Item 9A. Controls and Procedures
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of October 1, 2022. At the time that the Original Form 10-K was filed on November 17, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 1, 2022, our disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. Based on the identification of the material weakness described below, the Company, under the supervision of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, re-evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this re-evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of October 1, 2022.
Management’s Report on Internal Control Over Financial Reporting (As Restated)
The management of Kulicke and Soffa Industries, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. The 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 in the United States of America.
The Company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and 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 future events, in each instance no matter how remote, or that the degree of compliance with the policies or procedures may deteriorate.
In Management's Report on Internal Control Over Financial Reporting included in the Original Form 10-K, our management had previously concluded that we maintained effective internal control over financial reporting as of October 1, 2022. Management has subsequently concluded that the material weakness described below existed as of October 1, 2022. As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of October 1, 2022, based on the criteria in Internal Control-Integrated Framework (2013) issued by the COSO. Accordingly, management has restated its report on internal control over financial reporting.
As described in the Explanatory Note, subsequent to the Original Form 10-K, the Company concluded that its prior determination that certain prior period conclusions about the Company’s operating and reportable segments were erroneous. As a result, the Company had incorrectly presented certain segment-related disclosures in the notes to our previously issued consolidated financial statements.
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In light of the foregoing, we have identified a material weakness in our internal control over financial reporting that existed as of October 1, 2022. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness is a result of a design gap in the existing review of the segment reporting process, which failed to (a) identify all of the key metrics used by the CODM to evaluate performance and allocate resources, (b) assess in totality the level of information provided to and utilized by the CODM to evaluate performance and allocate resources and (c) appropriately analyze every factor pertinent to whether operating segments share economic similarities that are required for aggregation under ASC 280. There were no material misstatements as a result of this material weakness; however, it could result in omitted disclosures within the segment reporting footnote disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected on a timely basis. Due to the material weakness, we have concluded that our internal control over financial reporting was not effective as of October 1, 2022.
The Company has evaluated the impact of the incorrect presentation of segment information, considering both quantitative and qualitative factors, and concluded that the errors were immaterial to the consolidated financial statements included in the Original Form 10-K and that there was no impact to the primary financial statements in the Original Form 10-K.
The effectiveness of the Company’s internal control over financial reporting as of October 1, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report, which appears in Part II, Item 8 of this Amendment.
Management’s Plans for Remediation of the Material Weakness
The Company is in the process of assessing and finalizing its plan for remediation of the material weakness, with the oversight of the Audit Committee of the Board of Directors, the Chief Executive Officer and the Chief Financial Officer. Specifically, we have improved our review process including the documentation of the evaluation of segment reporting under ASC 280. In addition, the Company has engaged an outside consultant to assist management in the development of a segment analysis framework to be used on a go forward basis to support the segment related disclosures, particularly when the Company has significant organizational structure or reporting structure changes that may impact the Company’s analysis under ASC 280.
While we believe the measures described above and others that may be identified and implemented in future periods will strengthen our internal control over financial reporting and remediate the identified material weakness, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the three months ended October 1, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
Page
(1) Financial Statements - Kulicke and Soffa Industries, Inc.:
Report of Independent Registered Public Accounting Firm (PCAOB ID 1093 )
28
Consolidated Balance Sheets as of October 1, 2022 and October 2, 2021 31
Consolidated Statements of Operations for fiscal 2022, 2021 and 2020 32
Consolidated Statements of Comprehensive Income for fiscal 2022, 2021 and 2020 33
Consolidated Statements of Changes in Shareholders' Equity for fiscal 2022, 2021 and 2020 34
Consolidated Statements of Cash Flows for fiscal 2022, 2021 and 2020 35
Notes to Consolidated Financial Statements 36
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts 70
All other schedules are omitted because they are not applicable or the required information is
shown in the Consolidated Financial Statements or notes thereto.
(3) Exhibits:
See “Exhibit Index” within Item 15 below. 71
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KULICKE AND SOFFA INDUSTRIES, INC.
Schedule II-Valuation and Qualifying Accounts
( in thousands
Fiscal 2022: Beginning of period Charged to Costs and Expenses Other Additions Other Deductions End of period
Allowance for doubtful accounts $ 687 $ ( 245 ) $ — $ ( 442 ) (1) $ —
Inventory reserve $ 23,042 $ ( 2,171 ) $ — $ ( 1,633 ) (2) $ 19,238
Valuation allowance for deferred taxes $ 34,095 $ — $ — $ ( 12,345 ) (4) $ 21,750
Fiscal 2021:
Allowance for doubtful accounts $ 968 $ ( 248 ) $ — $ ( 33 ) (1) $ 687
Inventory reserve $ 31,163 $ ( 2,965 ) $ — $ ( 5,156 ) (2) $ 23,042
Valuation allowance for deferred taxes $ 46,561 $ — $ — $ ( 12,466 ) (4) $ 34,095
Fiscal 2020:
Allowance for doubtful accounts $ 597 $ 371 $ — $ — (1) $ 968
Inventory reserve $ 29,313 $ 4,170 $ — $ ( 2,320 ) (2) $ 31,163
Valuation allowance for deferred taxes $ 58,411 $ 6,887 (3) $ — $ ( 18,737 ) (5) $ 46,561
(1) Represents write-offs of specific accounts receivable.
(2) Sale or scrap of previously reserved inventory.
(3) Reflects the net increase in the valuation allowance primarily associated with the Company’s U.S. and foreign tax credits, U.S. and foreign net operating losses and other deferred tax assets.
(4) Reflects the net decrease in the valuation allowance primarily associated with the Company’s utilization of certain foreign net operating losses for which a valuation allowance had previously been recorded, partially offset by an increase for U.S. and foreign tax credits, U.S. and foreign net operating losses and other deferred tax assets.
(5) Reflects the balances relating to foreign tax credits on undistributed foreign earnings and related valuation allowances that have been reclassified in fiscal 2020.
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EXHIBIT INDEX
EXHIBIT NUMBER ITEM
3.1 The Company's Amended and Restated Articles of Incorporation, dated December 5, 2007, is incorporated herein by reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 2007, SEC file number 000-00121.
3.2 The Company's Amended and Restated By-Laws, dated October 22, 2015, is incorporated herein by reference to Exhibit 3(ii) to the Company's Current Report on Form 8-K dated October 22, 2015.
4.1 Specimen Common Share Certificate of Kulicke and Soffa Industries Inc., is incorporated herein by reference to Exhibit 4 to the Company's Form-8A12G/A dated September 11, 1995, SEC file number 000-00121.
4.2 Description of the Company's securities.
10.1 Kulicke & Soffa Industries, Inc. Executive Severance Pay Plan, dated as of August 9, 2011, is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 12, 2011.*
10.2 Kulicke & Soffa Industries, Inc. Officer Severance Pay Plan, dated as of August 9, 2011, is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on August 12, 2011.*
10.3 Form of Change of Control Agreement, is incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on August 12, 2011.*
10.4 Form of Director Indemnification Agreement is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 10, 2013.*
10.5 Lease Agreement between DBS Trustee Limited, as trustee of Mapletree Industrial Trust, and the Kulicke & Soffa Pte. Ltd, dated December 1, 2013, is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 5, 2013.
10.6 Lease Agreement Variation Letter between DBS Trustee Limited, as trustee of Mapletree Industrial Trust, and the Kulicke & Soffa Pte. Ltd, dated December 1, 2013, is incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 5, 2013.
10.7 Form of Officer Indemnification Agreement is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 11, 2013.*
10.8 Offer Letter between Kulicke and Soffa Industries, Inc. and Fusen Chen dated October 3, 2016, incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on October 3, 2016.*
10.9 2017 Equity Plan is incorporated herein by reference to Appendix A to the Company's Proxy Statement on Schedule 14A for the annual meeting of shareholders on March 14, 2017.*
10.10 Form of Performance Share Unit Award Agreement regarding the 2017 Equity Plan is incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on November 6, 2017.
10.11 Form of Restricted Share Unit Award Agreement regarding the 2017 Equity Plan is incorporated herein by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on November 6, 2017.
10.12 The Company's 2021 Omnibus Incentive Plan is incorporated herein by reference to the Company's Proxy Statement on Schedule 14A for the annual meeting of shareholders on March 4, 2021
10.13 Form of CEO Performance Share Unit Award Agreement (Growth PSUs) regarding the 2021 Omnibus Incentive Plan.
10.14 Form of Executive Performance Share Unit Award Agreement (Growth PSUs) regarding the 2021 Omnibus Incentive Plan.
10.15 Form of CEO Performance Share Unit Award Agreement (Relative TSR) regarding the 2021 Omnibus Incentive Plan.
10.16 Form of Executive Performance Share Unit Award Agreement (Relative TSR) regarding the 2021 Omnibus Incentive Plan.
10.17 Form of Restricted Stock Unit Award Agreement regarding the 2021 Omnibus Incentive Plan.
10.18 Incentive Compensation Plan Fiscal Year 2022 .
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21.1 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP (Independent Registered Public Accounting Firm) .
31.1 Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2 Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1 Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Indicates a management contract or compensatory plan or arrangement
** Copies of certain instruments defining the rights of holders of certain of our long-term debt are not filed herewith. We hereby agree to furnish a copy of any such instrument to the SEC upon request.
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SIGNATURES
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.
KULICKE AND SOFFA INDUSTRIES, INC.
By: /s/ FUSEN CHEN
Fusen Chen
President and Chief Executive Officer
Dated: August 8, 2023
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 date indicated.
Signature Title Date
/s/ FUSEN CHEN President and Chief Executive Officer August 8, 2023
Fusen Chen (Principal Executive Officer)
/s/ LESTER WONG Executive Vice President and Chief Financial Officer August 8, 2023
Lester Wong (Principal Financial Officer and Principal Accounting Officer)
/s/ JON A. OLSON Director August 8, 2023
Jon A. Olson
/s/ GREGORY F. MILZCIK
Director August 8, 2023
Gregory F. Milzcik
/s/ CHIN HU LIM Director August 8, 2023
Chin Hu Lim
/s/ JEFF RICHARDSON Director August 8, 2023
David J. Richardson
/s/ MUI SUNG YEO Director August 8, 2023
Mui Sung Yeo
/s/ PETER T. KONG Director August 8, 2023
Peter T. Kong
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