What changed in this filing

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Item 9A. Controls and Procedures

2024-02-16 compared with 2023-02-17 · 808 added, 1035 removed, 979 unchanged (65% of the section changed)

Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures - Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of December 30, 2023, the end of the period covered by this annual report.

Changes in Internal Control over Financial Reporting - There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management ’

s Annual Report on Internal Control Over Financial Reporting - Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Management ’ s Annual Report on Internal Control Over Financial Reporting - Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

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Opinion on Internal Control over Financial Reporting

We have audited Cohu, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Cohu, Inc.’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Cohu, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023, based on the COSO criteria.

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.

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 30, 2023 and December 31, 2022, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15(a) and our report dated February 16, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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.

Ernst & Young LLP

/s/ Ernst & Young LLP

San Diego, California

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Other Information.

Rule 10b5 - 1 Trading Plans

Our directors and executive officers may purchase or sell shares of our common stock in the market from time to time, including pursuant to equity trading plans adopted in accordance with Rule 10b5 - 1 under the Exchange Act and in compliance with guidelines specified by our insider trading policy.

In accordance with Rule 10b5 - 1 and our insider trading policy, directors, officers and certain employees who, at such time, are not in possession of material non-public information are permitted to enter into written plans that pre-establish amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our stock, including shares acquired pursuant to our equity incentive plans.

Under a Rule 10b5 - 1 trading plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them.

The use of these trading plans permits asset diversification as well as personal financial and tax planning.

Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5 - 1 plan when they are not in possession of material nonpublic information, subject to compliance with SEC rules, the terms of our insider trading policy and certain minimum holding requirements.

The following table shows the Rule 10b5 - 1 trading plans intended to satisfy the affirmative defense conditions of Rule 10b - 1 (c) adopted or terminated by our directors and executive officers during the fourth quarter of fiscal 2023.

Number of Shares

Name and Position

Adoption Date

to be Sold under Plan

Richardson , Director

Transactions by Section 16 directors and officers will be disclosed publicly through Form 144 and Form 4 filings with the SEC to the extent required by law.

No non-Rule 10b5 - 1 trading arrangements (as defined by Item 408 (a) of Regulation S-K) were entered into, adopted or terminated by any Section 16 director or officer during the fourth quarter of fiscal 2023.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

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Directors, Executive Officers and Corporate Governance.

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.

The other information required by this item is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the Securities and Exchange Commission (SEC) within 120 days after the close of fiscal 2022.

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.

The other information required by this item is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2023.

Code of Business Conduct and Code of Ethics

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These documents are available on the Investor Relations section of our website at www.cohu.com.

The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K.

The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K.

Executive Compensation.

Information regarding Executive Compensation is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2022.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2022.

Certain Relationships and Related Transactions, and Director Independence.

Information regarding Certain Relationships and Related Transactions, and Director Independence is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2022.

Principal Accounting Fees and Services.

Information regarding the Principal Accounting Fees and Services is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2022.

Exhibits, Financial Statement Schedules.

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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 51:

Description Page Number

Consolidated Balance Sheets at December 30, 2023 and December 31, 2022

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

Consolidated Statements of Income for each of the three years in the period ended December 30, 2023

Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 30, 2023

Consolidated Statements of Stockholders’

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

Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 30, 2023

Consolidated Statements of Cash Flows for each of the three years in the period ended December 30, 2023

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Financial Statement Schedule

Schedule II –

Valuation and Qualifying Accounts 85

Schedule II – Valuation and Qualifying Accounts

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

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Cash and cash equivalents

$ 242,341  

$ 290,201  

$ 245,524 $ 242,341

Short-term investments

143,235  

89,704  

90,174 143,235

Accounts receivable, net

176,148  

192,873  

170,141  

161,053  

124,624 176,148

155,793 170,141

Prepaid expenses

24,017  

16,194  

17,696 24,017

Other current assets

Total current assets

764,851  

750,793  

638,818 764,851

Property, plant and equipment, net

65,011  

63,957  

213,539  

219,791  

69,085 65,011

241,658 213,539

Intangible assets, net

140,104  

177,320  

21,105  

22,123  

151,770 140,104

32,243 21,105

Operating lease right of use assets

22,804  

25,060  

$ 1,227,414  

$ 1,259,044  

16,778 22,804

$ 1,150,352 $ 1,227,414

LIABILITIES AND STOCKHOLDERS' EQUITY

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Short-term borrowings

$ 1,907  

$ 3,059  

$ 1,773 $ 1,907

Current installments of long-term debt

11,338  

Accounts payable

51,763  

85,230  

33,600 51,763

Customer advances

Accrued compensation and benefits

38,348  

39,835  

31,897 38,348

Accrued warranty

Deferred profit

13,208  

Income taxes payable

26,648  

Other accrued liabilities

17,280  

19,002  

14,589 17,280

Total current liabilities

160,872  

192,459  

103,421 160,872

Other accrued liabilities

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Accrued retirement benefits

10,363  

18,037  

10,802 10,363

Deferred income taxes

21,359  

25,887  

23,154 21,359

Long-term debt

72,664  

103,393  

34,303 72,664

Long-term lease liabilities

19,209  

22,040  

13,175 19,209

Stockholders' equity:

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90,000 shares authorized, 49,429 shares issued and outstanding in 2023 and 49,276 shares in 2022

49,276  

48,756  

49,429 49,276

Paid-in capital

687,218  

674,777  

686,146 687,218

Treasury stock, at cost;

2,253 shares in 2023 and 1,767 shares in 2022

( 58,043 )  

( 69,184 ) ( 58,043 )

Retained earnings

290,402  

193,555  

318,558 290,402

Accumulated other comprehensive loss

( 40,012 )  

( 34,779 ) ( 40,012 )

Total stockholders' equity

928,841  

882,502  

$ 1,227,414  

$ 1,259,044  

950,170 928,841

$ 1,150,352 $ 1,227,414

The accompanying notes are an integral part of these statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

$ 812,775  

$ 887,214  

$ 636,007  

$ 636,322 $ 812,775 $ 887,214

Cost and expenses:

Cost of sales (1)

429,449  

500,253  

364,225  

333,454 429,449 500,253

Research and development

92,589  

91,963  

86,151  

88,571 92,589 91,963

Selling, general and administrative

131,390  

126,958  

129,248  

132,249 131,390 126,958

Amortization of purchased intangible assets

33,185  

35,414  

38,746  

36,355 33,185 35,414

Gain on sale of PCB Test business (2)

( 70,815 )  

- - ( 70,815 )

Restructuring charges (Note 4)

2,421 605 1,823

Impairment charges

11,249  

Gain on sale of facilities

687,218  

685,696  

632,747  

593,050 687,218 685,696

Income from operations

125,557  

201,518  

43,272 125,557 201,518

Other (expense) income:

Interest expense

( 4,177 )  

( 6,413 )  

( 3,382 ) ( 4,177 ) ( 6,413 )

Interest income

11,504 4,012 239

Foreign transaction gain (loss)

Gain (loss) on extinguishment of debt

( 312 )  

( 3,411 )  

Income (loss) from continuing operations before taxes

126,715  

192,344  

( 5,209 ) 1,635 411

Loss on extinguishment of debt

( 369 ) ( 312 ) ( 3,411 )

Income before taxes

45,816 126,715 192,344

Income tax provision

29,868  

25,019  

Income (loss) from continuing operations

96,847  

167,325  

Income from discontinued operations, net of tax

Net income (loss)

$ 96,847  

$ 167,325  

Income (loss) per share:

Income (loss) from continuing operations

$ 2.01  

$ 3.53  

Income from discontinued operations

Net income (loss)

$ 2.01  

$ 3.53  

Income (loss) from continuing operations

$ 1.98  

$ 3.45  

Income from discontinued operations

Net income (loss)

$ 1.98  

$ 3.45  

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

48,178  

47,409  

41,854  

48,799  

48,460  

41,854  

17,660 29,868 25,019

$ 28,156 $ 96,847 $ 167,325

Income per share:

$ 0.59 $ 2.01 $ 3.53

$ 0.59 $ 1.98 $ 3.45

Weighted average shares used in computing income per share:

47,486 48,178 47,409

48,025 48,799 48,460

Excludes amortization of $28,418, $26,023, and $27,508 for the years ended December 30, 2023, December 31, 2022, and December 25, 2021, respectively.

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

See Note 14, “Business Divestitures and Discontinued Operations”

for additional information on this transaction and financial statement presentation.

See Note 14, “Business Divestitures and Discontinued Operations” for additional information on this transaction and financial statement presentation.

The accompanying notes are an integral part of these statements.

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(in thousands)

Net income (loss)

December 30, December 31,

$ 28,156 $ 96,847 $ 167,325

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

6,815 ( 17,950 ) ( 22,956 )

Adjustments related to postretirement benefits

( 2,375 ) 5,894 2,602

Change in unrealized gain/loss on investments

793 ( 694 ) ( 67 )

Reclassification due to sale of PCB Test business

- - ( 2,515 )

Other comprehensive income (loss), net of tax

5,233 ( 12,750 ) ( 22,936 )

Comprehensive income

$ 33,389 $ 84,097 $ 144,389

The accompanying notes are an integral part of these statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

(in thousands, except par value and per share amounts)

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Balance at December 26, 2020

$ 41,395  

$ 433,190  

$ 42,517  

$ ( 34,030 )  

$ 483,072  

( 13,801 )  

$ 42,190 $ 448,194 $ 26,230 $ ( 4,326 ) $ - $ 512,288

Common stock repurchases

- - - - ( 7,324 ) ( 7,324 )

- - 167,325 - - 167,325

Changes in cumulative translation adjustment

27,321  

- - - ( 22,956 ) - ( 22,956 )

Adjustments related to postretirement benefits, net of tax

Cash dividends - $ 0.06 per share

( 2,486 )  

- - - 2,602 - 2,602

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

- - - ( 67 ) - ( 67 )

Exercise of stock options

250 2,260 - - - 2,510

Shares issued under ESPP

161 3,403 - - - 3,564

Shares issued for restricted stock units vested

( 660 )  

704 ( 704 ) - - - -

Repurchase and retirement of stock

( 209 )  

( 2,597 )  

( 242 ) ( 10,222 ) - - - ( 10,464 )

Impact of sale of PCB Test business

- - - ( 2,515 ) - ( 2,515 )

Share-based compensation expense

14,234  

- 14,420 - - - 14,420

Sale of common stock, net of issuance costs

5,693 217,426 - - - 223,119

Balance at December 25, 2021

42,190  

448,194  

26,230  

( 4,326 )  

512,288  

48,756 674,777 193,555 ( 27,262 ) ( 7,324 ) 882,502

Common stock repurchases

( 7,324 )  

167,325  

- - - - ( 50,719 ) ( 50,719 )

- - 96,847 - - 96,847

Changes in cumulative translation adjustment

( 22,956 )  

- - - ( 17,950 ) - ( 17,950 )

Adjustments related to postretirement benefits, net of tax

- - - 5,894 - 5,894

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

( 67 )  

- - - ( 694 ) - ( 694 )

Exercise of stock options

12 105 - - - 117

Shares issued under ESPP

161 3,470 - - - 3,631

Shares issued for restricted stock units vested

( 704 )  

529 ( 529 ) - - - -

Repurchase and retirement of stock

( 242 )  

( 10,222 )  

Impact of sale of PCB Test business

( 2,515 )  

( 182 ) ( 5,523 ) - - - ( 5,705 )

Share-based compensation expense

14,420  

Sale of common stock, net of issuance costs

217,426  

223,119  

- 14,918 - - - 14,918

Balance at December 31, 2022

48,756  

674,777  

193,555  

( 27,262 )  

( 7,324 )  

882,502  

49,276 687,218 290,402 ( 40,012 ) ( 58,043 ) 928,841

Common stock repurchases

( 50,719 )  

96,847  

- - - - ( 23,641 ) ( 23,641 )

- - 28,156 - - 28,156

Changes in cumulative translation adjustment

( 17,950 )  

- - - 6,815 - 6,815

Adjustments related to postretirement benefits, net of tax

- - - ( 2,375 ) - ( 2,375 )

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

( 694 )  

Exercise of stock options

- - - 793 - 793

Shares issued under ESPP

147 3,785 - - - 3,932

Shares issued for restricted stock units vested

( 529 )  

6 ( 20,174 ) - - 20,168 -

Repurchase and retirement of stock

( 182 )  

( 5,523 )  

- ( 1,920 ) - - ( 7,668 ) ( 9,588 )

Share-based compensation expense

14,918  

- 17,237 - - - 17,237

Balance at December 30, 2023

$ 49,276  

$ 687,218  

$ 290,402  

$ ( 40,012 )  

$ ( 58,043 )  

$ 928,841  

$ 49,429 $ 686,146 $ 318,558 $ ( 34,779 ) $ ( 69,184 ) $ 950,170

The accompanying notes are an integral part of these statements.

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Cash flows from operating activities:

Net income (loss)

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

(Gain) loss on business divestitures

$ 28,156 $ 96,847 $ 167,325

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

Gain on business divestitures

- - ( 70,815 )

Interest capitalized associated with cloud computing implementation

- ( 199 ) ( 91 )

Net accretion on investments

(Gain) loss on extinguishment of debt

( 1,364 ) ( 859 ) -

Loss on extinguishment of debt

369 312 3,411

Impairment charges related to indefinite lived intangibles

Depreciation and amortization

49,744 46,016 48,568

Share-based compensation expense

17,237 14,918 13,792

Inventory related charges

5,619 6,725 6,523

Amortization of debt discounts and issuance costs

Accrued retiree benefits

( 540 ) ( 1,589 ) ( 500 )

Deferred income taxes

( 4,774 ) ( 3,504 ) 953

Changes in other assets

( 13,286 ) ( 3,230 ) ( 1,652 )

Amortization of cloud-based software implementation costs

2,800 2,060 1,644

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

( 4 ) ( 203 ) 1

Changes in other accrued liabilities

( 702 ) ( 943 ) ( 416 )

Operating lease right-of-use assets

7,656 5,139 6,746

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

Customer advances

( 2,309 ) ( 184 ) ( 4,090 )

Accounts receivable

61,899 12,451 ( 59,123 )

12,839 ( 18,508 ) ( 35,864 )

Accrued compensation, warranty and other liabilities

( 14,897 ) ( 4,007 ) 225

Accounts payable

( 21,356 ) ( 33,130 ) 17,316

Deferred profit

( 4,447 ) ( 5,014 ) 4,732

Other current assets

10,920 ( 16,202 ) 1,709

Income taxes payable

( 24,782 ) 20,908 3,444

Current and long-term operating lease liabilities

( 7,454 ) ( 5,258 ) ( 6,666 )

Net cash provided by operating activities

101,470 112,861 97,915

Cash flows from investing activities:

Purchases of property, plant and equipment

( 16,053 ) ( 14,770 ) ( 12,000 )

Net cash received from sale of land, facility and assets

Purchases of short-term investments

( 97,290 ) ( 208,856 ) ( 204,699 )

Sales and maturities of short-term investments

152,649 155,406 135,549

Cash received from disposition of business, net of cash paid

Payment for purchase of MCT, net of cash received

(26,331 ) - -

Payment for purchase of EQT, net of cash received

(43,401 ) - -

Net cash provided by (used in) investing activities

( 30,210 ) ( 67,871 ) 39,893

Cash flows from financing activities:

Cash dividends paid

Proceeds from revolving line of credit and construction loans

Repayments of long-term debt

( 38,788 ) ( 38,226 ) ( 206,069 )

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

( 5,656 ) ( 1,957 ) ( 4,390 )

Payments on current and long-term finance lease liabilities

( 52 ) ( 167 ) ( 186 )

Acquisition of treasury stock

( 23,641 ) ( 50,719 ) ( 7,324 )

Proceeds received from issuance of common stock, net of fees

Net cash provided by (used in) financing activities

( 68,137 ) ( 91,069 ) 6,526

Effect of exchange rate changes on cash and cash equivalents

60 ( 1,781 ) ( 3,491 )

Net increase (decrease) in cash and cash equivalents

3,183 ( 47,860 ) 140,843

Cash and cash equivalents at beginning of year

242,341 290,201 149,358

Cash and cash equivalents at end of year

$ 245,524 $ 242,341 $ 290,201

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$ 44,276 $ 23,123 $ 22,717

Cash paid for interest

$ 3,424 $ 3,443 $ 6,253

Property, plant and equipment purchases included in accounts payable

$ 124 $ 152 $ 624

Inventory capitalized as capital assets

$ 1,215 $ 2,529 $ 1,635

The accompanying notes are an integral part of these statements.

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Summary of Significant Accounting Policies

Basis of Presentation –

(“Cohu”, “we”, “our”, “us”

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

Basis of Presentation – Cohu, Inc.

(“Cohu”, “we”, “our”, “us” 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.

All intercompany balances and transactions have been eliminated in consolidation.

We evaluate the need to consolidate affiliates based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

We evaluate the need to consolidate affiliates based on standards set forth in ASC Topic 810, Consolidation (“ASC 810” ).

Actual results could differ from these estimates.

Our fiscal years are based on a 52 - or 53 -week period ending on the last Saturday in December.

Our current fiscal year, which ended on December 31, 2022, consisted of 53 weeks.

Our fiscal years ended on December 30, 2023 and December 25, 2021, each consisted of 52 weeks.

Business Divestitures and Discontinued Operations –

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

Our fiscal year ended on December 31, 2022 consisted of 53 weeks.

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

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

In February 2020, we divested our fixtures services business.

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

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

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

See Note 14, “

Business Divestitures and Discontinued Operations ”

for additional information.

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

Income (Loss) Per Share –

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period.

Diluted income (loss) per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of outstanding restricted stock and performance stock units and issuance of stock under our employee stock purchase plan using the treasury stock method.

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

See Note 15, “ Business Divestitures ” for additional information.

Income Per Share – Basic income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period.

Diluted income per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of outstanding restricted stock and performance stock units and issuance of stock under our employee stock purchase plan using the treasury stock method.

In loss periods, potentially dilutive securities are excluded from the per share computations due to their anti-dilutive effect.

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 purposes of computing diluted income 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 30, 2023, December 31, 2022 and December 25, 2021, approximately 193,000 , 261,000 , and 180,000 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:

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

(in thousands)

Weighted average common shares outstanding

48,178  

47,409  

41,854  

47,486 48,178 47,409

Effect of dilutive stock options and restricted stock units

48,799  

48,460  

41,854  

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.

The control number used is income from continuing operations.

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 –

Highly liquid investments with insignificant interest rate risk and original maturities of three months or less are classified as cash and cash equivalents.

539 621 1,051

48,025 48,799 48,460

Cash, Cash Equivalents and Short-term Investments – Highly liquid investments with insignificant interest rate risk and original maturities of three months or less are classified as cash and cash equivalents.

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

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

Fair Value of Financial Instruments –

The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturities of these financial instruments.

Concentration of Credit Risk –

Financial instruments that potentially subject us to significant credit risk consist principally of cash equivalents, short-term investments and trade accounts receivable.

Fair Value of Financial Instruments – The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturities of these financial instruments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk – Financial instruments that potentially subject us to significant credit risk consist principally of cash equivalents, short-term investments and trade accounts receivable.

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

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

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

While we believe that our allowance for credit losses is adequate and represents our best estimate at December 30, 2023, we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates regarding expected credit losses.

Inventories –

Inventories are stated at the lower of cost, determined on a first -in, first -out basis, or net realizable value.

Inventories – Inventories are stated at the lower of cost, determined on a first -in, first -out basis, or net realizable value.

Cost includes labor, material and overhead costs.

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

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 Xcerra’s semiconductor test handler products.

Charges to cost of sales for excess and obsolete inventories totaled $ 4.5 million, $ 7.2 million and $ 7.1 million in 2023, 2022 and 2021, respectively.

Inventories by category were as follows (in thousands) :

Raw materials and purchased parts

$ 106,041  

$ 92,798  

$ 103,118 $ 106,041

Work in process

36,024  

40,732  

26,820 36,024

Finished goods

28,076  

27,523  

25,855 28,076

Total inventories

$ 170,141  

$ 161,053  

Gain on Sale of Facilities –

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

See Note 4, “Restructuring Charges”

for additional information on this program.

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

Property, Plant and Equipment –

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

$ 155,793 $ 170,141

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

Land is not depreciated.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Land and land improvements

$ 7,066  

$ 7,703  

$ 7,301 $ 7,066

Buildings and building improvements

31,161  

31,711  

39,677 31,161

Machinery and equipment

105,109  

95,542  

143,336  

134,956  

108,831 105,109

155,809 143,336

Less accumulated depreciation and amortization

( 78,325 )  

( 86,724 ) ( 78,325 )

Property, plant and equipment, net

$ 65,011  

$ 63,957  

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 is a result of assets becoming fully depreciated.

Cloud Computing Implementation Costs –

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

Goodwill and Other (“ASC 350”

$ 69,085 $ 65,011

Depreciation expense was $ 13.4 million in 2023, $ 12.8 million in 2022 and $ 13.2 million in 2021.

The decrease in depreciation expense between 2022 and 2021 recognized is a result of assets becoming fully depreciated.

Cloud Computing Implementation Costs – We have capitalized certain costs associated with the implementation of our new cloud-based Enterprise Resource Planning (“ERP”) system in accordance with ASC Topic 350, Intangibles — Goodwill and Other (“ASC 350” ).

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

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

Total unamortized capitalized cloud computing implementation costs totaled $ 12.2 million and $ 14.7 million at December 30, 2023 and December 31, 2022, 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.

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.

Implementation costs are amortized using the straight-line method over seven years and we recorded $ 2.8 million and $ 2.1 million in amortization expense during the years ended December 30, 2023 and December 31, 2022, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 & 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  –

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.

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, Purchased Intangible Assets and Other 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, in the case of in-process research and development, to the fair value of the asset.

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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 

1, 2022, as we determined that the estimated fair values of our reporting units exceeded their carrying values on that date.

We conduct our annual impairment test as of October 1st of each year, and have determined there was no impairment as of October 1, 2023, as we determined that the estimated fair values of our reporting units exceeded their carrying values on that date.

Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates.

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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.

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.

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, probability-weighted future cash flows.

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

Product Warranty –

Product warranty costs are accrued in the period sales are recognized.

Product Warranty – Product warranty costs are accrued in the period sales are recognized.

Our products are generally sold with standard warranty periods, which differ by product, ranging from 12 to 36 months.

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Costs associated with our extended warranty contracts are expensed as incurred.

Income Taxes –

We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting dates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income Taxes – We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting dates.

For those tax positions where it is more-likely-than- not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

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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.

Contingencies and Litigation –

We assess the probability of adverse judgments in connection with current and threatened litigation.

Contingencies and Litigation – We assess the probability of adverse judgments in connection with current and threatened litigation.

We would accrue the cost of an adverse judgment if, in our estimation, the adverse outcome is probable, and we can reasonably estimate the ultimate cost.

Leases –

We determine if a contract contains a lease at inception.

Operating leases are included in operating lease right of use (“ROU”) assets, current other accrued liabilities, and long-term lease liabilities on our consolidated balance sheets.

Leases – We determine if a contract contains a lease at inception.

Operating leases are included in operating lease right of use (“ROU”) assets, current other accrued liabilities, and long-term lease liabilities on our consolidated balance sheets.

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

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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.

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We account for lease and non-lease components as a single lease component.

Revenue Recognition –

Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant.

Revenue Recognition – Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant.

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

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 we transfer control to our customer 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) for contracts with original expected durations of over one year, respectively.

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

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

We generally sell our equipment with a product warranty.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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Included in the transaction price estimate are amounts in which it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Variable consideration that does not meet revenue recognition criteria is deferred. 

Our contracts are typically less than one year in duration and we have elected to use the practical expedient available in ASC 606 to expense cost to obtain contracts as they are incurred because they would be amortized over less than one year.

Accounts receivable represents our unconditional right to receive consideration from our customers.

Accounts receivable represent our unconditional right to receive consideration from our customers.

Payments terms do not exceed one year from the invoice date and therefore do not include a significant financing component.

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On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped.

In certain instances where customer payments are received prior to product shipment, the customer’s payments are recorded as customer advances.

At December 31, 2022, we had deferred revenue totaling approximately $ 16.1  million, current deferred profit of $ 8.0  million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $ 5.5  million.

At December 25, 2021, we had deferred revenue totaling approximately $ 21.9  million, current deferred profit of $ 13.2  million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $ 6.1  million.

In certain instances where customer payments are received prior to product shipment, the customer’s payments are recorded as customer advances.

At December 30, 2023, we had deferred revenue totaling approximately $ 8.8 million, current deferred profit of $ 3.6 million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $ 4.9 million.

At December 31, 2022, we had deferred revenue totaling approximately $ 16.1 million, current deferred profit of $ 8.0 million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $ 5.5 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated net sales by segment are as follows:

1 unchanged sentence

Systems-Semiconductor Test & Inspection

$ 474,655  

$ 541,589  

$ 317,821  

$ 326,448 $ 474,655 $ 541,589

Non-systems-Semiconductor Test & Inspection

338,120  

318,865  

267,419  

309,874 338,120 318,865

Systems-PCB Test

17,831  

33,293  

Non-systems-PCB Test

17,474  

$ 812,775  

$ 887,214  

$ 636,007  

Advertising Costs –

Advertising costs are expensed as incurred and were not material for all periods presented.

Restructuring Costs –

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

$ 636,322 $ 812,775 $ 887,214

Advertising Costs – Advertising costs are expensed as incurred and were not material for all periods presented.

Restructuring Costs – 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.

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

Debt Issuance Costs –

We defer costs related to the issuance of debt.

Debt Issuance Costs – 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.

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

Amortization related to deferred debt issuance costs and original discount costs was $ 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.

Amortization related to deferred debt issuance costs and original discount costs was $ 0.1 million, $ 0.3 million and $ 0.6 million for the years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

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 assumptions including our stock price volatility, employee exercise patterns (expected life of the options) and related tax effects.

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Although we believe the assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could materially impact our reported financial results.

Foreign Remeasurement and Currency Translation –

Assets and liabilities of our wholly owned foreign subsidiaries that use the U.S.

Foreign Remeasurement and Currency Translation – Assets and liabilities of our wholly owned foreign subsidiaries that use the U.S.

Dollar as their functional currency are re-measured using exchange rates in effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and equipment, which are re-measured using historical exchange rates.

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

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.

During the year ended December 30, 2023, in our consolidated statement of income we recognized a foreign exchange loss of $ 5.2 million.

During the years ended December 31, 2022 and December 25, 2021, we recognized foreign exchange gains totaling $ 1.6 million and $ 0.4 million, respectively.

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

Cumulative translation adjustments resulting from the translation of the financial statements are included as a separate component of stockholders’

Foreign Exchange Derivative Contracts –

We operate and sell our products in various global markets.

Cumulative translation adjustments resulting from the translation of the financial statements are included as a separate component of stockholders’ equity.

Foreign Exchange Derivative Contracts – We operate and sell our products in various global markets.

As a result, we are exposed to changes in foreign currency exchange rates.

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

To minimize foreign exchange volatility we enter into foreign currency forward contracts with a financial institution to hedge against future movements in foreign exchange rates that affect certain existing U.S.

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

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

Additional information related to our foreign exchange derivative contracts is included in Note 7, “

Derivative Financial Instruments ”.

Accumulated Other Comprehensive Loss –

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.

Additional information related to our foreign exchange derivative contracts is included in Note 8, “ Derivative Financial Instruments ”.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Loss – Our accumulated other comprehensive loss totaled approximately $ 34.8 million at December 30, 2023, and $ 40.0 million at December 31, 2022, and was attributed to, net of income taxes where applicable, foreign currency adjustments resulting from the translation of certain accounts into U.S.

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.

Dollar strengthened relative to certain foreign currencies in countries where we have operations as of December 31, 2022 and then weakened as of December 30, 2023 and consequently, our accumulated other comprehensive loss attributed to foreign currency translation adjustments increased by $ 18.0 million and decreased by $ 6.8 million during the years ended December 31, 2022 and December 30, 2023, respectively.

Reclassification adjustments from accumulated other comprehensive loss during 2023 and 2022 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 ”.

Additional information related to accumulated other comprehensive loss, on an after-tax basis is included in Note 16, “ Accumulated Other Comprehensive Income ”.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements –

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

Recently Issued Accounting Pronouncements –

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

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

Our Term Loan Credit Facility bears interest at fluctuating interest rates based on LIBOR.

If LIBOR ceases to exist, we may need to renegotiate our loan and we cannot predict what alternative index would be negotiated with our lenders.

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

Recently Adopted Accounting Pronouncements – In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020 - 04, Reference Rate Reform (Topic 848 ) Facilitation of the Effects of Reference Rate Reform on Financial Reporting ( “ ASC 848 ” ) .

ASC 848 provides temporary optional expedients and exceptions to certain U.S.

GAAP contract modification requirements for contracts affected by reference rate reform as entities transition away from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates.

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.

Deferral of the Sunset Date of Topic 848 to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the optional expedients in ASC 848.

Effective June 16, 2023, we adopted ASC 848.

Our Term Loan B Credit and Guaranty Agreement is our only contract where interest expense is based on LIBOR.

The ICE Benchmark Administration Limited, LIBOR’s administrator, has ceased publishing certain LIBOR settings and stopped publishing the Overnight, 1 -month, 3 -month, 6 -month, and 12 -month USD LIBOR U.S.

dollar settings in 2023.

As a result, we commenced the transition of our LIBOR-based contract to SOFR.

The optional expedients under ASC 848 have allowed and will allow us to account for contract modifications as continuations of the existing contract without further reassessments or remeasurements that would otherwise be required under the applicable U.S.

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 principal of our Term Loan Credit Facility.

Recently Issued Accounting Pronouncements – In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures , which requires enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid.

This ASU is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption.

We are currently evaluating the impact of the adoption of this standard.

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures , which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

This ASU is effective for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024.

Retrospective application is required, and early adoption is permitted.

We are currently evaluating the impact of the adoption of this standard.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Goodwill and Purchased Intangible Assets

Changes in the carrying value of our goodwill during the years ended December 30, 2023, and December 31, 2022, were as follows ( in thousands ):

Semiconductor Test &

Total Goodwill

Balance December 25, 2021

$ 230,724  

$ 21,580  

$ 252,304  

Sale of PCB Test Business (1)

( 21,899 )  

Impact of currency exchange

( 10,933 )  

Balance December 31, 2022

219,791  

Impact of currency exchange

( 6,252 )  

Balance December 30, 2023

$ 213,539  

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

See Note 14, “

Business Divestitures and Discontinued Operations ” for additional information.

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

4 unchanged sentences

Developed technology

$ 224,253  

$ 128,938  

$ 229,131  

$ 104,855  

$ 233,623 $ 137,168 4.2 $ 224,253 $ 128,938

Customer relationships

64,632  

31,015  

65,916  

26,189  

20,461  

20,877  

73,759 28,932 7.1 64,632 31,015

21,569 11,231 5.4 20,461 9,397

100 25 0.8 - -

Covenant not-to-compete

$ 309,615  

$ 169,511  

$ 316,232  

$ 138,912  

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.

250 175 3.0 269 161

$ 329,301 $ 177,531 $ 309,615 $ 169,511

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

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

1 unchanged sentence

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

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.

Amortization expense related to purchased intangible assets was approximately $ 33.2  million in 2022, $ 35.4  million in 2021 and $ 38.7  million in 2020.

During 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.

Amortization expense related to purchased intangible assets was approximately $ 36.4 million in 2023, $ 33.2 million in 2022 and $ 35.4 million in 2021.

As of December 30, 2023, we expect amortization expense in future periods to be as follows:

2023 - $ 33.4  million;

2024 - $ 33.4  million;

2025 - $ 24.8  million;

2026 - $ 18.6  million 2027 - $ 15.1  million;

and thereafter $ 14.8  million.

2024 - $ 39.3 million;

2025 - $ 30.6 million;

2026 - $ 24.4 million;

2027 - $ 20.8 million 2028 - $ 18.2 million;

and thereafter $ 18.5 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 unchanged sentences

Bank term loan under credit agreement

$ 66,952  

$ 103,130  

$ 29,327 $ 66,952

Bank term loans-Kita

Construction loan-Cohu GmbH

10,045  

Lines of credit

79,739  

119,304  

40,876 79,739

financing fees and discount

( 764 )  

( 249 ) ( 764 )

current portion

( 6,311 )  

( 6,324 ) ( 6,311 )

Total long-term debt

$ 72,664  

$ 103,393  

$ 34,303 $ 72,664

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

$ 6,574  

61,130  

$ 79,739  

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 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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

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 fair value of the debt approximates the carrying value at December 30, 2023.

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 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.

2 unchanged sentences

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 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 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.

1 unchanged sentence

Restructuring Charges

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

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

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

MCT Integration Program

During 2023, we began a strategic restructuring and integration program in connection with the acquisition of MCT (“MCT Integration Program”).

As part of the MCT Integration Program, we consolidated MCT’s Penang, Malaysia manufacturing operations into Cohu’s Melaka, Malaysia manufacturing operations by the end of 2023.

Relating to the facility consolidation actions, we notified certain impacted employees of a reduction in force program and the facility consolidation and reduction in force programs are being implemented as part of a comprehensive review of our operations and are intended to reduce our operating cost structure and capitalize on acquisition synergies.

As a result of the activities described above, we recognized total pretax charges of $ 2.4 million during the twelve months ended December 30, 2023, that are within the scope of ASC 420.

Charges related to the MCT Integration Program for the year ended December 30, 2023, were as follows:

(in thousands)

Employee severance costs

Other restructuring costs

Costs associated with restructuring activities are presented in our consolidated statements of income as restructuring charges.

Other restructuring costs include facility closure and manufacturing software integration costs.

The following table summarizes the activity within the restructuring related accounts for the MCT Integration Program during the year ended December 30, 2023 (in thousands) :

Employee Severance

Other Exit Costs

Balance, December 31, 2022

Costs accrued

2,159 262 2,421

Amounts paid or charged

( 2,091 ) ( 262 ) ( 2,353 )

Impact of currency exchange

Balance, December 30, 2023

$ 68 $ - $ 68

Xcerra Integration Program

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

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

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

1 unchanged sentence

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 $ 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.

Charges related to the Integration Program for the years ended December 31, 2022, December 25, 2021 and December 26, 2020, were as follows (in thousands):

As of December 31, 2022, restructuring activities associated with the Xcerra Integration Program were materially complete.

Certain end of life inventory adjustment continued during the current year.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As a result of the activities described above, we recognized total pretax (credits)/charges of $( 0.1 ) million, $ 0.2 million and $ 1.3 million for the years ended December 30, 2023 ,December 31, 2022 and December 25, 2021, respectively, that are within the scope of ASC 420.

All costs of the Xcerra Integration Program were incurred by our Semiconductor Test & Inspection segment.

Charges related to the Xcerra Integration Program for the years ended December 30, 2023, December 31, 2022 and December 25, 2021, were as follows (in thousands):

(in thousands)

Employee severance costs

$ ( 8 )  

$ 1,161  

$ 6,485  

- $ ( 8 ) $ 1,161

Inventory related charges (adjustments)

( 454 )  

( 558 )  

( 62 ) ( 454 ) ( 558 )

Other restructuring costs

$ 1,265  

$ 11,354  

Costs associated with restructuring activities are presented in our consolidated statements of operations as restructuring charges, except for certain costs associated with inventory charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products, which are classified within cost of sales.

$ ( 62 ) $ 151 $ 1,265

Costs associated with restructuring activities were presented in our consolidated statements of income as restructuring charges, except for certain costs associated with inventory charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products, which were classified within cost of sales.

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

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) :

The following table summarizes the activity within the restructuring related accounts for the Xcerra Integration Program during the years ended December 31, 2022 and December 25, 2021 (in thousands) :

Employee Severance

1 unchanged sentence

Balance, December 26, 2020

$ 5,826  

$ 5,826 $ - $ 5,826

Costs accrued

1,161 662 1,823

Amounts paid or charged

( 6,545 )  

( 662 )  

( 6,545 ) ( 662 ) ( 7,207 )

Impact of currency exchange

( 94 )  

( 94 ) - ( 94 )

Balance, December 25, 2021

Costs accrued

( 8 ) 613 605

Amounts paid or charged

( 331 )  

( 613 )  

( 331 ) ( 613 ) ( 944 )

Impact of currency exchange

( 9 ) - ( 9 )

Balance, December 31, 2022

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

At December 30, 2023, our total accrual for restructuring related items for both the MCT and Xcerra Integration Programs is reflected within current liabilities in our consolidated balance sheets as these amounts are expected to be paid out in 2024.

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

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

7 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Corporate debt securities (2)

$ 59,283  

$ 59,073  

$ 45,105 $ 147 $ 15 $ 45,237

treasury securities

34,614  

34,197  

20,439 26 116 20,349

Bank certificates of deposit

36,500  

36,479  

15,468 20 - 15,488

Asset-backed securities

12,727  

12,658  

8,017 17 10 8,024

Foreign government security

$ 143,952  

$ 143,235  

Municipal securities

$ 90,100 $ 215 $ 141 $ 90,174

At December 31, 2022

Corporate debt securities (2)

$ 84,060  

$ 84,031  

treasury securities

$ 59,283 $ 30 $ 240 $ 59,073

Bank certificates of deposit

36,500 20 41 36,479

treasury securities

34,614 1 418 34,197

Asset-backed securities

12,727 10 79 12,658

Foreign government security

$ 89,738  

$ 89,704  

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.

$ 143,952 $ 61 $ 778 $ 143,235

As of December 30, 2023, the cost and fair value of investments with loss positions were approximately $ 38.5 million and $ 38.4 million, respectively.

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

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.

3 unchanged sentences

(in thousands)

Due in one year or less

$ 112,956  

$ 112,683  

Due after one year through three years

30,996  

30,552  

$ 143,952  

$ 143,235  

Due in 1 year or less

$ 57,981 $ 57,887

Due after 1 year through 5 years

31,378 31,546

Due after 5 years through 10 years

$ 90,100 $ 90,174

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

9 unchanged sentences

Total estimated

$ 190,371  

Corporate debt securities

69,753  

$ 157,697 $ - $ - $ 157,697

Money market funds

40,290  

Bank certificates of deposit

37,480  

- 81,115 - 81,115

Corporate debt securities

- 51,949 - 51,949

treasury securities

34,196  

- 20,349 - 20,349

Bank certificates of deposit

- 15,488 - 15,488

Asset-backed securities

12,658  

- 8,024 - 8,024

Foreign government security

$ 190,371  

$ 195,205  

$ 385,576  

Municipal securities

$ 157,697 $ 178,001 $ - $ 335,698

Fair value measurements at December 31, 2022 using:

Total estimated

$ 195,297  

Money market funds

92,400  

$ 190,371 $ - $ - $ 190,371

Corporate debt securities

86,535  

- 69,753 - 69,753

Money market funds

- 40,290 - 40,290

Bank certificates of deposit

- 37,480 - 37,480

treasury securities

- 34,196 - 34,196

Asset-backed securities

- 12,658 - 12,658

Foreign government security

Bank certificates of deposit

$ 195,297  

$ 184,608  

$ 379,905  

$ 190,371 $ 195,205 $ - $ 385,576

Employee Benefit Plans

Defined Contribution Retirement Plans –

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

Participation is voluntary and participants’

contributions are based on their eligible compensation.

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

Participation is voluntary and participants’ contributions are based on their eligible compensation.

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

In 2022, 2021 and 2020 we made matching contributions to the plan of $ 2.4  million, $ 2.4  million and $ 2.3  million, respectively.

Defined Benefit Retirement Plans –

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

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

In 2023, 2022 and 2021 we made matching contributions to the plan of $ 2.5 million, $ 2.4 million and $ 2.4 million, respectively.

Defined Benefit Retirement Plans – Some of our employees located in Europe and Asia participate in defined benefit retirement plans.

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

(in thousands)

$ 1,223  

$ 1,310  

$ 551 $ 954 $ 1,223

Interest cost

Expected return on assets

( 128 )  

( 487 )  

( 331 ) ( 128 ) ( 128 )

( 177 ) ( 487 ) 72

Net periodic costs

$ 1,228  

$ 1,469  

$ 553 $ 395 $ 1,228

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 unchanged sentences

Benefit obligation at beginning of year

$ ( 28,765 )  

( 954 )  

$ ( 21,628 ) $ ( 28,765 )

( 551 ) ( 954 )

Interest cost

( 56 )  

Actuarial gain

( 510 ) ( 56 )

Actuarial gain (loss)

( 1,391 ) 6,043

Participant contributions

( 1,459 )  

( 1,153 ) ( 1,459 )

Benefits paid

Foreign currency exchange adjustment

( 2,213 ) 362

Benefit obligation at end of year

( 21,628 )  

( 24,884 ) ( 21,628 )

Change in plan assets:

Fair value of plan assets at beginning of year

18,919  

18,756  

18,411 18,919

Return on assets, net of actuarial loss

2 unchanged sentences

Benefits paid

( 378 )  

( 2,426 )  

( 385 ) ( 378 )

( 2,177 ) ( 2,426 )

Foreign currency exchange adjustment

( 113 )  

1,786 ( 113 )

Fair value of plan assets at end of year

18,411  

18,919  

19,700 18,411

Net liability at end of year

$ ( 3,217 )  

At December 31, 2022 and December 25, 2021, the Swiss Plan’s net liability is included in noncurrent accrued retirement benefits.

$ ( 5,184 ) $ ( 3,217 )

At December 30, 2023 and December 31, 2022, 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 gains totaling $ 4.2 million and $ 6.8 million at December 30, 2023 and December 31, 2022, 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.

The actuarial loss of $ 1.4 million and the actuarial gain of $ 6.0 million for the years ended December 30, 2023 and December 31, 2022, 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:

3 unchanged sentences

Discount rate

1.5 % 2.3 % 0.2 %

Rate of return on assets

1.5 % 1.8 % 0.7 %

Compensation increase

2023 employer and employee contributions to the Swiss Plan are expected to total $ 0.9  million.

2.0 % 3.0 % 1.1 %

During 2024 employer and employee contributions to the Swiss Plan are expected to total $ 0.9 million.

Estimated benefit payments are expected to be as follows:

2023 - $ 1.2  million;

2024 - $ 1.3  million;

2025 - $ 1.0  million;

2026 - $ 1.2  million;

2027 - $ 1.3  million;

and $ 6.8  million thereafter through 2032.

2024 - $ 1.2 million;

2025 - $ 1.1 million;

2026 - $ 1.2 million;

2027 - $ 1.4 million;

2028 - $ 1.3 million;

and $ 7.3 million thereafter through 2033.

As is customary with Swiss pension plans, the assets of the plan are invested in a collective fund with multiple employers.

3 unchanged sentences

however, the individual investments of the fund are generally Level 1 (equity securities), Level 2 (fixed income) and Level 3 (real estate and alternative) investments.

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

See Note 5, “

Financial Instruments Measured at Fair Value ”

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

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

See Note 5, “ Financial Instruments Measured at Fair Value ” for additional information on the three -tier fair value hierarchy.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

for which the majority of the obligations and net periodic benefit cost were determined to be immaterial for all periods presented.

Retiree Medical Benefits –

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

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

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

The net periodic benefit cost was $ 0.1 million in both 2023 and 2022 and was insignificant in 2021.

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

2 unchanged sentences

This rate was then assumed to decrease 0.39 % per year and 0.48 % per year for pre- 65 participants and post- 65 participants, respectively, to 4.4 % in 2033 and remain level thereafter.

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

Contributions to the post-retirement health benefit plan are expected to total $ 0.1 million in 2024.

Estimated benefit payments are expected to be as follows:

7 unchanged sentences

Accumulated benefit obligation at beginning of year

$ ( 2,097 )  

$ ( 1,657 ) $ ( 2,097 )

Interest cost

( 51 )  

Actuarial gain

( 78 ) ( 51 )

Actuarial (gain) loss

Benefits paid

Accumulated benefit obligation at end of year

( 1,657 )  

( 1,651 ) ( 1,657 )

Plan assets at end of year

Funded status

$ ( 1,657 )  

Deferred Compensation –

The Cohu, Inc.

$ ( 1,651 ) $ ( 1,657 )

Deferred Compensation – The Cohu, Inc.

Deferred Compensation Plan allows certain of our officers to defer a portion of their current compensation.

1 unchanged sentence

Participant contributions, distributions and investment earnings and losses are accumulated in a separate account for each participant.

At December 31, 2022, the payroll liability to participants, included in accrued compensation and benefits in the consolidated balance sheet, was approximately $ 1.1  million and the cash surrender value of the related life insurance policies included in other current assets was approximately $ 1.4  million.

At December 25, 2021, the liability totaled $ 1.6  million and the corresponding assets were $ 1.8  million.

Employee Stock Purchase Plan –

The Cohu, Inc.

1997 Employee Stock Purchase Plan (“the Plan”) provides for the issuance of a maximum of 2,650,000 shares of our common stock.

At December 30, 2023, the payroll liability to participants, included in accrued compensation and benefits in the consolidated balance sheet, was approximately $ 0.9 million and the cash surrender value of the related life insurance policies included in other current assets was approximately $ 1.4 million.

At December 31, 2022, the liability totaled $ 1.1 million and the corresponding assets were $ 1.4 million.

Employee Stock Purchase Plan – The Cohu, Inc.

1997 Employee Stock Purchase Plan (“the Plan”) provides for the issuance of a maximum of 3,750,000 shares of our common stock.

Under the Plan, eligible employees may purchase shares of common stock through payroll deductions.

3 unchanged sentences

2022 - 160,855 and 2021 - 161,351.

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.

At December 30, 2023, there were 799,669 shares available for issuance under the Plan.

On May 10, 2023, our stockholders approved an amendment to the ESPP which increased the number of ESPP shares that may be issued by 600,000 and eliminated the requirement that no participant may purchase shares for any offering period with a value exceeding $ 12,500 divided by the share value on the first date of the offering period.

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.

1 unchanged sentence

At December 30, 2023, there were 3,509,023 shares available for future equity grants under the 2005 Plan.

On May 10, 2023, our stockholders approved amendments to the 2005 Plan which increased the shares of stock available for issuance by 3,200,000 , specified an annual limit of $ 750,000 on our non-employee director compensation, increased the amounts permitted for cash payouts of performance awards from current limit of $ 2,000,000 to $ 4,000,000 per each fiscal year and provided updated criteria for performance awards.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 unchanged sentences

Outstanding and exercisable, beginning of year

$ 9.44  

$ 10.01  

$ 10.27  

( 12 )  

$ 9.44  

( 250 )  

$ 10.03  

( 101 )  

$ 10.95  

12 $ 9.44 262 $ 10.01

( 12 ) $ 9.44 ( 250 ) $ 10.03

Outstanding and exercisable, end of year

$ 9.44  

$ 10.01  

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

- $ - 12 $ 9.44

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

At December 30, 2023, 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.

Restricted stock units vest over a one -year, two -year or a four -year period from the date of grant.

5 unchanged sentences

Outstanding, beginning of year

$ 21.16  

$ 15.16  

$ 17.05  

$ 27.74  

$ 41.66  

$ 14.02  

( 474 )  

$ 19.94  

( 579 )  

$ 16.23  

( 621 )  

$ 17.48  

( 46 )  

$ 24.33  

( 47 )  

$ 18.96  

( 72 )  

$ 17.59  

969 $ 24.55 1,058 $ 21.16 1,414 $ 15.16

365 $ 36.66 431 $ 27.74 270 $ 41.66

( 428 ) $ 22.33 ( 474 ) $ 19.94 ( 579 ) $ 16.23

( 22 ) $ 28.62 ( 46 ) $ 24.33 ( 47 ) $ 18.96

Outstanding, end of year

$ 24.55  

$ 21.16  

$ 15.16  

884 $ 30.52 969 $ 24.55 1,058 $ 21.16

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.

The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 

0 % to 

200 % of the number granted and is determined based on certain performance criteria over a three -year measurement period.

The performance criteria for the PSUs are based on a combination of our annualized Total Shareholder Return (“TSR”) for the performance period and the relative performance of our TSR compared with the annualized TSR of certain peer companies for the performance period.

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

The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 0 % to 200 % of the number granted and is determined based on certain performance criteria over a three -year measurement period.

The performance criteria for the majority of PSUs are based on a combination of our annualized Total Shareholder Return (“TSR”) for the performance period and the relative performance of our TSR compared with the annualized TSR of certain peer companies for the performance period.

PSUs granted vest 100 % on the third anniversary of their grant, assuming achievement of the applicable performance criteria.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant.

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Outstanding, beginning of year

$ 22.22  

$ 15.51  

$ 18.72  

$ 33.22  

$ 51.43  

$ 13.18  

( 55 )  

$ 14.11  

( 125 )  

$ 21.77  

( 39 )  

$ 21.40  

( 77 )  

$ 15.94  

$ 14.04  

( 100 )  

$ 20.25  

403 $ 28.64 384 $ 22.22 425 $ 15.51

270 $ 39.97 151 $ 33.22 93 $ 51.43

( 258 ) $ 13.18 ( 55 ) $ 14.11 ( 125 ) $ 21.77

( 7 ) $ 42.52 ( 77 ) $ 15.94 ( 9 ) $ 14.04

Outstanding, end of year

$ 28.64  

$ 22.22  

$ 15.51  

Share-based Compensation –

We estimate the fair value of stock options and RSUs on the grant date using the Black-Scholes valuation model.

408 $ 45.65 403 $ 28.64 384 $ 22.22

Share-based Compensation – We estimate the fair value of our employee stock purchase plan using the Black-Scholes valuation model.

The assumptions for the Black-Scholes model include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award.

The estimated fair value of PSUs is determined on the grant date using the Monte Carlo simulation valuation model.

Option valuation models require the input of highly subjective assumptions and changes in the assumptions used can materially affect the grant date fair value of an award.

These assumptions for the Black-Scholes model include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award.

The risk-free rate of interest is based on the U.S.

Treasury rates appropriate for the expected term of the award as of the grant date.

Expected dividends are based primarily on historical factors related to our common stock.

Expected volatility is based on historic weekly stock price observations of our common stock during the period immediately preceding the share-based award grant that is equal in length to the award’s expected term.

We believe that historical volatility is the best estimate of future volatility.

Expected life of the award is based on historical option exercise data.

The Monte Carlo simulation model incorporates assumptions for the risk-free interest rate, Cohu and the selected peer group price volatility, the correlation between Cohu and the selected index, and dividend yields.

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.

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

All awards granted in 2023, 2022 and 2021 exclude the assumption of dividend payments and the estimated fair value awards granted in prior years, when dividends were paid, are unchanged.

2 unchanged sentences

Dividend yield

0.0 % 0.0 % 0.0 %

Expected volatility

45.6 %  

58.3 %  

36.3 % 45.6 % 58.3 %

Risk-free interest rate

4.5 % 1.2 % 0.1 %

Expected term (years)

Weighted-average grant date fair value per share

$ 8.79  

$ 9.42  

$ 6.01  

Weighted-average grant date fair

value per share

$ 8.54 $ 8.79 $ 9.42

Restricted Stock Units

Dividend yield

0.0 % 0.0 % 0.0 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reported share-based compensation is classified in the consolidated financial statements as follows:

1 unchanged sentence

Cost of sales

$ 845 $ 646 $ 828

Research and development

3,394 3,100 3,017

Selling, general and administrative

11,172  

10,096  

12,998 11,172 9,947

Share-based compensation of continuing operations

14,918  

13,792  

14,234  

17,237 14,918 13,792

Income tax benefit

( 4,004 )  

( 722 )  

( 1,770 ) ( 4,004 ) ( 722 )

Total share-based compensation, net of tax

$ 10,914  

$ 13,070  

$ 13,271  

$ 15,467 $ 10,914 $ 13,070

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

At December 31, 2022, we had approximately $ 21.6  million of pre-tax unrecognized compensation cost related to unvested restricted stock units and performance stock units which is expected to be recognized over a weighted-average period of approximately 2.3  years.

At December 30, 2023, we had approximately $ 27.9 million of pre-tax unrecognized compensation cost related to unvested restricted stock units and performance stock units which is expected to be recognized over a weighted-average period of approximately 2.2 years.

Business Acquisitions

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 MCT 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 of which $ 0.6 million was used to pay former MCT CFO and CEO and expensed as restructuring severance expense.

Taking into consideration the amount expensed as severance and the working capital adjustment receivable resulted in a final net purchase price of approximately $ 26.8 million.

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

The MCT Acquisition has been accounted for in conformity with ASC Topic 805, Business Combinations, (“ASC 805” ).

The acquired assets and liabilities of MCT were recorded at their respective fair values including an amount for goodwill representing the difference between the consideration paid and the fair value of the identifiable net assets.

The purchase price allocation was finalized during the fourth quarter of 2023.

The table below summarizes the assets acquired and liabilities assumed as of January 30, 2023 ( in thousands ):

Current assets, including cash received

Property, plant and equipment

Intangible assets

Total assets acquired

Liabilities assumed

Net assets acquired

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Developed technology

Customer relationships

Product backlog

Total intangible assets

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

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

The value assigned to developed technology was determined by using the relief from royalty method under the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount rates.

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

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

The estimated after-tax cash flows were based on a hypothetical royalty rate applied to the revenues for the developed technology.

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

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

The estimated cash flows were based on revenues from the existing customers net of operating expenses and net of contributory asset charges.

The discount rate utilized to discount the net cash flows of the customer relationships to present value was based on the respective cash flows taking into consideration the perceived risks.

The value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of January 30, 2023, using the multi-period excess earnings method under the income approach to discount back to present value the cash flows attributable to the backlog at a discount rate commensurate with the expected risks of the backlog cash flows.

MCT’s results of operations have been included starting January 30, 2023.

The impact of MCT on our consolidated statements of income and comprehensive income was not material.

In connection with the MCT Acquisition, during the twelve months ended December 30, 2023 we incurred acquisition-related costs, which were expensed as selling, general and administrative costs totaling $ 0.5 million.

During the prior year period no acquisition-related costs were incurred.

On October 2, 2023, we completed the acquisition of Equiptest Engineering Pte.

(“EQT”), a provider of semiconductor test contactors and other consumables.

(“the EQT Acquisition”).

EQT is a Singapore based company with a principal manufacturing site located there.

EQT provides test interface products including, high performance thermal, MEMS, Infrared, Coaxial and Kelvin Contactors that expands our interface products in mid- to high-power contactors.

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

We made a cash payment of SGD 66.0 million ($ 48.3 million) on October 2, 2023, and set up a retention sum liability for potential adjustments to working capital, future tax or insurance claims in the amount of SGD 2.2 million ($ 1.6 million) resulting in an initial purchase price of SGD 68.3 million ($ 49.9 million).

The working capital adjustment was finalized in January 2024 and an additional cash payment was made to EQT owners of SGD 0.8 million (approximately $ 0.6 million).

As of December 30, 2023 we accrued this additional payment due to the sellers in resulting in an adjusted purchase price of SGD 68.8 million ($ 50.3 million) and the additional SGD 0.5 million ($ 0.4 million) is accrued in the short term other liabilities.

The retention liability for net working capital, remaining tax, insurance and other claims as of December 30, 2023 was SGD 2.2 million ($ 1.6 million) and $ 0.3 million and $ 1.3 million is accrued in short term and long term other liabilities, respectively, on our consolidated balance sheet.

The EQT Acquisition has been accounted for in conformity with ASC Topic 805, Business Combinations, (“ASC 805” ).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 30, 2023, we have not finalized the purchase price allocation.

Accordingly, the preliminary purchase price allocation shown below could change as we are still in the process of finalizing the fair values of the tangible and intangible assets acquired and liabilities assumed, and the related income tax effects may still be adjusted as they are finalized during the remainder of the measurement period (which will not exceed 12 months from the acquisition closing date).

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

The acquired assets and liabilities of EQT were recorded at their respective fair values including an amount for goodwill representing the difference between the consideration paid and the fair value of the identifiable net assets.

The table below summarizes the assets acquired and liabilities assumed as of October 2, 2023 ( in thousands ):

Current assets, including cash received

Property, plant and equipment

Intangible assets

Total assets acquired

Liabilities assumed

Net assets acquired

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

Developed technology

Customer relationships

Product backlog

Trademarks and trade name

Total intangible assets

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

The preliminary value assigned to developed technology was determined by using the relief from royalty method under the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount rates.

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

The estimated after-tax cash flows were based on a hypothetical royalty rate applied to the revenues for the developed technology.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The preliminary value assigned to customer relationships was determined by using the multi-period excess earnings method under the income approach.

The estimated cash flows were based on revenues from the existing customers net of operating expenses and net of contributory asset charges.

The discount rate utilized to discount the net cash flows of the customer relationships to present value was based on the respective cash flows taking into consideration the perceived risks.

The preliminary value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of October 2, 2023, using the multi-period excess earnings method under the income approach to discount back to present value the cash flows attributable to the backlog at a discount rate commensurate with the expected risks of the backlog cash flows.

The preliminary value assigned to trademarks and trade names acquired was determined by using the using the relief from royalty method under the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount rates.

EQT’s results of operations have been included starting October 2, 2023.

The impact of EQT on Cohu’s condensed consolidated statements of income and comprehensive income were not material.

In connection with the acquisition of EQT, during the twelve months ended December 30, 2023 we incurred acquisition-related costs, which were expensed as selling, general and administrative costs totaling $ 1.1 million.

During the prior year period no acquisition-related costs were incurred.

Derivative Financial Instruments

1 unchanged sentence

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

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

To minimize foreign exchange volatility we utilize foreign currency forward contracts to offset against future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities.

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

We do not use derivative financial instruments for speculative or trading purposes.

For accounting purposes, our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our consolidated balance sheets with changes in fair value recorded within foreign transaction gain (loss) in our consolidated statements of operations for both realized and unrealized gains and losses.

For accounting purposes, our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our consolidated balance sheets with changes in fair value recorded within foreign transaction gain (loss) in our consolidated statements of income for both realized and unrealized gains and losses.

The cash flows associated with the foreign currency forward contracts are reported in net cash provided by operating activities in our consolidated statements of cash flows.

5 unchanged sentences

(Local Currency)

Contract Amount (U.S.

81,677  

$ 87,300  

20,714  

22,500  

$ 109,800  

Contract Amount

89,186 $ 98,800

10,407 12,400

South Korean Won

2,574,040 2,000

Malaysian Ringgit

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

The fair value of our foreign currency contracts as of December 30, 2023 was immaterial.

The location and amount of gains (losses) related to non-designated derivative instruments in the consolidated statements of operations were as follows (in thousands) :

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The location and amount of losses related to non-designated derivative instruments in the consolidated statements of income were as follows (in thousands) :

Derivatives Not Designated

4 unchanged sentences

Foreign transaction gain (loss)

$ ( 5,356 )  

$ ( 3,428 )  

$ ( 2,127 ) $ ( 5,356 ) $ ( 3,428 )

Common Stock Issuance

1 unchanged sentence

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

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

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

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, 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.

1 unchanged sentence

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.

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.

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.

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

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

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

(in thousands)

$ 1,609  

$ 1,103  

31,307  

22,862  

$ 694 $ 1,609 $ 1,103

21,654 31,307 22,862

Total current

33,372  

24,066  

( 3,495 )  

22,434 33,372 24,066

( 4,835 ) ( 3,495 ) 948

Total deferred

( 3,504 )  

$ 29,868  

$ 25,019  

( 4,774 ) ( 3,504 ) 953

$ 17,660 $ 29,868 $ 25,019

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

(in thousands)

$ 9,180  

$ 30,588  

117,535  

161,756  

11,828  

$ 126,715  

$ 192,344  

$ ( 37,799 ) $ 9,180 $ 30,588

83,615 117,535 161,756

$ 45,816 $ 126,715 $ 192,344

Deferred tax effects

6 unchanged sentences

Inventory, receivable and warranty reserves

$ 13,599  

$ 12,166  

$ 10,931 $ 13,599

Net operating loss carryforwards

39,545  

44,806  

36,602 39,545

Tax credit carryforwards

29,646  

31,264  

34,637 29,646

Capitalized R&D

19,819  

30,485 19,819

Accrued employee benefits

1 unchanged sentence

Lease liabilities

Uniform capitalization

Gross deferred tax assets

114,452  

112,055  

124,016 114,452

Less valuation allowance

( 89,234 )  

( 99,888 ) ( 89,234 )

Total deferred tax assets

25,218  

35,805  

24,128 25,218

Deferred tax liabilities:

Intangible assets and other acquisition basis differences

38,921  

48,657  

34,076 38,921

Operating lease right-of-use assets

1 unchanged sentence

Total deferred tax liabilities

42,647  

56,930  

41,086 42,647

Net deferred tax liabilities

$ ( 17,429 )  

$ ( 16,958 ) $ ( 17,429 )

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

1 unchanged sentence

Other assets (long-term)

$ 3,930  

$ 4,762  

$ 6,196 $ 3,930

Long-term deferred income tax liabilities

( 21,359 )  

( 23,154 ) ( 21,359 )

Net deferred tax liabilities

$ ( 17,429 )  

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.

$ ( 16,958 ) $ ( 17,429 )

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.

7 unchanged sentences

• Duration of statutory carryforward and carryback periods

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Statutory limitations against utilization of tax attribute carryforwards against taxable income

1 unchanged sentence

• Near- and medium-term financial outlook

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

7 unchanged sentences

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.

Based on the evidence available, including a lack of sustainable earnings and history of expiring unused net operating losses 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 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.

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.

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

federal statutory tax rate to the provision (benefit) for income taxes for continuing operations is as follows:

federal statutory tax rate to the provision for income taxes is as follows:

(in thousands)

1 unchanged sentence

21% statutory rate

$ 26,610  

$ 40,392  

$ 9,470 $ 26,610 $ 40,392

State income taxes, net of federal tax benefit

( 1,535 )  

Settlements, adjustments and releases from statute expirations

( 787 )  

( 633 ) ( 1,535 ) 2,246

Accruals, adjustments and releases from statute expirations

579 348 ( 787 )

Federal R&D credits

( 1,679 )  

( 943 )  

( 1,360 ) ( 1,679 ) ( 943 )

Stock-based compensation

( 572 )  

( 4,802 )  

( 1,504 ) ( 572 ) ( 4,802 )

Excess executive compensation

1,375 946 1,608

Change in valuation allowance

13,307  

( 9,882 )  

10,654 13,307 ( 9,882 )

Exemption of PTG gain

( 12,378 )  

- - ( 12,378 )

Dividend, net of foreign tax credits

GILTI, net of foreign tax credits

1,735 3,458 9,343

Foreign rate differential

( 6,131 )  

( 1,023 )  

( 4,897 )  

$ 29,868  

$ 25,019  

2,093 ( 6,131 ) ( 1,023 )

( 4,749 ) ( 4,897 ) 552

$ 17,660 $ 29,868 $ 25,019

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

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

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

At December 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 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.

At December 30, 2023, we had federal, state and foreign net operating loss carryforwards of approximately $ 120.9 million, $ 130.1 million and $ 13.2 million, respectively, that expire in various tax years beginning in 2024 through 2042 or have no expiration date.

We also have federal and state tax credit carryforwards at December 30, 2023 of approximately $ 4.0 million and $ 33.7 million, respectively, certain of which expire in various tax years beginning in 2024 through 2042, 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.

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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 both 2022 and 2021, and $ 3.6  million, or $ 0.09  per share, in fiscal 2020.

The impact of these holidays was an increase in net income of approximately $ 3.8 million or $ 0.08 per share in 2023 and $ 4.5 million, or $ 0.09 per share, in both fiscal 2022 and 2021.

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

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Balance at beginning of year

$ 33,391  

$ 33,696  

$ 34,740  

$ 33,368 $ 33,391 $ 33,696

Additions for tax positions of current year

Reductions for tax positions of prior years

( 428 )  

( 83 )  

Additions/(Reductions) for tax positions of prior years

1,802 ( 428 ) ( 83 )

Reductions due to lapse of the statute of limitations

( 354 )  

( 1,012 )  

Reductions due to settlements

( 295 ) ( 354 ) ( 1,012 )

Foreign exchange rate impact

( 151 )  

126 ( 151 ) 104

Balance at end of year

$ 33,368  

$ 33,391  

$ 33,696  

$ 35,900 $ 33,368 $ 33,391

If the unrecognized tax benefits at December 30, 2023 are ultimately recognized, excluding the impact of U.S.

tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately $ 5.8  million ($ 5.3  million at December 25, 2021 and $ 5.9 million at December 26, 2020) would result in a reduction in our income tax expense and effective tax rate.

tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately $ 7.5 million ($ 5.8 million at December 31, 2022 and $ 5.3 million at December 25, 2021) would result in a reduction in our income tax expense and effective tax rate.

It is reasonably possible that unrecognized tax benefits related to transfer pricing will decrease by up to $ 1.1 million within the next 12 months.

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

Cohu had approximately $ 0.6  million and $ 0.8  million accrued for the payment of interest and penalties at December 

2022, and December 25, 2021, respectively.

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

Cohu had approximately $ 0.7 million and $ 0.6 million accrued for the payment of interest and penalties at December 30, 2023, and December 31, 2022, respectively.

Interest expense, net of accrued interest reversed, was $( 0.1 ) million in 2023 and 2022 and $( 0.2 ) million in 2021.

federal and state income tax returns for years after 2019 and 2018, respectively, remain open to examination, subject to the statute of limitations.

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

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, Singapore, Philippines and Malaysia.

We conduct business globally and as a result, Cohu or one or more of its subsidiaries files income tax returns in the U.S.

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, Singapore, Philippines and Thailand.

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

Tax positions have been reflected in the consolidated financial statements in accordance ASC 740, Income Taxes.

Such tax positions are, based solely on their technical merits, more likely than not to be sustained upon examination by taxing authorities and reflect the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information.

We have both intent and ability to initiate a claim pursuant to the competent authority (e.g., Mutual Agreement Procedure) for reasonable and prudent situations such as, for example, when the resulting tax benefit exceeds the costs involved to obtain such tax benefit, and the success of prevailing upon pursuing the competent authority is more-likely-than- not achievable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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.

All amounts presented in our consolidated balance sheet as of December 30, 2023 and December 31, 2022, and our consolidated statement of income for the twelve months ended December 30, 2023 and December 31, 2022, represents the financial position and results of our remaining reportable segment.

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

(in thousands)

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Semiconductor Test & Inspection

$ 860,454  

$ 585,240  

26,760  

50,767  

Total consolidated net sales for reportable segments

$ 887,214  

$ 636,007  

Segment profit (loss) before tax:

Semiconductor Test & Inspection

$ 138,026  

Profit for reportable segments

141,933  

Other unallocated amounts:

Corporate expenses

( 10,819 )  

Gain on sale of PCB Test business

70,815  

Interest expense

( 6,413 )  

Interest income

Gain on extinguishment of debt

( 3,411 )  

Profit (loss) from continuing operations before taxes

$ 192,344  

(in thousands)

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Semiconductor Test & Inspection

$ 48,129  

$ 51,548  

Total depreciation and amortization

$ 48,568  

$ 52,746  

Capital expenditures by segment:

Semiconductor Test & Inspection

$ 11,954  

$ 18,616  

Total consolidated capital expenditures

$ 12,000  

$ 18,660  

(in thousands)

Total assets by segment:

Semiconductor Test & Inspection

$ 968,028  

66,826  

Total assets for reportable segments

1,034,854  

Corporate, principally cash and investments

55,492  

Discontinued operations

Total consolidated assets

$ 1,090,346  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

STMicroelectronics

Analog Devices

14.1 %  

* Less than 10% of consolidated net sales.

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

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

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

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

(in thousands)

$ 146,227  

$ 213,575  

$ 143,360  

111,647  

155,070  

56,272  

99,508  

79,777  

57,893  

$ 100,949 $ 99,508 $ 79,777

92,529 111,647 155,070

92,408 146,227 213,575

United States

79,093  

77,495  

108,694  

59,835  

88,152  

83,685  

76,995 79,093 77,495

Rest of the world

316,465  

273,145  

186,103  

$ 812,775  

$ 887,214  

$ 636,007  

273,441 376,300 361,297

$ 636,322 $ 812,775 $ 887,214

Geographic location of our property, plant and equipment and other long-lived assets was as follows:

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Property, plant and equipment:

$ 22,501 $ 14,706

United States

$ 18,419  

$ 18,375  

15,977  

17,419  

14,706  

10,384  

11,156  

16,093 18,419

15,843 15,977

Rest of the world

$ 65,011  

$ 63,957  

$ 69,085 $ 65,011

Goodwill and other intangible assets:

$ 158,401  

$ 181,146  

$ 149,592 $ 158,401

United States

131,068  

150,477  

43,571  

43,611  

12,512  

12,990  

111,660 131,068

63,249 43,571

60,875 12,512

Rest of the world

$ 353,643  

$ 397,111  

$ 393,428 $ 353,643

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

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

Lease and non-lease components are included in the calculation of the right of use asset (“ROU”) asset and lease liabilities.

Our leases have remaining lease terms ranging from 1 year to 34 years, some of which include one or more options to extend the lease for up to 25 years.

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Operating lease right-of-use assets

$ 22,804  

$ 25,060  

$ 16,778 $ 22,804

Finance lease assets

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Total lease assets $ 17,025 $ 23,127

$ 23,127  

$ 25,483  

Other accrued liabilities

$ 4,927  

$ 4,886  

Other accrued liabilities

Long-term lease liabilities

19,185  

21,977  

Long-term lease liabilities

Operating Other accrued liabilities

$ 5,122 $ 4,927

Finance Other accrued liabilities

Operating Long-term lease liabilities

13,160 19,185

Finance Long-term lease liabilities

Total lease liabilities $ 18,308 $ 24,185

$ 24,185  

$ 27,093  

Weighted-average remaining lease term (years):

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Operating leases

$ 6,698  

$ 7,638  

$ 6,691 $ 6,698 $ 7,638

Variable lease expense

2,389 2,220 2,192

Short-term operating leases

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Sublease income

( 69 )  

( 29 ) ( 69 ) ( 81 )

Net lease cost

$ 8,942  

$ 9,906  

$ 9,158 $ 8,942 $ 9,906

Future minimum lease payments at December 30, 2023, are as follows:

(in thousands)

$ 6,197  

$ 6,247  

$ 6,090 $ 12 $ 6,102

5,271 12 5,283

2,520 3 2,523

1,503 - 1,503

1,269 - 1,269

5,547 - 5,547

Total lease payments

29,812  

29,887  

( 5,700 )  

22,200 27 22,227

( 3,918 ) ( 1 ) ( 3,919 )

Present value of lease liabilities

$ 24,112  

$ 24,185  

$ 18,282 $ 26 $ 18,308

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Operating cash flows from operating leases

$ 6,716  

$ 7,628  

$ 6,756 $ 6,716 $ 7,628

Operating cash flows from finance leases

Financing cash flows from finance leases

$ 52 $ 167 $ 186

Leased assets obtained in exchange for new finance lease liabilities $ - $ - $ 54

Leased assets obtained in exchange for new operating lease liabilities

$ 2,874  

$ 3,866  

$ 1,415 $ 2,874 $ 3,866

Financing lease assets acquired in MCT acquisition

Operating lease assets acquired in MCT acquisition

$ 130 $ - $ -

Commitments and Contingencies

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Beginning balance

$ 7,691  

$ 6,382  

$ 6,155  

$ 6,214 $ 7,691 $ 6,382

Warranty accruals

13,389  

6,555 8,897 13,389

Warranty payments

( 10,374 )  

( 11,135 )  

( 7,862 ) ( 10,374 ) ( 11,135 )

Warranty liability transferred

( 945 )  

110 - ( 945 )

Ending balance

$ 6,214  

$ 7,691  

$ 6,382  

$ 5,017 $ 6,214 $ 7,691

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

These amounts totaled $ 0.6  million and $ 1.1  million at December 31, 2022 and December 25, 2021, respectively.

Business Divestitures and Discontinued Operations

These amounts totaled $ 0.4 million and $ 0.6 million at December 30, 2023 and December 31, 2022, respectively.

Business Divestitures

PCB Test Equipment Business

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

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

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

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

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

We evaluated the guidance in ASC 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.

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

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

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

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

We evaluated the guidance in ASC 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.

Fixtures Services Business ( “

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

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

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

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

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) :

Operating income

Gain on sale of FSG

Income before taxes

Income tax provision

Income, net of tax

Accumulated Other Comprehensive Income (Loss)

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Foreign currency translation adjustments

$ 27,321  

$ ( 22,859 ) $ ( 97 ) $ ( 22,956 )

Adjustments related to postretirement benefits

( 216 )  

Other comprehensive income

$ 29,920  

$ ( 216 )  

$ 29,704  

2,920 ( 318 ) 2,602

Change in unrealized gain/loss on investments

( 67 ) - ( 67 )

Reclassification due to sale of PBC Test Business

( 2,515 ) - ( 2,515 )

Other comprehensive loss

$ ( 22,521 ) $ ( 415 ) $ ( 22,936 )

Year ended December 31, 2022

Foreign currency translation adjustments

$ ( 22,859 )  

$ ( 97 )  

$ ( 17,991 ) $ 41 $ ( 17,950 )

Adjustments related to postretirement benefits

( 318 )  

6,690 ( 796 ) 5,894

Change in unrealized gain/loss on investments

( 67 )  

Reclassification due to sale of PBC Test Business

( 2,515 )  

( 694 ) - ( 694 )

Other comprehensive loss

$ ( 22,521 )  

$ ( 415 )  

$ ( 11,995 ) $ ( 755 ) $ ( 12,750 )

Year ended December 30, 2023

Foreign currency translation adjustments

$ ( 17,991 )  

$ 6,256 $ 559 $ 6,815

Adjustments related to postretirement benefits

( 796 )  

$ 5,894  

( 2,800 ) 425 ( 2,375 )

Change in unrealized gain/loss on investments

( 694 )  

Other comprehensive loss

$ ( 11,995 )  

$ ( 755 )  

Other comprehensive income

$ 4,249 $ 984 $ 5,233

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

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Accumulated net currency translation adjustments

$ ( 46,308 )  

$ ( 39,493 ) $ ( 46,308 )

Accumulated net adjustments related to postretirement benefits

$ 1,153  

Accumulated net unrealized gain/loss on investments

( 735 )  

Accumulated reclassification due to sale of PBC Test Business

Total accumulated other comprehensive loss

$ ( 40,012 )  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ ( 34,779 ) $ ( 40,012 )

Related Party Transactions

1 unchanged sentence

which owns 15.8 % of our outstanding common stock as reported in its Form 13 -G/A filing made with the Securities and Exchange Commission on January 22, 2024.

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

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

During 2023, 2022 and 2021, purchases of products from FTZ were not material.

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

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

During 2021 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.

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

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 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”).

(the Company) as of December 30, 2023 and December 31, 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 17, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Valuation of inventories

Description of 

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

Description of the Matter

As of December 30, 2023, the Company’s consolidated inventories balance was $155.8 million.

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 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 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.

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 the determination of expected future product demand.

How We Addressed the Matter in Our Audit

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

To test the valuation of inventories, our audit procedures included, among others, evaluating expected future product demand 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 expectations, compared the balance of on-hand inventories to demand assumptions, and assessed the historical accuracy of management’s estimates by comparing prior period forecasted demand to actual consumption.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1956.

San Diego, California

February 16, 2024

Index to  

Index to Exhibits

The following exhibits are filed as part of, or incorporated into, the 2023 Cohu, Inc.

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incorporated herein by reference to Exhibit 3.1 from the Cohu, Inc.

Current Report on Form 8-K (file no.

001-04298) filed with the Securities and Exchange Commission on May 5, 2022

Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2022

Amended and Restated Bylaws of Cohu, Inc.

incorporated herein by reference to Exhibit 3.1 from the Cohu, Inc.

Current Report on Form 8-K (file no.

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

Description of Capital Stock

Form 8-K filed with the Securities and Exchange Commission on May 12, 2023

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 February 17, 2023

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

4 unchanged sentences

Form 10-Q filed with the Securities and Exchange Commission on November 7, 2018

Amended Cohu, Inc.

2005 Equity Incentive Plan incorporated herein by reference to Appendix A from the Cohu, Inc.

2005 Equity Incentive Plan, as amended May 10, 2023, incorporated herein by reference to Appendix B from the Cohu, Inc.

Form DEF 14A filed with the Securities and Exchange Commission on March 28, 2023*

Amended Cohu, Inc.

1997 Employee Stock Purchase Plan, herein by reference to Appendix B from the Cohu, Inc.

1997 Employee Stock Purchase Plan, as amended May 10, 2023, incorporated herein by reference to Appendix C from the Cohu, Inc.

Form DEF 14A filed with the Securities and Exchange Commission on March 28, 2023*

Deferred Compensation Plan (as amended and restated) incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc.

Current Report on Form 8-K (file no.

001-04298) filed with the Securities and Exchange Commission on December 29, 2008*

Form of employee restricted stock unit agreement for use with restricted stock units granted pursuant to the Cohu, Inc.

Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008*

Form of executive employee restricted stock unit agreement for use with restricted stock units granted pursuant to the Cohu, Inc.

2005 Equity Incentive Plan 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 August 4, 2015*

Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023*

Form of non-employee director restricted stock unit agreement for use with restricted stock units granted pursuant to the Cohu, Inc.

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

Current Report on Form 8-K (file no.

001-04298) filed December 13, 2018*

Current Report on Form 8-K filed December 13, 2018*

Retiree Health Benefits Agreement (as amended) incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc.

Current Report on Form 8-K (file no.

001-04298) filed with the Securities and Exchange Commission on December 29, 2008*

Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008*

Lease agreement dated December 4, 2015 by and between CT Crosthwaite I, LLC and Cohu, Inc.

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

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

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

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

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

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

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

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

7 unchanged sentences

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

First Amendment to Credit and Guaranty Agreement, dated as of June 16, 2023, between Cohu, Inc.

and Deutsche Bank AG New York Branch, as administrative agent incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc.

Form 8-K filed with the Securities and Exchange Commission on June 23, 2023

Subsidiaries of Cohu, Inc.

Consent of Independent Registered Public Accounting Firm

31.1            

Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 for Luis A.

31.2            

Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 for Jeffrey D.

3 unchanged sentences

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

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

Policy for Recovery of Erroneously Awarded Incentive Compensation

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

Inline XBRL Taxonomy Extension Schema Document

3 unchanged sentences

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

 Management contract or compensatory plan or arrangement

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

* Management contract or compensatory plan or arrangement

Form 10-K Summary.

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

February 16, 2024

 /s/ Luis A.

President and Chief Executive Officer

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

Signature  

 /s/ James A.

Chairperson of the Board,

February 16, 2024

 /s/ Luis A.

President and Chief Executive Officer, Director

1 unchanged sentence

(Principal Executive Officer)

 /s/ Jeffrey D.

Vice President, Finance and CFO

/s/ Jeffrey D.

Senior Vice President, Finance and CFO

February 16, 2024

(Principal Financial and Accounting Officer)

 /s/ William E.

February 16, 2024

 /s/ Steven J.

February 16, 2024

 /s/ Andrew M.

February 16, 2024

 /s/ Yon Y.

February 16, 2024

 /s/ Andreas W.

February 16, 2024

 /s/ Nina L.

February 16, 2024

1 unchanged sentence

(in thousands)

(1) to Expense

Allowance for doubtful accounts:

Year ended December 25, 2021

$ ( 1 )  

$ ( 41 )  

$ 128 $ 14 $ 149 $ 1 $ 290

Year ended December 31, 2022

$ 290 $ ( 8 ) $ 122 $ 205 $ 199

Year ended December 30, 2023

$ ( 8 )  

$ 199 $ 5 $ 140 $ 4 $ 340

Reserve for excess and obsolete inventories:

Year ended December 25, 2021

$ 20,958  

$ 4,611  

$ 8,117  

$ 6,749  

$ 26,937  

$ 26,937 $ ( 2,926 ) (2) $ 7,102 $ 8,101 $ 23,012

Year ended December 31, 2022

$ 26,937  

$ ( 2,926 ) (2) $ 7,102  

$ 8,101  

$ 23,012  

$ 23,012 $ 698 $ 7,179 $ 4,018 $ 26,871

Year ended December 30, 2023

$ 23,012  

$ 7,179  

$ 4,018  

$ 26,871  

$ 26,871 $ 648 $ 4,540 $ 11,641 $ 20,418

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

2 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures