<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
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 office) (Zip Code)
Registrant's telephone number, including area code 619-277-6700
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
----- -----
As of March 31, 1996, the Registrant had 9,237,805 shares of its $1.00 par value
common stock outstanding.
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COHU, INC.
INDEX
FORM 10-Q
MARCH 31, 1996
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995...................3
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 1996 and 1995........................4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1996 and 1995.........................5
Notes to Unaudited Condensed Consolidated Financial Statements.....6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................9
Signatures.................................................................9
2
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COHU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,666 $ 28,874
Accounts receivable, less allowance
for doubtful accounts 27,425 27,572
Inventories, at lower of average cost or market:
Finished goods 4,772 3,466
Work in process 9,192 7,759
Raw materials and purchased parts 9,929 10,019
-------- --------
23,893 21,244
Deferred income taxes 9,413 9,413
Prepaid expenses 1,004 973
-------- --------
Total current assets 96,401 88,076
Property, plant and equipment, at cost:
Land and land improvements 1,150 1,150
Buildings and building improvements 11,437 10,355
Machinery and equipment 13,090 11,697
-------- --------
25,677 23,202
Less accumulated depreciation and amortization 10,354 10,031
-------- --------
Net property, plant and equipment 15,323 13,171
Goodwill, net 2,587 2,626
Other assets 60 61
-------- --------
$114,371 $103,934
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,259 $ 7,453
Income taxes payable 6,715 7,062
Other accrued liabilities 14,467 16,333
-------- --------
Total current liabilities 33,441 30,848
Accrued retiree medical benefits 881 859
Deferred income taxes 198 198
Stockholders' equity:
Preferred stock - -
Common stock 9,238 9,092
Paid in excess of par 4,495 4,252
Retained earnings 66,118 58,685
-------- --------
Total stockholders' equity 79,851 72,029
-------- --------
$114,371 $103,934
======== ========
</TABLE>
See accompanying notes.
3
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COHU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------- -------
<S> <C> <C>
Net sales $50,232 $32,182
Cost and expenses:
Cost of sales 27,348 19,359
Research and development 3,528 2,235
Selling, general and administrative 6,873 4,932
------- -------
Income from operations 12,483 5,656
Interest income 411 34
Interest expense - (10)
------- -------
Income before income taxes 12,894 5,680
Provision for income taxes 5,000 2,200
------- -------
Net income $ 7,894 $ 3,480
======= =======
Net income per share $ 0.81 $ 0.37
======= =======
Average common shares and equivalents 9,705 9,396
======= =======
</TABLE>
See accompanying notes.
4
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COHU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,894 $ 3,480
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 362 394
Daymarc earnout to be paid in stock 414 -
Increase in accrued retiree medical benefits 22 14
Changes in assets and liabilities:
Accounts receivable 147 (2,551)
Inventories (2,649) (2,303)
Prepaid expenses (31) (41)
Accounts payable 4,806 4,085
Income taxes payable (347) 1,236
Other accrued liabilities (2,280) (1,203)
------- -------
Net cash provided from operating activities 8,338 3,111
Cash flows from investing activities:
Purchases of property, plant, equipment and other assets (2,474) (174)
------- -------
Net cash used for investing activities (2,474) (174)
Cash flows from financing activities:
Reduction in long-term borrowings - (1,400)
Issuance of stock, net 389 319
Cash dividends (461) (312)
------- -------
Net cash used for financing activities (72) (1,393)
------- -------
Net increase in cash and cash equivalents 5,792 1,544
Cash and cash equivalents at beginning of period 28,874 3,096
------- -------
Cash and cash equivalents at end of period $34,666 $ 4,640
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 5,335 $ 964
Interest - 10
</TABLE>
See accompanying notes.
5
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COHU, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1 - The accompanying interim financial statements are unaudited but include
all adjustments (consisting of normal recurring adjustments) which the
Company considers necessary for a fair statement of the results for the
period. The operating results for the three months ended March 31, 1996 are
not necessarily indicative of the operating results for the entire year.
These financial statements should be read in conjunction with the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
2 - 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.
3 - In October 1995, the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," which provides an alternative to APB Opinion No.
25, "Accounting for Stock Issued to Employees," in accounting for
stock-based compensation issued to employees. The Statement allows for a
fair value-based method of accounting for employee stock options and similar
equity instruments. However, for companies that continue to account for
stock-based compensation arrangements under Opinion No. 25, Statement No.
123 requires disclosure of the pro forma effect on net income and earnings
per share of its fair value-based accounting for those arrangements. These
disclosure requirements are effective for fiscal years beginning after
December 15, 1995. The Company plans to continue to account for stock-based
compensation under Opinion No. 25.
In March 1995, the FASB issued Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets for which disposal is expected. The Company
adopted Statement 121 in the first quarter of 1996 and such adoption did not
have a material impact on its financial condition and results of operations.
6
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MARCH 31, 1996
RESULTS OF OPERATIONS
Net sales increased 56% to $50.2 million in the first quarter of 1996 compared
to net sales of $32.2 million in 1995. Sales of semiconductor test handling
equipment by the Company's Delta Design and Daymarc subsidiaries increased an
aggregate of 73% in 1996 and accounted for 82% of consolidated net sales in the
first quarter of 1996. Sales of television cameras and equipment increased 5%
while the combined sales of metal detection and microwave equipment increased
13% over 1995. Gross margin as a percentage of net sales in the first quarter of
1996 was approximately 46% versus 40% in 1995. 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, price increases in certain
product lines and reduced provisions for excess and obsolete inventories as a
percentage of net sales. Research and development expense as a percentage of net
sales was 7% in the first quarter of 1996 and 1995. Selling, general and
administrative expense increased 39% in 1996 over 1995 but decreased as a
percentage of net sales from 15% to 14%. Interest income in the quarter
increased to $.4 million due to the significant increase in cash and cash
equivalents. The provision for income taxes expressed as a percentage of pre-tax
income was 39% in the first quarter of 1996 and for the year ended December 31,
1995. For the first fiscal quarter, as a result of the factors set forth above,
net income increased 127% to $7.9 million in 1996 from $3.5 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows generated from operating activities in the first
quarter of 1996 totaled $8.3 million. The major components of cash flows from
operating activities were net income of $7.9 million, increased inventory of
$2.6 million and increased accounts payable of $4.8 million due mainly to
inventory purchases. Net cash used for investing activities was $2.5 million and
was used for the purchase of property, plant and equipment. Net cash used for
financing activities was $72,000. Cash used for financing activities included
$.5 million for the payment of dividends offset by $.4 million received from the
issuance of stock upon the exercise of stock options. The Company has $3 million
available under its bank line of credit and working capital of $63 million at
March 31, 1996. It is anticipated that present working capital, profitable
operations and available borrowings under the line of credit will be sufficient
to meet the Company's 1996 operating requirements and the remaining anticipated
capital expenditures for 1996 of approximately $2.5 million.
BUSINESS RISKS AND UNCERTAINTIES
The Company's operating results are substantially dependent on the semiconductor
test handling 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 and the
first quarter
7
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS RISKS AND UNCERTAINTIES (cont.)
of 1996 benefited from the record growth in worldwide demand for and production
of semiconductors. There can be no assurance that such growth can be sustained.
Recent announcements by certain semiconductor manufacturers and the declining
book to bill ratio indicate there has been a slowdown in demand for
semiconductors, particularly in the personal computer market. This slowdown may
impact the Company's operating results in the second half of 1996. 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 37% of net sales in the first quarter of 1996 and 35% for the year ended
December 31, 1995). The loss of or a significant reduction in orders by either
of these or other significant customers 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, the introduction by competitors of
products with perceived or actual advantages or disputes over rights of the
Company or its competitors to use certain intellectual property or technology
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. In addition, certain
matters discussed above are forward looking statements that are subject to the
risks and uncertainties noted herein and the other risk factors listed from time
to time in the Company's SEC reports, including but not limited to the 1995
Annual Report on Form 10-K, that could cause actual results to differ materially
from those projected or forecasted.
8
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits:
27.1 - Financial Data Schedule (Filed electronically)
(B) Reports on Form 8-K: The Company did not file any reports
on Form 8-K during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements 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.
--------------------------------
(Registrant)
Date: April 30, 1996 /s/ Charles A. Schwan
--------------------------- -------------------------------
Charles A. Schwan
President & Chief Executive
Officer
Date: April 30, 1996 /s/ John H. Allen
--------------------------- --------------------------------
John H. Allen
Vice President, Finance & Chief
Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1995 AND
1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 34,666
<SECURITIES> 0
<RECEIVABLES> 27,425
<ALLOWANCES> 0
<INVENTORY> 23,893
<CURRENT-ASSETS> 96,401
<PP&E> 25,677
<DEPRECIATION> 10,354
<TOTAL-ASSETS> 114,371
<CURRENT-LIABILITIES> 33,441
<BONDS> 0
9,238
0
<COMMON> 0
<OTHER-SE> 70,613
<TOTAL-LIABILITY-AND-EQUITY> 114,371
<SALES> 50,232
<TOTAL-REVENUES> 50,232
<CGS> 27,348
<TOTAL-COSTS> 27,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,894
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 7,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,894
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
