What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-02-16 compared with 2023-02-17 · 166 added, 193 removed, 254 unchanged (59% of the section changed)

Market for Registrant ’

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

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

Market Information

stock is traded on the Nasdaq Global Select Market under the symbol “COHU”.

At February 7, 2024, Cohu had 499 stockholders of record.

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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.

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

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

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

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

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

Recent Sales of Unregistered Securities

During 2022, we did not issue any securities that were not registered under the Securities Act of 1933, as amended.

During fiscal 2023, we did not issue any securities that were not registered under the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities

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.

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.

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(in thousands except price per share)

Sep 25, 2022 - Oct 22, 2022

Oct 1, 2023 - Oct 28, 2023

Oct 29, 2023 - Nov 25, 2023

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Comparative Stock Performance Graph

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

soliciting material ”

filed ”

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

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

The information contained in this Stock Performance Graph section shall not be deemed to be “ soliciting material ” or “ filed ” with the SEC or subject to the liabilities of Section 18 of the Exchange Act except to the extent that Cohu specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

The 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.

The custom peer group in fiscal 2023 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., Novanta, Inc., Onto Innovation, OSI Systems, Inc., Photronics, Inc., Smart Global Holdings, Inc., Ultra Clean Holdings, Inc.

and Veeco Instruments, Inc.

The only change from the custom peer group used in fiscal 2022 was the removal of National Instruments Corporation, due to it being acquired by Emerson Electric Co.

In selecting our 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.

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

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

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

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

Management ’

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

Cohu is a leading supplier of semiconductor test and inspection 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.

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

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

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

For the year ended December 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.

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

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

Cohu is a leading supplier of semiconductor test and inspection and metrology automation systems (handlers), MEMS test modules, test contactors, thermal subsystems, and semiconductor ATE 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 and operating budgets of our customers, who often abruptly delay or accelerate purchases in reaction to variations in their business.

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

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

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

In 2023, global macroeconomic and geopolitical factors impacted the semiconductor industry.

In response to the higher cost of capital and slowing demand, many chip companies are cutting costs, reducing employee headcount, and pushing out capital expenditures for additional capacity.

For the year ended December 30, 2023, our net sales decreased 21.7%, year-over-year, to $636.3 million due to lower demand for automotive, industrial, consumer, mobility, and 5G-related products driven by these global economic conditions.

Over the past twelve months, we have seen improvements in our gross margin due to favorable revenue mix, and greater insourcing of contactor manufacturing.

Despite recent weakness in the semiconductor industry based on our ongoing assessment of business conditions and the results from our operations, we have continued to take actions to reduce outstanding principal debt under our Term Loan Credit Facility through voluntary prepayments.

On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding principal of our Term Loan Credit Facility.

During 2023 we repurchased 700,270 shares of our common stock for approximately $23.6 million.

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.

Our long-term market drivers and market strategy remain intact, and we are encouraged by increased use of semiconductors including the most recent developments in artificial intelligence (“AI”), along with customer traction with our new products.

We continue to capture new customers and new opportunities within our current customers’ business and remain optimistic about the long-term prospects for our business due to the increasing ubiquity of semiconductors, 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, computing, and consumer markets.

Application of Critical Accounting Estimates and Policies

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Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Our critical accounting estimates that we believe are the most important to investors’

understanding of our financial results and condition and require complex management judgment include:

Our critical accounting estimates that we believe are the most important to investors’ understanding of our financial results and condition and require complex management judgment include:

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

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tax law as described herein, which impact our tax provision;

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 assessment of recoverability of long-lived assets and 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.

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

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

Revenue for established products that have previously satisfied a customer’s acceptance requirements is generally recognized upon shipment.

In cases where a prior history of customer acceptance cannot be demonstrated or from sales where customer payment dates are not determinable and in the case of new products, revenue and cost of sales are deferred until customer acceptance has been received.

Our post-shipment obligations typically include installation and standard warranties.

The estimated fair value of installation related revenue is recognized in the period the installation is performed.

Our post-shipment obligations typically include standard warranties.

Service revenue is recognized over time as the transfer of control is completed for the related contract or upon completion of the services if they are short-term in nature.

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

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 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.

At December 30, 2023, and December 31, 2022, we had $6.2 million and $7.1 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.

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 Topic 460, Guarantees (“ASC 460”), and not as a separate performance obligation.

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 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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The deferred tax assets are reduced by a valuation allowance if, based upon all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Establishing, reducing or increasing a valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the statement of operations.

Establishing, reducing or increasing a valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the statement of income.

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.

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Segment 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.

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”).

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”).

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

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

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

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

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

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 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.

Under the income approach, we use a discounted cash flow methodology to derive an indication of value, which requires management to make 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.

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In the event we determine that an interim goodwill impairment review is required in a future period, the review may result in an impairment charge, which would have a negative impact on our results of operations.

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 within all of our identified reporting units and our indefinite-lived intangible assets.

We performed an interim assessment as of March 28, 2020 and determined that the fair values of our identified reporting units all exceeded their carrying values and we 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 the developing our interim fair value estimate resulted in a $3.9 million impairment to IPR&D recorded during the first quarter as the carrying value exceeded fair value.

During the third quarter of 2020, we became aware of additional delays in customer adoption of the same 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 a $7.3 million impairment to IPR&D.

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

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

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

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

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

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

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

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 future cash flows.

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

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Share-based compensation on performance stock units with market-based goals is calculated using a Monte Carlo simulation model on the date of the grant.

Share-based compensation expense related to stock options is recorded based on the fair value of the award on its grant date, which we estimate using the Black-Scholes valuation model.

When granted, share-based compensation expense related to stock options is recorded based on the fair value of the award on its grant date, which we estimate using the Black-Scholes valuation model.

Our estimate of share-based compensation expense requires a number of complex and subjective assumptions and 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.

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Recent Accounting Pronouncements:

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 1, “Recent Accounting Pronouncements”

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

RESULTS OF OPERATIONS

Recent Transactions Impacting Results of Operations

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 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 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.

Unless otherwise indicated, the discussion below covers the comparative results from continuing operations.

On January 30, 2023, we completed the acquisition of MCT, a U.S.

based company that 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 October 2, 2023, we acquired EQT, a Singapore-based company that is a provider of semiconductor test contactors and other test consumables.

MCT and EQT are included in Cohu’s consolidated results from operations as of the date of they were acquired by Cohu.

In 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.

The following table summarizes certain operating data as a percentage of net sales:

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Impairment charges

Gain on sale of facilities

Income from operations

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

in Part II, Item 7 in our 2021 Annual Report on Form 10-K, filed with the SEC on February 18, 2022, for comparative discussion of our fiscal years ended December 25, 2021 and December 26, 2020.

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2022 Annual Report on Form 10-K, filed with the SEC on February 17, 2023, for comparative discussion of our fiscal years ended December 31, 2022 and December 25, 2021.

2023 Compared to 2022

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.

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.

Cohu’s consolidated net sales decreased 21.7% from $812.8 million in 2022 to $636.3 million in 2023.

The decrease was due to the current global macroeconomic environment, which is driving lower demand for automotive, industrial, and mobility products (including 5G-related products).

Our consolidated net sales in 2023 also include the net sales of MCT and EQT, which Cohu acquired during 2023, and totaled $13.8 million.

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

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

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

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

Our gross margin, as a percentage of net sales, increased to 47.6% in 2023 from 47.2% in 2022.

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

During 2023, our gross margin improved compared to 2022 due to favorable product mix and increased insourcing of contactor manufacturing.

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

During 2023, we recorded net charges to cost of sales of approximately $4.5 million for excess and obsolete inventory.

In 2022, net charges to cost of sales for excess and obsolete inventory were $7.2 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 30, 2023.

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

Research and Development Expense ( “

R&D Expense ”

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

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

Our future operating results depend, to a considerable extent, on our ability to maintain a competitive advantage in the products we provide, and historically we have maintained our commitment to investing in R&D in order to be able to continue to offer new products to our customers.

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.

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 ( “

SG&A Expense ”

R&D expense in 2023 was $88.6 million, or 13.9% of net sales, compared to $92.6 million, or 11.4% of net sales in 2022.

R&D expenses decreased during fiscal 2023 due to lower spending on material costs associated with product development during the current year.

Our R&D costs in 2023 include $0.9 million of incremental R&D costs from MCT and EQT.

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

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

SG&A expense as a percentage of net sales 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.

SG&A expense as a percentage of net sales increased to 20.8% in 2023, from 16.2% in 2022, increasing from $131.4 million in 2022 to $132.2 million in 2023.

The increase in SG&A expense during 2023 resulted from $2.5 million of incremental SG&A costs from the operations of MCT and EQT and $1.6 million of transaction related costs incurred specifically related to the acquisitions of MCT and EQT.

Amortization of Purchased Intangible Assets

Amortization of purchased intangibles is the process of expensing the cost of an intangible asset acquired through a business combination over the projected life of the asset.

Amortization of acquisition-related intangible assets was $33.2 million and $35.4 million for 2022 and 2021, respectively.

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

Gain on sale of PCB Test Business

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

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

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

Amortization of acquisition-related intangible assets was $36.4 million and $33.2 million for 2023 and 2022, respectively.

The increase in expenses recorded during the current year was a result of the amortization of acquired intangible assets from MCT and EQT.

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 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”

in Part IV, Item 15(a) of this Form 10-K for additional information with respect to restructuring charges.

Impairment Charges

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.

After 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.

During the first quarter of 2023, we began a strategic restructuring and integration program in connection with the acquisition of MCT.

In connection with these integration plans, we recorded restructuring charges totaling $2.4 million and $0.6 million in 2023 and 2022, respectively.

Restructuring costs incurred in 2023 relate to the integration of MCT and restructuring costs incurred in 2022 relate to the integration of Xcerra.

See Note 4, “Restructuring Charges” in Part IV, Item 15(a) of this Form 10-K for additional information with respect to restructuring charges.

Interest Expense and Income

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

Interest expense was $3.4 million in 2023 compared to $4.2 million in 2022.

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.

Interest income was $11.5 million and $4.0 million in 2023 and 2022, respectively.

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

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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”

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

During 2023, the U.S.

Dollar weakened against foreign currencies we operate in resulting in foreign currency losses.

During 2023 we recognized losses of $5.2 million, net of $2.1 million of gains generated by our foreign currency forward contracts.

In 2022, the U.S.

Dollar strengthened against foreign currencies we operate in resulting in foreign currency gains.

In 2022 we recognized gains of $1.6 million, net of $5.4 million of losses generated by our foreign currency forward contracts.

See Note 8 “Derivative Financial Instruments” in Part IV, Item 15(a) of this Form 10-K for additional information with respect to our foreign currency forward contracts.

The income tax provision expressed as a percentage of pre-tax income or loss in 2023 and 2022 was 38.6% and 23.6%, respectively.

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”

realization standard.

The provision for income taxes decreased from $29.9 million in 2022 to $17.7 million in 2023 primarily due to the reduction in pre-tax income from continuing operations, a lower GILTI inclusion, and higher stock-based compensation deductions, offset by changes in our jurisdictional mix of income.

The four sources of taxable income that must be considered in determining whether DTAs will be realized are, (1) future reversals of existing taxable temporary differences (i.e.

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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.

Our valuation allowance on our DTAs at December 30, 2023, and December 31, 2022, was approximately $99.9 million and $89.2 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.

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.

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

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

As a result of the factors set forth above, our net income was $28.2 million in 2023 and $96.8 million in 2022.

LIQUIDITY AND CAPITAL RESOURCES

Our business is dependent on capital expenditures by semiconductor manufacturers and test subcontractors that are, in turn, dependent on the current and anticipated market demand for semiconductors.

The seasonal and volatile nature of demand for semiconductor equipment, our primary industry, makes estimates of future revenues, results of operations and net cash flows difficult.

The cyclical, seasonal and volatile nature of demand for semiconductor equipment, our primary industry, makes estimates of future revenues, results of operations and net cash flows difficult.

Our primary historical source of liquidity and capital resources has been cash flow generated by operations and we manage our business to maximize operating cash flows as our primary source of liquidity.

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

As of December 31, 2022, $154.5 million or 40.1% of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries.

As of December 30, 2023, $155.7 million or 46.4% of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries.

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

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

At December 31, 2022, our total indebtedness, net of discount and deferred financing costs, was $79.0 million, which included $66.2 million outstanding under the Term Loan Credit Facility, $2.5 million outstanding under Kita’s term loans, $8.4 million outstanding under Cohu GmbH’s construction loans, and $1.9 million outstanding under Kita’s lines of credit.

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

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

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

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

At December 30, 2023, our total indebtedness, net of discount and deferred financing costs, was $40.6 million, which included $29.1 million outstanding under the Term Loan Credit Facility, $2.1 million outstanding under Kita’s term loans, $7.6 million outstanding under Cohu GmbH’s construction loans, and $1.8 million outstanding under Kita’s lines of credit.

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

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

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

On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding principal of our Term Loan Credit Facility.

In 2023 and 2022, we repurchased 700,270 shares and 1,767,070 shares of our outstanding common stock for $23.6 million and $50.7 million to be held as treasury stock, respectively.

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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Additional financing may not be available or not available on terms favorable to us.

A discussion of cash flows for the year ended December 26, 2020 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

under the heading “Liquidity and Capital Resources”

in our Annual Report on Form 10-K for the year ended December 25, 2021, filed with the SEC on February 18, 2022, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

A discussion of cash flows for the year ended December 25, 2021 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 17, 2023, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

Working Capital:

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(in thousands)

Percentage Change

Cash, cash equivalents and short-term investments

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

Our net cash flows provided by operating activities in 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 net income as compared to a net loss in the prior year.

Our net cash flows provided by operating activities in 2023 totaled $101.5 million compared to $112.9 million in 2022.

The decrease in cash provided by operating activities in the current year was a result of weaker business conditions.

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.

The timing of payments to our suppliers resulted in the $21.4 million decrease in accounts payable, and net sales in the fourth quarter of 2023 and the timing of the resulting cash conversion cycle drove the $61.9 million decrease in accounts receivable.

Deferred profit decreased $4.4 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 $14.9 million due to lower business volume resulting in lower rates of accrual.

Cash provided by operating activities was also impacted by decreases in income taxes payable of $24.8 million a result of payments made.

During 2023, inventories decreased $12.8 million due to lower business volume and strict inventory management, and other current assets increased $10.9 million due to a reduction in prepaid expenses.

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 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.

Our net cash used in investing activities in 2023 totaled $30.2 million.

In 2023 we used $97.3 million in cash for purchases of short-term investments and generated $152.6 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 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.

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 2023, we used $26.3 million of cash, net of cash received, for the acquisition of MCT which was a strategic transaction for our test handler group.

In 2023, we also used $43.4 million of cash, net of cash received, for the acquisition of EQT, which was a strategic transaction for our interface solutions group.

Additions to property, plant and equipment in 2023 were $16.1 million and were made to support our operating and development activities.

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

In 2022 we used $14.8 million for additions to property, plant and equipment and we used $208.9 million in cash for purchases of short-term investments and generated $155.4 million from sales and maturities.

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.

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.

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.

In fiscal 2023, our cash used in financing activities totaled $68.1 million.

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

Repayments of short-term borrowings and long-term debt during 2023 totaled $38.8 million, which includes $34.1 million of cash prepayments of our Term Loan Credit Facility.

During 2022 our repayments totaled $38.2 million and included $31.7 million of cash prepayments of our Term Loan Credit Facility.

During 2023 and 2022, we made payments totaling $23.6 million and $50.7 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.

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.

In 2023, 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 $5.7 million.

In 2022, net cash used to settle the minimum statutory tax withholding requirements on behalf of our employees totaled $2.0 million.

The increase in cash used to settle tax withholding requirements between 2023 and 2022 is directly correlated to the increase in Cohu’s stock price at the end of March year over year when the majority of awards vest.

Share Repurchase Program

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

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

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

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

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

For the year ended December 30, 2023, we repurchased 700,270 shares of our common stock for $23.6 million to be held as treasury stock.

As of December 30, 2023, we may purchase up to $58.3 million of shares of our common stock under our share repurchase program.

Capital Resources

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Credit Agreement

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

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

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

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

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

At December 31, 2022, the outstanding loan balance, net of discount and deferred financing costs, was $66.2 million and $3.2 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, net of discount and deferred financing costs, was $101.6 million and $10.1 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

As of December 31, 2022, the fair value of the debt was $66.6 million.

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

The loans under the Term Loan Credit Facility bore interest, at Cohu’s option, at a floating annual rate equal to the London Interbank Offered Rate (“LIBOR”) plus a margin of 3.00%.

On June 16, 2023, in connection with the discontinuation of LIBOR, we entered into an amendment to our Term Loan Credit Facility, which provided for the transition of the benchmark interest rate from LIBOR to the Secured Overnight Financing Rate (“SOFR” or “Term SOFR”).

Effective with the interest period beginning July 1, 2023, LIBOR was replaced with Adjusted Term SOFR, a floating annual rate equal to SOFR plus a margin of 3.0%.

At December 30, 2023, the outstanding loan balance, net of discount and deferred financing costs, was $29.1 million and $3.4 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

At December 31, 2022, the outstanding loan balance, net of discount and deferred financing costs, was $66.2 million and $3.2 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

As of December 30, 2023, the fair value of the debt was $29.4 million.

The measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of December 30, 2023 and is considered a Level 2 fair value measurement.

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

Under the terms of the Credit Agreement, the lender had the option to accelerate the payment terms upon the occurrence of certain events of default set forth therein, which included:

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

As of December 30, 2023, we believe no such events of default have occurred.

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 $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 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.

During 2023, we prepaid $34.1 million in principal of our Term Loan Credit Facility in cash.

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

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

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

Approximately $29.3 million in principal of the Term Loan Credit Facility remained outstanding as of December 30, 2023.

Subsequent to our fiscal year ended December 30, 2023, on February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding amounts owed under our Term Loan Credit Facility.

We accounted for the transaction as a debt extinguishment, and in the first quarter of fiscal 2024 we will recognize a loss of $0.2 million due to the recognition of the remaining debt discount and deferred financing costs.

Kita Term Loans

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

The loans are collateralized by the facility and land, carry interest rates ranging from 0.05% to 0.45%, and expire at various dates through 2034.

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

At December 30, 2023, the outstanding loan balance was $2.1 million and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

At December 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.

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

Construction Loans

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

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

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

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

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

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

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

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

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

The third facility totaling €0.9 million has been fully drawn and 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.

At December 31, 2022, total outstanding borrowings under the Loan Facilities was $8.4 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets.

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

At December 30, 2023, total outstanding borrowings under the Loan Facilities was $7.7 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets.

At December 31, 2022, total outstanding borrowings under the Loan Facilities was $8.4 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets.

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

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

The credit facilities renew monthly and provide Kita with access to working capital totaling up to 960 million Japanese Yen of which 250 million Japanese Yen is drawn.

At December 31, 2022, total borrowings outstanding under the revolving lines of credit were $1.9 million.

The credit facilities renew monthly and provide Kita with access to working capital totaling up to 960 million Japanese Yen of which 250 million Japanese Yen is drawn.

At December 30, 2023, total borrowings outstanding under the revolving lines of credit were $1.8 million.

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

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

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

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

At December 30, 2023 and December 31, 2022, no amounts were outstanding under this line of credit.

We also have a letter of credit facility (“LC Facility”) under which Bank of America, N.A., has agreed to administer the issuance of letters of credit on our behalf.

The LC Facility requires us to maintain deposits of cash or other approved investments in amounts that approximate our outstanding letters of credit and contains customary restrictive covenants.

In addition, our wholly owned subsidiary, Xcerra, has arrangements with various financial institutions for the issuance of letters of credit and bank guarantees.

As of December 31, 2022, $0.3 million was outstanding under standby letters of credit and bank guarantees.

As of December 30, 2023, $0.3 million was outstanding under standby letters of credit and bank guarantees.

We expect that we will continue to make capital expenditures to support our business and we anticipate that present working capital will be sufficient to meet our operating requirements for at least the next twelve months.

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The following table summarizes our significant contractual obligations at December 30, 2023, and the effect such obligations are expected to have on our liquidity and cash flows in future periods.

Amounts excluded include our liability for unrecognized tax benefits that totaled approximately $33.4 million at December 31, 2022.

Amounts excluded are our liability for unrecognized tax benefits that totaled approximately $35.9 million at December 30, 2023.

We are currently unable to provide a reasonably reliable estimate of the amount or period(s) the cash settlement of this liability may occur.

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Excludes an insignificant amount of short-term lease obligations.

On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding amounts owed under our Term Loan Credit Facility.

The table above does not include pension, post-retirement benefit and warranty obligations because it is not certain when these liabilities will be funded.

For additional information regarding our pension and post-retirement benefits obligations see Note 6, “Employee Benefit Plans”

and for more information on our contractual obligations, see Note 13, “Guarantees”

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

For additional information regarding our pension and post-retirement benefits obligations see Note 6, “Employee Benefit Plans” and for more information on our contractual obligations, see Note 14, “Guarantees” in Part IV, Item 15(a) of this Form 10-K.

Commitments to contract manufacturers and suppliers.

From time-to-time, we enter into commitments with our vendors and outsourcing partners to purchase inventory at fixed prices or in guaranteed quantities. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements.

From time-to-time, we enter into commitments with our vendors and outsourcing partners to purchase inventory at fixed prices or in guaranteed quantities.

We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements.

Our purchase orders are based on our current manufacturing needs and are fulfilled by our vendors within relatively short time horizons.

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During the ordinary course of business, we provide standby letters of credit instruments to certain parties as required.

As of December 31, 2022, $0.3 million was outstanding under standby letters of credit.

As of December 30, 2023, $0.3 million was outstanding under standby letters of credit.

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