<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, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-4298
COHU, INC.
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(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
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 619-277-6700
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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, 1997, the Registrant had 9,384,861 shares of its $1.00 par
value common stock outstanding.
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COHU, INC.
INDEX
FORM 10-Q
MARCH 31, 1997
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
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<S> <C> <C>
Item 1. Condensed Consolidated Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . 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
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Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
2
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COHU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1997 DECEMBER 31, 1996
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(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,659 $ 24,660
Short-term investments 42,673 28,326
Accounts receivable, less allowance
for doubtful accounts 25,787 19,170
Inventories, at lower of average cost or market:
Finished goods 2,873 2,395
Work in process 8,590 6,012
Raw materials 7,386 7,175
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18,849 15,582
Deferred income taxes 9,681 9,681
Prepaid expenses 1,239 1,166
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Total current assets 107,888 98,585
Property, plant and equipment, at cost:
Land and land improvements 2,114 2,114
Buildings and building improvements 12,081 11,932
Machinery and equipment 14,484 14,069
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28,679 28,115
Less accumulated depreciation and amortization 11,641 11,304
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Net property, plant and equipment 17,038 16,811
Goodwill, net 2,430 2,469
Other assets 101 61
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$ 127,457 $ 117,926
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,243 $ 4,464
Income taxes payable 4,387 1,552
Other accrued liabilities 12,970 14,566
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Total current liabilities 25,600 20,582
Accrued retiree medical benefits 937 916
Deferred income taxes 156 156
Stockholders' equity:
Preferred stock - -
Common stock 9,385 9,341
Paid in excess of par 6,160 5,863
Retained earnings 85,219 81,068
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Total stockholders' equity 100,764 96,272
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$ 127,457 $ 117,926
========= =========
</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,
----------------------------
1997 1996
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<S> <C> <C>
Net sales $ 34,762 $ 50,232
Cost and expenses:
Cost of sales 19,908 27,348
Research and development 3,261 3,528
Selling, general and administrative 4,817 6,873
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Income from operations 6,776 12,483
Interest income 738 411
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Income before income taxes 7,514 12,894
Provision for income taxes 2,800 5,000
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Net income $ 4,714 $ 7,894
======== ========
Net income per share $ 0.48 $ 0.81
======== ========
Average common shares and equivalents 9,802 9,705
======== ========
</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,
---------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,714 $ 7,894
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 402 362
Purchase consideration to be paid in stock 58 414
Increase in accrued retiree medical benefits 21 22
Changes in assets and liabilities:
Accounts receivable (6,617) 147
Inventories (3,267) (2,649)
Prepaid expenses (73) (31)
Accounts payable 3,779 4,806
Income taxes payable 2,835 (347)
Other accrued liabilities (1,654) (2,280)
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Net cash provided from operating activities 198 8,338
Cash flows from investing activities:
Purchases of short-term investments (14,347) -
Purchases of property, plant, equipment and other assets (630) (2,474)
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Net cash used for investing activities (14,977) (2,474)
Cash flows from financing activities:
Issuance of stock, net 341 389
Cash dividends (563) (461)
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Net cash used for financing activities (222) (72)
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Net increase (decrease) in cash and cash equivalents (15,001) 5,792
Cash and cash equivalents at beginning of period 24,660 28,874
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Cash and cash equivalents at end of period $ 9,659 $ 34,666
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 2 $ 5,335
</TABLE>
See accompanying notes.
5
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COHU, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
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, 1997
are not necessarily indicative of the operating results for the entire
year or any future period. These financial statements should be read in
conjunction with the consolidated financial statements incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
2 - Earnings per share (EPS) 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.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, Earnings per Share,
which supersedes APB Opinion No. 15. Statement No. 128 replaces the
presentation of primary EPS with "Basic EPS" which includes no dilution
and is based on weighted-average common shares outstanding for the
period. Companies with complex capital structures, including Cohu, Inc.,
will also be required to present "Diluted EPS" that reflects the
potential dilution of securities like employee stock options. Statement
No. 128 is effective for financial statements issued for periods ending
after December 15, 1997. The Company has not yet determined what the
impact of Statement No. 128 will be on the calculation of earnings per
share.
3 - On February 28, 1997 the Board of Directors of the Company adopted the
Cohu, Inc. 1997 Employee Stock Purchase Plan. The Plan provides for the
issuance of a maximum of 300,000 shares of the Company's Common Stock to
employees and is subject to stockholder approval.
6
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MARCH 31, 1997
RESULTS OF OPERATIONS
Net sales decreased 31% to $34.8 million in the first quarter of 1997 compared
to net sales of $50.2 million in 1996. Sales of semiconductor test handling
equipment by the Company's Delta Design and Daymarc subsidiaries decreased 37%
in the first quarter of 1997 and accounted for 75% of consolidated net sales
versus 82% in the first quarter of 1996. Sales of television cameras and other
equipment decreased 3% and accounted for 25% of consolidated net sales in the
first quarter of 1997 versus 18% in 1996. Gross margin as a percentage of net
sales in the first quarter of 1997 was approximately 43% versus 46% in 1996.
The decrease in margin was primarily due to the decline in margins within the
semiconductor equipment segment largely attributable to reduced business
volume. Research and development expense as a percentage of net sales was 9%
in the first quarter of 1997 compared to 7% in 1996 and reflected the Company's
continued investment in new product development in the semiconductor equipment
business. Selling, general and administrative expense as a percentage of net
sales was 14% in both the 1997 and 1996 periods. Interest income in the
quarter increased 80% to $.7 million due to the significant increase in
short-term investments. The provision for income taxes expressed as a
percentage of pre-tax income was 37% in the first quarter of 1997 versus 38%
for the year ended December 31, 1996. For the first fiscal quarter, as a
result of the factors set forth above, net income decreased 40% to $4.7 million
in 1997 from $7.9 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows generated from operating activities in the first
quarter of 1997 totaled $.2 million. The major components of cash flows from
operating activities were net income of $4.7 million and increases in accounts
payable of $3.8 million and income taxes payable of $2.8 million offset by
increases in accounts receivable of $6.6 million and inventories of $3.3
million. Net cash used for investing activities was $15 million and was used
for the purchase of short-term investments ($14.3 million) and property, plant
and equipment. Net cash used for financing activities was $.2 million. Cash
used for financing activities included $.6 million for the payment of dividends
offset by $.3 million received from the issuance of stock upon the exercise of
stock options. The Company had $5 million available under its bank line of
credit and working capital of $82.3 million at March 31, 1997. It is
anticipated that present working capital and available borrowings under the
line of credit will be sufficient to meet the Company's 1997 operating
requirements and the remaining anticipated capital expenditures for 1997 of
approximately $4 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.
Historically, the semiconductor industry has been highly cyclical with
recurring periods of oversupply, which often have had a significant effect on
the semiconductor industry's demand
7
<PAGE> 8
COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS RISKS AND UNCERTAINTIES (cont.)
for capital equipment, including equipment of the type manufactured and
marketed by the Company. The Company believes that the markets for newer
generations of semiconductors may also be subject to similar cycles and
downturns such as that experienced in 1996. Reductions in capital equipment
investment by semiconductor manufacturers will adversely affect the Company's
results of operations.
As is common in the semiconductor equipment industry, the Company relies on a
limited number of customers for a substantial percentage of its net sales. The
loss of or a significant reduction in orders by these customers would adversely
impact the Company's results of operations. Furthermore, the concentration of
the Company's revenues in a limited number of large customers may cause
significant fluctuations in the Company's future annual and quarterly operating
results.
The semiconductor equipment industry is intensely competitive and the Company
faces substantial competition from numerous companies throughout the world.
Some of these competitors have substantially greater financial, engineering,
manufacturing and customer support capabilities than the Company. In addition,
there are smaller, emerging semiconductor equipment companies that provide or
may provide innovative technology incorporated in products that may compete
favorably against those of the Company. The Company expects its competitors to
continue to improve the design and performance of their current products and to
introduce new products with improved performance capabilities. 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 the Company's competitive position and reduced sales
of existing products.
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 with improved
performance capabilities. 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. There can be no assurance that future technologies, processes and
product developments will not render the Company's current product offerings
obsolete or that the Company will be able to develop and introduce new products
or enhancements to its existing products in a timely manner to satisfy customer
needs or achieve market acceptance.
Due to these and other factors, historical results may not 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 risks and uncertainties listed
from time to time in the Company's filings with the Securities and Exchange
Commission, including but not limited to the 1996 Annual Report on Form 10-K,
that could cause actual results to differ materially from those projected or
forecasted. The Company undertakes no obligation to update the information,
including the forward-looking statements, in this Form 10-Q.
8
<PAGE> 9
Part II OTHER INFORMATION
Item 2. Changes in Securities
(c) During the quarter ended March 31, 1997, the Company issued
28,687 shares of common stock to Nicholas J. Cedrone. These
shares were issued pursuant to the exemption provided by Section
4(2) of the Securities Act of 1933, in partial consideration for
the acquisition of Daymarc Corporation in June 1994, with the
amount of shares being determined by the operating results of
Daymarc during 1996.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27.1 - Financial Data Schedule
(b) Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the quarter ended March 31, 1997.
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.
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(Registrant)
Date: April 30, 1997 /s/ Charles A. Schwan
------------------ -------------------------------------------------
Charles A. Schwan
President & Chief Executive Officer
Date: April 30, 1997 /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 1996 AND
1997 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-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,659
<SECURITIES> 42,673
<RECEIVABLES> 25,787
<ALLOWANCES> 0
<INVENTORY> 18,849
<CURRENT-ASSETS> 107,888
<PP&E> 28,679
<DEPRECIATION> 11,641
<TOTAL-ASSETS> 127,457
<CURRENT-LIABILITIES> 25,600
<BONDS> 0
0
0
<COMMON> 9,385
<OTHER-SE> 91,379
<TOTAL-LIABILITY-AND-EQUITY> 127,457
<SALES> 34,762
<TOTAL-REVENUES> 34,762
<CGS> 19,908
<TOTAL-COSTS> 19,908
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,514
<INCOME-TAX> 2,800
<INCOME-CONTINUING> 4,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,714
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.00
</TABLE>
