COHU INC

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 Topic810, Consolidation (“ASC810”).

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. Actual results could differ from these estimates.

Our fiscal years are based on a52- or53-week period ending on the last Saturday in* December.Our fiscal years ended on December 30, 2023and December 25, 2021,each consisted of52* weeks. Our fiscal year ended on* December 31, 2022consisted of53* 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. Our decision to sell this non-core business and assets resulted from management’s determination that that it wasnot* 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 Note15, “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 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, 2022and 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 per share:

Cash, Cash Equivalents and Short-term Investments – Highly liquid investments with insignificant interest rate risk and original maturities ofthree months or less are classified as cash and cash equivalents. Investments with maturities greater thanthree months are classified as short-term investments. All of our short-term investments in debt securities are classified as available-for-sale and are reported at fair value, with any unrealized gains and losses, net of tax, recorded in the statement of comprehensive income (loss). We manage our cash equivalents and short-term investments as a single portfolio of highly marketable securities. We have the ability and intent, if necessary, to liquidate any of our investments in order to meet the liquidity needs of our current operations during the next12 months. Accordingly, investments with contractual maturities greater thanone 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.

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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 anyone 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 Topic326, Financial Instruments-Credit Losses(“ASC326”). 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 afirst-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. Charges to cost of sales for excess and obsolete inventories totaled $4.5 million, $7.2 million and $7.1 million in2023, 2022 and2021, respectively.

Inventories by category were as follows*(in thousands)*:

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 ofthirty toforty years for buildings, five tofifteen years for building improvements, three toten years for machinery, equipment and software and the lease life for financing leases. Land isnot depreciated.

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

Depreciation expense was $13.4 million in2023, $12.8 million in2022 and $13.2 million in2021. The decrease in depreciation expense between2022 and2021 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 Topic350, Intangibles—Goodwill and Other(“ASC350”). 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 $12.2 million and $14.7 million at* December 30, 2023and December 31, 2022,respectively. These amounts are recorded within other assets in our consolidated balance sheets. 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, 2023and December 31, 2022,*respectively.

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Segment Information – We applied the provisions of ASC Topic280, Segment Reporting (“ASC280”), 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 ourthree 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 ASC280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report inone segment, Semiconductor Test & Inspection. Prior to the sale of our PCB Test business on* June 24, 2021,*we reported intwo 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 byfirst 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. If the fair value is determined to be less than the book value, asecond 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, in order to obtain an indication of value. We then apply a50/50 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* October1st* of each year, and have determined there wasno impairment as of* October1,* 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* mayalso require goodwill to be tested for impairment between annual measurement dates. As of December 30, 2023,we donot* believe that circumstances have occurred that indicate impairment of our goodwill is more-likely-than-not. 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 are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets mightnot 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 isnot 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. 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 fair value and recognized on a straight-line basis over the contract period. Costs associated with our extended warranty contracts are expensed as incurred.

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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 than50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it isnot more-likely-than-not that a tax benefit will be sustained,no tax benefit has been recognized in the financial statements. Where applicable, associated interest and penalties have also been recognized and recorded, net of federal and state tax benefits, in income tax expense.

We recognized deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established for those jurisdictions when necessary to reduce deferred tax assets to the amounts that are more likely thannot to be realized in the future.

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. Finance leases are included in property, plant and equipment, other current accrued liabilities, and long-term lease liabilities on our 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 the adoption date of* January 1, 2019,or the commencement date for leases entered into after the adoption date. As most of our leases donot* 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.

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 of12 months or less arenot 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 tothird 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, non-system products or the completion of services. In circumstances where control isnot transferred until destination or acceptance, we defer revenue recognition until such events occur.

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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 arenot 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 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. These arrangements involve the delivery or performance of multiple performance obligations, and transfer of control of performance obligations* 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* December 30, 2023and 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 overone* year, respectively. As allowed under ASC606, we have opted tonot disclose unsatisfied performance obligations for contracts with original expected durations of less thanone 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 Topic460, Guarantees(“ASC460”), andnot as a separate performance obligation.

The transaction price reflects our expectations about the consideration we will be entitled to receive from the customer and* mayinclude 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. 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 willnot* occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration that doesnot meet revenue recognition criteria is deferred.

Our contracts are typically less thanone year in duration and we have elected to use the practical expedient available in ASC606 to expense cost to obtain contracts as they are incurred because they would be amortized over less thanone year.

Accounts receivable represent our unconditional right to receive consideration from our customers. Payments terms donot exceedone year from the invoice date and therefore donot include a significant financing component. To date, there have beenno material impairment losses on accounts receivable. There wereno material contract assets recorded on the consolidated balance sheet in any of the periods presented.

On shipments where sales arenot 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 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 afterone* 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 afterone* year included in noncurrent other accrued liabilities of $5.5 million.

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Disaggregated net sales by segment are as follows:

Advertising Costs – Advertising costs are expensed as incurred and werenot material for all periods presented.

Restructuring Costs – We record restructuring activities including costs forone-time termination benefits in accordance with ASC Topic420, Exit or Disposal Cost Obligations(“ASC420”). The timing of recognition for severance costs accounted for under ASC420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits. If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period. Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees. Employee termination benefits covered by existing benefit arrangements are recorded in accordance with ASC Topic712, Nonretirement Postemployment Benefits. 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 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 $0.1 million, $0.3 million and $0.6 million for the years ended* December 30, 2023,** December 31, 2022and 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. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. 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. 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 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, 2022and 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’ 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 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 Note8, “Derivative Financial Instruments”.

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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. The U.S. Dollar strengthened relative to certain foreign currencies in countries where we have operations as of December 31, 2022and then weakened as of December 30, 2023and 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, 2022and December 30, 2023,respectively. Reclassification adjustments from accumulated other comprehensive loss during2023* and2022 werenot significant. Additional information related to accumulated other comprehensive loss, on an after-tax basis is included in Note16, “Accumulated Other Comprehensive Income”.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements – In* March 2020,the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)2020-04, Reference Rate Reform (Topic848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASC848**”). ASC848* 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 ASU2022*-06, Reference Rate Reform (Topic848*): Deferral of the Sunset Date of Topic848** to defer the sunset date of ASC848* from* December 31, 2022to December 31, 2024,after which entities willno* longer be permitted to apply the optional expedients in ASC848.

Effective* June 16, 2023,we adopted ASC848.* 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, and12-month USD LIBOR U.S. dollar settings in2023. As a result, we commenced the transition of our LIBOR-based contract to SOFR. The optional expedients under ASC848 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. GAAP.

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 ASU2023*-09, Income Taxes (Topic740*): 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 ASU2023*-07, Segment Reporting (Topic280*): 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, 2023and 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.

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All other newly issued accounting pronouncementsnot yet effective have been deemed either immaterial ornot applicable.

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

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

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. We completed our required annual goodwill impairment testing as of* October 1, 2023,thefirst* day of ourfourth quarter and concluded there wereno impairments of goodwill within our reporting units or our indefinite-lived intangible assets at that time. 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.

During2021 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 in2023, $33.2 million in2022 and $35.4 million in2021. As of* December 30, 2023,we expect amortization expense in future periods to be as follows:2024 - $39.3 million;2025 - $30.6 million;2026 - $24.4 million;2027 - $20.8 million2028* - $18.2 million; and thereafter $18.5 million.

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The following table is a summary of our borrowings as of* December 30, 2023and December 31, 2022:*

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

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. 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 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, 2023and is considered a Level2* fair value measurement.

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 believeno* such events of default have occurred.

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During2023 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. During2022 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 thefirst* quarter of fiscal2024 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

We have a series of term loans with Japanese financial institutions primarily related to the expansion of our facility in Osaka, Japan. The loans are collateralized by the facility and land, carry interest rates ranging from 0.05% to 0.45%, and expire at various dates through2034. 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.*

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

Construction Loans

In* July 2019and 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.

Thefirst 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.Thesecond* 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.Thethird* 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 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. The fair value of the debt approximates the carrying value at December 30, 2023.*

Lines of Credit

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 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 hasone 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.

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MCT Integration Program

During2023, 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 of2023. 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 thetwelve months ended* December 30, 2023,that are within the scope of ASC420.*

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

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)*:

Xcerra Integration Program

Subsequent to the acquisition of Xcerra, during thefourth quarter of2018, 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 (“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 in2019.

In2019, 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 thefourth quarter of2020 we implemented a voluntary program and termination agreements with certain employees of our wholly owned subsidiary, Cohu GmbH. These programs collectively reduced headcount, enabled us to consolidate the facilities of our multiple operations located near Kolbermoor and Rosenheim, Germany, as well as transitioned certain manufacturing to other lower cost regions. 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 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.

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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, 2022and December 25, 2021,respectively, that are within the scope of ASC420.*

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, 2022and December 25, 2021,were as follows(in thousands):*

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 Xcerra Integration Program during the years ended* December 31, 2022and December 25, 2021**(in thousands)*:

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 in2024.* 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.

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities. We donot hold investment securities for trading purposes. All short-term investments in debt securities are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

Gains and losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Factors that could indicate an impairment exists include, but arenot limited to earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented werenot significant.

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

Effective maturities of short-term investments at* December 30, 2023,*were as follows:

Accounting standards pertaining to fair value measurements establish athree-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level1, defined as observable inputs such as quoted prices in active markets; Level2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level3, defined as unobservable inputs in which little orno market data exists, therefore requiring an entity to develop its own assumptions. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information.

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The following table summarizes, by major security type, our financial instruments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy*(in thousands)*:

Defined Contribution Retirement Plans – Cohu maintains a defined contribution401(k) retirement savings plan covering all salaried and hourly U.S. employees. 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. In2023, 2022 and2021 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. 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.

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

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The following table sets forth the projected benefit obligation, the fair value of plan assets, the funded status and the liability we have recorded in our consolidated balance sheets related to the Swiss Plan:

At* December 30, 2023and 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, 2023and December 31, 2022,*respectively.

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

Weighted-average assumptions used to determine net periodic benefit cost of the Swiss Plan are as follows:

During2024 employer and employee contributions to the Swiss Plan are expected to total $0.9 million. Estimated benefit payments are expected to be as follows: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 through2033.

As is customary with Swiss pension plans, the assets of the plan are invested in a collective fund with multiple employers. We haveno investment authority over the assets of the plan that are held and invested by a Swiss insurance company. Investment holdings are made with respect to Swiss laws and target allocations for plan assets are 50% debt securities and cash,24% real estate investments,16% alternative investments and 10% equity securities. The valuation of the collective fund assets as a whole is a Level3 measurement; however, the individual investments of the fund are generally Level1 (equity securities), Level2 (fixed income) and Level3 (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 Note5, “Financial Instruments Measured at Fair Value” for additional information on thethree-tier fair value hierarchy.

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We maintain other defined benefit plans for employees located outside the U.S. 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 both2023 and2022 and was insignificant in2021. We fund benefits as costs are incurred and as a result there areno plan assets.

The weighted average discount rate used in determining the accumulated post-retirement benefit obligation was 4.7% in2023, 4.9% in2022 and 2.5% in2021. The annual rates of increase of the cost of health benefits was assumed to be 7.9% and 8.7% in2024 for pre-65 participants and post-65 participants, respectively. 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% in2033 and remain level thereafter.

Contributions to the post-retirement health benefit plan are expected to total $0.1 million in2024. Estimated benefit payments are expected to be as follows:2024 - $0.1 million;2025 - $0.1 million;2026 - $0.1 million;2027 - $0.1 million;2028 - $0.1 million and $0.6 million thereafter through2033.

The following table sets forth the post-retirement benefit obligation, funded status and the liability we have recorded in our consolidated balance sheets:

Deferred Compensation – The Cohu, Inc. Deferred Compensation Plan allows certain of our officers to defer a portion of their current compensation. We have purchased life insurance policies on the participants with Cohu as the named beneficiary. Participant contributions, distributions and investment earnings and losses are accumulated in a separate account for each participant. 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* maypurchase shares of common stock through payroll deductions. The price paid for the common stock is equal to 85% of the fair market value of our common stock on specified dates. During the lastthree* years we issued shares under the Plan as follows:2023 -146,829; 2022 -160,855 and2021 -161,351. 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 maybe issued by 600,000 and eliminated the requirement thatno* participant* maypurchase shares for any offering period with a value exceeding $12,500 divided by the share value on thefirst* date of the offering period.

Employee Stock Benefit Plans – Our2005 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* maybe granted under the program include, but arenot* limited to, non-qualified and incentive stock options, restricted stock units, and performance stock units. We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of restricted stock units, and performance stock units with newly issued common shares. At* December 30, 2023,there were 3,509,023 shares available for future equity grants under the2005* Plan. On* May 10, 2023,our stockholders approved amendments to the2005* 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.

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Stock Options

Under the2005 Plan stock options* maybe granted to employees, consultants and outside directors to purchase a fixed number of shares of our common stock at pricesnot* less than 100% of the fair market value at the date of grant. Options generally vest and become exercisable afterone year or infour annual increments beginningone year after the grant date and expireten years from the grant date. We have historically issued new shares of Cohu common stock upon share option exercise.

During2023, 2022 and2021 no stock options were granted and the activity under our share-based compensation plans was as follows:

The aggregate intrinsic value of options exercised was $0.2 million in2022 and $8.4 million in2021. At* December 30, 2023,*we hadno stock options exercisable and outstanding.

Restricted Stock Units

Under our equity incentive plans, restricted stock units (“RSUs”)* maybe granted to employees, consultants and outside directors. Restricted stock units vest over aone-year, two-year or afour-year period from the date of grant. Prior to vesting, restricted stock units donot* have dividend equivalent rights, donot have voting rights and the shares underlying the restricted stock units arenot considered issued and outstanding. New shares of our common stock will be issued on the date the restricted stock units vest net of the statutory tax withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding at* December 30, 2023.*

Restricted stock unit activity under our share-based compensation plans was as follows:

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 athree-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 thethird anniversary of their grant, assuming achievement of the applicable performance criteria.

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We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized over the requisite service period. 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.

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

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. 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 in2023,* 2022 and2021 exclude the assumption of dividend payments and the estimated fair value awards granted in prior years, when dividends were paid, are unchanged.

The following weighted average assumptions were used to value share-based awards granted:

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

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

MCT

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 Topic805,* Business Combinations, (“ASC805”).

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 thefourth quarter of2023. The table below summarizes the assets acquired and liabilities assumed as of* January 30, 2023 (*in thousands):

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

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 wasnot* material.

In connection with the MCT Acquisition, during thetwelve 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 periodno acquisition-related costs were incurred.

EQT

On* October 2, 2023,we completed the acquisition of Equiptest Engineering Pte. Ltd. (“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 2024and an additional cash payment was made to EQT owners of SGD 0.8 million (approximately $0.6 million). As of December 30, 2023we 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, 2023was 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 Topic805,* Business Combinations, (“ASC805”).

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As of* December 30, 2023,we havenot* 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* maystill be adjusted as they are finalized during the remainder of the measurement period (which willnot* exceed12 months from the acquisition closing date). The EQT Acquisition was nontaxable and certain of the assets acquired, including goodwill and intangibles, willnot 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):

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

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 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 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 EQT 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.

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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 werenot* material.

In connection with the acquisition of EQT, during thetwelve 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 periodno acquisition-related costs were incurred.

Foreign Exchange Derivative Contracts

We operate and sell our products in various global markets and, as a result, we are exposed to changes in foreign currency exchange rates. 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 donot use derivative financial instruments for speculative or trading purposes. For accounting purposes, our foreign currency forward contracts arenot 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.

The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points. All our foreign exchange derivative contracts outstanding at* December 30, 2023will mature during thefirst* quarter of fiscal2024.

The following table provides information about our foreign currency forward contracts outstanding as of* December 30, 2023**(in thousands)*:

Our foreign currency contracts are classified within Level2 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.

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

Common Stock Issuance

On* March 8, 2021,we closed an underwritten follow-on public offering of 4,950,000 shares of our common stock at $41.00 per share. As part of the transaction, the underwriters were also granted a30*-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. This share repurchase program was effective as of November 2, 2021and hasno* 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. Repurchases under this program will be made using our existing cash resources and* maybe commenced or suspended from time-to-time at our discretion without prior notice. Repurchases maybe made in the open market, through10b5*-1 programs, or in privately negotiated transactions at prevailing market rates in accordance with federal securities laws. 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:

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

Deferred tax effects

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

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of our deferred tax assets and liabilities were as follows:

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

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 thannot” realization standard. Thefour 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. offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. We have evaluated our DTAs each reporting period, including an assessment of taxable income in prior carryback years, future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and prudent and feasible tax planning strategies that we would be willing to undertake to prevent a deferred tax asset from otherwise expiring.

The assessment regarding whether a valuation allowance is required or whether a change in judgement regarding the valuation allowance has occurred also considers all available positive and negative evidence, including butnot limited to:

• Nature, frequency, and severity of cumulative losses in recent years

• Duration of statutory carryforward and carryback periods

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

• Historical experience with tax attributes expiring unused

• Near- and medium-term financial outlook

The weight given to the positive and negative evidence is commensurate with the extent to which the evidence* maybe objectively verified. Accordingly, it is generally difficult to conclude a valuation allowance isnot* required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. We use the actual results for the lasttwo years and current year results as the primary measure of cumulative losses in recent years.

The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events recognized in the financial statements or tax returns and future profitability. The recognition of deferred tax assets represents our best estimate of those future events. Changes in the current estimates, due to unanticipated events or otherwise, could have a material effect on our results of operations and financial condition.

In certain tax jurisdictions, our analysis indicates that it has cumulative losses in recent years. This is considered significant negative evidence, which is objective and veritable and, therefore, difficult to overcome. However, the cumulative loss position isnot 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 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 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 wasnot* 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 for income taxes is as follows:

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 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 in2024* through2042 or haveno expiration date. We also have federal and state tax credit carryforwards at* December 30, 2023of approximately $4.0 million and $33.7 million, respectively, certain of which expire in various tax years beginning in2024* through2042, or haveno expiration date. The federal and state loss and credit carryforwards are subject to annual limitations under Sections382 and383 of the Internal Revenue Code and applicable state tax laws. We analyzed and determined that there wereno ownership changes during thethree-year period ending* December 30, 2023.*We will continue to assess the realizability of these carryforwards in subsequent periods. Future changes in the ownership of Cohu could further limit the utilization of these carryforwards.

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We have certain tax holidays with respect to our operations in Malaysia and the Philippines. These holidays require compliance with certain conditions and expire at various dates through2027. The impact of these holidays was an increase in net income of approximately $3.8 million or $0.08 per share in2023 and $4.5 million, or $0.09 per share, in both fiscal2022 and2021.

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

If the unrecognized tax benefits at* December 30, 2023are ultimately recognized, excluding the impact of U.S. tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately $7.5 million ($5.8 million at December 31, 2022and $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 next12* months.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. 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 in2023* and2022 and $(0.2) million in2021.

Our U.S. federal and state income tax returns for years after2019 and2018, respectively, remain open to examination, subject to the statute of limitations. Net operating loss and credit carryforwards arising prior to these years are also open to examination if and when utilized. The statute of limitations for the assessment and collection of income taxes related to our foreign tax returns varies by country. In the foreign countries where we have significant operations these time periods generally range from four toten 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 orone 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 ASC740, Income Taxes. Such tax positions are, based solely on their technical merits, more likely thannot 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 thannot 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.

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We applied the provisions of ASC280, 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 ourthree identified operating segments are: THG, STG and ISG. Our THG, STG and ISG operating segments qualify for aggregation under ASC280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report inone segment, Semiconductor Test & Inspection. All amounts presented in our consolidated balance sheet as of* December 30, 2023and December 31, 2022,and our consolidated statement of income for thetwelve* months ended* December 30, 2023and 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 intwo* segments, Semiconductor Test & Inspection and PCB Test.

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During the lastthree years, the following customers of our Semiconductor Test & Inspection segment that comprised10% or greater of our consolidated net sales were as follows:

On* June 24, 2021,we completed the divestment of our PCB Test business. Prior to this,no customer of our PCB Test segment exceeded10%* 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:

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

We lease certain of our facilities, equipment and vehicles under non-cancelable operating and finance leases. Leases with initial terms with12 months or less arenot 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 includeone or more options to extend the lease for up to 25 years. Our lease term includes renewal terms when we are reasonably certain that we will exercise the renewal options. We sublease certain leased assets tothird parties, mainly as a result of unused space in our facilities.

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Supplemental balance sheet information related to leases was as follows:

The components of lease expense were as follows:

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

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Supplemental cash flow information related to leases was as follows:

From time-to-time we are involved in various legal proceedings, examinations by various tax authorities and claims that have arisen in the ordinary course of our business. The outcome of any litigation is inherently uncertain. While there can beno assurance, we donot believe at the present time that the resolution of these matters will have a material adverse effect on our assets, financial position or results of operations.

Accrued Warranty

Changes in accrued warranty during thethree-year period ended* December 30, 2023,*was as follows:

Accrued warranty amounts expected to be incurred afterone year are included in noncurrent other accrued liabilities in the consolidated balance sheet. These amounts totaled $0.4 million and $0.6 million at* December 30, 2023and December 31, 2022,*respectively.

PCB Test Equipment Business

On* June 24, 2021,we completed the sale of our PCB Test business, which represented our PCB Test reportable 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. Our decision to sell this non-core business resulted from management’s determination that that they wereno* 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 thetwelve 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 Topic205-20, Presentation of Financial Statements–* Discontinued Operations*, and determined that the divestment of our PCB Test business doesnot represent a strategic shift as the divestiture willnot have a major effect on Cohu’s operations and financial results and, as a result, it isnot presented as discontinued operations in any periods presented. Subsequent to the sale of our PCB Test business, we haveone reportable segment, Semiconductor Test & Inspection.

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Components of other comprehensive income (loss), on an after-tax basis, were as follows:

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

At* December 30, 2023,certain of our cash and short-term investments were held and managed by BlackRock, Inc. which owns 15.8% of our outstanding common stock as reported in its Form13*-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 toone of our wholly owned subsidiaries. This investment is accounted for under the equity method and isnot material to our consolidated balance sheets. During2023, 2022 and2021, purchases of products from FTZ werenot 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, 2021as part of the sale of the PCB Test business and ETZ isno* longer a related party. During2021, purchases of products from ETZ, when it was a related party, werenot material.

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