<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended DECEMBER 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-4298
COHU, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-1934119
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5755 KEARNY VILLA ROAD, SAN DIEGO, CALIFORNIA 92123
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 277-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$1.00 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $199,801,000 as of March 8, 1996. Shares of common
stock held by each officer and director and by each person or group who owns 5%
or more of the outstanding common stock have been excluded in that such persons
or groups may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of March 8, 1996, the Registrant had 9,236,805 shares of its $1.00 par value
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part I, Part II and Part IV incorporate certain information by reference from
the Annual Report to Stockholders for the year ended December 31, 1995. Part III
incorporates certain information by reference from the Proxy Statement for the
1996 Annual Meeting of Stockholders.
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PART I
ITEM 1. BUSINESS
A predecessor of Cohu, Inc. (the "Company") was incorporated under the laws of
California in 1947 as Kalbfell Lab., Inc. and commenced active operations in the
same year. Its name was changed to Kay Lab in 1954. In 1957 the Company was
reincorporated under the laws of Delaware as Cohu Electronics, Inc. and in 1972
its name was changed to Cohu, Inc.
The Company operates in two industry segments. Semiconductor test handling
equipment used in the final test of integrated circuits is designed,
manufactured and sold by the Company's Delta Design and Daymarc subsidiaries to
semiconductor manufacturers throughout the world and accounted for approximately
82% of consolidated net sales in 1995. The television and other equipment
segment includes electronic products used in electronic imaging, surveillance,
detection and microwave communication that are manufactured and sold to
government agencies, original equipment manufacturers, contractors, distributors
and consumers throughout the world. The Company conducts operations through one
division and four subsidiaries
On June 22, 1994, the Company acquired Daymarc Corporation, a privately-held
manufacturer of gravity feed semiconductor test handling equipment that
complements the pick and place test handling equipment manufactured by Delta
Design. The semiconductor test handling equipment segment includes the results
of Delta Design and Daymarc.
The television and other equipment segment includes the results of the
Electronics Division, Fisher Research Laboratory, Inc. ("FRL") and Broadcast
Microwave Services, Inc. ("BMS").
FINANCIAL INFORMATION BY INDUSTRY SEGMENT AND EXPORT SALES
Financial information on industry segments and export sales for each of the last
three years is included on pages 4 (Selected Financial Data) and 14 (Note 7) in
the 1995 Annual Report to Stockholders and is incorporated herein by reference.
SEMICONDUCTOR TEST HANDLING EQUIPMENT
The Company through subsidiaries Delta Design and Daymarc is the largest U. S.
based and one of the world's largest, suppliers of semiconductor test handling
equipment that is used by semiconductor manufacturers in the final test
operations of integrated circuits. The Company strives to provide test handling
solutions to reduce the customers' total cost of ownership through dual
strategies of new system sales and continuous improvement of the Company's
installed base of test handling equipment.
Delta Design has a broad line of pick and place test handlers capable of
handling virtually all semiconductor package types through the use of dedication
kits.
The Delta Flex(TM) Handlers (models 1210, 1220, 1240 and custom models) are
tri-temperature (i.e., the equipment operates at hot, cold or ambient
temperatures) pick and place handlers. The system features modular construction
and provides wide flexibility in device and media handling, including automated
tray handling. During 1995 a major upgrade to the Delta Flex(TM) handlers was
introduced which reduced index time (index time being the time between the
completion of testing one device to the commencement of testing a second
device). The new models incorporating this upgrade are designated "Turbo
Flex(TM)" in recognition of the faster speed.
The RFS(TM) handler, introduced in late 1993, is a high speed, tri-temperature
pick and place handler designed for high volume manufacturing and short test
time applications. The RFS(TM) handler provides sub-second index time, automated
tray handling and may be configured for single, dual or quad test sites.
The Model 1688 handler, introduced in late 1994, is an ambient pick and place
handler that provides sub-second index time, fully automated tray handling and a
small footprint.
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Daymarc is a leader in the gravity feed handler market segment and produces
three lines of test handlers; the 717 Series, 3000 Series and 4000 Series. The
717 Series test handlers are designed specifically for small outline ("SOIC")
packages. The small dimensions and high speed applications of the SOIC package
require a handler with minimal transition distances, high performance contacting
and automation features to reduce the need for operator intervention. The 717
ambient and tri-temperature handlers feature index times of 350 and 500
milliseconds, respectively. Changeover for a different device package requires
less than 30 minutes.
The 3000 Series handler is available in single, dual/quad and thirty-two site
configurations. These handlers can be reconfigured with device dedication kits
to accommodate a range of package types at throughput rates up to 4,200 units
per hour ("UPH"). The 3000 Series handlers provide tri-temperature operation and
input/output automation for increased productivity.
The 4000 Series handlers combine high speed with multi-site capability. The
first in the Series, the 4100, operates at 18,000 UPH in dual or quad site
configurations. The 4100, which occupies only seven feet of floor space, is
believed to be the fastest handler on the market.
The Company's operating results are substantially dependent on the semiconductor
equipment business segment. This segment is in turn highly dependent on the
overall strength of the semiconductor industry. Worldwide demand for
semiconductors has historically been subject to substantial cyclical swings and
price volatility. The Company's favorable operating results in 1995 benefited
from the record growth in worldwide demand for and production of semiconductors.
The Company cannot predict how long the favorable conditions in the
semiconductor industry will continue. To the extent that the industry growth
rate slows, demand for capital equipment such as that produced by the Company
will be negatively impacted. In 1995 the semiconductor test handling equipment
segment accounted for 82% of consolidated net sales and 95% of consolidated
operating profit. In 1994 semiconductor test handling equipment accounted for
71% of consolidated net sales and 89% of consolidated operating profit. In 1993
semiconductor test handling equipment accounted for 64% of consolidated net
sales and 84% of consolidated operating profit.
TELEVISION AND OTHER EQUIPMENT
The Electronics Division of the Company has been a designer, manufacturer and
seller of closed circuit television ("CCTV") cameras and systems for over 40
years. The customer base is broadly distributed between machine vision,
scientific imaging and security/surveillance markets. The current product line
represents an extensive array of indoor and outdoor CCTV cameras as well as
camera control equipment. To support its camera lines, the Electronics Division
offers a wide selection of accessories including monitors, lenses and camera
test equipment.
FRL designs, manufactures and sells metal detectors and related underground
detection devices for consumer and industrial markets. All products are sold
under the Fisher M-Scope label. Industrial instruments include pipe and cable
locators, water leak detectors, property marker locators and instruments for
finding reinforcing bars in concrete. FRL's new TW-770 digital line tracer
guides the operator over the path of a buried pipe or cable and, with the push
of a button, provides an accurate depth reading.
BMS is a manufacturer of microwave radios, antenna systems and associated
equipment for use in government, industry and commercial broadcast markets. The
products are used to transmit and receive television and radio signals.
Applications in the government and industrial area include tracking antenna
systems and transmission from unmanned vehicles. Applications in the commercial
broadcast area include electronic news gathering, sports events and station to
station relay.
In 1995 the television and other equipment segment accounted for 18% of
consolidated net sales and 5% of consolidated operating profit. In 1994
television and other equipment accounted for 29% of consolidated net sales and
11% of consolidated operating profit. In 1993 television and other equipment
accounted for 36% of consolidated net sales and 16% of consolidated operating
profit.
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CUSTOMERS
SEMICONDUCTOR TEST HANDLING EQUIPMENT
The Company's customer base includes companies that manufacture semiconductor
devices primarily for internal use and companies that manufacture devices for
sale to others. Repeat sales to existing customers represent a significant
portion of the Company's sales in this business segment. The Company believes
that its installed customer base represents a significant competitive advantage.
The Company relies on a limited number of customers for a substantial percentage
of its net sales. In 1995 Motorola and Micron Technology each accounted for 17%
of the Company's net sales. In 1994 Motorola and Micron Technology represented
22% and 10%, respectively, of the Company's net sales. In 1993 Motorola
accounted for 17% of the Company's net sales. The loss of or a significant
reduction in orders by either of these or other significant customers not
compensated for by other customer orders, including reductions due to market,
economic or competitive conditions in the semiconductor industry, could
adversely affect the Company's business and results of operations.
TELEVISION AND OTHER EQUIPMENT
The Company's customer base in this industry segment is diverse and includes
government agencies, original equipment manufacturers, contractors, distributors
and consumers throughout the world. No single customer of this segment accounted
for 10% or more of the Company's consolidated net sales in 1995, 1994 or 1993.
Contracts, including subcontract work, with U.S. Government agencies accounted
for net sales of $4.5 million in 1995 as compared to $5.6 million in 1994 and
$5.5 million in 1993. Such contracts are frequently subject to termination
provisions.
MARKETING
The Company markets its products worldwide through a combination of direct sales
force and independent sales representatives. In a geographic area where the
Company believes there is sufficient sales potential, the Company maintains
sales offices staffed with its own sales personnel. The Company maintains sales
offices for the semiconductor equipment business in Santa Clara, California and
Austin, Texas. In 1993, a foreign subsidiary was formed in Singapore to handle
the sales and service requirements of semiconductor manufacturers located in
Southeast Asia. In 1995 a branch of the Singapore sales and service subsidiary
was opened in Taipei, Taiwan. The sales in Europe are derived primarily through
sales representatives.
COMPETITION
The semiconductor equipment industry is intensely competitive and is
characterized by rapid technological change and demanding worldwide service
requirements. Significant competitive factors include product performance, price
and reliability, customer support and installed base of products. While the
Company believes it is the largest U. S. based supplier of semiconductor test
handling equipment it faces substantial competition in the U. S. and throughout
the world. The Japanese market for this equipment is large and represents a
significant percentage of the worldwide market. During the last five years the
Company has had limited sales to Japanese customers who have historically
purchased test handling equipment from Japanese suppliers or their affiliates.
Some of the Company's competitors have substantially greater financial,
engineering, manufacturing and customer support capabilities than the Company.
To remain competitive the Company believes it will require significant financial
resources to offer a broad range of products, maintain customer support and
service centers worldwide and to invest in research and development of new
products. Failure to introduce new products in a timely manner or the
introduction by competitors of products with perceived or actual advantages
could result in a loss of competitive position and reduced sales of existing
products. No assurance can be given that the Company will continue to compete
successfully in the U. S. or throughout the world.
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The Company's products in the Television and Other Equipment Segment are sold in
highly competitive markets throughout the world and competition is on the basis
of price, product integration with customer requirements, service and product
quality and reliability. Many of the Company's competitors are divisions or
segments of large, diversified companies with substantially greater financial,
engineering, marketing, manufacturing and customer support capabilities than the
Company. No assurance can be given that the Company will continue to compete
successfully in this business segment.
BACKLOG
The dollar amount of backlog of the Company as of December 31, 1995 was $45.4
million as compared to $34.8 million at December 31, 1994. Of these amounts,
$37.8 million ($27.5 million in 1994) was in semiconductor test handling
equipment and $7.6 million ($7.3 million in 1994) was in television and other
equipment. All backlog is expected to be shipped within the next twelve months.
Due to the possibility of customer changes in delivery schedules, cancellation
of orders and potential delays in product shipments, the Company's backlog as of
any point in time may not be representative of actual sales in any future
period. All orders are subject to cancellation by the customer with limited
penalty. There is no significant seasonal aspect to the business of the Company.
MANUFACTURING AND RAW MATERIALS
The Company's manufacturing activities take place in San Diego, California (BMS,
Delta Design and the Electronics Division), outside Boston, Massachusetts
(Daymarc) and Los Banos, California (FRL). Many of the components and
subassemblies are standard products although certain items are made to Company
specifications. Certain components are obtained or are available from a limited
number of suppliers. The Company seeks to reduce its dependence on sole and
limited source suppliers, however in some cases the complete or partial loss of
certain of these sources could have at least a temporary negative effect on the
Company's operations.
PATENTS AND TRADEMARKS
The Company protects its proprietary technology through various intellectual
property laws. However, the Company believes that, due to the rapid pace of
technological change in the semiconductor equipment industry, the successful
manufacture and sales of its products generally depend upon its experience,
technological know-how, manufacturing and marketing skills, and speed of
response to sales opportunities, rather than on the legal protection afforded to
any one or more items of intellectual property, such as patents, trademarks,
copyrights and trade secrets. In the absence of patent protection the Company
may be vulnerable to competitors who attempt to copy or imitate the Company's
products or processes. Although the Company believes its intellectual property
has value (and includes trademark rights and trade names other than Cohu), and
the Company has in the past and will in the future take actions it deems
appropriate to protect such property from misappropriation, there can be no
assurance such actions will provide meaningful protection from competition.
Protecting the Company's intellectual property rights or defending against
claims brought by other holders of such rights would likely be expensive and
time consuming and could have a material adverse effect on the Company and its
operations.
RESEARCH AND DEVELOPMENT
Certain of the markets served by the Company, particularly the semiconductor
equipment industry, are characterized by rapid technological change. Research
and development activities are carried on in the respective operations and are
directed toward development of entirely new products and equipment, as well as
enhancements to existing products and equipment. Total research and development
expenses were $10.2 million in 1995, $7.5 million in 1994 and $5.5 million in
1993. Total dollar expenditures in 1995 and 1994 increased primarily due to
increased spending for R & D on semiconductor test handling equipment. There was
no significant customer-sponsored product development during these years.
The Company works closely with its key customers to make improvements on its
existing products and in the development of new products. The Company expects to
continue to invest heavily in research and development and must manage product
transitions successfully as introductions of new products could adversely impact
sales of existing products.
5
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ENVIRONMENTAL LAWS
Compliance with Federal, State and local laws which have been enacted or adopted
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment has not had a material effect and is not
expected to have a material effect upon the capital expenditures, results of
operations or competitive position of the Company.
EMPLOYEES
At December 31, 1995 the Company had approximately 900 employees. None of these
employees is covered by a labor union. The Company believes that a great part of
its future success will depend on its continued ability to attract and retain
qualified employees. Competition for the services of certain personnel is
increasing. The Company considers its relations with its employees to be good.
RISK AND UNCERTAINTIES
Certain matters discussed in this Annual Report (Form 10-K) and in documents
incorporated herein by reference are forward looking statements that are subject
to risks and uncertainties as described above. Such risks and uncertainties,
including others not presently known to the Company, could cause actual results
to differ materially from those projected or forecasted.
ITEM 2. PROPERTIES
Certain information concerning the Company's principal properties at December
31, 1995 identified by business segment is set forth below:
<TABLE>
<CAPTION>
LOCATION APPROXIMATE OWNERSHIP
- -------- SQ. FOOTAGE ---------
-----------
<S> <C> <C>
Littleton, MA. (1) 102,000 Owned
San Diego, CA. (1) 52,000 Owned
San Diego, CA. (1) 26,000 Owned
Singapore (1) 3,600 Leased
Waltham, MA. (1) 51,000 Leased
San Diego, CA. (2) 52,000 Owned
San Diego, CA. (2) 26,000 Owned
Los Banos, CA. (2) 23,000 Owned
</TABLE>
(1) Semiconductor test handling equipment
(2) Television and other equipment
In November 1995 the Company acquired a 102,000 square foot building and
approximately 46 acres of land in Littleton, Massachusetts. In March 1996
Daymarc moved into this building from its leased facility in Waltham,
Massachusetts. The Company is obligated under a lease on the Waltham facility
with a current employee and stockholder of the Company through June 1998. The
Company is currently attempting to sublease the Waltham facility.
In February 1996 the Company entered into a lease for approximately 15,000
square feet of space in San Diego, California. The operations of BMS will be
relocated to this facility in March 1996 and Delta Design will occupy the 26,000
square feet of space previously occupied by BMS.
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In addition to the locations listed above the Company leases other properties
for sales offices in various locations. The Company believes its facilities are
suitable for their respective uses and are adequate for the Company's present
needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material legal proceedings, other
than ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES OF THE REGISTRANT
The following sets forth the names and ages of and the positions and offices
held by all executive officers and significant employees of the Company as of
March 8, 1996:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS:
- -------------------
Charles A. Schwan 56 President & Chief Executive Officer, Director
John H. Allen 44 Vice President, Finance & Chief Financial
Officer, Secretary
SIGNIFICANT EMPLOYEES:
- ----------------------
Melvyn W. Bosch 57 President, Daymarc
James M. Brown 58 President, Cohu Electronics Division
Graham Bunney 40 President, BMS
James A. Donahue 47 President, Delta Design
James C. Lewellen 56 President, FRL
</TABLE>
Mr. Schwan has been employed by the Company since 1971 and became President &
Chief Executive Officer on March 1, 1996. Mr. Schwan had been Treasurer since
1972, Vice President, Finance since 1983 and Executive Vice President & Chief
Operating Officer since September 1995. Mr. Schwan has been a member of the
Board of Directors since 1990 and served as Secretary from 1988 until September
1995.
Mr. Allen has been employed by the Company since June, 1995. He was Director of
Finance until September 1995, became Vice President, Finance and Secretary in
September 1995 and was appointed Chief Financial Officer in October 1995. Prior
to joining the Company, Mr. Allen held various positions with Ernst & Young LLP
from 1976 until June 1995 and had been a partner with that firm since 1987.
Mr. Bosch has been employed by Daymarc since 1986 and has been President of
Daymarc since 1989.
Mr. Brown has been employed by the Cohu Electronics Division since 1980 and has
been President of that division since 1983.
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Mr. Bunney has been employed by BMS since 1985. Mr. Bunney was a project manager
until June 1994, manufacturing manager from June 1994 until January 1996 and was
promoted to President of BMS in January 1996.
Mr. Donahue has been employed by Delta Design since 1978 and has been President
of Delta Design since 1983.
Mr. Lewellen has been employed by FRL since 1974 and has been President of FRL
since 1979.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Information regarding the market prices of the Company's stock, markets for that
stock and the number of stockholders may be found on page 16 of the 1995 Annual
Report to Stockholders under "Cohu Stock Information". Dividend information may
be found on page 4 of the 1995 Annual Report to Stockholders. Such information
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial Data" on page 4 of the 1995 Annual Report to Stockholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 15 of the 1995 Annual Report to Stockholders is incorporated
herein by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company, including the report
thereon of Ernst & Young LLP, on pages 10 - 14 and the unaudited Quarterly
Financial Data on page 4 of the 1995 Annual Report to Stockholders is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company is set forth under "Election Of
Directors" in the Company's Proxy Statement for the 1996 Annual Meeting of
Stockholders ("the Proxy Statement"), which information is incorporated herein
by reference. Information concerning the executive officers of the Company is
included in Part I, on page 7.
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ITEM 11. EXECUTIVE COMPENSATION
Information regarding the Company's compensation of its executive officers is
set forth in the Proxy Statement under "Compensation of Executive Officers",
"Option Grants in Last Fiscal Year", "Aggregated Option Exercises In Last Fiscal
Year And Fiscal Year-End Option Values", "Compensation Committee Report" and
"Comparative Stock Performance Graph" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is set forth in the Proxy Statement under "Security Ownership Of
Certain Beneficial Owners", "Election Of Directors" and "Information Concerning
Other Directors and Executive Officers" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is set
forth in the Proxy Statement under "Certain Relationships and Related
Transactions" and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are
incorporated herein by reference as part of this Annual Report
on Form 10-K.
2. Financial Statement Schedules
See index to financial statements and financial statement
schedules.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are
filed or incorporated herein by reference as part of this
Annual Report on Form 10-K.
(b) Reports on Form 8-K
None
9
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COHU, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
<TABLE>
<CAPTION>
Pages incorporated
from Annual Report
to Stockholders
---------------
<S> <C>
Consolidated balance sheets at
December 31, 1995 and 1994 10
Consolidated statements of income for
each of the three years in the
period ended December 31, 1995 11
Consolidated statements of cash flows
for each of the three years in
the period ended December 31, 1995 12
Consolidated statements of stockholders'
equity for each of the three years
in the period ended December 31, 1995 12
Notes to consolidated financial
statements 13 - 14
</TABLE>
All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the consolidated financial
statements and the notes thereto.
The consolidated financial statements listed in the above index which are
included in the Annual Report to Stockholders of Cohu, Inc. for the year ended
December 31, 1995 are incorporated herein by reference. With the exception of
the pages listed in the above index and the Items referred to in Items 1, 5, 6,
7, and 8, the 1995 Annual Report to Stockholders is not to be deemed filed as
part of this report.
10
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COHU, INC.
INDEX TO EXHIBITS
(Item 14(a)3)
Description
- -----------
3.1 Restated and amended Certificate of Incorporation of Cohu, Inc.
incorporated herein by reference from the 1981 Form 10-K, Exhibit 1
3.2 Bylaws, as amended, of Cohu, Inc. incorporated herein by reference
from the 1981 Form 10-K, Exhibit 1
10.1 Cohu, Inc. 1988 Employee Stock Option Plan, incorporated herein by
reference from the Company's Proxy Statement for its May 3, 1988 Annual
Meeting of Stockholders
10.2 Cohu, Inc. description of Executive Incentive Bonus Plan, incorporated
herein by reference from the 1990 Form 10-K, Exhibit 10.3
10.3 Termination agreement between Cohu, Inc. and Charles A. Schwan,
incorporated herein by reference from the 1990 Form 10-K, Exhibit 10.5
10.4 The Cohu, Inc. 1992 Stock Option Plan, incorporated herein by reference
from the Company's Proxy Statement for its May 5, 1992 Annual Meeting of
Stockholders
10.5 The Cohu, Inc. 1994 Stock Option Plan, incorporated herein by reference
from the Company's Proxy Statement for its May 2, 1995 Annual Meeting of
Stockholders
10.6 Agreement of Purchase and Plan of Merger by and among Cohu, Inc.,
Daymarc Corporation, Cohu Acquisition Corporation, N.J. Cedrone and
Melvyn Bosch as of June 16, 1994, incorporated herein by reference from
the June 22, 1994 Form 8-K
10.7 Purchase and Sale Agreement dated October 17, 1995 between Daymarc, Inc.
and DOE Partners, L.P. incorporated herein by reference from the Form
10-Q dated September 30, 1995
10.8 The Cohu, Inc. 1996 Stock Option Plan, incorporated herein by reference
from the Company's Proxy Statement for its 1996 Annual Meeting of
Stockholders
10.9 Employment Agreement between Cohu, Inc. and James W. Barnes
13 1995 Annual Report to Stockholders (Provided for information only except
as specifically incorporated by reference)
21 Cohu, Inc. has the following wholly owned subsidiaries:
Delta Design, Inc., a Delaware corporation
Fisher Research Laboratory, Inc., a Delaware corporation
Broadcast Microwave Services, Inc., a Delaware corporation
Daymarc, Inc., a Delaware corporation
Cohu Foreign Sales Ltd., a Barbados corporation
23 Consent of Ernst & Young LLP, Independent Auditors
27 Financial Data Schedule (filed electronically)
11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
COHU, INC.
Date: March 26, 1996 By /s/ Charles A. Schwan
-------------------------
Charles A. Schwan
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ William S. Ivans Chairman Of the Board March 26, 1996
- ----------------------------
William S. Ivans
/s/ Charles A. Schwan President & Chief Executive Officer, March 26, 1996
- ---------------------------- Director (Principal Executive Officer)
Charles A. Schwan
/s/ John H. Allen Vice President, Finance & Chief March 26, 1996
- ---------------------------- Financial Officer, Secretary (Principal
John H. Allen Financial & Accounting Officer)
/s/ J. W. Barnes Director March 26, 1996
- ----------------------------
J. W. Barnes
/s/ Harry L. Casari Director March 26, 1996
- ----------------------------
Harry L. Casari
/s/ Frank W. Davis Director March 26, 1996
- ---------------------------
Frank W. Davis
/s/ Gene E. Leary Director March 26, 1996
- ---------------------------
Gene E. Leary
</TABLE>
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made effective as of March 1,
1996 between Cohu, Inc., a Delaware corporation (the "Company"), and James W.
Barnes ("Barnes").
RECITALS
The Company desires to continue the services and employment of Barnes for the
period provided for in this Agreement and Barnes is willing to continue
employment by the Company on a part-time basis for such period and upon the
terms and conditions set forth below.
Now, therefore, in consideration of the foregoing and the mutual covenants
contained herein, Barnes and the Company hereto agree as follows:
1. EMPLOYMENT - Barnes has resigned as President & Chief Executive Officer
of the Company effective March 1, 1996. Barnes will remain a member of the
Company's Board of Directors (the "Board") subject to reelection by the
stockholders at the conclusion of his current term of office. The Company agrees
to employ Barnes in a non officer capacity on a part-time basis for the three
(3) year period from March 1, 1996 through February 28, 1999 upon the terms and
conditions provided herein.
2. DUTIES - During the period of his part-time employment pursuant to this
Agreement, Barnes will devote his best efforts and skills to the affairs of the
Company under and pursuant to the direction of the Executive Officers ("Senior
Management") and the Board of the Company. Barnes may serve on the boards of
directors of and hold any other offices or positions in companies or
organizations that will not present any conflict of interest with the Company or
any of its subsidiaries or divisions or materially affect the performance of
Barnes' duties under this Agreement. The Company will retain the full direction
and control of the means and methods by which Barnes performs the services under
this Agreement.
3. RESPONSIBILITIES - Subject to the conditions stated in 2. above and
exclusive of his Board responsibilities, Barnes will devote a minimum of four
hundred (400) hours per annum to the business and affairs of the Company. Barnes
will provide the Company with regular reports on the services performed and the
results of his work and retain appropriate records of time incurred in
performing such services, all according to such guidelines as the Company may
reasonably establish from time to time.
4. COMPENSATION; OTHER BENEFITS; EXPENSES - Pursuant to this Agreement
Barnes will receive an annual salary of $30,000. Barnes will not be compensated
for his services as a member of the Company's Board. As the services provided
pursuant to this Agreement will be performed on a part-time basis, Barnes will
not participate in any incentive bonus program of the Company for services
performed after March 1, 1996. However, Barnes shall be entitled to receive all
other benefits of employment generally available to other employees of the
Company who perform services on a part-time basis. The Company shall pay or
reimburse Barnes for all reasonable expenses incurred in performing his duties
under this Agreement. All stock options to purchase common stock of the Company
held by Barnes at the date of this Agreement shall continue to be subject to the
terms and conditions contained in the related Option Agreements.
<PAGE> 2
5. TERMINATION - The Company may terminate this Agreement "for cause" at
any time upon providing written notice to Barnes indicating the cause of
termination. If Barnes is terminated for cause the annual salary under this
Agreement shall be paid on a prorated basis to the date of termination. For
purposes of this Agreement, "for cause" shall mean the discharge resulting from
a determination by the Company that Barnes (a) has been convicted of a crime
involving moral turpitude, including fraud, theft or embezzlement, (b) has
failed or refused to follow the policies or directives established by the Board
or of the Company, or (c) has willfully and consistently failed to attend to the
material duties imposed on him pursuant to this Agreement.
The Company may terminate the employment of Barnes without cause at any
time during the term of this Agreement; provided, however, that the Company
shall be obligated to pay Barnes an amount equal to the annual salary under this
Agreement from the date of termination through February 28, 1999. In addition
the Company, by action of the Compensation Committee of the Board, shall
accelerate the vesting of all stock options to purchase common stock of the
Company held by Barnes that would have become exercisable by February 28, 1999.
Barnes may terminate this Agreement at any time. In so doing Barnes will be
paid on a prorated basis to the date of termination and any stock options to
purchase common stock of the Company held by Barnes at that date will be subject
to the termination of option provisions contained in the related Option
Agreement.
Barnes and the Company hereby acknowledge that as a result of his
resignation as President & Chief Executive Officer of the Company the
Termination Agreement dated May 10, 1985 between the Company and Barnes is no
longer effective as of March 1, 1996.
6. INDEMNIFICATION - During the term of his employment under this Agreement
Barnes will continue to be subject to the indemnification provisions contained
in Section 7.1 of the Company's Bylaws.
7. ARBITRATION - Any dispute under this Agreement shall be subject to
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect.
8. MISCELLANEOUS - Barnes and the Company acknowledge that any explicit or
implicit employment agreements or understandings between the parties prior to
the date of this Agreement are hereby terminated and of no further effect. The
terms of Barnes' employment with the Company will be governed by this Agreement
and by the employment policies and practices of the Company. No agreements,
express or implied, with respect to the matters covered herein have been made by
either party which are not set forth expressly in this Agreement. All questions
concerning validity and enforceability of this Agreement shall be governed by
and construed in accordance with the laws of the State of California.
In witness whereof, Barnes and the Company, pursuant to a resolution of its
Board at a duly constituted meeting have executed this Agreement, effective as
of March 1, 1996.
By /s/ Charles A. Schwan
----------------------------
Charles A. Schwan
President & Chief Executive Officer
/s/ James W. Barnes
-------------------
James W. Barnes
<PAGE> 1
EXHIBIT 13
COMPANY PROFILE
Cohu, Inc., with sales and service facilities worldwide, is the largest U.S.
based, and one of the world's largest, suppliers of semiconductor test handling
equipment that is used by semiconductor manufacturers in final test operations.
The Company also manufactures closed circuit television, metal detection and
microwave equipment.
FINANCIAL HIGHLIGHTS
RECORD ORDERS - Increased 77% in 1995
RECORD SALES - Increased 74% in 1995
RECORD NET INCOME - Increased 133% in 1995
RECORD STOCKHOLDERS' EQUITY - Increased 52% in 1995
<TABLE>
<CAPTION>
================================================================================
STOCKHOLDERS'
YEAR ORDERS SALES NET INCOME EQUITY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 $ 47.5 $ 48.2 $ 2.6 $25.1
1992 55.5 54.4 3.1 27.5
1993 77.9 75.3 6.8 33.6
1994 106.8 102.7 10.1 47.4
1995 189.4 178.8 23.6 72.0
- --------------------------------------------------------------------------------
(In millions)
================================================================================
</TABLE>
1
<PAGE> 2
LETTER TO SHAREHOLDERS:
================================================================================
[PHOTO]
In 1995, your Company recorded, for the fourth consecutive year, the
best financial results in its history, setting new records in orders, sales and
profits. This outstanding performance was primarily the result of the increased
level of acceptance of our test handling equipment by global semiconductor
manufacturers.
Sales for 1995 increased 74% to $178,759,000 compared to $102,726,000
in 1994. Net income increased 133% to $23,622,000 compared to $10,118,000 in
1994. Net income per share increased 114% to $2.46 per share compared to $1.15
per share in 1994. Order input for 1995 totalled $189,394,000, compared to year
earlier orders of $106,798,000. Year end 1995 backlog was $45,399,000 compared
to year earlier backlog of $34,764,000.
In addition to the improved operating results, Cohu ended 1995 with the
strongest balance sheet in its history with no bank debt and $29 million in
cash. The record operating results were mainly due to increased sales and
orders by the Company's Delta Design subsidiary, the full year addition of the
operating results of Daymarc (which was acquired in June 1994), and increased
sales and orders by Daymarc. Delta Design and Daymarc produce test handling
equipment used by major semiconductor manufacturers in operations located
worldwide. Combined sales of this equipment increased 102% and accounted for
82% of consolidated sales for 1995. Sales of television cameras and related
equipment by the Electronics Division accounted for 12% of sales, and the FRL
and BMS subsidiaries, combined, contributed 6% of sales.
International sales increased from $38 million in 1994 to $72 million
in 1995 and accounted for 40% of consolidated sales in 1995 compared to 37% for
the prior year. Most of these sales were to offshore operations of major U.S.
semiconductor manufacturers.
To support our growing worldwide semiconductor customer base in 1995,
we further expanded our sales and service organizations and now have service
personnel located in North America, Singapore, Malaysia, Hong Kong, Taiwan,
Thailand, People's Republic of China and the Philippines. In addition, in late
1995 we purchased a new facility for Daymarc and made arrangements to expand
the Delta Design facility. The completion of these projects will have expanded
our semiconductor equipment floor space by 60% from approximately 129,000 to
206,000 square feet.
2
<PAGE> 3
===============================================================================
According to VLSI Research, the worldwide semiconductor industry grew
in excess of 40% from $100 billion in 1994 to more than $140 billion in 1995.
Industry forecasts predict that the semiconductor industry may reach $350
billion by the year 2000. The long-term outlook for the industry and related
equipment suppliers remains promising.
However, the semiconductor industry has historically been cyclical and
there will be events and circumstances within the industry that effect the
demand for semiconductors that will impact the operating results of
semiconductor equipment companies. Furthermore, recent announcements by certain
semiconductor manufacturers and industry analysts indicate that the industry
growth rate in 1996 will be less than the record growth experienced in 1995.
Nevertheless, quote activity remains high in the Company's operations.
This activity, strong operating results, the expansion of our manufacturing and
service capabilities, excellent liquidity and the high level of backlog places
the Company in a position to maintain its leadership in the semiconductor test
handling equipment market.
Dividends of $1.4 million or $.16 per share were paid in 1995, the 18th
consecutive year of cash dividend payments and the 9th year in a row in which
dividends were increased.
Effective March 1, 1996 James W. Barnes retired as President & Chief
Executive Officer of the Company. We thank him for the outstanding contribution
he has made to Cohu and look forward to working with him as he continues as a
member of the Board of Directors.
We thank our customers and shareholders for their confidence and our
employees and suppliers for their support and loyalty.
Sincerely,
Charles A. Schwan
President & Chief Executive Officer
March 8, 1996
3
<PAGE> 4
SELECTED FINANCIAL DATA*
================================================================================
(in thousands, except per share and employee data)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales:
Semiconductor test handling equipment $146,093 $ 72,502 $47,827 $30,045 $19,112
Television and other equipment 32,666 30,224 27,451 24,353 29,076
-------- -------- ------- ------- -------
$178,759 $102,726 $75,278 $54,398 $48,188
======== ======== ======= ======= =======
Operating profit:
Semiconductor test handling equipment $ 36,490 $ 15,063 $ 9,261 $ 4,582 $ 2,437
Television and other equipment 1,964 1,829 1,821 1,386 1,802
Gain on sale of land and building -- -- -- -- 158
-------- -------- ------- ------- -------
38,454 16,892 11,082 5,968 4,397
Less:
Corporate administrative expense (224) (128) (99) (61) (87)
Interest income 704 60 31 -- 18
Interest expense (12) (206) (4) (130) (56)
-------- -------- ------- ------- -------
Income before income taxes and effect of
accounting change 38,922 16,618 11,010 5,777 4,272
Provision for income taxes 15,300 6,500 4,200 2,290 1,630
-------- -------- ------- ------- -------
Income before effect of accounting change 23,622 10,118 6,810 3,487 2,642
Transition effect of accounting change, net
of taxes -- -- -- 410 --
-------- -------- ------- ------- -------
Net income $ 23,622 $ 10,118 $ 6,810 $ 3,077 $ 2,642
======== ======== ======= ======= =======
Income per share before effect of accounting
change $ 2.46 $ 1.15 $ .81 $ .43 $ .33
Net income per share 2.46 1.15 .81 .38 .33
Cash dividends per share, paid quarterly .16 .12 .10 .09 .08
Depreciation and amortization deducted in
arriving at operating profit:
Semiconductor test handling equipment $ 1,051 $ 498 $ 260 $ 224 $ 214
Television and other equipment 833 683 692 675 588
-------- -------- ------- ------- -------
$ 1,884 $ 1,181 $ 952 $ 899 $ 802
======== ======== ======= ======= =======
Capital Expenditures:
Semiconductor test handling equipment $ 4,932 $ 649 $ 409 $ 342 $ 375
Television and other equipment 355 371 328 870 2,812
-------- -------- ------- ------- -------
$ 5,287 $ 1,020 $ 737 $ 1,212 $ 3,187
======== ======== ======= ======= =======
AT DECEMBER 31
- --------------
Total assets by industry segment:
Semiconductor test handling equipment $ 48,708 $ 45,316 $19,733 $17,449 $14,016
Television and other equipment 19,126 18,730 18,313 17,337 18,441
Corporate 36,100 3,922 4,789 1,274 1,640
-------- -------- ------- ------- -------
$103,934 $ 67,968 $42,835 $36,060 $34,097
======== ======== ======= ======= =======
Working capital $ 57,228 $ 37,680 $26,352 $19,126 $18,536
Long-term debt -- 1,400 -- -- --
Number of employees 903 707 562 476 521
Number of equivalent shares 9,584 8,816 8,366 8,140 8,124
QUARTERLY FINANCIAL DATA (Unaudited) First Second Third Fourth Year
- ------------------------------------ -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales: 1995 $ 32,182 $ 45,212 $49,035 $52,330 $178,759
1994 17,518 22,612 31,703 30,893 102,726
Gross profit: 1995 12,823 17,895 19,508 23,419 73,645
1994 7,066 8,602 11,798 12,773 40,239
Net income: 1995 3,480 4,940 6,500 8,702 23,622
1994 1,631 2,173 3,032 3,282 10,118
Net income per share: 1995 .37 .52 .67 .90 2.46
1994 .20 .26 .33 .36 1.15
</TABLE>
- -----------------
*All share and per share amounts have been retroactively restated for a
two-for-one stock split effective June 1995.
4
<PAGE> 5
SEMICONDUCTOR TEST HANDLING EQUIPMENT
================================================================================
Cohu, through subsidiaries Delta Design and Daymarc, is the largest
U.S. based, and one of the world's largest, suppliers of semiconductor test
handling equipment that is used by semiconductor manufacturers in final test
operations. During 1995, these operations contributed 82 percent of
consolidated net sales. The Company designs, manufactures, markets and services
automated test handling equipment from manufacturing facilities in San Diego,
CA (Delta Design) and Waltham, MA (Daymarc). Sales, service and technical
support offices are located throughout the U.S., Europe and Asia. The Company's
product lines include equipment used for semiconductor package types that
require pick and place test handling (Delta Design) and packages that can be
handled using gravity feed technology (Daymarc).
The Company strives to provide test handling solutions to reduce the
customers' total cost of ownership through dual strategies of new system sales
and through continuous improvement of our substantial global installed base of
test handling equipment, numbering in the thousands. The Company's results in
1995 were driven by both market growth and new applications for semiconductor
devices, that were unprecedented. According to industry estimates, the
worldwide semiconductor industry grew from $100 billion in 1994 to more than
$140 billion in 1995, a growth rate in excess of 40%. In addition, industry
experts predict that semiconductor content of all electronic products produced
will increase significantly in the next few years and that the semiconductor
industry may reach $350 billion by the year 2000.
During 1995, increasing global investment from semiconductor
manufacturers provided strong demand for test handling products. Accelerating
capital investment in wafer fabrication facilities ("wafer fabs" or "front
ends") generally precedes demand for "back end" assembly and test facilities,
usually with an offset of 1 to 1.5 years. According to industry sources, over
140 new, state of the art wafer fabs are believed to be currently under
construction worldwide. Each of these wafer fabs could represent a capital
investment in excess of $1 billion. A dominant percentage of the devices
produced by these "front ends" must be assembled, packaged and tested,
utilizing pick and place or gravity feed test handling equipment such as that
manufactured by Delta Design and Daymarc.
The Company's objectives are to increase market share by expanding
sales and support efforts worldwide, by investing in continuous improvement of
existing products and by aggressively developing new products for existing and
emerging markets. We also intend to leverage our position as an industry leader
to expand in market segments expected to show substantial growth, such as
contract manufacturing. The Company increased the number of customers worldwide
during 1995, adding to market share growth.
The customer base of Delta Design and Daymarc includes many of the
largest and most technologically demanding semiconductor manufacturers in the
world. In 1996, the focus will be on enhancing market leadership position
through penetration of emerging high-growth markets, accelerated new product
introduction, technology leadership, world-class manufacturing,
5
<PAGE> 6
================================================================================
enhancement of our global support staff deployed close to our customers'
facilities, infrastructure development to support continuing growth and, most
importantly, maintaining strong customer relationships.
DELTA DESIGN, INC.
Delta Design once again set records in sales, orders, and net income
during 1995.
Delta's success, driven by industry growth and market share gains, is
also directly attributable to the Company's strong focus on customer
satisfaction and employee empowerment. Delta once again was awarded the
prestigious VLSI Research "10 Best" Customer Satisfaction Award.
Delta has a broad line of pick and place test handlers, capable of
handling virtually all semiconductor package types through the use of dedication
kits. The Company's handlers provide reliable, high throughput performance,
parallel test and hot/cold test capability. Two systems, the RFS(TM) and 1688,
are believed to have the fastest index times in the industry. The Delta Turbo
Flex(TM) continues to provide customers with the versatility and dependable
performance required in the demanding and often unpredictable environment of
back-end semiconductor manufacturing.
Delta Design's products are improved on an ongoing basis by a Continuous
Product Improvement (CPI) organization whose role is to increase the return on
investment that customers make in Delta equipment. The Turbo Flex(TM) upgrade,
which provides customers with productivity improvements through reduced handler
index time, is an example of the significant benefits which Delta customers
realize through our CPI activities. The Delta Flex(TM) and more recently
Turbo-Flex(TM) have established high performance standards for dependability and
versatility in a broad range of production applications worldwide.
The fast-index time and large environmental storage capacity of the
Model 2040, or RFS(TM), provides customers with outstanding productivity,
particularly in high volume and parallel test applications. The tri-temperature
RFS(TM) incorporates a patented contactor indexing mechanism for sub-second
index time.
The Model 1688 ambient pick and place handler utilizes the same
sub-second indexing mechanism as the RFS(TM). The unusually small eleven square
feet footprint, dependable performance and competitive pricing have proven to be
key determinants influencing customer acceptance of this system.
[PHOTO WITH CAPTION]
Delta 1688, pick and place IC test handler
6
<PAGE> 7
================================================================================
Delta Design's commitment to continue to meet the evolving needs of the
demanding and dynamic semiconductor industry is demonstrated by record
investment in new product development planned during 1996.
DAYMARC, INC.
Daymarc, acquired by Cohu in June 1994, had an outstanding year in 1995
and established records for sales, orders and net income. Daymarc was
established in 1959 and was the first equipment company to introduce a gravity
feed, fully automatic test handler. Daymarc has experienced rapid growth during
the past several years and is a leader in the gravity feed market segment.
To accommodate future growth, Daymarc relocated during March 1996 to a
larger facility in Littleton, MA. The Littleton facility has 102,000 square
feet and is twice the size of the former facility. The new facility, with
expansion options for future growth, will support Daymarc's manufacturing needs
for the foreseeable future.
Daymarc test handlers are designed to deliver high throughput, maximize
operator productivity and increase yields through proprietary, high performance
contacting technology.
Daymarc manufactures three lines of test handlers; the 717 Series, 3000
Series and 4000 Series. The 717 Series test handlers are designed specifically
for small outline (SOIC) packages. The small dimensions and high speed
applications of the SOIC package require a handler with minimal transition
distances, high performance contacting and automation features to reduce the
need for operator intervention. The 717 ambient and tri-temperature handlers
feature index times of 350 and 500 milliseconds, respectively. Changeover for a
different device package requires less than 30 minutes.
The 3000 Series is available in single, dual/quad and thirty-two site
configurations. These handlers can be reconfigured with device dedication kits
to accommodate a wide range of package types at throughput rates up to 4,200
units per hour (UPH). The 3000 Series handlers provide tri-termperature
operation and input/output automation for increased productivity.
The 4000 Series handlers combine high speed with multi-site capability.
The first in the Series, the 4100, operates at 18,000 UPH in dual or quad site
configurations. The 4100, which occupies only seven square feet of floor space,
is believed to be the fastest handler available on the market.
[PHOTO WITH CAPTION]
Daymarc 3287, 32 site gravity fed IC test
handler
7
<PAGE> 8
TELEVISION AND OTHER EQUIPMENT
- --------------------------------------------------------------------------------
The Electronics Division has been a leading designer and manufacturer
of closed circuit television (CCTV) cameras and systems for over 40 years. The
customer base is broadly distributed between machine vision, scientific
imaging, and security/surveillance markets. Division bookings and sales reached
new records in 1995 as a result of increased sales efforts within these defined
markets. Distribution channels for television products include direct sales to
end users, contractors, value-added resellers, and a growing list of original
equipment manufacturers (OEM) that integrate Cohu cameras into their products.
The Division is most readily differentiated from the competition by its
willingness and ability to create quality products that solve a customer's
unique requirements. Cohu's leading roll in advanced CCTV technology is based
on a continuing commitment to quality, product performance and competitiveness.
The growth of semiconductor manufacturing has led to an increase in the
requirement for video-based machine imaging systems. Cohu cameras are ideally
suited to this purpose, and are used by numerous suppliers of these systems.
Cameras are most commonly used for assembly, test, and measurement applications.
Cohu manufactures several CCTV camera models suited to security and
surveillance applications, and pursues system sales in this area. The Division
was selected to design a state-of-the-art CCTV security surveillance system for
a commuter rail line, and supply the television cameras and system controls.
Cohu is well positioned to provide products and engineering design expertise
for high value asset protection, crime deterrence, and personnel safety.
The Division continues to take advantage of a growing European market
through the support of existing distribution channels and increased OEM
opportunities, primarily in machine vision applications. Process monitoring and
advanced imaging applications provide the majority of international sales.
Cohu is firmly established as a leader in video systems for traffic
management across the U.S. and is an OEM provider to key manufacturers of wide
area detection products for intersection control. Repeat and add-on sales may
follow as a result of the growing customer base. Major contracts were completed
for traffic surveillance cameras and equipment on the Washington, DC beltway,
throughout California, and the New York and New Jersey bridge and tunnel
systems. The Division aggressively maintains a leading position in this
marketplace, which includes monitoring traffic conditions on freeways, bridges
and surface streets, and in tunnels and commuter parking areas.
The Division is registered compliant to ISO-9001 standards, the most
rigid of five levels
[PHOTO WITH CAPTION]
Cohu camera monitoring passenger train terminal
8
<PAGE> 9
================================================================================
of standards in the ISO 9000 series. ISO registration is a competitive
advantage in market areas where ISO 9000 is heavily supported, such as Europe
and the Middle East, and is becoming an advantage in the domestic market.
The Division is a recognized leader in the design and manufacture of
specialty CCTV systems for the nuclear fuel and power industry. In 1996 and
beyond, key markets for Cohu CCTV products are expected to include applications
in the transportation and management of nuclear and other hazardous materials.
The remote surveillance and handling of hazardous materials should continue to
provide many opportunities for both standard and custom products.
FRL, INC.
Fisher Research Laboratory (FRL) designs, manufactures and sells metal
detectors and related underground detection devices for industrial and hobby
markets. All products are sold under the Fisher M-Scope label.
Industrial instruments include pipe and cable locators, cable fault
locators, water leak detectors, property marker locators and instruments for
finding reinforcing bars in concrete. Fisher's new TW-770 digital line tracer
guides the operator over the path of a buried pipe or cable and, with the push
of a button, provides an accurate depth reading.
Fisher products are sold world wide with major customers located in
Western Europe, Canada and Pacific rim. China is a growing market for
industrial products and hobby metal detectors are now being sold in countries
like Russia, South Africa and Bulgaria. Export sales were approximately 25% of
sales in 1995. Although the foreign consumer market seems to be maturing,
demand for Fisher industrial products has been increasing rapidly.
Fisher intends to remain at the forefront of this relatively small
market through continuous, evolutionary product development.
BMS, INC.
Broadcast Microwave Services, Inc. (BMS) is a manufacturer of microwave
radios, antenna systems, and associated equipment for use in government,
industry and commercial broadcast markets. The products are used to transmit
and receive television video and audio signals.
Applications in the government and industrial areas include automatic
tracking antenna systems and transmission from unmanned vehicles. Applications
in the commercial broadcast area include electronic news gathering (ENG),
sports events, and station to station relay.
These niche markets have seen declines for the past several years. The
government markets due to general budget reductions. The broadcast capital
equipment market has experienced a decline since 1986 due to reduced
advertising revenues and increased production costs. Present indicators show
that the broadcast market will likely show some growth in the next one to two
years, mostly in the replacement of existing point-to-point and ENG equipment.
In 1995 BMS developed and continues to develop new products for both point-to-
point and ENG applications.
Government related programs are shifting to non-tactical, non-lethal,
systems such as unmanned vehicles, both ground based and airborne. BMS has
developed a line of cost effective automatic tracking and remotely controlled
antenna systems. These systems have been sold into pilot programs for unmanned
vehicle surveillance and observation applications.
- --------------------------------------------------------------------------------
Certain matters discussed in this Annual Report are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially from those projected or forecasted. Such risks and
uncertainties include, but are not limited to, the risk of slowing growth in
the demand for semiconductors and semiconductor equipment and the risk of
challenges from the Company's competition.
9
<PAGE> 10
CONSOLIDATED BALANCE SHEETS
================================================================================
(in thousands, except par value)
<TABLE>
<CAPTION>
December 31,
1995 1994
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28,874 $ 3,096
Accounts receivable less allowance for doubtful accounts
of $1,565 in 1995 and $429 in 1994 27,572 20,487
Inventories, at lower of average cost or market:
Finished goods 3,466 3,920
Work in process 7,759 8,800
Material and parts 10,019 15,721
-------- -------
21,244 28,441
Deferred income taxes 9,413 2,850
Prepaid expenses 973 638
-------- -------
Total current assets 88,076 55,512
Property, plant and equipment, at cost:
Land and land improvements 1,150 150
Buildings and building improvements 10,355 7,721
Machinery and equipment 11,697 10,565
-------- -------
23,202 18,436
Less accumulated depreciation and amortization 10,031 9,357
-------- -------
Net property, plant and equipment 13,171 9,079
Goodwill, net of accumulated amortization of $501 in 1995 and $329 in 1994 2,626 3,315
Other assets 61 62
-------- -------
$103,934 $67,968
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,453 $ 6,382
Commissions payable 1,735 2,217
Income taxes payable 7,062 1,930
Accrued payroll and payroll related 7,881 4,267
Accrued warranty 2,567 442
Other accrued liabilities 4,150 2,594
-------- -------
Total current liabilities 30,848 17,832
Long-term note payable to bank -- 1,400
Accrued retiree medical benefits 859 801
Deferred income taxes 198 564
Commitments
Stockholders' equity:
Preferred stock, $1 par value; 1,000 shares authorized, none issued -- --
Common stock $1 par value; 10,000 shares authorized, 9,092 issued and
outstanding in 1995 and 4,405 in 1994 9,092 4,405
Paid in excess of par 4,252 6,510
Retained earnings 58,685 36,456
-------- -------
Total stockholders' equity 72,029 47,371
-------- -------
$103,934 $67,968
======== =======
</TABLE>
See accompanying notes.
10
<PAGE> 11
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Net sales $178,759 $102,726 $75,278
Cost and expenses:
Cost of sales 105,114 62,487 46,496
Research and development 10,192 7,477 5,455
Selling, general and administrative 25,223 15,998 12,344
-------- -------- -------
Income from operations 38,230 16,764 10,983
Interest income 704 60 31
Interest expense (12) (206) (4)
-------- -------- -------
Income before income taxes 38,922 16,618 11,010
Provision for income taxes 15,300 6,500 4,200
-------- -------- -------
Net income $ 23,622 $ 10,118 $ 6,810
======== ======== =======
Net income per share $ 2.46 $ 1.15 $ .81
======== ======== =======
Average common shares and equivalents 9,584 8,816 8,366
======== ======== =======
</TABLE>
See accompanying notes.
11
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $23,622 $10,118 $ 6,810
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization 1,884 1,181 952
Daymarc earnout paid in stock 1,593 - -
Deferred income taxes (6,929) (1,886) (314)
Increase in accrued retiree medical benefits 58 58 57
Changes in assets and liabilities, net of effects from purchase of Daymarc:
Accounts receivable (7,085) (8,332) 2,646
Inventories 7,197 (3,116) (6,174)
Prepaid expenses (335) (261) 60
Accounts payable 1,071 3,032 (1,525)
Commissions payable (482) 642 165
Income taxes payable 5,132 490 34
Accrued payroll, warranty and other liabilities 7,295 1,312 1,251
------- ------- -------
Net cash provided from operating activities 33,021 3,238 3,962
Cash flows from investing activities:
Purchases of property, plant and equipment (5,287) (1,020) (737)
Other assets 1 (29) 161
Purchase of Daymarc, net of cash acquired - (3,590) -
------- ------- -------
Net cash used for investing activities (5,286) (4,639) (576)
Cash flows from financing activities:
Reduction in line of credit and long-term borrowings (1,400) (2,600) -
Proceeds from long-term borrowings - 4,000 -
Issuance of stock, net 836 202 89
Dividends paid (1,393) (1,016) (808)
------- ------- -------
Net cash provided from (used for) financing activities (1,957) 586 (719)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 25,778 (815) 2,667
Cash and cash equivalents at beginning of year 3,096 3,911 1,244
------- ------- -------
Cash and cash equivalents at end of year $28,874 $ 3,096 $ 3,911
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $17,097 $ 7,047 $ 4,430
Interest 12 206 4
Liabilities assumed in purchase of Daymarc - 4,971 -
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
(in thousands, except
per share amounts)
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
-------------------------------------------------------------------------
Common Stock Paid in Retained
$1 par value excess of par earnings Total
------------ ------------- -------- -------
<S> <C> <C> <C>
Balance at December 31, 1992 $4,011 $2,137 $21,352 $27,500
Cash dividends - $.10 per share - - (808) (808)
Repurchase and retirement of stock (8) (89) - (97)
Exercise of stock options 50 136 - 186
Net income - - 6,810 6,810
------ ------ ------- -------
Balance at December 31, 1993 4,053 2,184 27,354 33,591
Cash dividends - $.12 per share - - (1,016) (1,016)
Acquisition of Daymarc 280 3,906 - 4,186
Shares issued for Daymarc earnout 18 272 - 290
Repurchase and retirement of stock (2) (25) - (27)
Exercise of stock options 56 173 - 229
Net income - - 10,118 10,118
------ ------ ------- -------
Balance at December 31, 1994 4,405 6,510 36,456 47,371
Two-for-one stock split 4,405 (4,405) - -
Cash dividends - $.16 per share - - (1,393) (1,393)
Shares issued for Daymarc earnout 62 1,531 - 1,593
Repurchase and retirement of stock (6) (114) - (120)
Exercise of stock options 226 730 - 956
Net income - - 23,622 23,622
------ ------ ------- -------
Balance at December 31, 1995 $9,092 $4,252 $58,685 $72,029
====== ====== ======= =======
</TABLE>
See accompanying notes.
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES
PRESENTATION--The consolidated financial statements include the accounts
of Cohu, Inc. (the Company) and its wholly-owned subsidiaries. All
intercompany accounts and balances have been eliminated in consolidation.
Reclassification has been made to certain prior year amounts to conform to
the 1995 presentation.
CASH EQUIVALENTS--Cash equivalents consist of money market accounts and
U.S. Treasury securities with a maturity date at acquisition of three
months or less. Cash equivalents are classified as available-for-sale and
are stated at cost plus accrued interest which approximates market value.
DEPRECIATION AND AMORTIZATION--Depreciation and amortization of property,
plant and equipment is calculated principally on the straight-line method
based on estimated useful lives of five to forty years for buildings and
building improvements and three to ten years for machinery and equipment.
Goodwill is being amortized on the straight-line method over twenty years.
INCOME PER SHARE--Per share information is based on the weighted average
number of shares outstanding during each period and the dilutive effect of
the assumed exercise of stock options. All per share and certain share
amounts have been retroactively restated for a two-for-one stock split
authorized by the Board of Directors effective June 6, 1995.
REVENUE RECOGNITION--Revenue is generally recognized upon shipment or, in
instances where products are required to meet certain customer
requirements, upon successful completion of such requirements. Product
warranty costs are accrued in the period sales are recognized.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions about the future that effect the amounts reported
in the consolidated financial statements. These estimates include assessing
the collectibility of accounts receivable, the usage and recoverability of
inventory and long-lived assets and the incurrence of warranty costs. The
actual results could differ from those estimates.
2. ACQUISITION OF DAYMARC
On June 22, 1994 the Company acquired Daymarc Corporation, a
privately-held manufacturer of gravity feed semi-conductor test handling
equipment. The Company issued 560,000 shares of Cohu common stock, an
option to purchase 140,000 shares of Cohu common stock and paid $4,000,000
in cash to the securityholders of Daymarc. In addition, performance-based
consideration is payable in Cohu common stock and cash through June 1998.
The acquisition has been accounted for as a purchase and goodwill is being
amortized over twenty years. The Company's consolidated financial
statements include the results of Daymarc from June 22, 1994 forward. In
1995 and 1994 performance-based consideration and compensation totaling
$3,982,000 and $833,000 payable in stock and cash was earned and charged to
operations.
Pro forma results of the Company's operations, assuming the acquisition
had occurred as of January 1, 1993, are presented below.
<TABLE>
<CAPTION>
Year ended December 31 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
(in thousands, except per share data
Net sales $114,988 $89,629
Net income 11,688 7,525
Net income per share 1.28 .84
</TABLE>
3. LINE OF CREDIT
The Company maintains a $3,000,000 unsecured bank line-of-credit facility
bearing interest at the bank's prime reference rate. The facility requires
compliance with certain financial covenants and expires in April 1996. No
borrowings were outstanding at December 31, 1995.
4. INCOME TAXES
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $18,154 $6,404 $3,391
State 4,075 1,982 1,123
-------- -------- --------
Total current 22,229 8,386 4,514
Deferred:
Federal (5,627) (1,458) (253)
State (1,302) (428) (61)
-------- -------- --------
Total deferred (6,929) (1,886) (314)
-------- -------- --------
$15,300 $ 6,500 $4,200
======== ======== ========
</TABLE>
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 the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31,
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Reserves and accrued warranty not
currently deductible $ 8,284 $1,882
Accrued state taxes 784 431
Accrued employee benefits 926 760
Other 202 177
-------- --------
Total deferred tax assets 10,196 3,250
-------- --------
Deferred tax liabilities:
Tax over book depreciation 981 964
-------- --------
Net deferred tax assets $ 9,215 $2,286
======== ========
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory
tax rates to the provision for income taxes is as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rates $13,623 $5,816 $ 3,743
State income taxes, net of
federal tax benefit 1,827 1,026 701
FSC benefit (1,278) (228) (240)
Nondeductible goodwill and
performance-based
consideration expense 799 34 9
Other - net 329 (148) (13)
-------- -------- --------
$15,300 $6,500 $4,200
======== ======== ========
</TABLE>
13
<PAGE> 14
NOTES (CONTINUED)
- --------------------------------------------------------------------------------
5. COMMITMENTS
The Company leases certain property, plant and equipment. Total rent
expense during the years ended December 31, 1995, 1994 and 1993 was $717,000,
$292,000 and $72,000, respectively. The aggregate minimum annual rental
commitment, exclusive of property taxes, insurance and other costs, as of
December 31, 1995 under long-term leases is $788,000 in 1996, $571,000 in 1997,
$289,000 in 1998 and $25,000 in 1999.
6. EMPLOYEE BENEFIT PLANS
STOCK OPTIONS -- Under incentive stock option plans approved by
stockholders, options may be granted to key employees to purchase shares of the
Company's common stock at prices not less than 100% of the fair market value at
the date of grant. Options become exercisable from one-third to one-fourth
annually beginning one year after the grant date and expire 5 to 10 years from
the grant date. Stock option activity was as follows:
<TABLE>
<CAPTION>
(in thousands, except 1995 1994 1993
per share data) ---- ---- ----
<S> <C> <C> <C>
Outstanding, beginning of year 1,022 672 348
Granted 114 490 426
Exercised (226) (112) (100)
Canceled (32) (28) (2)
----- ----- ----
Outstanding, end of year 878 1,022 672
===== ===== ====
Options outstanding at end of year:
Per share price range $1.65-31.25 $1.65-9.69 $1.91-7.60
Aggregate purchase price $7,997 $6,333 $3,699
</TABLE>
At December 31, 1995, 40,168 shares of common stock were reserved for future
grants and options to purchase 398,832 shares were exercisable.
RETIREMENT PLAN -- The Company has voluntary defined contribution
retirement (401(k)) plan whereby it will match up to 4% of employee earnings.
Company contributions to the plan were $737,000 in 1995, $700,000 in 1994 and
$586,000 in 1993.
RETIREE MEDICAL BENEFITS -- The Company provides postretirement health
benefits under a noncontributory plan to certain executives and directors. The
net periodic benefit cost was $68,000, $65,000 and $67,000 in 1995, 1994 and
1993, respectively. The accumulated postretirement benefit obligation at
December 31, 1995 consisted of $261,000 attributable to retired employees,
$298,000 to active eligible employees and $300,000 attributable to other active
employees. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5%. Annual rates of
increase of the cost of health benefits were assumed to be approximately 9.25%
in 1996. These rates were then assumed to decrease 0.25% per year to 6% in 2009
and remain level thereafter. A 1% increase in the rate would increase the net
periodic benefit cost by approximately $10,000 and the accumulated
postretirement benefit obligation as of December 31, 1995 by approximately
$100,000.
7. INFORMATION ON INDUSTRY SEGMENTS
The Company operates in two industry segments. Semiconductor test
handling equipment is designed, manufactured and sold by the Company's Delta
Design and Daymarc subsidiaries to semiconductor manufacturers throughout the
world and accounted for approximately 82% of 1995 consolidated net sales. The
television and other equipment segment includes electronic products used in
electronic imaging, surveillance, detection and microwave communication that are
manufactured and sold to government agencies, original equipment manufacturers,
contractors, distributors and consumers throughout the world. Export sales,
mainly to the Far East and Europe, were $72,000,000, $37,900,000 and
$35,800,000 in 1995, 1994 and 1993, respectively. One customer of the test
handling equipment segment accounted for 17%, 22% and 17% of net sales 1995,
1994 and 1993, respectively. Another customer of the same segment accounted for
17% and 10% of net sales in 1995 and 1994, respectively. Information regarding
industry segments for 1995, 1994 and 1993 contained in the Selected Financial
Data on page 4 is an integral part of these financial statements.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
The Board of Directors and Stockholders
Cohu, Inc.
We have audited the accompanying consolidated balance sheets of Cohu,
Inc. as of December 31, 1995 and 1994, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cohu,
Inc. at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
February 8, 1996
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================================================
1995 COMPARED TO 1994
NET SALES - Net sales increased 74% in 1995 compared to 1994. This
increase was largely due to increased sales by the Company's Delta Design and
Daymarc subsidiaries. Delta Design and Daymarc produce test handling equipment
used by semiconductor manufacturers in operations located worldwide. Combined
sales of this equipment increased 102% and accounted for 82% of net sales in
1995. Daymarc was acquired in June 1994 and its operating results are included
from that date forward. Net sales of television and other equipment increased
8% and accounted for 18% of net sales in 1995. Export sales accounted for 40%
of net sales in 1995 compared to 37% in 1994.
COST OF SALES - Gross margin as a percentage of net sales was 41% in
1995 and 39% in 1994. The increase in margin was due to the increasing
percentage of total net sales attributable to semiconductor equipment which has
higher margins than television and other equipment. Within the semiconductor
equipment segment margins improved due to production efficiencies, volume
material purchase discounts and price increases in certain product lines offset
by increased provisions for excess and obsolete inventories.
OPERATING EXPENSES - Research and development expense increased to
$10.2 million in 1995 although as a percentage of net sales it decreased to 6%
versus 7% in 1994. Selling, general and administrative expense increased 58% in
1995 over 1994 but decreased as a percentage of net sales to 14% from 16% in
1994 as the revenue growth rate exceeded the growth rate in this expense area.
INCOME TAXES - The effective tax rate was 39% in 1995 and 1994. The
effective rate was substantially unchanged from 1994 as increased benefits from
the Company's foreign sales corporation were offset by the effect of
nondeductible expenses.
1994 COMPARED TO 1993
NET SALES - Net sales increased 36% in 1994 compared to 1993. Export
sales were 37% of net sales in 1994 and 48% of net sales in 1993. The reduced
percentage, on increased sales, is due to Daymarc's sales being primarily to
domestic based operations of U.S. semiconductor manufacturers.
Sales of semiconductor test handling equipment increased 52% in 1994
with 36% of the increase due to the acquisition of Daymarc on June 22, 1994 and
16% from increased sales of pick and place handling equipment by Delta Design.
Television and other equipment sales increased 10% in 1994 as sales of
television camera equipment increased 19% which more than offset a decrease in
the sales of microwave equipment.
COST OF SALES - Gross margin as a percentage of net sales improved to
39% in 1994 from 38% in 1993 due to a larger percentage of total sales being
attributable to semiconductor test handling equipment which has a more
favorable gross margin than television and other equipment.
EXPENSES - Research and development expense as a percentage of net
sales remained constant at 7% for 1994 and 1993. Selling, general and
administrative expenses as a percentage of net sales remained constant at 16%
for 1994 and 1993. Interest expense increased due to increased borrowings
resulting from the acquisition of Daymarc and working capital needs.
INCOME TAXES - The effective tax rate was 39% in 1994 and 38% in 1993.
The 1% increase was due primarily to the rate increase as a result of passage
of the Revenue Reconciliation Act of 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flow generated by operating activities in 1995
was $33 million. This was up substantially from 1994 due to increased earnings
combined with significant increases in accrued payroll, warranty and other
liabilities. Net cash used for investing activities was $5.3 million including
$4.1 million for the acquisition of Daymarc's new facility. Net cash used for
financing activities was $2 million. Cash used for financing activities
included a $1.4 million reduction in long-term borrowings and $1.4 million cash
used for dividends. At December 31, 1995, the Company had $3 million available
under its short-term line of credit and working capital of $57.2 million. It is
anticipated that present working capital, cash flow from operations and
available borrowings under the credit line will be sufficient to meet the
Company's 1996 operating requirements and anticipated capital expenditures of
approximately $5 million.
BUSINESS RISKS AND UNCERTAINTIES
The Company's operating results are substantially dependent on the
semiconductor equipment business conducted through its Delta Design and Daymarc
subsidiaries. This capital equipment business is in turn highly dependent on
the overall strength of the semiconductor industry. Worldwide demand for
semiconductors has historically been subject to substantial cyclical swings and
price volatility. The Company's favorable operating results in 1995 benefited
from the record growth in worldwide demand for and production of
semiconductors.
The Company cannot predict how long the favorable conditions in the
semiconductor industry will continue. To the extent that the industry growth
rate slows, demand for capital equipment such as that produced by the Company
will be negatively impacted. In addition, as is common in the industry, the
Company relies on a limited number of customers for a substantial percentage of
its net sales (two customers accounted for 35% of net sales in 1995). The loss
of or a significant reduction in orders by any such customer not compensated
for by other customer orders could adversely impact the Company's annual and
quarter to quarter results of operations.
Semiconductor equipment and processes are subject to rapid
technological change. The Company believes that its future success will depend
in part on its ability to enhance existing products and develop new products
that enable semiconductor manufacturers to handle and test semiconductors more
efficiently. Failure to introduce new products in a timely manner or the
introduction by competitors of products with perceived or actual advantages
could result in a loss of competitive position and reduced sales of existing
products.
Due to these and other factors, historical results may not necessarily
be indicative of results of operations for any future period.
================================================================================
15
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C> <C>
BOARD OF DIRECTORS OFFICERS
WILLIAM S. IVANS JAMES W. BARNES*
Chairman of the Board President & Chief Executive Officer
of the Company
San Diego, California CHARLES A. SCHWAN*
Executive Vice President & Chief Operating Officer
JOHN H. ALLEN
JAMES W. BARNES* Vice President, Finance & Chief Financial Officer, Secretary
President & Chief Executive Officer
of the Company *Effective March 1, 1996 Mr. Schwan was promoted to President &
San Diego, California Chief Executive Officer
HARRY L. CASARI REGISTRAR AND TRANSFER AGENT
Retired Partner Chemical Mellon Shareholder Services
Ernst & Young LLP 300 S. Grand Ave.
San Diego, California Los Angeles, California 90091
(800) 356-2017
INDEPENDENT AUDITORS
FRANK W. DAVIS Ernst & Young LLP
Retired Aerospace Executive; San Diego, California
former President of Convair
Aerospace Division of COUNSEL
General Dynamics Gray Cary Ware & Freidenrich
La Jolla, California San Diego, California
COHU STOCK INFORMATION
Cohu, Inc. stock is traded on the NASDAQ National Marketing System
GENE E. LEARY under the symbol "COHU."
Retired Accounting and Data The following table sets forth the high and low closing sales prices as
Processing Executive at reported on the NASDAQ National Market System during the last two
Honeywell, Inc. and years. Stock prices reported prior to June 6, 1995 have been restated
Control Data Corporation to reflect a two-for-one stock split.
La Jolla, California
1995 1994
--------------- -----------------
High Low High Low
------ ------ ------ -----
CHARLES A. SCHWAN* First Quarter 16 10 7/8 11 3/8 9 1/8
Executive Vice President Second Quarter 23 7/8 14 1/4 9 1/8 8 1/8
& Chief Operating Officer Third Quarter 35 3/4 26 10 5/8 7 5/8
of the Company Fourth Quarter 32 3/4 23 3/4 11 1/4 9 5/8
San Diego, California
At December 31, 1995 the Company had 1,635 shareholders of record.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION FOR 1995 IS AVAILABLE
WITHOUT CHARGE.
Please Contact:
John H. Allen
Cohu, Inc.
5755 Kearny Villa Road
San Diego, CA 92123
(619) 277-6700
</TABLE>
16
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
[PLEASE SEE PAGE 11 OF THE FORM 10-K]
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Cohu, Inc. of our report dated February 8, 1996, included in the 1995 Annual
Report to Stockholders of Cohu, Inc.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8) and in the related Prospectuses of our report dated February 8, 1996,
with respect to the consolidated financial statements of Cohu, Inc.,
incorporated by reference in the Annual Report (Form 10-K) for the year ended
December 31, 1995.
ERNST & YOUNG LLP
San Diego, California
March 26, 1996
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 28,874
<SECURITIES> 0
<RECEIVABLES> 29,137
<ALLOWANCES> 1,565
<INVENTORY> 21,244
<CURRENT-ASSETS> 88,076
<PP&E> 23,202
<DEPRECIATION> 10,031
<TOTAL-ASSETS> 103,934
<CURRENT-LIABILITIES> 30,848
<BONDS> 0
0
0
<COMMON> 9,092
<OTHER-SE> 62,937
<TOTAL-LIABILITY-AND-EQUITY> 103,934
<SALES> 178,759
<TOTAL-REVENUES> 178,759
<CGS> 105,114
<TOTAL-COSTS> 105,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 38,922
<INCOME-TAX> 15,300
<INCOME-CONTINUING> 23,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,622
<EPS-PRIMARY> 2.46
<EPS-DILUTED> 2.46
</TABLE>
