Cohu(COHU) - 2022 Q4 - Annual Report

PART I Business Overview Cohu, Inc. is a global technology leader providing test, automation, inspection, and metrology products and services to the semiconductor industry. - Cohu is a global technology leader supplying test, automation, inspection, and metrology products and services to the semiconductor industry, focusing on optimizing manufacturing yield and productivity[9] - The company operates in one reportable segment, Semiconductor Test and Inspection Equipment, after divesting its PCB Test business on June 24, 2021[12][14] Sales by Reportable Segment (Percentage of Total Consolidated Net Sales) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Semiconductor Test & Inspection | 100% | 97% | 92% | | PCB Test | -% | 3% | 8% | | Total | 100% | 100% | 100% | - Cohu's product portfolio includes Semiconductor Automated Test Equipment (ATE), Semiconductor Handlers, Interface Products (test contactors, probe heads, probe pins), Inspection and Metrology products (NV-Core), Data Analytics (DI-Core), Spares and Kits, and Services[16][17][18][19][20][21][22] Sales by Product Line (Percentage of Consolidated Net Sales) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Semiconductor test & inspection systems (including kits) | 58% | 61% | 50% | | Recurring revenues (1) | 42% | 37% | 45% | | PCB test systems | -% | 2% | 5% | (1) Recurring revenues include interface products, spares, kits (not as part of system sales), DI-Core and services. - Research and development expenses were $92.6 million in 2022, $92.0 million in 2021, and $86.2 million in 2020, reflecting continuous investment in new products and enhancements[36] - As of January 30, 2023, Cohu had approximately 3,218 employees in 24 countries, with 68% located in Asia Pacific, 19% in the Americas, and 13% in EMEA[52] Risk Factors Cohu faces significant risks from the COVID-19 pandemic, intense competition, geopolitical instability, and financial indebtedness. - The COVID-19 pandemic may continue to adversely affect Cohu's business, financial condition, and results of operations due to evolving public health requirements, supply chain disruptions, and increased costs[66][71][72] - Cohu's significant investments in new products and enhancements (R&D expense of $92.6 million in 2022) may not be commercially successful, impacting operating results[74] - The semiconductor industry is intensely competitive, characterized by rapid technological change, and subject to seasonal, volatile, and unpredictable demand, which can adversely impact sales and gross margin[28][84][85] - Geopolitical instability, particularly in Asia (e.g., Taiwan Strait, Ukraine-Russia conflict), and increasingly restrictive trade and export regulations (especially concerning China) may disrupt operations, supply chains, and limit sales[106][107][114][117][118] - Cohu's indebtedness (approximately $79 million at December 31, 2022) and credit agreement covenants limit financial flexibility, and the need for continued access to capital could be challenging if not available on favorable terms[119][124] - Cybersecurity breaches, intellectual property infringement claims, and the loss of key personnel are significant risks that could harm competitive position, operations, and financial results[100][151][152][154] Unresolved Staff Comments There are no unresolved staff comments to report. - No unresolved staff comments were reported[155] Properties Cohu's principal properties include manufacturing, sales, and engineering facilities globally, deemed suitable for current needs. Principal Properties at December 31, 2022 | Location | Major Activities | Approx. Sq. Ft. | Ownership | | :--- | :--- | :--- | :--- | | Poway, California | Corporate Admin/Principal Executive Offices and Global Headquarters, Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 147,000 | Leased | | Malacca, Malaysia | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 96,000 | Leased | | Kolbermoor, Germany | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 83,000 | Owned | | Osaka, Japan | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 67,000 | Owned | | Norwood, Massachusetts | Sales, Service and Customer Support, Engineering and Product Development, Marketing, Finance and General Administration | 56,000 | Leased | | Calamba City, Laguna, Philippines | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 52,000 | Leased | | La Chaux-de-Fonds, Switzerland | Sales, Service and Customer Support, Engineering and Product Development, Marketing, Finance and General Administration | 33,000 | Leased | | Milpitas, California | Sales, Service and Customer Support, Engineering and Product Development, Marketing, Finance and General Administration | 31,000 | Leased | | Lincoln, Rhode Island | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 22,000 | Leased | | Singapore | Sales, Service and Customer Support, Engineering and Product Development, Marketing, Finance and General Administration | 20,000 | Leased | | St. Paul, Minnesota | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 17,000 | Leased | | Penang, Malaysia (1) | Sales, Service and Customer Support, Manufacturing, Engineering and Product Development, Marketing, Finance and General Administration | 10,000 | Leased | (1) Location was acquired on January 30, 2023, in conjunction with the purchase of MCT. Legal Proceedings Cohu is involved in various legal proceedings and claims in the ordinary course of business, but does not currently anticipate a material adverse effect on its financial position or results of operations from their resolution. - Cohu is involved in various legal proceedings and claims, but does not expect a material adverse effect on its financial position or results of operations[158][451] Mine Safety Disclosures This item is not applicable to Cohu's operations. - Mine Safety Disclosures are not applicable to Cohu[159] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cohu's common stock trades on Nasdaq, with 577 stockholders, a suspended dividend, and an active share repurchase program. - Cohu, Inc. common stock is traded on the Nasdaq Global Select Market under the symbol 'COHU'[2][161] - As of February 8, 2023, Cohu had 577 stockholders of record[162] - Cohu's Board of Directors authorized suspending the quarterly cash dividend indefinitely as of May 5, 2020, saving approximately $10 million annually to deleverage and strengthen the balance sheet[163] - An additional $70 million was authorized for the share repurchase program on October 25, 2022, following an initial $70 million authorization in October 2021. In 2022, Cohu repurchased 1,767,070 shares for $50.7 million[165][235] Share Repurchase Activity (Q4 2022) | Period | Total Number of Shares Purchased (thousands) | Weighted Average Price Paid Per Share | Total Purchase Cost (thousands) | Maximum $ Value of Shares That May Yet Be Purchased Under The Programs (thousands) | | :--- | :--- | :--- | :--- | :--- | | Sep 25, 2022 - Oct 22, 2022 | 200 | $27.54 | $5,513 | $89,085 | | Oct 23, 2022 - Nov 19, 2022 | 61 | $33.20 | $2,041 | $87,044 | | Nov 20, 2022 - Dec 31, 2022 | 150 | $33.87 | $5,088 | $81,957 | | Total | 411 | $30.70 | $12,642 | | Comparative Stock Performance Graph (Cumulative Total Stockholder Return) | | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cohu, Inc. | $100 | $116 | $167 | $291 | $173 | $146 | | NASDAQ Index | $100 | $97 | $133 | $192 | $235 | $159 | | Russell 2000 | $100 | $89 | $112 | $134 | $154 | $122 | | 2021 Peer Group | $100 | $85 | $149 | $210 | $314 | $194 | | 2022 Peer Group | $100 | $83 | $124 | $154 | $212 | $162 | Reserved This item is reserved due to amendments to Regulation S-K, requiring no retrospective changes. - Item 6 is reserved due to amendments to Items 301 and 302 of Regulation S-K, with no retrospective changes requiring disclosure[175] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Cohu's financial performance, critical accounting estimates, and liquidity, highlighting decreased sales but improved gross margin in 2022. - Cohu's net sales decreased 8.4% year-over-year to $812.8 million in 2022, primarily due to lower demand for mobility and 5G-related products and the divestiture of the PCB Test business[178][202] - Gross margin improved to 47.2% in 2022 from 43.6% in 2021, driven by favorable product mix, increased insourcing of contactor manufacturing, and foreign currency fluctuations[203] - The company continues to focus on building a well-balanced and resilient business model, encouraged by demand across main market segments and new product traction, with optimism for long-term prospects due to semiconductor ubiquity, 5G rollout, and increasing complexity[179] - Key accounting estimates include revenue recognition, inventory reserves, income taxes, and the recoverability of long-lived and indefinite-lived assets (goodwill and intangibles)[181] - Net cash provided by operating activities was $112.9 million in 2022, up from $97.9 million in 2021, primarily due to increased net income and changes in working capital[231] - Total indebtedness, net of discount and deferred financing costs, was $79.0 million at December 31, 2022, down from $119.3 million at December 25, 2021, reflecting voluntary prepayments[227][364] Overview Cohu, a leading semiconductor test and inspection supplier, saw 2022 net sales decrease by 8.4% but gross margin improve, with optimism for long-term market drivers. - Cohu is a leading supplier of semiconductor test and inspection automation systems, MEMS test modules, test contactors, thermal subsystems, and automated test equipment[176] - Capital equipment revenue is driven by customer capital expenditure budgets and spending patterns, which are often volatile, while consumable products provide a more stable, recurring revenue source[176][177] Net Sales (2021 vs. 2022) | Year | Net Sales (millions) | Change YoY | | :--- | :--- | :--- | | 2021 | $887.2 | | | 2022 | $812.8 | -8.4% | - The decline in 2022 net sales was attributed to lower demand for mobility and 5G-related products, and the divestiture of the PCB Test business (which contributed $26.8 million in 2021)[178][202] - Gross margin improved in 2022 due to favorable product mix, increased insourcing of contactor manufacturing, and price increases offsetting supply chain costs[178][203] - Long-term market drivers and strategy remain intact, with optimism for business prospects due to increasing semiconductor ubiquity, 5G rollout, semiconductor complexity, and quality demands[179] Application of Critical Accounting Estimates and Policies Cohu's financial statements rely on critical accounting estimates for revenue recognition, inventory, income taxes, and asset impairment, based on historical data and forecasts. - Critical accounting estimates include revenue recognition, valuation allowances (inventory reserves), income tax assets/liabilities, and recoverability of long-lived and indefinite-lived assets (goodwill and intangibles)[181] - Revenue is recognized when control of products or services is transferred, with deferrals for sales requiring destination or acceptance, or for undelivered performance obligations in multiple-element arrangements[182][337][339] Unsatisfied Performance Obligations (Over One Year) | Date | Revenue Expected to be Recognized (millions) | | :--- | :--- | | December 31, 2022 | $7.1 | | December 25, 2021 | $7.7 | - Inventory is valued at the lower of cost or net realizable value, with reserves for estimated excess and obsolete inventory based on future demand forecasts. Net charges for excess and obsolete inventory were $7.2 million in 2022 and $7.1 million in 2021[184][204][315] - Income tax liabilities involve significant judgments for current and deferred taxes, unrecognized tax benefits, and valuation allowances against deferred tax assets. The gross deferred tax asset balance was $114.5 million at December 31, 2022, with a valuation allowance of $89.2 million[185][221] - Goodwill and indefinite-lived intangible assets are tested for impairment annually (as of October 1st) or more frequently if impairment indicators arise. No impairment was determined as of October 1, 2022[189][190][325] - Share-based compensation expense is estimated using complex assumptions for valuation models (Black-Scholes, Monte Carlo simulation) and recognized over the requisite service period[196][350] Results of Operations Cohu's operating results for 2022 showed a decrease in net sales but an improvement in gross margin compared to 2021. Net income for 2022 was $96.8 million, down from $167.3 million in 2021, largely due to the one-time gain on the sale of the PCB Test business in 2021. - The PCB Test business was sold on June 24, 2021, impacting comparative results; 2021 includes six months of PCB Test business, while 2020 includes a full twelve months[199] Operating Data as a Percentage of Net Sales | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | 100.0% | 100.0% | 100.0% | | Cost of sales | (52.8)% | (56.4)% | (57.3)% | | Gross margin | 47.2% | 43.6% | 42.7% | | Research and development | (11.4)% | (10.4)% | (13.5)% | | Selling, general and administrative | (16.2)% | (14.3)% | (20.3)% | | Amortization of purchased intangible assets | (4.1)% | (4.0)% | (6.1)% | | Gain on sale of PCB Test business | - | 8.0% | - | | Restructuring charges | (0.1)% | (0.2)% | (1.2)% | | Impairment charges | - | (0.0)% | (1.8)% | | Gain on sale of facilities | - | - | 0.7% | | Income from operations | 15.4% | 22.7% | 0.5% | Net Sales (2022 vs. 2021) | Year | Net Sales (millions) | Change YoY | | :--- | :--- | :--- | | 2021 | $887.2 | | | 2022 | $812.8 | -8.4% | Gross Margin (2022 vs. 2021) | Year | Gross Margin % | | :--- | :--- | | 2021 | 43.6% | | 2022 | 47.2% | Key Expenses (2022 vs. 2021) | Expense Category | 2022 (millions) | 2021 (millions) | Change YoY | | :--- | :--- | :--- | :--- | | Research and Development | $92.6 | $92.0 | +$0.6 | | Selling, General and Administrative | $131.4 | $127.0 | +$4.4 | | Amortization of Purchased Intangible Assets | $33.2 | $35.4 | -$2.2 | | Restructuring Charges | $0.6 | $1.8 | -$1.2 | | Interest Expense | $4.2 | $6.4 | -$2.2 | | Interest Income | $4.0 | $0.2 | +$3.8 | - A $70.8 million pre-tax gain was recognized in 2021 from the sale of the PCB Test business[209] Net Income (2022 vs. 2021) | Year | Net Income (millions) | | :--- | :--- | | 2021 | $167.3 | | 2022 | $96.8 | Liquidity and Capital Resources Cohu's liquidity primarily stems from operating cash flows, with ongoing debt reduction and share repurchases, and $154.5 million held by foreign subsidiaries. - Primary liquidity source is cash flow from operations, which was $112.9 million in 2022, compared to $97.9 million in 2021[224][231] Cash, Cash Equivalents, Short-term Investments, and Working Capital | (in thousands) | 2022 | 2021 | Increase | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Cash, cash equivalents and short-term investments | $385,576 | $379,905 | $5,671 | 1.5% | | Working capital | $603,979 | $558,334 | $45,645 | 8.2% | - At December 31, 2022, $154.5 million (40.1%) of cash, cash equivalents, and short-term investments were held by foreign subsidiaries[225] Total Indebtedness (Net of Discount and Deferred Financing Costs) | Date | Amount (millions) | | :--- | :--- | | December 31, 2022 | $79.0 | | December 25, 2021 | $101.6 | - In 2022, Cohu repurchased 1,767,070 shares of common stock for $50.7 million under its share repurchase program, with $82.0 million remaining authorized as of December 31, 2022[228][235] Contractual Obligations at December 31, 2022 (in thousands) | (in thousands) | Total | 2023 | 2024-2025 | 2026-2027 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $29,812 | $6,197 | $11,082 | $4,629 | $7,904 | | Finance leases | $75 | $50 | $22 | $3 | $- | | Bank term loans (principal and interest) | $93,703 | $10,132 | $75,925 | $2,486 | $5,160 | | Revolving credit facilities | $1,907 | $1,907 | $- | $- | $- | | Total contractual obligations | $125,497 | $18,286 | $87,029 | $7,118 | $13,064 | Quantitative and Qualitative Disclosures About Market Risk Cohu is exposed to investment and interest rate risk, primarily from its short-term fixed-income investments and floating-rate long-term debt. An immediate 10% change in interest rates would not materially impact financial condition or results due to the short duration of the investment portfolio. The company also faces foreign currency exchange risk from global operations, particularly with the Swiss Franc, Euro, Malaysian Ringgit, Chinese Yuan, Philippine Peso, and Japanese Yen. Foreign currency forward contracts are used to hedge against these fluctuations, and a hypothetical 10% devaluation/appreciation of the U.S. dollar would result in an approximate $34.2 million translation adjustment. - Cohu's investment portfolio of $143.2 million in short-term, fixed-income securities is subject to interest rate risk, but due to its short duration, a 10% change in rates would not materially impact financial condition or results[256] - The Term Loan Credit Facility ($67.0 million outstanding at December 31, 2022) bears floating interest rates (LIBOR plus a margin), exposing Cohu to interest rate fluctuations and the uncertainty of LIBOR's phase-out by June 2023[258][259] - Cohu faces foreign currency exchange risk from operations in several countries, particularly with the Swiss Franc, Euro, Malaysian Ringgit, Chinese Yuan, Philippine Peso, and Japanese Yen[261] - Foreign currency forward contracts are used to hedge against foreign exchange rate movements affecting U.S. Dollar denominated assets and liabilities at foreign subsidiaries[262][413] - A hypothetical 10% devaluation of the U.S. dollar would result in an approximate $34.2 million positive translation adjustment, while a 10% appreciation would result in a negative $34.2 million adjustment[264] Financial Statements and Supplementary Data The required financial statements and supplementary data are included in Part IV, Item 15(a) of this Form 10-K. - Financial statements and supplementary data are located in Part IV, Item 15(a)[265] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure. - No changes in or disagreements with accountants on accounting and financial disclosure were reported[266] Controls and Procedures Cohu's management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022. There were no material changes in internal control over financial reporting during the three months ended December 31, 2022. Management also concluded that internal control over financial reporting was effective as of December 31, 2022, a conclusion affirmed by Ernst & Young LLP, the independent registered public accounting firm. - Cohu's disclosure controls and procedures were effective as of December 31, 2022[267] - No material changes in internal control over financial reporting occurred during the three months ended December 31, 2022[268] - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework[269] - Ernst & Young LLP, the independent registered public accounting firm, audited and expressed an unqualified opinion on the effectiveness of Cohu's internal control over financial reporting as of December 31, 2022[271][273][467] - The valuation of inventories was identified as a critical audit matter due to subjective judgments and sensitivity to assumptions like product expectations and future usage of materials[471][472] Other Information There is no other information to report under this item. - No other information was reported[281] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to Cohu's operations. - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[282] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance, including the Code of Business Conduct and Ethics and Corporate Governance Guidelines, is incorporated by reference from Cohu's definitive proxy statement to be filed within 120 days after fiscal 2022 close. Executive officer information is also provided in Part I, Item 1. - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement[284] - Cohu has adopted a Code of Business Conduct and Ethics and Corporate Governance Guidelines, available on its website[285][286] Executive Compensation Information regarding executive compensation is incorporated by reference from Cohu's definitive proxy statement, which will be filed within 120 days after the close of fiscal 2022. - Executive compensation information is incorporated by reference from the definitive proxy statement[288] 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 incorporated by reference from Cohu's definitive proxy statement, which will be filed within 120 days after the close of fiscal 2022. - Security ownership information for beneficial owners and management is incorporated by reference from the definitive proxy statement[289] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from Cohu's definitive proxy statement, which will be filed within 120 days after the close of fiscal 2022. - Information on related party transactions and director independence is incorporated by reference from the definitive proxy statement[290] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from Cohu's definitive proxy statement, which will be filed within 120 days after the close of fiscal 2022. - Information on principal accounting fees and services is incorporated by reference from the definitive proxy statement[291] PART IV Exhibits, Financial Statement Schedules This section lists the consolidated financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K. - The financial statements include Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows[292] - The Report of Independent Registered Public Accounting Firm by Ernst & Young LLP is also included, expressing an unqualified opinion on the financial statements and internal control over financial reporting[292][466][467] - A schedule of Valuation and Qualifying Accounts is provided, detailing changes in allowance for doubtful accounts and reserve for excess and obsolete inventories[292][487] - A comprehensive list of exhibits, including corporate documents, credit agreements, equity incentive plans, and executive compensation agreements, is incorporated by reference[293][477][478][479] Financial Statements This sub-section presents Cohu's audited consolidated financial statements for the fiscal years ended December 31, 2022, December 25, 2021, and December 26, 2020, along with detailed notes explaining significant accounting policies, financial instruments, debt, equity, and other financial disclosures. Consolidated Balance Sheets The Consolidated Balance Sheets show Cohu's financial position at December 31, 2022, and December 25, 2021. Total assets decreased slightly from $1,259.0 million in 2021 to $1,227.4 million in 2022, while total stockholders' equity increased from $882.5 million to $928.8 million. Consolidated Balance Sheet Summary (in thousands) | (in thousands) | December 31, 2022 | December 25, 2021 | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | $764,851 | $750,793 | | Property, plant and equipment, net | $65,011 | $63,957 | | Goodwill | $213,539 | $219,791 | | Intangible assets, net | $140,104 | $177,320 | | Total assets | $1,227,414 | $1,259,044 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $160,872 | $192,459 | | Long-term debt | $72,664 | $103,393 | | Total stockholders' equity | $928,841 | $882,502 | | Total liabilities and stockholders' equity | $1,227,414 | $1,259,044 | Consolidated Statements of Operations The Consolidated Statements of Operations show Cohu's financial performance for the years ended December 31, 2022, December 25, 2021, and December 26, 2020. Net sales decreased to $812.8 million in 2022 from $887.2 million in 2021, while net income decreased to $96.8 million in 2022 from $167.3 million in 2021, largely due to the prior year's gain on sale of the PCB Test business. Consolidated Statements of Operations Summary (in thousands) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $812,775 | $887,214 | $636,007 | | Cost of sales (1) | $429,449 | $500,253 | $364,225 | | Gross margin | $383,326 | $386,961 | $271,782 | | Income from operations | $125,557 | $201,518 | $3,260 | | Income (loss) from continuing operations before taxes | $126,715 | $192,344 | $(13,177) | | Income tax provision | $29,868 | $25,019 | $666 | | Net income (loss) | $96,847 | $167,325 | $(13,801) | | Basic EPS | $2.01 | $3.53 | $(0.33) | | Diluted EPS | $1.98 | $3.45 | $(0.33) | (1) Excludes amortization of $26,023, $27,508, and $29,510 for 2022, 2021, and 2020, respectively. - The gain on sale of PCB Test business was $70.8 million in 2021, contributing significantly to that year's net income[296][297] Consolidated Statements of Comprehensive Income The Consolidated Statements of Comprehensive Income show net income adjusted for other comprehensive income (loss) items, such as foreign currency translation adjustments, postretirement benefit adjustments, and changes in unrealized gains/losses on investments. Comprehensive income for 2022 was $84.1 million, down from $144.4 million in 2021. Consolidated Statements of Comprehensive Income Summary (in thousands) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net income (loss) | $96,847 | $167,325 | $(13,801) | | Other comprehensive income (loss), net of tax | $(12,750) | $(22,936) | $29,704 | | Comprehensive income | $84,097 | $144,389 | $15,903 | - Foreign currency translation adjustments resulted in losses of $17.95 million in 2022 and $22.96 million in 2021, due to the strengthening U.S. Dollar[300][354] Consolidated Statements of Stockholders' Equity The Consolidated Statements of Stockholders' Equity detail changes in equity components over the past three fiscal years. Total stockholders' equity increased from $882.5 million in 2021 to $928.8 million in 2022, driven by net income and share-based compensation, partially offset by common stock repurchases and negative foreign currency translation adjustments. Consolidated Statements of Stockholders' Equity Summary (in thousands) | (in thousands) | December 31, 2022 | December 25, 2021 | December 26, 2020 | | :--- | :--- | :--- | :--- | | Common stock | $49,276 | $48,756 | $42,190 | | Paid-in capital | $687,218 | $674,777 | $448,194 | | Retained earnings | $290,402 | $193,555 | $26,230 | | Accumulated other comprehensive loss | $(40,012) | $(27,262) | $(4,326) | | Treasury stock | $(58,043) | $(7,324) | $- | | Total stockholders' equity | $928,841 | $882,502 | $512,288 | - In 2022, common stock repurchases totaled $50.7 million, increasing treasury stock[302] - In 2021, Cohu issued 5,692,500 shares of common stock in a public offering, raising $223.1 million net proceeds[302][418] Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows show the sources and uses of cash for operating, investing, and financing activities. Net cash provided by operating activities increased to $112.9 million in 2022 from $97.9 million in 2021. Investing activities used $67.9 million in 2022, primarily for short-term investments, while financing activities used $91.1 million, mainly for debt repayments and share repurchases. Consolidated Statements of Cash Flows Summary (in thousands) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $112,861 | $97,915 | $49,880 | | Net cash provided by (used in) investing activities | $(67,871) | $39,893 | $(18,363) | | Net cash provided by (used in) financing activities | $(91,069) | $6,526 | $(38,218) | | Effect of exchange rate changes on cash and cash equivalents | $(1,781) | $(3,491) | $129 | | Net increase (decrease) in cash and cash equivalents | $(47,860) | $140,843 | $(6,572) | | Cash and cash equivalents at end of year | $242,341 | $290,201 | $149,358 | - Cash provided by operating activities in 2022 was driven by increased net income and favorable changes in accounts receivable and income taxes payable, partially offset by decreases in accounts payable and increases in inventories[231] - Investing activities in 2022 included $208.9 million in purchases of short-term investments and $14.8 million in capital expenditures[233] - Financing activities in 2022 included $38.2 million in debt repayments (including $31.7 million of Term Loan prepayments) and $50.7 million for share repurchases[234] Notes to Consolidated Financial Statements The Notes to Consolidated Financial Statements provide detailed explanations of Cohu's accounting policies, financial instruments, debt, equity, and other financial disclosures. Key areas covered include revenue recognition, inventory valuation, income taxes, goodwill and intangible assets, employee benefit plans, and recent accounting pronouncements. The notes also detail the impact of business divestitures and subsequent events like the MCT acquisition. - Cohu's fiscal years are based on a 52- or 53-week period ending on the last Saturday in December; fiscal year 2022 consisted of 53 weeks[306] - The PCB Test business was divested on June 24, 2021, and the fixtures services business in February 2020; only the latter is presented as discontinued operations[307][453][455] - Goodwill and other indefinite-lived intangible assets are evaluated for impairment annually as of October 1st; no impairment was found in 2022[325][361] - Total debt, net of financing fees and discount, was $79.0 million at December 31, 2022, down from $119.3 million at December 25, 2021[364] - The Term Loan Credit Facility had an outstanding balance of $66.2 million at December 31, 2022, with $31.8 million in principal prepaid during 2022[365][367] - Cohu maintains defined contribution 401(k) plans and defined benefit retirement plans (primarily the Swiss Plan), with matching contributions of $2.4 million in 2022 for the 401(k)[387][388] - The company uses foreign currency forward contracts to hedge against foreign exchange rate movements, with all contracts outstanding at December 31, 2022, maturing in Q1 2023[413][415] - The number of authorized common stock shares was increased from 60 million to 90 million on May 4, 2022[420] - At December 31, 2022, Cohu had federal, state, and foreign net operating loss carryforwards of approximately $140.0 million, $113.9 million, and $9.0 million, respectively[432] - Unrecognized tax benefits totaled $33.4 million at December 31, 2022[250][435] - On January 30, 2023, Cohu acquired MCT Worldwide, LLC for $28.0 million in cash, expanding its automated solutions for the semiconductor industry[10][463] Financial Statement Schedule Schedule II provides details on Valuation and Qualifying Accounts, specifically the allowance for doubtful accounts and the reserve for excess and obsolete inventories, for the fiscal years ended December 31, 2022, December 25, 2021, and December 26, 2020. Allowance for Doubtful Accounts (in thousands) | Description | Balance at Beginning of Year | Additions (Reductions) Not Charged to Expense (1) | Additions Charged to Expense | Deductions/Write-offs | Balance at End of Year | | :--- | :--- | :--- | :--- | :--- | :--- | | Year ended December 26, 2020 | $9 | $(1) | $79 | $(41) | $128 | | Year ended December 25, 2021 | $128 | $14 | $149 | $1 | $290 | | Year ended December 31, 2022 | $290 | $(8) | $122 | $205 | $199 | (1) Changes in reserve balances resulting from foreign currency impact and reclassifications from other reserves. Reserve for Excess and Obsolete Inventories (in thousands) | Description | Balance at Beginning of Year | Additions (Reductions) Not Charged to Expense (1) | Additions Charged to Expense | Deductions/Write-offs | Balance at End of Year | | :--- | :--- | :--- | :--- | :--- | :--- | | Year ended December 26, 2020 | $20,958 | $4,611 | $8,117 | $6,749 | $26,937 | | Year ended December 25, 2021 | $26,937 | $(2,926) (2) | $7,102 | $8,101 | $23,012 | | Year ended December 31, 2022 | $23,012 | $698 | $7,179 | $4,018 | $26,871 | (1) Changes in reserve balances resulting from foreign currency impact and reclassifications from other reserves. (2) Reductions not charged to expense includes $2.2 million transferred as part of the sale of our PCB Test business. Exhibits This section lists all exhibits filed with, or incorporated by reference into, the Form 10-K, including corporate governance documents, credit agreements, equity plans, and executive agreements. - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, Credit and Guaranty Agreement, Pledge and Security Agreement, Equity Incentive Plan, Employee Stock Purchase Plan, Deferred Compensation Plan, various stock unit and option agreements, Indemnification Agreement, Retiree Health Benefits Agreement, Lease agreement, Severance and Change in Control Agreements for executives, and the Share and Asset Purchase Agreement related to the PCB Test business sale[477][478][479] Form 10-K Summary No Form 10-K Summary is provided in this report. - No Form 10-K Summary is included[480] Signatures The Form 10-K is duly signed on behalf of Cohu, Inc. by its President and Chief Executive Officer, Luis A. Müller, and other directors and officers, including the Principal Financial and Accounting Officer, Jeffrey D. Jones, as of February 17, 2023. - The report is signed by Luis A. Müller (President and CEO) and Jeffrey D. Jones (SVP, Finance and CFO), along with other directors, on February 17, 2023[485][486]