| Significant Accounting Policies [Text Block] | 1.
Summary of Significant Accounting Policies Basis of Presentation Our fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. The condensed consolidated balance sheet at December 30, 2023, has been derived from our audited financial statements at that date. The interim condensed consolidated financial statements as of September 28, 2024, (also referred to as “the third quarter of fiscal 2024” and “the first nine months of fiscal 2024”) and September 30, 2023, (also referred to as “the third quarter of fiscal 2023” and “the first nine months of fiscal 2023”) are unaudited. However, in management’s opinion, these financial statements reflect all adjustments (consisting only of normal, recurring items) necessary to provide a fair presentation of our financial position, results of operations and cash flows for the periods presented. Both the three- and nine-month periods ended September 28, 2024 and September 30, 2023 were comprised of 13 and 39 weeks, respectively. Our interim results are not necessarily indicative of the results that should be expected for the full year. The condensed consolidated financial statements presented herein reflect estimates and assumptions made by management at September 28, 2024 and for the three- and nine-month periods ended September 28, 2024. For a better understanding of Cohu, Inc. and our financial statements, we recommend reading these interim condensed consolidated financial statements in conjunction with our audited financial statements for the year ended December 30, 2023, which are included in our 2023 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”). In the following notes to our interim condensed consolidated financial statements, Cohu, Inc., is referred to as “Cohu”, “we”, “our” and “us”. All significant intercompany transactions and balances have been eliminated in consolidation. 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 Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments-Credit Losses 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. Determining the net realizable value of inventories involves numerous estimates and judgments including projecting average selling prices and sales volumes for future periods and costs to complete and dispose of inventory. 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. Inventories by category were as follows ( in thousands
September 28,
December 30,
2024
2023
Raw materials and purchased parts $ 95,961 $ 103,118
Work in process 25,572 26,820
Finished goods 22,592 25,855
Total inventories $ 144,125 $ 155,793 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 forty five fifteen three ten (in thousands)
September 28,
December 30,
2024
2023
Land and land improvements $ 7,372 $ 7,301
Buildings and building improvements 47,963 39,677
Machinery and equipment 107,230 108,831
162,565 155,809
Less accumulated depreciation and amortization (85,899 ) (86,724 )
Property, plant and equipment, net $ 76,666 $ 69,085 Cloud-based Enterprise Resource Planning Implementation Costs We have capitalized certain costs associated with the implementation of our cloud-based Enterprise Resource Planning (“ERP”) system in accordance with ASC Topic 350, Intangibles Goodwill and Other Total unamortized capitalized cloud computing implementation costs totaled $10.0 million and $12.2 million at September 28, 2024, and December 30, 2023, respectively. These amounts are recorded within other current assets and other assets in our condensed consolidated balance sheets. Implementation costs are amortized using the straight-line method over seven Segment Information We apply the provisions of ASC Topic 280, Segment Reporting three one Goodwill, Intangible Assets and Other Long-Lived Assets We evaluate goodwill 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. If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the fair value of the reporting unit and its carrying value, not to exceed the carrying value of goodwill. We estimated the fair values of our reporting units using a weighting of the income and market approaches. Under the income approach, we use a discounted cash flow methodology to derive an indication of value, which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, we use the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance metrics of the reporting unit being tested, to obtain an indication of value. We then apply a 50/50 weighting to the indicated values from the income and market approaches to derive the fair values of the reporting units. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on customer forecasts, industry trade organization data and general economic conditions. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. We conduct our annual impairment test as of October 1 each year and have determined there was no 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. During the first nine months of fiscal 2024 and 2023, no events or conditions occurred suggesting an impairment in our long-lived assets. 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. Parts and labor are typically covered under the terms of the warranty agreement. Our warranty expense accruals are based on historical and estimated costs by product and configuration. From time-to-time we offer customers extended warranties beyond the standard warranty period. In those situations, the revenue relating to the extended warranty is deferred at its estimated relative standalone selling price and recognized on a straight-line basis over the contract period. Costs associated with our extended warranty contracts are expensed as incurred. Restructuring Costs We record restructuring activities including costs for one-time termination benefits in accordance with ASC Topic 420, Exit or Disposal Cost Obligations . Nonretirement Postemployment Benefits Debt Issuance Costs We defer costs related to the issuance of debt. Debt issuance costs directly related to our Term Loan Credit Facility were presented within noncurrent liabilities as a reduction of long-term debt in our condensed consolidated balance sheets. The amortization of such costs was 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 $32,000 and $0.1 million for the three and nine months ended September 30, 2023, respectively. On February 9, 2024, we repaid the remaining outstanding amounts owed under our Term Loan Credit Facility and recognized the remaining capitalized debt issuance costs. See Note 3, “Borrowings and Credit Agreements” for additional information. 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. Revenues and costs are re-measured using average exchange rates for the period, except for costs related to those balance sheet items that are re-measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized as incurred. During the three and nine months ended September 28, 2024, we recognized foreign exchange losses, net of the impact of foreign exchange derivative contracts, of $1.6 million and $2.5 million, respectively, in our condensed consolidated statements of operations. During the three and nine months ended September 30, 2023, we recognized foreign exchange losses, net of the impact of foreign exchange derivative contracts, of $1.2 million and $2.3 million, respectively, in our condensed consolidated statements of operations. 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 foreign currency 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. 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. We do not use derivative financial instruments for speculative or trading purposes. The accounting for changes in the fair value of our derivatives depends on the intended use of the derivative and whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting. All derivative instruments are recognized at fair value on our condensed consolidated balance sheets and all changes in fair value are recognized in net earnings or stockholders’ equity through accumulated other comprehensive loss (AOCI). For contracts that qualify for hedge accounting treatment, the hedge contracts must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Hedge effectiveness is assessed periodically. For accounting purposes, certain of 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 condensed consolidated balance sheets with changes in fair value recorded within foreign transaction gain (loss) in our condensed consolidated statements of operations for both realized and unrealized gains and losses. See Note 7, “Derivative Financial Instruments” for additional information. Share-Based Compensation We measure and recognize all share-based compensation under the fair value method. Reported share-based compensation is classified, in our condensed consolidated financial statements, as follows (in thousands)
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2024
2023
2024
2023
Cost of sales $ 270 $ 223 $ 759 $ 619
Research and development 765 849 2,600 2,534
Selling, general and administrative 4,213 3,262 12,100 9,527
Total share-based compensation 5,248 4,334 15,459 12,680
Income tax effect 12 (45 ) 223 (2,883 )
Total share-based compensation, net $ 5,260 $ 4,289 $ 15,682 $ 9,797 Income (Loss) Per Share Basic income (loss) 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 per share, certain restricted and performance stock units and stock options with exercise prices that exceed the average fair market value of our common stock for the period are excluded. For the three and nine months ended September 30, 2023, awards to issue approximately 186,000 and 206,000 potentially issuable shares of common stock were excluded from the computation, respectively. All shares repurchased and held as treasury stock are reflected as a reduction to our basic weighted average shares outstanding based on the trade date of the share repurchase. The following table reconciles the denominators used in computing basic and diluted income per share ( in thousands)
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2024
2023
2024
2023
Weighted average common shares 46,815 47,615 46,971 47,525
Effect of dilutive securities - 492 - 577
46,815 48,107 46,971 48,102 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 condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, other current accrued liabilities, and long-term lease liabilities on our condensed consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at January 1, 2019, the adoption date of ASU 2016-02, Leases (Topic 842) 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. Variable lease payments include estimated payments that are subject to reconciliations throughout the lease term, increases or decreases in the contractual rent payments, as a result of changes in indices or interest rates and tax payments that are based on prevailing rates. Our lease terms may include renewal options to extend the lease when it is reasonably certain that we will exercise those options. In addition, we include purchase option amounts in our calculations when it is reasonably certain that we will exercise those options. Rent expense for minimum payments under operating leases is recognized on a straight-line basis over the term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet but recognized in our consolidated statements of operations on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component and include both in our calculation of the ROU assets and lease liabilities. We sublease certain leased assets to third parties, mainly as a result of unused space in our facilities. None of our subleases contain extension options. Variable lease payments in our subleases include tax payments that are based on prevailing rates. 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. We recognize revenue when the obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our systems and non-system products or the completion of services. In circumstances where control is not transferred until destination or acceptance, we defer revenue recognition until such events occur. Revenue for established products that have previously satisfied a customer’s acceptance requirements is generally recognized upon shipment. In cases where a prior history of customer acceptance cannot be demonstrated 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 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. Spares, contactor and kit revenue is generally recognized upon shipment. Certain of our equipment sales have multiple performance obligations that may occur at different points in time or over different periods of time. For arrangements containing multiple performance obligations, the revenue relating to the undelivered performance obligation is deferred using the relative standalone selling price method utilizing estimated sales prices until satisfaction of the deferred performance obligation. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. At September 28, 2024, we had $5.8 million of revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) for contracts with original expected durations of over one year. As allowed under ASC Topic 606, Revenue from Contracts with Customers 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 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. Fixed consideration primarily includes sales to customers that are known as of the end of the reporting period. Variable consideration includes sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period. Such consideration primarily includes sales made to certain customers with cumulative tier volume discounts offered. Variable consideration arrangements are rare; however, when they occur, we estimate variable consideration as the expected value to which we expect to be entitled. 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 customer. Payment terms do not exceed one year from the invoice date and therefore do not include a significant financing component. To date, there have been no no On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our condensed 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 September 28, 2024, we had deferred revenue totaling approximately $9.4 million, current deferred profit of $4.1 million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $4.4 million. 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. Net sales by type are as follows (in thousands):
Three Months Ended
Nine Months Ended
Disaggregated Net Sales
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Systems $ 31,102 $ 73,173 $ 103,685 $ 263,469
Non-systems 64,240 77,631 203,972 235,627
Total net sales $ 95,342 $ 150,804 $ 307,657 $ 499,096 Revenue by geographic area based upon product shipment destination (in thousands
Three Months Ended
Nine Months Ended
Disaggregated Net Sales
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
United States $ 16,512 $ 23,604 $ 48,327 $ 58,097
China 12,770 19,689 43,586 69,193
Malaysia 12,223 23,550 42,913 78,703
Singapore 9,051 13,693 34,044 38,387
Philippines 10,451 19,983 32,001 77,132
Rest of the World 34,335 50,285 106,786 177,584
Total net sales $ 95,342 $ 150,804 $ 307,657 $ 499,096 A small number of customers historically have been responsible for a significant portion of our net sales. Significant customer concentration information is as follows:
Three Months Ended
Nine Months Ended
September 28,
September 30,
September 28,
September 30,
2024
2023
2024
2023
Customers individually accounting for more than 10% of net sales one two * one
Percentage of net sales 12% 22% * 13%
*
No single customer represented more than 10% of consolidated net sales. Accumulated Other Comprehensive Loss Our accumulated other comprehensive loss balance totaled approximately $37.6 million and $34.8 million at September 28, 2024 and December 30, 2023, respectively, and was attributed to all non-owner changes in stockholders’ equity and consists of, on an after-tax basis where applicable, foreign currency adjustments resulting from the translation of certain of our subsidiary accounts where the functional currency is not the U.S. Dollar, unrealized loss on investments and adjustments related to postretirement benefits. Reclassification adjustments from accumulated other comprehensive loss during the first nine months of fiscal 2024 and 2023 were not significant. Retiree Medical Benefits We provide post-retirement health benefits to certain retired executives, one director (who is a former executive) and their eligible dependents under a noncontributory plan. These benefits are no longer offered to any other retired Cohu employees. The net periodic benefit cost incurred during the first nine months of fiscal 2024 and 2023 was not significant. Recent Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures In March 2024, the U.S. Securities and Exchange Commission issued its final climate disclosure rules, The Enhancement and Standardization of Climate-Related Disclosures for Investors |
