be incurred during fiscal 2023.

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Cohu, Inc.

(the Company) as of December 25, 2021 and December 26, 2020, and the related consolidated statements of operations, comprehensive income (loss), stockholders’

(the Company) as of December 31, 2022 and December 25, 2021, and the related consolidated statements of operations, comprehensive income, stockholders’

equity, and cash flows for each of the three years in the period ended December 31, 2022, 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”).

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

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:

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Valuation of inventories

Description of the Matter

Description of 

As of December 31, 2022, the Company’s consolidated inventories balance was $170.1 million.

As described in Note 1 to the consolidated financial statements, the Company values its inventories at lower of cost, determine on a first-in, first-out basis, or net realizable value.

As described in Note 1 to the consolidated financial statements, the Company values its inventories at lower of cost, determined on a first-in, first-out basis, or net realizable value.

Obsolete inventory or inventory in excess of management's estimated usage requirement is written down to its estimated net realizable value.

Auditing management’s estimates for excess and obsolete inventory involved subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company's control.

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.

How We Addressed the Matter in Our Audit

In particular, the excess and obsolete inventory calculations are sensitive to significant assumptions, including product expectations and expected future usage of individual materials.

Addressed the

Matter in Our

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.

To test the valuation of inventories, our audit procedures included, among others, evaluating the significant assumptions stated above and testing the completeness and accuracy of the underlying data used by management in the analysis of excess and obsolete inventory.

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.

We evaluated adjustments to inventory reserves for specific product expectations, 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.

/s/ Ernst & Young LLP

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001-04298) filed with the Securities and Exchange Commission on May 17, 2018

Description of Capital Stock incorporated herein by reference to Exhibit 4.1 from the Cohu, Inc.

Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2020

Description of Capital Stock

Credit and Guaranty Agreement dated as of October 1, 2018, by and among Cohu, Inc., Certain Subsidiaries of Cohu, Inc.

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Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015*

Intel Corporation Purchase Agreement Capital Equipment, Goods and Services, dated April 30, 2012, by and between Delta Design, Inc.

and Intel Corporation incorporated herein by reference to Exhibit 99.1 from the Cohu, Inc.

Current Report on Form 8-K/A (file no.

001-04298) filed August 1, 2012

Form of Indemnification Agreement, incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc.

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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 *

Severance Agreement, dated September 8, 2020, between the Company and Ian Lawee incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc.

Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 29, 2022 *

Change in Control Agreement, dated September 8, 2020, between the Company and Ian Lawee incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc.

Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 29, 2022 *

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

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

* Management contract or compensatory plan or arrangement

 Management contract or compensatory plan or arrangement

Form 10-K Summary.

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February 17, 2023

 /s/ Lynne J.

February 18, 2022

 /s/ Yon Y.

February 17, 2023

 /s/ Andreas W.

February 17, 2023

 /s/ Nina L.

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$ ( 1 )  

Year ended December 26, 2020

$ ( 41 )  

Year ended December 25, 2021

Year ended December 31, 2022

$ ( 8 )  

Reserve for excess and obsolete inventories:

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$ 23,012  

$ 26,937  

Year ended December 31, 2022

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$ 26,871  

$ 23,012  

All amounts presented above have been restated to exclude the impact of our discontinued operations.

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

What changed 10-K

Item 9A. Controls and Procedures