10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ √ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 26, 2016

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-04298

COHU, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-1934119
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12367 Crosthwaite Circle, Poway, California	92064-6817
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (858) 848-8100

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 ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐        Accelerated filer ☑        Non-accelerated filer ☐        Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐   No ☑

As of April 11, 2016 the Registrant had 26,588,665 shares of its $1.00 par value common stock outstanding.

COHU, INC.

INDEX

FORM 10-Q

MARCH 26, 2016

		Page Number
Part I	Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets March 26, 2016 (unaudited) and December 26, 2015	3
	Condensed Consolidated Statements of Operations (unaudited) Three Months Ended March 26, 2016 and March 28, 2015	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended March 26, 2016 and March 28, 2015	5
	Condensed Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 26, 2016 and March 28, 2015	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
Part II	Other Information
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

Item 1.

COHU, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	March 26,			December 26,
	2016			2015 *
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	104,945		$	115,370
Short-term investments		9,576			1,652
Accounts receivable, net		65,210			59,832
Inventories:
Raw materials and purchased parts		27,555			24,423
Work in process		22,476			20,124
Finished goods		4,613			6,801
		54,644			51,348
Other current assets		8,657			6,261
Total current assets		243,032			234,463
Property, plant and equipment, at cost:
Land and land improvements		4,297			4,607
Buildings and building improvements		8,041			8,971
Machinery and equipment		33,272			31,888
		45,610			45,466
Less accumulated depreciation and amortization		(26,962	)		(26,466	)
Net property, plant and equipment		18,648			19,000
Goodwill		60,814			60,264
Intangible assets, net		23,780			25,297
Other assets		6,540			6,322
	$	352,814		$	345,346
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	33,170		$	27,290
Accrued compensation and benefits		14,593			15,628
Accrued warranty		4,246			3,785
Deferred profit		5,564			3,730
Income taxes payable		4,412			4,195
Other accrued liabilities		10,101			8,563
Total current liabilities		72,086			63,191
Accrued retirement benefits		15,601			15,397
Noncurrent deferred gain on sale of facility		12,781			13,142
Deferred income taxes		6,459			6,954
Noncurrent income tax liabilities		7,193			6,761
Other accrued liabilities		1,728			1,764
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value; 1,000 shares authorized, none issued		-			-
Common stock, $1 par value; 60,000 shares authorized, 26,586 shares issued and outstanding in 2016 and 26,240 shares in 2015		26,586			26,240
Paid-in capital		104,998			105,516
Retained earnings		124,666			128,153
Accumulated other comprehensive loss		(19,284	)		(21,772	)
Total stockholders' equity		236,966			238,137
	$	352,814		$	345,346

* Derived from December 26, 2015 audited financial statements

The accompanying notes are an integral part of these statements.

3

COHU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

	Three Months Ended
	March 26,			March 28,
	2016			2015
Net sales	$	65,778		$	63,447
Cost and expenses:
Cost of sales		46,337			43,302
Research and development		7,803			8,565
Selling, general and administrative		13,370			12,272
		67,510			64,139
Loss from operations		(1,732	)		(692	)
Interest and other, net		43			6
Loss from continuing operations before taxes		(1,689	)		(686	)
Income tax provision		222			1,034
Loss from continuing operations		(1,911	)		(1,720	)
Loss from discontinued operations		-			(1,020	)
Net loss	$	(1,911	)	$	(2,740	)
Loss per share:
Basic:
Loss from continuing operations	$	(0.07	)	$	(0.07	)
Loss from discontinued operations		-			(0.04	)
Net loss	$	(0.07	)	$	(0.11	)
Diluted:
Loss from continuing operations	$	(0.07	)	$	(0.07	)
Loss from discontinued operations		-			(0.04	)
Net loss	$	(0.07	)	$	(0.11	)
Weighted average shares used in computing loss per share:
Basic		26,317			25,751
Diluted		26,317			25,751
Cash dividends declared per share	$	0.06		$	0.06

The accompanying notes are an integral part of these statements.

4

COHU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

	Three Months Ended
	March 26,			March 28,
	2016			2015
Net loss	$	(1,911	)	$	(2,740	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		2,505			(8,343	)
Adjustments related to postretirement benefits		(18	)		(55	)
Change in unrealized gain/loss on investments		1			-
Other comprehensive income (loss), net of tax		2,488			(8,398	)
Comprehensive income (loss)	$	577		$	(11,138	)

The accompanying notes are an integral part of these statements.

5

COHU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Three Months Ended
	March 26,			March 28,
	2016			2015
Cash flows from operating activities:
Net loss	$	(1,911	)	$	(2,740	)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Loss on disposal of assets		32			-
Operating cash flows of discontinued operations		-			(463	)
Depreciation and amortization		2,669			2,910
Share-based compensation expense		1,957			1,698
Deferred income taxes		(535	)		(781	)
Asset impairment charge		-			273
Changes in other accrued liabilities		28			297
Changes in other assets		(26	)		(78	)
Changes in current assets and liabilities, excluding effects from divestitures:
Accounts receivable		(5,258	)		7,685
Inventories		(2,518	)		(5,474	)
Other current assets		(1,856	)		577
Accounts payable		5,053			5,578
Deferred profit		1,817			502
Income taxes payable, including excess stock option exercise benefit		487			505
Accrued compensation, warranty and other liabilities		(1,398	)		(6,274	)
Net cash provided by (used in) operating activities		(1,459	)		4,215
Cash flows from investing activities, excluding effects from divestitures:
Purchases of short-term investments		(8,891	)		-
Sales and maturities of short-term investments		967			45
Purchases of property, plant and equipment		(895	)		(1,056	)
Cash received from sale of assets		813			-
Investing cash flows of discontinued operations		-			(15	)
Net cash used in investing activities		(8,006	)		(1,026	)
Cash flows from financing activities:
Cash dividends paid		(1,573	)		(1,539	)
Repurchases of common stock		(395	)		(1,230	)
Net cash used in financing activities		(1,968	)		(2,769	)
Effect of exchange rate changes on cash and cash equivalents		1,008			(2,696	)
Net decrease in cash and cash equivalents		(10,425	)		(2,276	)
Cash and cash equivalents at beginning of period		115,370			70,885
Cash and cash equivalents at end of period	$	104,945		$	68,609
Supplemental disclosure of cash flow information:
Cash paid (refunded) for income taxes	$	248		$	(703	)
Inventory capitalized as property, plant and equipment	$	115		$	97
Dividends declared but not yet paid	$	1,575		$	1,543

The accompanying notes are an integral part of these statements.

6

Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

1.           Summary of Significant Accounting Policies

Basis of Presentation

Our fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. The condensed consolidated balance sheet at December 26, 2015 has been derived from our audited financial statements at that date. The interim condensed consolidated financial statements as of March 26, 2016 (also referred to as “the first quarter of fiscal 2016” and “the first three months of fiscal 2016”) and March 28, 2015 (also referred to as “the first quarter of fiscal 2015” and “the first three months of fiscal 2015”) are unaudited. However, in management’s opinion, these financial statements reflect all adjustments (consisting only of normal, recurring items) necessary to provide a fair presentation of our financial position, results of operations and cash flows for the periods presented. The first quarter of fiscal 2016 and 2015 were each comprised of 13 weeks.

Our interim results are not necessarily indicative of the results that should be expected for the full year. For a better understanding of Cohu, Inc. and our financial statements, we recommend reading these interim condensed consolidated financial statements in conjunction with our audited financial statements for the year ended December 26, 2015, which are included in our 2015 Annual Report on Form 10-K, filed with the U. S. Securities and Exchange Commission (“SEC”). In the following notes to our interim condensed consolidated financial statements, Cohu, Inc. is referred to as “Cohu”, “we”, “our” and “us”.

Discontinued Operations

On June 10, 2015 we sold our microwave communications equipment segment, Broadcast Microwave Services, Inc. (“BMS”). The operating results of BMS are being presented as discontinued operations and all prior period amounts have been reclassified accordingly. See Note 2, “Discontinued Operations” for additional information. Unless otherwise indicated, all amounts herein relate to continuing operations.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant credit risk consist principally of cash equivalents, short-term investments and trade accounts receivable. We invest in a variety of financial instruments and, by policy, limit the amount of credit exposure with any one issuer.

Trade accounts receivable are presented net of allowance for doubtful accounts of $0.1 million at both March 26, 2016 and December 26, 2015, respectively. Our customers include semiconductor manufacturers and semiconductor test subcontractors and other customers located throughout many areas of the world. While we believe that our allowance for doubtful accounts is adequate and represents our best estimate at March 26, 2016, we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates regarding collectability.

Segment Information

We applied the provisions of Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, (“ASC 280”), which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, we have determined that our identified operating segments qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report in one segment, semiconductor equipment and the financial information disclosed herein materially represents all of the financial information related to our semiconductor equipment segment.

Goodwill, Other Intangible Assets and Long-lived Assets

We evaluate goodwill for impairment annually on October 1st of each year and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. As a part of our annual assessment process for 2015 we performed a qualitative assessment to determine whether current events or changes in circumstances lead us to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of our reporting unit is less than its carrying amount. Under this approach, absent a qualitative determination that the fair value of our reporting unit is more likely than not to be less than its carrying value, we do not need to proceed to the traditional estimated fair value test for that asset, which would involve comparing the book value of net assets to the fair value of our identified reporting unit.

7

Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

As of October 1, 2015, the results of our qualitative assessment indicated there was no impairment.

Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference between the assets carrying amount and estimated fair value.

Foreign Currency Translation

Assets and liabilities of our wholly owned foreign subsidiaries that use the U.S. Dollar as their functional currency are re-measured using exchange rates in effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and equipment, which are re-measured using historical exchange rates. Revenues and costs are re-measured using average exchange rates for the period, except for costs related to those balance sheet items that are re-measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized as incurred. Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue and expenses are translated using the average exchange rate for the period. During the three months ended March 26, 2016 we recognized foreign exchange losses of $0.5 million in our consolidated statement of operations. In the three months ended March 28, 2015 we recorded gains of $0.2 million. Cumulative translation adjustments resulting from the translation of the financial statements are included as a separate component of stockholders’ equity.

Share-Based Compensation

We measure and recognize all share-based compensation under the fair value method. Our estimate of share-based compensation expense requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), future forfeitures and related tax effects. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. Although we believe the assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could materially impact our reported financial results.

Reported share-based compensation is classified, in the condensed consolidated interim financial statements, as follows (in thousands):

	Three Months Ended
	March 26,			March 28,
	2016			2015
Cost of sales	$	(66	)	$	115
Research and development		416			331
Selling, general and administrative		1,607			1,252
Total share-based compensation		1,957			1,698
Income tax benefit		(40	)		(44	)
Total share-based compensation, net	$	1,917		$	1,654

Income (Loss) Per Share

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of outstanding restricted stock units and issuance of stock under our employee stock purchase plan using the treasury stock method. In loss periods, potentially dilutive securities are excluded from the per share computations due to their anti-dilutive effect.For purposes of computing diluted income per share, stock options with exercise prices that exceed the average fair market value of our common stock for the period are excluded.

8

Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

The following table reconciles the denominators used in computing basic and diluted income (loss) per share (in thousands):

	Three Months Ended
	March 26,		March 28,
	2016		2015
Weighted average common shares		26,317		25,751
Effect of dilutive stock options		-		-
		26,317		25,751

Revenue Recognition

Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant. We recognize revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment. In circumstances where either title or risk of loss pass upon destination or acceptance, we defer revenue recognition until such events occur.

Revenue for established products that have previously satisfied a customer’s acceptance requirements and provide for full payment tied to shipment is generally recognized upon shipment and passage of title. In certain instances, customer payment terms may provide that a minority portion (e.g. up to 20%) of the equipment purchase price be paid only upon customer acceptance. In those situations, the majority portion (e.g. 80%) of revenue where the contingent payment is tied to shipment and the entire product cost of sale are recognized upon shipment and passage of title and the minority portion of the purchase price related to customer acceptance is deferred and recognized upon receipt of customer acceptance. In cases where a prior history of customer acceptance cannot be demonstrated or from sales where customer payment dates are not determinable and in the case of new products, revenue is deferred until customer acceptance has been received. Our post-shipment obligations typically include installation and standard warranties. The estimated fair value of installation related revenue is recognized in the period the installation is performed. Service revenue is recognized ratably over the period of the related contract or upon completion of the services if they are short-term in nature. Spares and kit revenue is generally recognized upon shipment.

Certain of our equipment sales are accounted for as multiple-element arrangements. A multiple-element arrangement is a transaction which may involve the delivery or performance of multiple products, services, or rights to use assets, and performance may occur at different points in time or over different periods of time. For arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment.

On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped. At March 26, 2016, we had deferred revenue totaling approximately $7.3 million and deferred profit of $5.6 million. At December 26, 2015, we had deferred revenue totaling approximately $5.0 million and deferred profit of $3.7 million. The periodic increase is primarily a result of deferrals of revenue associated with product shipments made to our customers in accordance with our revenue recognition policy.

9

Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

A small number of customers historically have been responsible for a significant portion of our net sales. Significant customer concentration information is as follows:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Customers individually accounting for more than 10% of net sales		2			3
Percentage of net sales		32	%		47	%

Comprehensive Loss

Our accumulated other comprehensive loss balance totaled approximately $19.3 million and $21.8 million at March 26, 2016 and December 26, 2015, respectively, and was attributed to all non-owner changes in stockholders’ equity and consists of, on an after-tax basis where applicable, foreign currency adjustments resulting from the translation of certain of our subsidiary accounts where the functional currency is not the U.S. Dollar and adjustments related to postretirement benefits. Reclassification adjustments from accumulated other comprehensive income during the three months of fiscal 2016 and 2015 were not significant.

Retiree Medical Benefits

We provide post-retirement health benefits to certain executives and directors under a noncontributory plan. The net periodic benefit cost incurred during the three months of fiscal 2016 and 2015 was not significant.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements – In the first quarter of 2016 we adopted Accounting Standards Update (“ASU”) No. 2015-16 “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (ASU 2015-16). ASU 2015-16 requires an entity to: recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date; and present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The adoption of this authoritative guidance did not impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements – On March 31, 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, “Compensation – Stock Compensation” (Topic 718). The FASB issued this update to improve the accounting for employee share-based paymentsand affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to record most leases on their balance sheets. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expense related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. The standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. We are currently evaluating the impact of this new standard on our financial reporting, but recognizing the lease liabilities and related right-of-use assets will impact our balance sheet.

10

Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities”, which amends the guidance on the classification and measurement of financial instruments. The changes primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, equity investments in unconsolidated entities that are not accounted for under the equity method will generally be measured at fair value through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The guidance is effective for interim and annual periods beginning after December 15, 2017. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory”. ASU 2015-11 simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, in scope inventory should be measured at the lower of cost and net realizable value. The standard is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. We are evaluating the impact of the new standard on our consolidated financial statements and our timing for adoption.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This standard sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about an entity’s ability to continue as a going concern, and if so, to provide related footnote disclosures. The standard is effective for interim and annual periods beginning after December 15, 2016. The Company does not believe that the adoption of this guidance will have any material impact on its financial position or results of operations.

In May 2014, the FASB issued new guidance on revenue from contracts with customers. The amended guidance outlines a single comprehensive revenue model for entities to use in accounting for revenue arising from contracts with customers. The guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. This guidance is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016. In April 2015, the FASB agreed to propose a one-year deferral of the revenue recognition standard's effective date for all entities, which would change the effectiveness to annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently evaluating the impact of the new guidance on our financial statements and have not yet determined which transition method we will utilize upon adoption or the potential impact of this new guidance on our consolidated financial statements.

2. Discontinued Operations

In June 2015, we sold all of the outstanding stock of BMS for $4.9 million in cash and up to $2.5 million of contingent cash consideration. Our decision to sell this non-core business resulted from management’s determination that it was no longer a strategic fit within our organization.

As part of the divestiture of BMS at June 27, 2015 we recorded a $0.2 million, long-term contingent consideration receivable that has been classified as Level 3 in the fair value hierarchy. See Note 4, “Financial Instruments Measured at Fair Value” for additional information on the three-tier fair value hierarchy. The contingent consideration represents the estimated fair value of future payments we are due based on BMS achieving annual revenue targets in certain years as specified in the sale agreement. We determined the initial value of the contingent consideration by using the Monte Carlo simulation model with subsequent changes to the fair value of the contingent consideration recognized in discontinued operations. The fair value of the receivable totaled $0.5 million at March 26, 2016.

In connection with the disposal of BMS we incurred divestiture-related costs in the first quarter of 2015 that would not have been incurred otherwise. These costs consist of legal and investment banking advisory services, success based compensation arrangements and certain other items that are incremental to normal operating charges and were expensed as incurred. These costs are included in the loss from sale amount presented below.

11

Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

Operating results of our discontinued segment are summarized as follows (in thousands):

	Three Months Ended
	March 26,		March 28,
	2016		2015
Net sales	$	-	$	4,621
Operating loss before income taxes	$	-	$	(914	)
Loss from sale of BMS		-		(100	)
Loss before taxes		-		(1,014	)
Income tax provision		-		6
Loss, net of tax	$	-	$	(1,020	)

3.     Goodwill and Other Purchased Intangible Assets

Changes in the carrying value of goodwill during the year ended December 26, 2015 and the three-month period ended March 26, 2016 were as follows (in thousands):

	Goodwill
Balance, December 27, 2014	$	63,132
Impact of currency exchange		(2,868	)
Balance, December 26, 2015		60,264
Impact of currency exchange		550
Balance, March 26, 2016	$	60,814

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

	March 26, 2016						December 26, 2015
	Gross Carrying		Accumulated		Remaining		Gross Carrying		Accumulated
	Amount		Amortization		Useful Life (years)		Amount		Amortization
Rasco technology	$	27,371	$	25,018		0.7	$	26,904	$	23,776
Ismeca technology		27,294		11,269		4.8		27,043		10,329
Trade names		5,614		212		14.5		5,547		92
	$	60,279	$	36,499			$	59,494	$	34,197

Amortization expense related to intangible assets in both the first quarter of fiscal 2016 and 2015 was $1.8 million. Changes in the carrying values of these intangible assets are a result of the impact of fluctuations in currency exchange rates.

4.     Financial Instruments Measured at Fair Value

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities. We do not hold investment securities for trading purposes. All short-term investments are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

Gains and losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Factors that could indicate an impairment exists include, but are not limited to: earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented were not significant.

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Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

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

	March 26, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Corporate debt securities	$	8,890	$	1	$	-	$	8,891
Foreign government security		661		-		-		661
Bank certificates of deposit		24		-		-		24
	$	9,575	$	1	$	-	$	9,576

	December 26, 2015
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Foreign government security	$	650	$	-	$	-	$	650
Bank certificates of deposit		1,002		-		-		1,002
	$	1,652	$	-	$	-	$	1,652

Effective maturities of short-term investments are as follows (in thousands):

	March 26, 2016				December 26, 2015
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	9,575	$	9,576	$	1,450	$	1,450
Due after one year through three years		-		-		202		202
	$	9,575	$	9,576	$	1,652	$	1,652

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information, and they are included in Level 2.

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

	Fair value measurements at March 26, 2016 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	75,674	$	-	$	-	$	75,674
Corporate debt securities		-		16,890		-		16,890
Money market funds		-		21,272		-		21,272
Bank certificates of deposit		-		24		-		24
Foreign government security		-		661		-		661
	$	75,674	$	38,847	$	-	$	114,521

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Cohu, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

	Fair value measurements at December 26, 2015 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	73,746	$	-	$	-	$	73,746
Foreign government security		-		650		-		650
Money market funds		-		41,624		-		41,624
Bank certificates of deposit		-		1,002		-		1,002
	$	73,746	$	43,276	$	-	$	117,022

5.     Employee Stock Benefit Plans

Our 2005 Equity Incentive Plan (the “2005 Plan”) is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. Awards that may be granted under the program include, but are not limited to, non-qualified and incentive stock options, restricted stock units, and performance-based stock units. We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of restricted stock units, and performance-based stock units with newly issued common shares. At March 26, 2016, there were 1,698,099 shares available for future equity grants under the 2005 Equity Incentive Plan.

Stock Options

Stock options may be granted to employees, consultants and directors to purchase a fixed number of shares of our common stock. The exercise prices of options granted are at least equal to the fair market value of our common stock on the dates of grant and options generally vest and become exercisable after one year or in four annual increments beginning one year after the date of grant. Stock options granted under the program have a maximum contractual term of ten years.

At March 26, 2016, we had 1,965,176 stock options outstanding. These options had a weighted-average exercise price of $11.25 per share, an aggregate intrinsic value of approximately $3.2 million and the weighted average remaining contractual term was approximately 4.2 years.

In the first three months of fiscal 2016, we did not issue any stock options and at March 26, 2016, we had 1,839,166 stock options outstanding that were exercisable. These options had a weighted-average exercise price of $11.35 per share, an aggregate intrinsic value of $3.0 million and the weighted average remaining contractual term was approximately 4.0 years.

Restricted Stock Units

We issue restricted stock units to certain employees, consultants and outside directors. Restricted stock units vest over either a one-year or a four-year period from the date of grant. Prior to vesting, restricted stock units do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock units are not considered issued and outstanding. New shares of our common stock will be issued on the date the restricted stock units vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding.

In the first three months of fiscal 2016, we awarded restricted stock units covering 391,522 shares of our common stock to employees and at March 26, 2016, we had 1,108,652 restricted stock units outstanding with an aggregate intrinsic value of approximately $12.7 million and the weighted average remaining vesting period was approximately 2.8 years.

Equity-Based Performance Stock Units

In 2012, we began granting equity-based performance units covering shares of our common stock to certain employees. The number of shares of stock ultimately issued will depend upon the extent to which certain financial performance goals set by our Board of Directors are met during the one-year award measurement period. Based upon the level of achievement of performance goals the number of shares we ultimately issue can range from 0% up to 150% of the number of shares under each grant which vest over 3 years from the date of initial grant. In 2014, we began awarding equity-based performance stock units to senior executives with vesting that is contingent on the level of achievement of certain performance goals, market return and continued service (“market-based PSUs”) and in 2015 and 2016, the market-based PSUs granted are only subject to certain adjustments resulting from performance of Cohu’s Relative Total Shareholder Return (“TSR”) to a selected peer group over a two- or three-year measurement period following the date of grant, respectively. The total number of shares earned can range from 20% up to 200% based on the percentage by which our TSR exceeds or falls below the selected peer group. Market-based PSUs granted in 2015 earned vest at the rate of 50% on the second and third anniversary of their grant. Market-based PSUs granted in 2016 earned vest 100% on the third anniversary of their grant. We estimated the fair value of market-based PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized ratably over the measurement period of each vesting tranche based on our current assessment of achievement of the performance goals. New shares of our common stock will be issued on the date the equity-based performance units vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number outstanding.

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Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

In the first three months of fiscal 2016, we awarded 197,731 market-based performance stock units to senior executives, and at March 26, 2016, we had 379,153 PSUs and market based PSUs outstanding with an aggregate intrinsic value of approximately $4.4 million and the weighted average remaining vesting period was approximately 1.9 years.

Employee Stock Purchase Plan (ESPP)

The Cohu, Inc. 1997 Employee Stock Purchase Plan (“the Plan”) provides for the issuance of shares of our common stock. Under the Plan, eligible employees may purchase shares of Cohu common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Cohu common stock at the beginning or end of each 6-month purchase period, subject to certain limits. During the first quarter of fiscal 2016, no shares of our common stock were sold to our employees under the Plan leaving 811,063 shares available for future issuance.

6.     Income Taxes

Ordinarily, interim tax provisions are calculated using the estimated effective tax rate (“ETR”) expected to be applicable for the full fiscal year. However, when a reliable estimate of the annual ETR cannot be made, the actual ETR for the year-to-date period may be the best estimate of the annual ETR. For the three months ended March 26, 2016 and March 28, 2015, we used the actual year-to-date ETR in computing our tax provision, as a reliable estimate of the annual ETR cannot be made, since relatively small changes in our projected income produce a significant variation in our ETR. The actual year-to-date ETR on loss from continuing operations for the three months ended March 26, 2016 and March 28, 2015, was (13.1)% and (150.7)%, respectively. The tax provision on loss from continuing operations in 2016 and 2015 differs from the U.S. federal statutory rate primarily due to the lack of a benefit on our domestic losses as a result of our valuation allowance on deferred tax assets, foreign income taxed at lower rates, changes in our deferred tax asset valuation allowance, state taxes and interest related to unrecognized tax benefits.

Other than for foreign currency exchange rate changes, there was no material change to our unrecognized tax benefits and related accrued interest and penalties during the three month periods ended March 26, 2016 and March 28, 2015.

7. Contingencies

From time-to-time we are involved in various legal proceedings, examinations by various tax authorities and claims that have arisen in the ordinary course of our business. The outcome of any litigation is inherently uncertain. While there can be no assurance, we do not believe at the present time that the resolution of the matters described above will have a material adverse effect on our assets, financial position or results of operations.

8. Guarantees and Other Obligations

Product Warranty

Our products are generally sold with warranty periods that range from 12 to 36 months following sale or acceptance. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical and projected experience by product and configuration.

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Notes to Unaudited Condensed Consolidated Financial Statements

March 26, 2016

Changes in accrued warranty were as follows (in thousands):

	Three Months Ended
	March 26,			March 28,
	2016			2015
Balance at beginning of period	$	4,886		$	5,848
Warranty expense accruals		1,820			1,267
Warranty payments		(1,488	)		(1,764	)
Balance at end of period	$	5,218		$	5,351

Accrued warranty amounts expected to be incurred after one year are included in noncurrent other accrued liabilities in the condensed consolidated balance sheet. These amounts total $1.0 million at March 26, 2016 and $1.1 million at December 26, 2015. 

Standby Letters of Credit

During the ordinary course of business, we provide standby letters of credit instruments to certain parties as required. As of March 26, 2016, the maximum potential amount of future payments that Cohu could be required to make under these standby letters of credit was $26,000. We have not recorded any liability in connection with these guarantee arrangements beyond that required to appropriately account for the underlying transaction being guaranteed. We do not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these arrangements.

Lines of Credit

One of our wholly owned subsidiaries has two available lines of credit which provide it with borrowings of up to a total of 2.5 million Swiss Francs. At March 26, 2016 and December 26, 2015 no amounts were outstanding under the lines of credit.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

March 26, 2016

Item. 2  Management's Discussion and Analysis of Financial Condition and Results of Operations

This Form 10-Q contains certain forward-looking statements including expectations of market conditions, challenges and plans, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the Safe Harbor provisions created by that statute. Such forward-looking statements are based on management’s current expectations and beliefs, including estimates and projections about our business and include, but are not limited to, statements concerning financial position, business strategy, and plans or objectives for future operations. Forward-looking statements are not guarantees of future performance, and are subject to certain risks, uncertainties, and assumptions that are difficult to predict and may cause actual results to differ materially from management’s current expectations. Such risks and uncertainties include those set forth in this Quarterly Report on Form 10-Q and our 2015 Annual Report on Form 10-K under the heading “Item 1A. Risk Factors”. The forward-looking statements in this report speak only as of the time they are made, and do not necessarily reflect management’s outlook at any other point in time. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or for any other reason, however, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the SEC after the date of this Quarterly Report.

OVERVIEW

Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electro mechanical system (MEMS) test modules, test contactors and thermal sub-systems used by global semiconductor manufacturers and test subcontractors. Our business is significantly dependent on capital expenditures by semiconductor manufacturers and test subcontractors, which in turn is dependent on the current and anticipated market demand for semiconductors that is subject to cyclical trends. We expect that the semiconductor equipment industry will continue to be cyclical and volatile in part because consumer electronics, the principal end market for integrated circuits, is a highly dynamic industry and demand has traditionally fluctuated.

Orders for semiconductor test and assembly equipment as reported by Semiconductor Equipment and Materials International (SEMI) increased sequentially each month from November 2015 through January 2016 until reaching a plateau and decreasing in both February and March of 2016. Despite recent weakness in the broader market, our operating results for the first quarter of fiscal 2016 were better than expected and benefitted from demand for equipment for testing devices used in mobile, automotive and computing applications. We monitor our customers’ test floors and equipment utilization increased sequentially a couple of points to 81%. Looking ahead, we see momentum in the automotive and mobile markets and are optimistic about the long-term prospects for the semiconductor equipment industry due to the increasing technological functionality of mobile devices, growing integrated circuit and LED content in automobiles and consumer products, and expanding applications in industrial. We are focused on growing our market share in the mobility, automotive and solid state markets and expanding into the test contacting and wafer level package test markets.  

Application of Critical Accounting Estimates and Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience, forecasts and on various other assumptions that are believed to be reasonable under the circumstances, however actual results may differ from those estimates under different assumptions or conditions. The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Our critical accounting estimates that we believe are the most important to an investor’s understanding of our financial results and condition and require complex management judgment include:

● revenue recognition, including the deferral of revenue on sales to customers, which impacts our results of operations;

● estimation of valuation allowances and accrued liabilities, specifically product warranty, inventory reserves and allowance for bad debts, which impact gross margin or operating expenses;

● the recognition and measurement of current and deferred income tax assets and liabilities, unrecognized tax benefits and the valuation allowance on deferred tax assets, which impact our tax provision;

● the assessment of recoverability of long-lived assets including goodwill and other intangible assets, which primarily impacts gross margin or operating expenses if we are required to record impairments of assets or accelerate their depreciation or amortization; and

● the valuation and recognition of share-based compensation, which impacts gross margin, research and development expense, and selling, general and administrative expense.

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Cohu, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

March 26, 2016

Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other policies that we consider key accounting policies; however, these policies typically do not require us to make estimates or judgments that are difficult or subjective.

Revenue Recognition: We generally recognize revenue upon shipment and title passage for established products (i.e., those that have previously satisfied customer acceptance requirements) that provide for full payment tied to shipment. Revenue for products that have not previously satisfied customer acceptance requirements or from sales where customer payment dates are not determinable is recognized upon customer acceptance. In certain instances, customer payment terms may provide that a minority portion (e.g. up to 20%) of the equipment purchase price be paid only upon customer acceptance. In those situations, the majority portion (e.g. 80%) of revenue where the contingent payment is tied to shipment and the entire product cost of sale are recognized upon shipment and passage of title and the minority portion of the purchase price related to customer acceptance is deferred and recognized upon receipt of customer acceptance. For arrangements containing multiple elements the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment. On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet, representing the difference between the receivable recorded and the inventory shipped.

Accounts Receivable: We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventory: The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. The determination of obsolete or excess inventory requires us to estimate the future demand for our products. The demand forecast is a direct input in the development of our short-term manufacturing plans. We record valuation reserves on our inventory for estimated excess and obsolete inventory and lower of cost or market concerns equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future product demand, market conditions and product selling prices. If future product demand, market conditions or product selling prices are less than those projected by management or if continued modifications to products are required to meet specifications or other customer requirements, increases to inventory reserves may be required which would have a negative impact on our gross margin.

Income Taxes: We estimate our liability for income taxes based on the various jurisdictions where we conduct business. This requires us to estimate our (i) current taxes; (ii) temporary differences that result from differing treatment of certain items for tax and accounting purposes and (iii) unrecognized tax benefits. Temporary differences result in deferred tax assets and liabilities that are reflected in the consolidated balance sheet. The deferred tax assets are analyzed and reduced by a valuation allowance by jurisdiction, if, based upon all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Establishing, reducing or increasing a valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the statement of operations. We must make significant judgments to determine the provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits and any valuation allowance to be recorded against deferred tax assets. Our gross deferred tax asset balance as of March 26, 2016 was approximately $46.8 million, with a valuation allowance of approximately $43.9 million. Our deferred tax assets consist primarily of reserves and accruals that are not yet deductible for tax and tax credit and net operating loss carryforwards.

Segment Information: We applied the provisions of ASC Topic 280, Segment Reporting, (“ASC 280”), which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, we have determined that our identified operating segments qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report in one segment, semiconductor equipment.

Goodwill, Other Intangible Assets and Long-lived Assets:We evaluate goodwill for impairment annually on October 1st of each year and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. As a part of our annual assessment process for 2015 we performed a qualitative assessment to determine whether current events or changes in circumstances lead us to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of our reporting unit is less than its carrying amount. Under this approach, absent a qualitative determination that the fair value of our reporting unit is more likely than not to be less than its carrying value, we do not need to proceed to the traditional estimated fair value test for that asset, which would involve comparing the book value of net assets to the fair value of our identified reporting unit.

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Cohu, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

March 26, 2016

As of October 1, 2015, the results of our qualitative assessment indicated there was no impairment.

Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference between the asset’s carrying amount and estimated fair value.

Warranty: We provide for the estimated costs of product warranties in the period sales are recognized. Our warranty obligation estimates are affected by historical product shipment levels, product performance and material and labor costs incurred in correcting product performance problems. Should product performance, material usage or labor repair costs differ from our estimates, revisions to the estimated warranty liability would be required.

Contingencies: We are subject to certain contingencies that arise in the ordinary course of our businesses which require us to assess the likelihood that future events will confirm the existence of a loss or an impairment of an asset. If a loss or asset impairment is probable and the amount of the loss or impairment is reasonably estimable, we accrue a charge to operations in the period such conditions become known.

Share-based Compensation: Share-based compensation expense related to stock options is recorded based on the fair value of the award on its grant date, which we estimate using the Black-Scholes valuation model. Share-based compensation expense related to restricted stock unit awards is calculated based on the market price of our common stock on the grant date, reduced by the present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock unit. Share-based compensation on performance stock units with market-based goals is calculated using a Monte Carlo simulation model on the date of the grant.

Recent Accounting Pronouncements

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 1, “Recent Accounting Pronouncements” in Part I, Item 1 of this Form 10-Q.

RESULTS OF OPERATIONS

In June 2015, we sold our mobile microwave communications equipment business. The operating results of this business are being presented as discontinued operations and all prior period amounts have been reclassified. Unless otherwise indicated the discussion below covers the comparative results from continuing operations.

The following table summarizes certain operating data as a percentage of net sales:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Net sales		100.0	%		100.0	%
Cost of sales		(70.4	)%		(68.2	)%
Gross margin		29.6	%		31.8	%
Research and development		(11.9	)%		(13.5	)%
Selling, general and administrative		(20.3	)%		(19.3	)%
Loss from operations		(2.6	)%		(1.0	)%

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Cohu, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

March 26, 2016

First Quarter of Fiscal 2016 Compared to First Quarter of Fiscal 2015

Net Sales

Our consolidated net sales increased 3.7% to $65.8 million in 2016, compared to net sales of $63.4 million in 2015. Global demand for back-end semiconductor test and assembly equipment is highly cyclical. Sales in the first quarter of 2016 were up, slightly, from the previous year as a result of higher demand for our products resulting from the rebound in global demand for back-end equipment that began in November 2015 and continued through January 2016.

Gross Margin

Gross margin consists of net sales less cost of sales. Cost of sales consists primarily of the cost of materials, assembly and test labor, and overhead from operations. Our gross margin can fluctuate due to a number of factors, including, but not limited to, the mix of products sold, product support costs, inventory reserve adjustments, and utilization of manufacturing capacity. Our gross margin, as a percentage of net sales, decreased to 29.6% in 2016 from 31.8% in 2015. Gross margin in 2016, as compared to the prior year, was adversely impacted by unfavorable product mix and higher charges for excess and obsolete inventory.

As highlighted above, our gross margin can be impacted by charges to cost of sales related to excess, obsolete and lower of cost or market inventory issues. We compute the majority of our excess and obsolete inventory reserve requirements using a one-year inventory usage forecast. During the first quarter of fiscal 2016 and 2015 we recorded charges to cost of sales of approximately $0.8 million and $0.3 million for excess and obsolete inventory, respectively. While we believe our reserves for excess and obsolete inventory and lower of cost or market concerns are adequate to cover known exposures at March 26, 2016, reductions in customer forecasts or continued modifications to products, as a result of our failure to meet specifications or other customer requirements, may result in additional charges to operations that could negatively impact our results of operations and gross margin in future periods.

Research and Development Expense (“R&D Expense”)

R&D expense consists primarily of salaries and related costs of employees engaged in ongoing research, product design and development activities, costs of engineering materials and supplies, and professional consulting expenses. R&D expense was $7.8 million or 11.9% of net sales in 2016, compared to $8.6 million or 13.5% in 2015. The decrease in 2016 resulted from product development programs that have concluded or are nearing completion as planned, cost control measures and a $0.6 million reduction as a result of reimbursements received under a cost-sharing arrangement with a customer entered into in the first quarter of 2016.

Selling, General and Administrative Expense (“SG&A Expense”)

SG&A expense consists primarily of salaries and benefit costs of employees, commission expense for independent sales representatives, product promotion and costs of professional services. SG&A expense was $13.4 million or 20.3% of net sales in 2016, compared to $12.3 million or 19.3% in 2015. In 2016, SG&A expense was adversely impacted by a weakening of the U.S. Dollar, which resulted in the recognition of $0.5 million in foreign currency losses. In the corresponding period of 2015, the U.S. Dollar strengthened and SG&A benefited from the recognition of $0.2 million of foreign currency gains. In the first quarter of 2016, employee share-based compensation expense was $0.4 million higher than the prior year period. This increase was driven by the number of employee restricted and performance share awards subject to vesting in the comparative periods and the corresponding valuation that was established on the date of grant and forfeiture rate adjustments recorded on award vesting.

Income Taxes

Ordinarily, interim tax provisions are calculated using the estimated effective tax rate (“ETR”) expected to be applicable for the full fiscal year. However, when a reliable estimate of the annual ETR cannot be made, the actual ETR for the year-to-date period may be the best estimate of the annual ETR. For the three months ended March 26, 2016 and March 28, 2015, we used the actual year-to-date ETR in computing our tax provision, as a reliable estimate of the annual ETR cannot be made, since relatively small changes in our projected income produce a significant variation in our ETR. The actual year-to-date ETR on loss from continuing operations for the three months ended March 26, 2016 and March 28, 2015, was (13.1)% and (150.7)%, respectively. The tax provision on loss from continuing operations in 2016 and 2015 differs from the U.S. federal statutory rate primarily due to the lack of a benefit on our domestic losses as a result of our valuation allowance on deferred tax assets, foreign income taxed at lower rates, changes in our deferred tax asset valuation allowance, state taxes and interest related to unrecognized tax benefits.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

March 26, 2016

Other than for foreign currency exchange rate changes, there was no material change to our unrecognized tax benefits and related accrued interest and penalties during the three month periods ended March 26, 2016 and March 28, 2015.

Income from Continuing Operations and Net Income

As a result of the factors set forth above, our loss from continuing operations and net loss was $1.9 million in 2016. In 2015 our loss from continuing operations was $1.7 million and including the results of our discontinued mobile microwave communication equipment business our net loss was $2.7 million.

LIQUIDITY AND CAPITAL RESOURCES

Our primary business is dependent on capital expenditures by semiconductor manufacturers and test subcontractors that are, in turn, dependent on the current and anticipated market demand for semiconductors. The cyclical and volatile nature of demand for semiconductor equipment, our primary industry, makes estimates of future revenues, results of operations and net cash flows difficult.

Our primary historical source of liquidity and capital resources has been cash flow generated by our operations and we manage our businesses to maximize operating cash flows as our primary source of liquidity.  We use cash to fund growth in our operating assets and to fund new products and product enhancements primarily through research and development. As of March 26, 2016, $69.7 million of our cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we may be required to accrue and pay U.S. taxes if we repatriate these funds.  Except for certain geographic locations where we have curtailed operations and from which repatriation would not result in incremental U.S. or foreign withholding tax, our intent is to indefinitely reinvest these funds in our foreign operations and we have no current plans that would require us to repatriate these funds to the U.S.

Liquidity

Working Capital: The following summarizes our cash, cash equivalents, short-term investments and working capital:

	March 26,		December 26,					Percentage
(in thousands)	2016		2015		Decrease			Change
Cash, cash equivalents and short-term investments	$	114,521	$	117,022	$	(2,501	)		(2.1	)%
Working capital	$	170,946	$	171,272	$	(326	)		(0.2	)%

Cash Flows

Operating Activities: Operating cash flows for the first three months of fiscal 2016 consist of our net loss, adjusted for non-cash expenses and changes in operating assets and liabilities. These adjustments include depreciation expense on property, plant and equipment, share-based compensation expense, amortization of intangible assets and deferred income taxes. Our net cash used in operating activities in the first three months of fiscal 2016 totaled $1.5 million. Cash used in operating activities was impacted by changes in current assets and liabilities and included increases in accounts receivable of $5.3 million, inventory of $2.5 million other current assets of $1.9 million, accounts payable of $5.1 million and deferred profit of $1.8 million. Accounts receivable increased from a sequential increase in product shipments and the timing of the resulting cash conversion cycle. Material purchases made to fulfill customer orders for equipment expected to ship in future quarters led to an increase in our inventory balance and accounts payable increased as a result of the timing of cash payments made to our suppliers and vendors. Other current assets increased as a result of prepayments of certain expenses and the increase in deferred profit resulted from deferral of certain sales in accordance with our revenue recognition policy. Accrued compensation, warranty and other liabilities decreased $1.4 million as a result of the payment of incentive compensation during the first quarter of 2016 that was accrued during fiscal 2015.

Investing Activities: Investing cash flows consist primarily of cash used for capital expenditures in support of our businesses, proceeds from investment maturities, asset disposals and divestitures and cash used for purchases of investments and business acquisitions. Net cash used in investing activities in the first three months of fiscal 2016 totaled $8.0 million and was primarily the result of $8.9 million in cash used for purchases of short-term investments offset by $1.0 million in net proceeds from sales and maturities of short-term investments. We invest our excess cash, in an attempt to seek the highest available return while preserving capital, in short-term investments since excess cash is only temporarily available and may be required for a business related purpose.Additions to property, plant and equipment of $0.9 million were made to support the operating and development activities of our business. Proceeds from the sale of assets totaled $0.8 million and resulted from the sale of a facility located in Chandler, Arizona that we no longer utilized.

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Cohu, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

March 26, 2016

Financing Activities: Cash flows from financing activities consist primarily of net proceeds from the issuance of common stock under our stock option and employee stock purchase plans and cash used to pay dividends to our stockholders. We issue stock options and maintain an employee stock purchase plan as components of our overall employee compensation. In the first three months of fiscal 2016, we used cash totaling $0.4 million to repurchase common stock to settle the minimum statutory tax withholding requirements paid by us on behalf of our employees upon vesting of restricted stock awards. At March 26, 2016 we had an additional $1.7 million accrued for tax withholding to be paid by us for restricted stock awards that vested at the end of the first quarter. We paid dividends totaling $1.6 million, or $0.06 per common share. On April 26, 2016, Cohu's Board of Directors approved a quarterly cash dividend of $0.06 per share payable on July 29, 2016, to shareholders of record on June 17, 2016. Future quarterly dividends are subject to our cash liquidity, capital availability and periodic determinations by our Board of Directors that cash dividends are in the best interests of our stockholders.

Capital Resources

We have a secured letter of credit facility (the “Secured Facility”) under which Bank of America, N.A., has agreed to administer the issuance of letters of credit on our behalf. The Secured Facility requires us to maintain deposits of cash or other approved investments, which serve as collateral, in amounts that approximate our outstanding letters of credit. As of March 26, 2016, we had approximately $26,000 of standby letters of credit outstanding under the Secured Facility. We also have credit agreements with multiple financial institutions under which they administer lines of credit on behalf of our wholly owned Ismeca subsidiary. The agreements provide Ismeca with 2.5 million Swiss Francs of available credit and at March 26, 2016, no amounts were outstanding. We expect that we will continue to make capital expenditures to support our business and we anticipate that present working capital will be sufficient to meet our operating requirements for at least the next twelve months.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations: Our significant contractual obligations consist of liabilities for operating leases, unrecognized tax benefits, pensions, post-retirement benefits and warranties. These obligations have not changed materially from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2015.

Purchase Commitments: From time to time, we enter into commitments with our vendors and outsourcing partners to purchase inventory at fixed prices or in guaranteed quantities. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current manufacturing needs and are fulfilled by our vendors within relatively short time horizons. We typically do not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements for the next three months.

Off-Balance Sheet Arrangements: During the ordinary course of business, we provide standby letters of credit instruments to certain parties as required. As of March 26, 2016, the maximum potential amount of future payments that we could be required to make under these standby letters of credit was $26,000. No liability has been recorded in connection with these arrangements beyond those required to appropriately account for the underlying transaction being guaranteed. We do not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these arrangements.

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Item 3.      Quantitative and Qualitative Disclosures About Market Risk.

Investment and Interest Rate Risk.

At March 26, 2016, our investment portfolio included short-term, fixed-income investment securities with a fair value of approximately $9.6 million. These securities are subject to interest rate risk and will likely decline in value if interest rates increase. Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. As we classify our short-term securities as available-for-sale, no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary. Due to the relatively short duration of our investment portfolio, an immediate ten percent change in interest rates would have no material impact on our financial condition or results of operations.

We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and our ability and intent to hold the investment for a period of time sufficient for anticipated recovery of market value. As of March 26, 2016, we had no investments with loss positions.

Foreign Currency Exchange Risk.

We have operations in several foreign countries and conduct business in the local currency in these countries. As a result, we have risk associated with currency fluctuations as the value of foreign currencies fluctuate against the U.S. Dollar, in particular the Swiss Franc, Euro, Malaysian Ringgit, Chinese Yuan and Philippine Peso. These fluctuations can impact our reported earnings.

Fluctuations in currency exchange rates also impact the U.S. Dollar amount of our net investment in foreign operations. The assets and liabilities of our foreign subsidiaries are translated into U.S. Dollars at the exchange rates in effect at the fiscal year-end balance sheet date. Income and expense accounts are translated at an average exchange rate during the year which approximates the rates in effect at the transaction dates. The resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other comprehensive income. As a result of fluctuations in certain foreign currency exchange rates in relation to the U.S. Dollar as of March 26, 2016 compared to December 26, 2015, our stockholders’ equity increased by $2.5 million.

Based upon the current levels of net foreign assets, a hypothetical 10% devaluation of the U.S. Dollar as compared to these currencies as of March 26, 2016 would result in an approximate $14.4 million positive translation adjustment recorded in other comprehensive income within stockholders’ equity. Conversely, a hypothetical 10% appreciation of the U.S. Dollar as compared to these currencies as of March 26, 2016 would result in an approximate $14.4 million negative translation adjustment recorded in other comprehensive income within stockholders’ equity.

Item 4.      Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Changes in Internal Controls. There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect our internal control over financial reporting.

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Part II     OTHER INFORMATION

Item 1.      Legal Proceedings.

The information set forth above under Note 7 contained in the "Notes to Unaudited Condensed Consolidated Financial Statements" of this Form 10-Q is incorporated herein by reference.

Item 1A.     Risk Factors.

The risks described below may not be the only risks we face. Additional risks that we do not currently believe are material may also impair our business operations. If any of the events or circumstances described in the following risks occur, our business, financial condition, results of operations or cash flows could suffer, and the trading price of our common stock and our market capitalization could decline.

We are making investments in new products to enter new markets, which may adversely affect our operating results; these investments may not be successful.

Given the highly competitive and rapidly evolving technology environment in which we operate, we believe it is important to develop new product offerings to meet strategic opportunities as they evolve. This includes developing products that we believe are necessary to meet the future needs of the marketplace. We are currently investing in new product development programs to enable us to compete in the test contactor and wafer level package (WLP) probing markets. We expect to continue to make investments and we may at any time, based on product need or marketplace demand, decide to significantly increase our product development expenditures in these or other products. The cost of investments in new product offerings can have a negative impact on our operating results and there can be no assurance that any new products we develop will be accepted in the marketplace or generate material revenues for us.

We are exposed to risks associated with acquisitions, investments and divestitures.

We have made, and may in the future make, acquisitions of, or significant investments in, businesses with complementary products, services and/or technologies. Acquisitions and investments involve numerous risks, including, but not limited to:

● difficulties and increased costs in connection with integration of the personnel, operations, technologies and products of acquired businesses;

● increasing the scope, geographic diversity and complexity of our business;

● diversion of management’s attention from other operational matters;

● the potential loss of key employees or customers of Cohu or acquired businesses;

● lack of synergy, or the inability to realize expected synergies, resulting from the acquisition;

● failure to commercialize purchased technology; and

● the impairment of acquired intangible assets and goodwill that could result in significant charges to operating results in future periods.

We may be required to finance future acquisitions and investments through a combination of borrowings, proceeds from equity or debt offerings and the use of cash, cash equivalents and short-term investments. 

Mergers, acquisitions and investments are inherently risky and the inability to effectively manage these risks could materially and adversely affect our business, financial condition and results of operations. At March 26, 2016 we had goodwill and net purchased intangible assets balances of $60.8 million and $23.8 million, respectively.

We are exposed to the risks of operating a global business.

We are a global corporation with offices and subsidiaries in certain foreign locations to manufacture our products, support our sales and services to the global semiconductor industry and, as such, we face risks in doing business abroad that we do not face domestically.  Certain aspects inherent in transacting business internationally could negatively impact our operating results, including:

● costs and difficulties in staffing and managing international operations;

● unexpected changes in regulatory requirements;

● difficulties in enforcing contractual and intellectual property rights;

● longer payment cycles;

● local political and economic conditions;

● potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double taxation”; and

● fluctuations in foreign currency exchange rates against the U.S. Dollar, which can affect demand for our products and increase our costs.

Additionally, managing geographically dispersed operations presents difficult challenges associated with organizational alignment and infrastructure, communications and information technology, inventory control, customer relationship management, terrorist threats and related security matters and cultural diversities.  If we are unsuccessful in managing such operations effectively, our business and results of operations will be adversely affected.

We are in the process of transitioning our manufacturing to Asia. Our inability to manage multiple manufacturing sites during this transition and to secure raw materials meeting our quality, cost and other requirements, or failures by our suppliers to perform, could harm our sales, service levels and reputation.

Our reliance on overseas manufacturers exposes us to significant risks including complex management, foreign currency, legal, tax and economic risks, which we may not be able to address quickly and adequately. In addition, it is time consuming and costly to qualify overseas supplier relationships. Therefore, if we should fail to effectively manage overseas manufacturing operations or if one or more of them should experience delays, disruptions or quality control problems, or if we had to change or add additional manufacturing sites, our ability to ship products to our customers could be delayed. Also, the addition of overseas manufacturing locations increases the demands on our administrative and operations infrastructure and the complexity of our supply chain management. If our overseas manufacturing locations are unable to meet our manufacturing requirements in a timely manner, our ability to ship products and to realize the related revenues when anticipated could be materially affected.

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Our suppliers are subject to the fluctuations in general economic cycles, and the global economic conditions may impact their ability to operate their business. They may also be impacted by the increasing costs of raw materials, labor and distribution, resulting in demands for less attractive contract terms or an inability for them to meet our requirements or conduct their own businesses. The performance and financial condition of a supplier may cause us to alter our business terms or to cease doing business with a particular supplier, or change our sourcing practices generally, which could in turn adversely affect our own business and financial condition.

Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations.

We use numerous vendors to supply parts, components and subassemblies for the manufacture of our products. It is not always possible to maintain multiple qualified suppliers for all of our parts, components and subassemblies. As a result, certain key parts may be available only from a single supplier or a limited number of suppliers. In addition, suppliers may cease manufacturing certain components that are difficult to replace without significant reengineering of our products. On occasion, we have experienced problems in obtaining adequate and reliable quantities of various parts and components from certain key suppliers. Our results of operations may be materially and adversely impacted if we do not receive sufficient parts to meet our requirements in a timely and cost effective manner.

The semiconductor industry we serve is highly volatile and unpredictable. 

Visibility into our markets is limited. The semiconductor equipment business is highly dependent on the overall strength of the semiconductor industry. Historically, the semiconductor industry has been highly cyclical with recurring periods of oversupply and excess capacity, which often have had a significant effect on the semiconductor industry’s demand for capital equipment, including equipment of the type we manufacture and market. We anticipate that the markets for newer generations of semiconductors and semiconductor equipment may also be subject to similar cycles and severe downturns. Any significant reductions in capital equipment investment by semiconductor integrated device manufacturers and test subcontractors will materially and adversely affect our business, financial position and results of operations. In addition, the volatile and unpredictable nature of semiconductor equipment demand has in the past and may in the future expose us to significant excess and obsolete and lower of cost or market inventory write-offs and reserve requirements. In fiscal 2015, 2014 and 2013, we recorded pre-tax inventory-related charges of approximately $2.4 million, $2.6 million, and $7.1 million, respectively, primarily as a result of changes in customer forecasts.

Due to the nature of our business, we need continued access to capital, which if not available to us or if not available on favorable terms, could harm our ability to operate or expand our business.  

Our business requires capital to finance accounts receivable and product inventory that is not financed by trade creditors when our business is expanding. If cash from available sources is insufficient or cash is used for unanticipated needs, we may require additional capital sooner than anticipated.

We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities will provide sufficient resources to meet our working capital and cash requirements for at least the next twelve months. In the event we are required, or elect, to raise additional funds, we may be unable to do so on favorable terms, or at all, and may incur expenses in raising the additional funds and future indebtedness could adversely affect our operating results and severely limit our ability to plan for, or react to, changes in our business or industry. We could also be limited by financial and other restrictive covenants in credit arrangements, including limitations on our borrowing of additional funds and issuing dividends. If we choose to issue new equity securities, existing stockholders may experience dilution, or the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. If we cannot raise funds on acceptable terms, we may not be able to take advantage of future opportunities or respond to competitive pressures or unanticipated requirements. Any inability to raise additional capital when required could have an adverse effect on our business and operating results.

The semiconductor equipment industry in general and the test handler market in particular, is highly competitive.

The semiconductor test handler industry is intensely competitive and we face substantial competition from numerous companies throughout the world. The test handler industry, while relatively small in terms of worldwide market size compared to other segments of the semiconductor equipment industry, has several participants resulting in intense competitive pricing pressures. Future competition may include companies that do not currently supply test handlers. Some of our competitors are part of larger corporations that have substantially greater financial, engineering, manufacturing and customer support capabilities and provide more extensive product offerings. In addition, there are emerging semiconductor equipment companies that provide or may provide innovative technology incorporated in products that may compete successfully against our products. We expect our competitors to continue to improve the design and performance of their current products and introduce new products with improved performance capabilities. Our failure to introduce new products in a timely manner, the introduction by our competitors of products with perceived or actual advantages, or disputes over rights to use certain intellectual property or technology could result in a loss of our competitive position and reduced sales of, or margins on our existing products. We believe that competitive conditions in the semiconductor test handler market have intensified over the last several years. This intense competition has adversely impacted our product average selling prices and gross margins on certain products. If we are unable to reduce the cost of our existing products and successfully introduce new lower cost products we expect these competitive conditions to negatively impact our gross margin and operating results in the foreseeable future.

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Semiconductor equipment is subject to rapid technological change, product introductions and transitions which may result in inventory write-offs, and our new product development involves numerous risks and uncertainties.

Semiconductor equipment and processes are subject to rapid technological change. We believe that our future success will depend in part on our ability to enhance existing products and develop new products with improved performance capabilities. We expect to continue to invest heavily in research and development and must manage product transitions successfully, as introductions of new products, including the products obtained in our acquisitions, may adversely impact sales and/or margins of existing products. In addition, the introduction of new products by us or by our competitors, the concentration of our revenues in a limited number of large customers, the migration to new semiconductor testing methodologies and the custom nature of our inventory parts increases the risk that our established products and related inventory may become obsolete, resulting in significant excess and obsolete inventory exposure. This increased exposure resulted in significant charges to operations during each of the years in the three-year period ended December 26, 2015. Future inventory write-offs and increased inventory reserve requirements could have a material adverse impact on our results of operations and financial condition.

The design, development, commercial introduction and manufacture of new semiconductor equipment is an inherently complex process that involves a number of risks and uncertainties. These risks include potential problems in meeting customer acceptance and performance requirements, integration of the equipment with other suppliers’ equipment and the customers’ manufacturing processes, transitioning from product development to volume manufacturing and the ability of the equipment to satisfy the semiconductor industry’s constantly evolving needs and achieve commercial acceptance at prices that produce satisfactory profit margins. The design and development of new semiconductor equipment is heavily influenced by changes in integrated circuit assembly, test and final manufacturing processes and integrated circuit package design changes. We believe that the rate of change in such processes and integrated circuit packages is accelerating. As a result of these changes and other factors, assessing the market potential and commercial viability of handling, MEMS, system-level and burn-in test equipment is extremely difficult and subject to a great deal of risk. In addition, not all integrated circuit manufacturers employ the same manufacturing processes. Differences in such processes make it difficult to design standard test products that are capable of achieving broad market acceptance. As a result, we might not accurately assess the semiconductor industry’s future equipment requirements and fail to design and develop products that meet such requirements and achieve market acceptance. Failure to accurately assess customer requirements and market trends for new semiconductor test products may have a material adverse impact on our operations, financial condition and results of operations.

The transition from product development to the manufacture of new semiconductor equipment is a difficult process and delays in product introductions and problems in manufacturing such equipment are common. We have in the past and may in the future experience difficulties in manufacturing and volume production of our new equipment. In addition, as is common with semiconductor equipment, after sale support and warranty costs have typically been significantly higher with new products than with our established products. Future technologies, processes and product developments may render our current or future product offerings obsolete and we might not be able to develop, introduce and successfully manufacture new products or make enhancements to our existing products in a timely manner to satisfy customer requirements or achieve market acceptance. Furthermore, we might not realize acceptable profit margins on such products.

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Global economic conditions may have an impact on our business and financial condition in ways that we currently cannot predict.

Our operations and financial results depend on worldwide economic conditions and their impact on levels of business spending, which have deteriorated significantly in many countries and regions and may remain depressed for the foreseeable future. Continued uncertainties may reduce future sales of our products and services. While we believe we have a strong customer base and have experienced strong collections in the past, if the current market conditions deteriorate, we may experience increased collection times and greater write-offs, either of which could have a material adverse effect on our cash flow.

In addition, the tightening of credit markets and concerns regarding the availability of credit may make it more difficult for our customers to raise capital, whether debt or equity, to finance their purchases of capital equipment, including the products we sell. Delays in our customers’ ability to obtain such financing, or the unavailability of such financing would adversely affect our product sales and revenues and therefore harm our business and operating results. We cannot predict the timing, duration of or effect on our business of the economic slowdown or the timing or strength of a subsequent recovery.

A limited number of customers account for a substantial percentage of our net sales. 

A small number of customers have been responsible for a significant portion of our net sales. During the past five years, the percentage of our sales derived from these significant customers has varied greatly. Such variations are due to changes in the customers’ business, consolidation within the semiconductor industry and their purchase of products from our competitors. It is common in the semiconductor test handler industry for customers to purchase equipment from more than one equipment supplier, increasing the risk that our competitive position with a specific customer may deteriorate. No assurance can be given that we will continue to maintain our competitive position with these or other significant customers. Furthermore, we expect the percentage of our revenues derived from significant customers will vary greatly in future periods. The loss of, or a significant reduction in, orders by these or other significant customers as a result of competitive products, market conditions including end market demand for our customers’ products, outsourcing final semiconductor test to test subcontractors that are not our customers or other factors, would have a material adverse impact on our business, financial condition and results of operations. Furthermore, the concentration of our revenues in a limited number of large customers is likely to cause significant fluctuations in our future annual and quarterly operating results.

If we cannot continue to develop, manufacture and market products and services that meet customer requirements for innovation and quality, our revenue and gross margin may suffer.

The process of developing new high technology products and services and enhancing existing products and services is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately could significantly harm our market share and results of operations. In addition, in the course of conducting our business, we must adequately address quality issues associated with our products and services, including defects in our engineering, design and manufacturing processes, as well as defects in third-party components included in our products. In order to address quality issues, we work extensively with our customers and suppliers and engage in product testing to determine the cause of quality problems and appropriate solutions. Finding solutions to quality issues can be expensive and may result in additional warranty, replacement and other costs, adversely affecting our profits. In addition, quality issues can impair our relationships with new or existing customers and adversely affect our reputation, which could lead to a material adverse effect on our operating results.

The cyclical nature of the semiconductor equipment industry places enormous demands on our employees, operations and infrastructure. 

The semiconductor equipment industry is characterized by dramatic and sometimes volatile changes in demand for its products. A number of factors including the semiconductor industry’s continually changing and unpredictable capacity requirements and changes in integrated circuit design and packaging, result in changes in product demand. Sudden changes in demand for semiconductor equipment have a significant impact on our operations. Typically, we reduce and increase our workforce, particularly in manufacturing, based on customer demand for our products. These changes in workforce levels place enormous demands on our employees, operations and infrastructure since newly hired personnel rarely possess the expertise and level of experience of current employees. Additionally, these transitions divert management time and attention from other activities and adversely impact employee morale. We have in the past and may in the future experience difficulties, particularly in manufacturing, in training and recruiting the large number of additions to our workforce. The volatility in headcount and business levels, combined with the cyclical nature of the semiconductor industry, may require that we invest substantial amounts in new operational and financial systems, procedures and controls. We may not be able to successfully adjust our systems, facilities and production capacity to meet our customers’ changing requirements. The inability to meet such requirements will have an adverse impact on our business, financial position and results of operations.

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The loss of key personnel could adversely impact our business.

Certain key personnel are critical to our business. Our future operating results depend substantially upon the continued service of our key personnel, many of whom are not bound by employment or non-competition agreements. Our future operating results also depend in significant part upon our ability to attract and retain qualified management, manufacturing, technical, engineering, marketing, sales and support personnel. Competition for qualified personnel, particularly those with technical skills, is intense, and we cannot ensure success in attracting or retaining qualified personnel. In addition, the cost of living in the San Diego, California, Kolbermoor, Germany and La Chaux-de-Fonds, Switzerland areas, where the majority of our development personnel are located, is high and we have had difficulty in recruiting prospective employees from other locations. There may be only a limited number of persons with the requisite skills and relevant industry experience to serve in these positions and it may become increasingly difficult for us to hire personnel over time. Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current position, or by our inability to attract and retain skilled employees.

Third parties may violate our proprietary rights or accuse us of infringing upon their proprietary rights.

We rely on patent, copyright, trademark and trade secret laws to establish and maintain proprietary rights in our technology and products. Any of our proprietary rights may expire due to patent life, or be challenged, invalidated or circumvented. In addition, from time to time, we receive notices from third parties regarding patent or copyright claims. Any such claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. In the event of a successful claim of infringement against us and our failure or inability to license the infringed technology or to substitute similar non-infringing technology, our business, financial condition and results of operations could be adversely affected.

A majority of our revenues are generated from exports to foreign countries, primarily in Asia, that are subject to economic and political instability and we compete against a number of Asian test handling equipment suppliers.

The majority of our export sales are made to destinations in Asia. Political or economic instability, particularly in Asia, may adversely impact the demand for capital equipment, including equipment of the type we manufacture and market. In addition, we face intense competition from a number of Asian suppliers that have certain advantages over United States (“U.S.”) suppliers, including us. These advantages include, among other things, proximity to customers, favorable tariffs and affiliation with significantly larger organizations. In addition, changes in the amount or price of semiconductors produced in Asia could impact the profitability or capital equipment spending programs of our foreign and domestic customers.

Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability.

We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Our tax liabilities are affected by, among other things, the amounts our affiliated entities charge each other for intercompany transactions. We may be subject to ongoing tax examinations in various jurisdictions. Tax authorities may disagree with our intercompany charges or other matters and assess additional taxes. While we regularly assess the likely outcomes of these examinations in order to determine the appropriateness of our tax provision, tax audits are inherently uncertain and an unfavorable outcome could occur. An unanticipated, unfavorable outcome in any specific period could harm our operating results for that period or future periods. The financial cost and management attention and time devoted to defending income tax positions may divert resources from our business operations, which could harm our business and profitability. Tax examinations may also impact the timing and/or amount of our refund claims. In addition, our effective tax rate in the future could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. In particular, the carrying value of our deferred tax assets and the utilization of our net operating loss and credit carryforwards are dependent on our ability to generate future taxable income in the U.S and other countries. Furthermore, these carryforwards may be subject to annual limitations as a result of changes in Cohu’s ownership.

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Compliance with regulations may impact sales to foreign customers and impose costs.

Certain products and services that we offer require compliance with U.S. and other foreign country export and other regulations. Compliance with complex U.S. and other foreign country laws and regulations that apply to our international sales activities increases our cost of doing business in international jurisdictions and could expose us or our employees to fines and penalties. These laws and regulations include import and export requirements, the U.S. State Department International Traffic in Arms Regulations (“ITAR”) and U.S. and other foreign country laws such as the Foreign Corrupt Practices Act (“FCPA”), and local laws prohibiting corrupt payments to governmental officials. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation. Although we have implemented policies and procedures designed to ensure compliance with these laws, there can be no assurance that our employees, contractors or agents will not violate our policies, or that our policies will be effective in preventing all potential violations. Any such violations could include prohibitions on our ability to offer our products and services to one or more countries, and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. Further, defending against claims of violations of these laws and regulations, even if we are successful, could be time-consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses.

In addition to government regulations regarding sale and export, we are subject to other regulations regarding our products. For example, the U.S. Securities and Exchange Commission has adopted disclosure rules for companies that use conflict minerals in their products, with substantial supply chain verification requirements in the event that the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries. These new rules and verification requirements will impose additional costs on us and on our suppliers, and may limit the sources or increase the cost of materials used in our products. Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers that could place us at a competitive disadvantage, and our reputation may be harmed.

Our business and operations could suffer in the event of security breaches.

Attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated and are sometimes successful. These attempts, which might be related to industrial or other espionage, include covertly introducing malware to our computers and networks and impersonating authorized users, among others. We seek to detect and investigate all security incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects. The theft, unauthorized use or publication of our intellectual property and/or confidential business information could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business. To the extent that any security breach results in inappropriate disclosure of our customers' or licensees' confidential information, we may incur liability as a result. In addition, we may be required to devote additional resources to the security of our information technology systems.

The occurrence of natural disasters and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales.

Our Corporate headquarters is located in San Diego, California, our Asian sales and service headquarters is located in Singapore and the majority of our sales are made to destinations in Asia. In addition, we have manufacturing plants in the Philippines, Malaysia and China. These regions are known for being vulnerable to natural disasters and other risks, such as earthquakes, tsunamis, fires, and floods, which at times have disrupted the local economies. A significant earthquake or tsunami could materially affect operating results. We are not insured for most losses and business interruptions of this kind, and do not presently have redundant, multiple site capacity in the event of a natural disaster. In the event of such disaster, our business would suffer.

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Our financial and operating results may vary and may fall below analysts’ estimates, which may cause the price of our common stock to decline.

Our operating results may fluctuate from quarter to quarter due to a variety of factors including, but not limited to:

●     cyclical nature of the semiconductor equipment industry;

●     timing and amount of orders from customers and shipments to customers;

●     inability to recognize revenue due to accounting requirements;

●     inventory writedowns;

●     inability to deliver solutions as expected by our customers; and

●     intangible and deferred tax asset writedowns.

Due to these factors or other unanticipated events, quarter-to-quarter comparisons of our operating results may not be reliable indicators of our future performance. In addition, from time to time our quarterly financial results may fall below the expectations of the securities and industry analysts who publish reports on our company or of investors in general. This could cause the market price of our stock to decline, perhaps significantly.

We have experienced significant volatility in our stock price.

A variety of factors may cause the price of our stock to be volatile. In recent years, the stock market in general, and the market for shares of high-technology companies in particular, including ours, have experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. During the last three years the price of our common stock has ranged from $13.84 to $8.63. The price of our stock may be more volatile than the stock of other companies due to, among other factors, the unpredictable and cyclical nature of the semiconductor industry, our significant customer concentration, intense competition in the test handler industry, our limited backlog and our relatively low daily stock trading volume. The market price of our common stock is likely to continue to fluctuate significantly in the future, including fluctuations related and unrelated to our performance.

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Item 3.      Defaults Upon Senior Securities.

None.

Item 4.      Mine Safety Disclosures

Not applicable.

Item 5.      Other Information.

None.

30

Item 6.	Exhibits.
3(i).1	Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by reference to Exhibit 3.1(a) from the Cohu, Inc. Form 10-Q for the quarterly period ended June 30, 1999
3(i).2	Certificate of Amendment of Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by reference to Exhibit 4.1(a) from the Cohu, Inc. Form S-8 filed with the Securities and Exchange Commission on June 30, 2000
3(ii)	Amended and Restated Bylaws of Cohu, Inc. incorporated herein by reference to Exhibit 3.2 from the Cohu, Inc. Report on Form 8-K filed with the Securities and Exchange Commission on December 12, 1996
31.1	Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

31

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 29, 2016	/s/ Luis A. Müller
	Luis A. Müller
	President & Chief Executive Officer

Date: April 29, 2016	/s/ Jeffrey D. Jones
	Jeffrey D. Jones
	Vice President, Finance & Chief Financial Officer
	(Principal Financial & Accounting Officer)

32

EXHIBIT INDEX
Exhibit No.	Description
3(i).1	Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by reference to Exhibit 3.1(a) from the Cohu, Inc. Form 10-Q for the quarterly period ended June 30, 1999
3(i).2	Certificate of Amendment of Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by reference to Exhibit 4.1(a) from the Cohu, Inc. Form S-8 filed with the Securities and Exchange Commission on June 30, 2000
3(ii)	Amended and Restated Bylaws of Cohu, Inc. incorporated herein by reference to Exhibit 3.2 from the Cohu, Inc. Report on Form 8-K filed with the Securities and Exchange Commission on December 12, 1996
31.1	Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

33

EX-31.1

Exhibit 31.1

COHU, INC.

SARBANES-OXLEY ACT SECTION 302(a)

CERTIFICATION

I, Luis A. Müller, certify that:

1. I have reviewed this Form 10-Q of Cohu, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 29, 2016

/s/ Luis A. Müller     
Luis A. Müller
President & Chief Executive Officer

EX-31.2

Exhibit 31.2

COHU, INC.

SARBANES-OXLEY ACT SECTION 302(a)

CERTIFICATION

I, Jeffrey D. Jones, certify that:

1. I have reviewed this Form 10-Q of Cohu, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 29, 2016

/s/ Jeffrey D. Jones

Jeffrey D. Jones
Vice President Finance & Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

      In connection with the accompanying Quarterly Report of Cohu, Inc. (the "Company") on Form 10-Q for the fiscal quarter ended March 26, 2016 (the "Report"), I, Luis A. Müller, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 29, 2016

/s/ Luis A. Müller

---------------------------------------------

Luis A. Müller,

President & Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

      In connection with the accompanying Quarterly Report of Cohu, Inc. (the "Company") on Form 10-Q for the fiscal quarter ended March 26, 2016 (the "Report"), I, Jeffrey D. Jones, Vice President Finance & Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 29, 2016

/s/ Jeffrey D. Jones

---------------------------------------------------

Jeffrey D. Jones,

Vice President Finance & Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 26, 2016	Apr. 11, 2016
Entity Registrant Name	COHU INC
Entity Central Index Key	0000021535
Trading Symbol	cohu
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		26,588,665
Document Type	10-Q
Document Period End Date	Mar. 26, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 26, 2016	Dec. 26, 2015
Current assets:
Cash and cash equivalents	$ 104,945,000	$ 115,370,000	[1]
Short-term investments	9,576,000	1,652,000	[1]
Accounts receivable, net	65,210,000	59,832,000	[1]
Inventories:
Raw materials and purchased parts	27,555,000	24,423,000	[1]
Work in process	22,476,000	20,124,000	[1]
Finished goods	4,613,000	6,801,000	[1]
Total inventory, net	54,644,000	51,348,000	[1]
Other current assets	8,657,000	6,261,000	[1]
Total current assets	243,032,000	234,463,000	[1]
Property, plant and equipment, at cost:
Land and land improvements	4,297,000	4,607,000	[1]
Buildings and building improvements	8,041,000	8,971,000	[1]
Machinery and equipment	33,272,000	31,888,000	[1]
Total Property, plant and equipment	45,610,000	45,466,000	[1]
Less accumulated depreciation and amortization	(26,962,000)	(26,466,000)	[1]
Net property, plant and equipment	18,648,000	19,000,000	[1]
Goodwill	60,814,000	60,264,000	[1]
Intangible assets, net	23,780,000	25,297,000	[1]
Other assets	6,540,000	6,322,000	[1]
Total assets	352,814,000	345,346,000	[1]
Current liabilities:
Accounts payable	33,170,000	27,290,000	[1]
Accrued compensation and benefits	14,593,000	15,628,000	[1]
Accrued warranty	4,246,000	3,785,000	[1]
Deferred profit	5,564,000	3,730,000
Income taxes payable	4,412,000	4,195,000	[1]
Other accrued liabilities	10,101,000	8,563,000	[1]
Total current liabilities	72,086,000	63,191,000	[1]
Accrued retirement benefits	15,601,000	15,397,000	[1]
Noncurrent deferred gain on sale of facility	12,781,000	13,142,000	[1]
Deferred income taxes	6,459,000	6,954,000	[1]
Noncurrent income tax liabilities	7,193,000	6,761,000	[1]
Other accrued liabilities	1,728,000	1,764,000	[1]
Stockholders' equity:
Preferred stock, $1 par value; 1,000 shares authorized, none issued	0	0	[1]
Common stock, $1 par value; 60,000 shares authorized, 26,586 shares issued and outstanding in 2016 and 26,240 shares in 2015	26,586,000	26,240,000	[1]
Paid-in capital	104,998,000	105,516,000	[1]
Retained earnings	124,666,000	128,153,000	[1]
Accumulated other comprehensive loss	(19,284,000)	(21,772,000)
Total stockholders' equity	236,966,000	238,137,000	[1]
Total liabilities and stockholder's equity	$ 352,814,000	$ 345,346,000	[1]

[1] Derived from December 26, 2015 audited financial statements

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 26, 2016	Dec. 26, 2015	[1]
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	60,000,000	60,000,000
Common stock, shares issued (in shares)	26,586,000	26,240,000
Common stock, shares outstanding (in shares)	26,586,000	26,240,000

[1] Derived from December 26, 2015 audited financial statements

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Net sales	$ 65,778	$ 63,447
Cost and expenses:
Cost of sales	46,337	43,302
Research and development	7,803	8,565
Selling, general and administrative	13,370	12,272
Cost and expenses	67,510	64,139
Loss from operations	(1,732)	(692)
Interest and other, net	43	6
Loss from continuing operations before taxes	(1,689)	(686)
Income tax provision	222	1,034
Loss from continuing operations	$ (1,911)	(1,720)
Loss from discontinued operations		(1,020)
Net loss	$ (1,911)	$ (2,740)
Basic:
Loss from continuing operations (in dollars per share)	$ (0.07)	$ (0.07)
Loss from discontinued operations (in dollars per share)		(0.04)
Net loss (in dollars per share)	$ (0.07)	(0.11)
Diluted:
Loss from continuing operations (in dollars per share)	$ (0.07)	(0.07)
Loss from discontinued operations (in dollars per share)		(0.04)
Net loss (in dollars per share)	$ (0.07)	$ (0.11)
Weighted average shares used in computing loss per share:
Weighted average common shares (in shares)	26,317	25,751
Diluted (in shares)	26,317	25,751
Cash dividends declared per share (in dollars per share)	$ 0.06	$ 0.06

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Net loss	$ (1,911)	$ (2,740)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	2,505	(8,343)
Adjustments related to postretirement benefits	(18)	$ (55)
Change in unrealized gain/loss on investments	1
Other comprehensive income (loss), net of tax	2,488	$ (8,398)
Comprehensive income (loss)	$ 577	$ (11,138)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 26, 2016		Mar. 28, 2015
Cash flows from operating activities:
Net loss	$ (1,911,000)		$ (2,740,000)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Loss on disposal of assets	$ 32,000
Operating cash flows of discontinued operations			$ (463,000)
Depreciation and amortization	$ 2,669,000		2,910,000
Share-based compensation expense	1,957,000		1,698,000
Deferred income taxes	$ (535,000)		(781,000)
Asset impairment charge			273,000
Changes in other accrued liabilities	$ 28,000		297,000
Changes in other assets	(26,000)		(78,000)
Changes in current assets and liabilities, excluding effects from divestitures:
Accounts receivable	(5,258,000)		7,685,000
Inventories	(2,518,000)		(5,474,000)
Other current assets	(1,856,000)		577,000
Accounts payable	5,053,000		5,578,000
Deferred profit	1,817,000		502,000
Income taxes payable, including excess stock option exercise benefit	487,000		505,000
Accrued compensation, warranty and other liabilities	(1,398,000)		(6,274,000)
Net cash provided by (used in) operating activities	(1,459,000)		$ 4,215,000
Cash flows from investing activities, excluding effects from divestitures:
Purchases of short-term investments	(8,891,000)
Sales and maturities of short-term investments	967,000		$ 45,000
Purchases of property, plant and equipment	(895,000)		$ (1,056,000)
Cash received from sale of assets	$ 813,000
Investing cash flows of discontinued operations			$ (15,000)
Net cash used in investing activities	$ (8,006,000)		(1,026,000)
Cash flows from financing activities:
Cash dividends paid	(1,573,000)		(1,539,000)
Repurchases of common stock	(395,000)		(1,230,000)
Net cash used in financing activities	(1,968,000)		(2,769,000)
Effect of exchange rate changes on cash and cash equivalents	1,008,000		(2,696,000)
Net decrease in cash and cash equivalents	(10,425,000)		(2,276,000)
Cash and cash equivalents at beginning of period	115,370,000	[1]	70,885,000
Cash and cash equivalents at end of period	104,945,000		68,609,000
Supplemental disclosure of cash flow information:
Cash paid (refunded) for income taxes	248,000		(703,000)
Inventory capitalized as property, plant and equipment	115,000		97,000
Dividends declared but not yet paid	$ 1,575,000		$ 1,543,000

[1] Derived from December 26, 2015 audited financial statements

XML

Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1.

          

Summary of Significant Accounting Policies

Basis of Presentation

Our fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. The condensed consolidated balance sheet at December 26, 2015 has been derived from our audited financial statements at that date. The interim condensed consolidated financial statements as of March 26, 2016 (also referred to as “the first quarter of fiscal 2016” and “the first three months of fiscal 2016”) and March 28, 2015 (also referred to as “the first quarter of fiscal 2015” and “the first three months of fiscal 2015”) are unaudited. However, in management’s opinion, these financial statements reflect all adjustments (consisting only of normal, recurring items) necessary to provide a fair presentation of our financial position, results of operations and cash flows for the periods presented. The first quarter of fiscal 2016 and 2015 were each comprised of 13 weeks.

Our interim results are not necessarily indicative of the results that should be expected for the full year. For a better understanding of Cohu, Inc. and our financial statements, we recommend reading these interim condensed consolidated financial statements in conjunction with our audited financial statements for the year ended December 26, 2015, which are included in our 2015 Annual Report on Form 10-K, filed with the U. S. Securities and Exchange Commission (“SEC”). In the following notes to our interim condensed consolidated financial statements, Cohu, Inc. is referred to as “Cohu”, “we”, “our” and “us”.

Discontinued Operations

On June 10, 2015 we sold our microwave communications equipment segment, Broadcast Microwave Services, Inc. (“BMS”). The operating results of BMS are being presented as discontinued operations and all prior period amounts have been reclassified accordingly. See Note 2, “Discontinued Operations” for additional information. Unless otherwise indicated, all amounts herein relate to continuing operations.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant credit risk consist principally of cash equivalents, short-term investments and trade accounts receivable. We invest in a variety of financial instruments and, by policy, limit the amount of credit exposure with any one issuer.

Trade accounts receivable are presented net of allowance for doubtful accounts of $0.1 million at both March 26, 2016 and December 26, 2015, respectively. Our customers include semiconductor manufacturers and semiconductor test subcontractors and other customers located throughout many areas of the world. While we believe that our allowance for doubtful accounts is adequate and represents our best estimate at March 26, 2016, we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates regarding collectability.

Segment Information

We applied the provisions of Accounting Standards Codification (“ASC”) Topic 280,

Segment Reporting

, (“ASC 280”), which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, we have determined that our identified operating segments qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report in one segment, semiconductor equipment and the financial information disclosed herein materially represents all of the financial information related to our semiconductor equipment segment.

Goodwill, Other Intangible Assets and

Long-lived Assets

We evaluate goodwill for impairment annually on October 1st of each year and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. As a part of our annual assessment process for 2015 we performed a qualitative assessment to determine whether current events or changes in circumstances lead us to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of our reporting unit is less than its carrying amount. Under this approach, absent a qualitative determination that the fair value of our reporting unit is more likely than not to be less than its carrying value, we do not need to proceed to the traditional estimated fair value test for that asset, which would involve comparing the book value of net assets to the fair value of our identified reporting unit.

As of October 1, 2015, the results of our qualitative assessment indicated there was no impairment.

Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference between the assets carrying amount and estimated fair value.

Foreign Currency Translation

Assets and liabilities of our wholly owned foreign subsidiaries that use the U.S. Dollar as their functional currency are re-measured using exchange rates in effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and equipment, which are re-measured using historical exchange rates. Revenues and costs are re-measured using average exchange rates for the period, except for costs related to those balance sheet items that are re-measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized as incurred. Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue and expenses are translated using the average exchange rate for the period. During the three months ended March 26, 2016

we recognized foreign exchange losses of $0.5 million in our consolidated statement of operations. In the three months ended March 28, 2015

we recorded gains of $0.2 million. Cumulative translation adjustments resulting from the translation of the financial statements are included as a separate component of stockholders’ equity.

Share-Based Compensation

We measure and recognize all share-based compensation under the fair value method. Our estimate of share-based compensation expense requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), future forfeitures and related tax effects. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. Although we believe the assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could materially impact our reported financial results.

Reported share-based compensation is classified, in the condensed consolidated interim financial statements, as follows

(in thousands)

:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Cost of sales	$	(66	)	$	115
Research and development		416			331
Selling, general and administrative		1,607			1,252
Total share-based compensation		1,957			1,698
Income tax benefit		(40	)		(44	)
Total share-based compensation, net	$	1,917		$	1,654

Income (Loss) Per Share

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of outstanding restricted stock units and issuance of stock under our employee stock purchase plan using the treasury stock method. In loss periods, potentially dilutive securities are excluded from the per share computations due to their anti-dilutive effect.

For purposes of computing diluted income per share, stock options with exercise prices that exceed the average fair market value of our common stock for the period are excluded.

The following table reconciles the denominators used in computing basic and diluted income (loss) per share

(in thousands)

:

	Three Months Ended
	March 26,		March 28,
	2016		2015
Weighted average common shares		26,317		25,751
Effect of dilutive stock options		-		-
		26,317		25,751

Revenue Recognition

Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant. We recognize revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment. In circumstances where either title or risk of loss pass upon destination or acceptance, we defer revenue recognition until such events occur.

Revenue for established products that have previously satisfied a customer’s acceptance requirements and provide for full payment tied to shipment is generally recognized upon shipment and passage of title. In certain instances, customer payment terms may provide that a minority portion (e.g. up to 20%) of the equipment purchase price be paid only upon customer acceptance. In those situations, the majority portion (e.g. 80%) of revenue where the contingent payment is tied to shipment and the entire product cost of sale are recognized upon shipment and passage of title and the minority portion of the purchase price related to customer acceptance is deferred and recognized upon receipt of customer acceptance. In cases where a prior history of customer acceptance cannot be demonstrated or from sales where customer payment dates are not determinable and in the case of new products, revenue is deferred until customer acceptance has been received. Our post-shipment obligations typically include installation and standard warranties. The estimated fair value of installation related revenue is recognized in the period the installation is performed. Service revenue is recognized ratably over the period of the related contract or upon completion of the services if they are short-term in nature. Spares and kit revenue is generally recognized upon shipment.

Certain of our equipment sales are accounted for as multiple-element arrangements. A multiple-element arrangement is a transaction which may involve the delivery or performance of multiple products, services, or rights to use assets, and performance may occur at different points in time or over different periods of time. For arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment.

On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped. At March 26, 2016, we had deferred revenue totaling approximately $7.3 million and deferred profit of $5.6 

million. At December 26, 2015, we had deferred revenue totaling approximately $5.0 million and deferred profit of $3.7 million. The periodic increase is primarily a result of deferrals of revenue associated with product shipments made to our customers in accordance with our revenue recognition policy.

A small number of customers historically have been responsible for a significant portion of our net sales. Significant customer concentration information is as follows:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Customers individually accounting for more than 10% of net sales		2			3
Percentage of net sales		32	%		47	%

Comprehensive Loss

Our accumulated other comprehensive loss balance totaled approximately $19.3 million and $21.8 million at March 26, 2016 and December 26, 2015, respectively, and was attributed to all non-owner changes in stockholders’ equity and consists of, on an after-tax basis where applicable, foreign currency adjustments resulting from the translation of certain of our subsidiary accounts where the functional currency is not the U.S. Dollar

and adjustments related to postretirement benefits. Reclassification adjustments from accumulated other comprehensive income

during the three months of fiscal 2016 and 2015 were not significant.

Retiree Medical Benefits

We provide post-retirement health benefits to certain executives and directors under a noncontributory plan. The net periodic benefit cost incurred during the three months of fiscal 2016 and 2015 was not significant.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements –

In the first quarter of 2016 we adopted Accounting Standards Update (“ASU”) No. 2015-16 “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (ASU 2015-16). ASU 2015-16 requires an entity to: recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date; and present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The adoption of this authoritative guidance did not impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

– On March 31, 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, “Compensation – Stock Compensation” (Topic 718). The FASB issued this update to improve the accounting for employee share-based payments

and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to record most leases on their balance sheets. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expense related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. The standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. We are currently evaluating the impact of this new standard on our financial reporting, but recognizing the lease liabilities and related right-of-use assets will impact our balance sheet.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities”, which amends the guidance on the classification and measurement of financial instruments. The changes primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, equity investments in unconsolidated entities that are not accounted for under the equity method will generally be measured at fair value through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The guidance is effective for interim and annual periods beginning after December 15, 2017. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory”. ASU 2015-11 simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, in scope inventory should be

 measured at the lower of cost

 and

 net realizable value. The standard is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. We are evaluating the impact of the new standard on our consolidated financial statements and our timing for adoption.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This standard sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about an entity’s ability to continue as a going concern, and if so, to provide related footnote disclosures. The standard is effective for interim and annual periods beginning after December 15, 2016. The Company does not believe that the adoption of this guidance will have any material impact on its financial position or results of operations.

In May 2014, the FASB issued new guidance on revenue from contracts with customers. The amended guidance outlines a single comprehensive revenue model for entities to use in accounting for revenue arising from contracts with customers. The guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. This guidance is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016. In April 2015, the FASB agreed to propose a one-year deferral of the revenue recognition standard's effective date for all entities, which would change the effectiveness to annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently evaluating the impact of the new guidance on our financial statements and have not yet determined which transition method we will utilize upon adoption or the potential impact of this new guidance on our consolidated financial statements.

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Note 2 - Discontinued Operations

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

2. Discontinued Operations

In June 2015, we sold all of the outstanding stock of BMS for $4.9 million in cash and up to $2.5 million of contingent cash consideration. Our decision to sell this non-core business resulted from management’s determination that it was no longer a strategic fit within our organization.

As part of the divestiture of BMS at June 27, 2015 we recorded a $0.2 million, long-term contingent consideration receivable that has been classified as Level 3 in the fair value hierarchy. See Note 4, “Financial Instruments Measured at Fair Value” for additional information on the three-tier fair value hierarchy.

The contingent consideration represents the estimated fair value of future payments we are due based on BMS achieving annual revenue targets in certain years as specified in the sale agreement. We determined the initial value of the contingent consideration by using the Monte Carlo simulation model with subsequent changes to the fair value of the contingent consideration recognized in discontinued operations. The fair value of the receivable totaled $0.5 million at March 26, 2016

.

In connection with the disposal of BMS we incurred divestiture-related costs in the first quarter of 2015 that would not have been incurred otherwise. These costs consist of legal and investment banking advisory services, success based compensation arrangements and certain other items that are incremental to normal operating charges and were expensed as incurred. These costs are included in the loss from sale amount presented below.

Operating results of our discontinued segment are summarized as follows

(in thousands)

:

	Three Months Ended
	March 26,		March 28,
	2016		2015
Net sales	$	-	$	4,621
Operating loss before income taxes	$	-	$	(914	)
Loss from sale of BMS		-		(100	)
Loss before taxes		-		(1,014	)
Income tax provision		-		6
Loss, net of tax	$	-	$	(1,020	)

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Note 3 - Goodwill and Purchased Intangible Assets

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

3.     

Goodwill and Other Purchased Intangible Assets

Changes in the carrying value of goodwill during the year ended December 26, 2015 and the three-month period ended March 26, 2016 were as follows

(

in thousands

):

	Goodwill
Balance, December 27, 2014	$	63,132
Impact of currency exchange		(2,868	)
Balance, December 26, 2015		60,264
Impact of currency exchange		550
Balance, March 26, 2016	$	60,814

Purchased intangible assets, subject to amortization are as follows

(

in thousands

)

:

	March 26, 2016						December 26, 2015
	Gross Carrying		Accumulated		Remaining		Gross Carrying		Accumulated
	Amount		Amortization		Useful Life (years)		Amount		Amortization
Rasco technology	$	27,371	$	25,018		0.7	$	26,904	$	23,776
Ismeca technology		27,294		11,269		4.8		27,043		10,329
Trade names		5,614		212		14.5		5,547		92
	$	60,279	$	36,499			$	59,494	$	34,197

Amortization expense related to intangible assets in both the first quarter of fiscal 2016 and 2015 was $1.8 million. Changes in the carrying values of these intangible assets are a result of the impact of fluctuations in currency exchange rates.

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Note 4 - Financial Instruments Measured at Fair Value

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Fair Value, Measurement Inputs, Disclosure [Text Block]

4.     

Financial Instruments Measured at Fair Value

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities. We do not hold investment securities for trading purposes. All short-term investments are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

Gains and losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Factors that could indicate an impairment exists include, but are not limited to: earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented were not significant.

Investments that we have classified as short-term, by security type, are as follows

(

in thousands

)

:

	March 26, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Corporate debt securities	$	8,890	$	1	$	-	$	8,891
Foreign government security		661		-		-		661
Bank certificates of deposit		24		-		-		24
	$	9,575	$	1	$	-	$	9,576

	December 26, 2015
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Foreign government security	$	650	$	-	$	-	$	650
Bank certificates of deposit		1,002		-		-		1,002
	$	1,652	$	-	$	-	$	1,652

Effective maturities of short-term investments are as follows

(in thousands)

:

	March 26, 2016				December 26, 2015
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	9,575	$	9,576	$	1,450	$	1,450
Due after one year through three years		-		-		202		202
	$	9,575	$	9,576	$	1,652	$	1,652

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information, and they are included in Level 2.

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

(in thousands)

:

	Fair value measurements at March 26, 2016 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	75,674	$	-	$	-	$	75,674
Corporate debt securities		-		16,890		-		16,890
Money market funds		-		21,272		-		21,272
Bank certificates of deposit		-		24		-		24
Foreign government security		-		661		-		661
	$	75,674	$	38,847	$	-	$	114,521

	Fair value measurements at December 26, 2015 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	73,746	$	-	$	-	$	73,746
Foreign government security		-		650		-		650
Money market funds		-		41,624		-		41,624
Bank certificates of deposit		-		1,002		-		1,002
	$	73,746	$	43,276	$	-	$	117,022

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Note 5 - Employee Stpck Benefit Plans

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5.     Employee Stock Benefit Plans

Our 2005 Equity Incentive Plan (the “2005 Plan”) is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. Awards that may be granted under the program include, but are not limited to, non-qualified and incentive stock options, restricted stock units, and performance-based stock units. We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of restricted stock units, and performance-based stock units with newly issued common shares. At March 26, 2016, there were 1,698,099 shares available for future equity grants under the 2005 Equity Incentive Plan.

Stock Options

Stock options may be granted to employees, consultants and directors to purchase a fixed number of shares of our common stock. The exercise prices of options granted are at least equal to the fair market value of our common stock on the dates of grant and options generally vest and become exercisable after one year or in four annual increments beginning one year after the date of grant. Stock options granted under the program have a maximum contractual term of ten years.

At March 26, 2016, we had 1,965,176 stock options outstanding. These options had a weighted-average exercise price of $11.25 per share, an aggregate intrinsic value of approximately $3.2 million and the weighted average remaining contractual term was approximately 4.2 years.

In

the first three months of fiscal 2016

, we did not issue any stock options and a

t March 26, 2016, we had 1,839,166 stock options outstanding that were exercisable. These options had a weighted-average exercise price of $11.35 per share, an aggregate intrinsic value of $3.0 million and the weighted average remaining contractual term was approximately 4.0 years.

Restricted Stock Units

We issue restricted stock units to certain employees, consultants and outside directors. Restricted stock units vest over either a one-year or a four-year period from the date of grant. Prior to vesting, restricted stock units do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock units are not considered issued and outstanding. New shares of our common stock will be issued on the date the restricted stock units vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding.

In

the first three months of fiscal 2016

,

we awarded restricted stock units covering 391,522 shares of our common stock to employees and at March 26, 2016, we had 1,108,652 restricted stock units outstanding with an aggregate intrinsic value of approximately $12.7 million and the weighted average remaining vesting period was approximately 2.8 years.

Equity-Based Performance Stock Units

In 2012, we began granting equity-based performance units covering shares of our common stock to certain employees. The number of shares of stock ultimately issued will depend upon the extent to which certain financial performance goals set by our Board of Directors are met during the one-year award measurement period. Based upon the level of achievement of performance goals the number of shares we ultimately issue can range from 0% up to 150% of the number of shares under each grant which vest over 3 years from the date of initial grant. In 2014, we began awarding equity-based performance stock units to senior executives with vesting that is contingent on the level of achievement of certain performance goals, market return and continued service (“market-based PSUs”) and in 2015 and 2016, the market-based PSUs granted are only subject to certain adjustments resulting from performance of Cohu’s Relative Total Shareholder Return (“TSR”) to a selected peer group over a two- or three-year measurement period following the date of grant, respectively. The total number of shares earned can range from 20% up to 200% based on the percentage by which our TSR exceeds or falls below the selected peer group. Market-based PSUs granted in 2015 earned vest at the rate of 50% on the second and third anniversary of their grant. Market-based PSUs granted in 2016 earned vest 100% on the third anniversary of their grant. We estimated the fair value of market-based PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized ratably over the measurement period of each vesting tranche based on our current assessment of achievement of the performance goals. New shares of our common stock will be issued on the date the equity-based performance units vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number outstanding.

In

the first three months of fiscal 2016

, we awarded

197,731 market-based performance stock units

to senior executives, and at

March 26, 2016, we had 379,153 PSUs and market based PSUs outstanding with an aggregate intrinsic value of approximately $4.4 million and the weighted average remaining vesting period was approximately 1.9 years.

Employee Stock Purchase Plan (ESPP)

The Cohu, Inc. 1997 Employee Stock Purchase Plan (“the Plan”) provides for the issuance of shares of our common stock. Under the Plan, eligible employees may purchase shares of Cohu common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Cohu common stock at the beginning or end of each 6-month purchase period, subject to certain limits.

During

the first quarter of fiscal 2016, no shares of our common stock were sold to our employees under the Plan leaving 811,063 shares available for future issuance.

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Note 6 - Income Taxes

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6.

     

Income Taxes

Ordinarily, interim tax provisions are calculated using the estimated effective tax rate (“ETR”) expected to be applicable for the full fiscal year. However, when a reliable estimate of the annual ETR cannot be made, the actual ETR for the year-to-date period may be the best estimate of the annual ETR. For the three months ended March 26, 2016 and March 28, 2015, we used the actual year-to-date ETR in computing our tax provision, as a reliable estimate of the annual ETR cannot be made, since relatively small changes in our projected income produce a significant variation in our ETR.

The actual year-to-date ETR on loss from continuing operations for the three months ended March 26, 2016 and March 28, 2015

, was (13.1)% and (150.7)%, respectively. The tax provision on loss from continuing operations in 2016 and 2015 differs from the U.S. federal statutory rate primarily due to the lack of a benefit on our domestic losses as a result of our valuation allowance on deferred tax assets, foreign income taxed at lower rates, changes in our deferred tax asset valuation allowance, state taxes and interest related to unrecognized tax benefits.

Other than for foreign currency exchange rate changes, there was no material change to our unrecognized tax benefits and related accrued interest and penalties during the three month periods ended March 26, 2016 and March 28, 2015.

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Note 7 - Contingencies

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Contingencies Disclosure [Text Block]

7. Contingencies

From time-to-time we are involved in various legal proceedings, examinations by various tax authorities and claims that have arisen in the ordinary course of our business. The outcome of any litigation is inherently uncertain. While there can be no assurance, we do not believe at the present time that the resolution of the matters described above will have a material adverse effect on our assets, financial position or results of operations.

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Note 8 - Guarantees and Other Obligations

3 Months Ended

Mar. 26, 2016

Notes to Financial Statements

Commitments Contingencies and Guarantees [Text Block]

8. Guarantees and Other Obligations

Product Warranty

Our products are generally sold with warranty periods that range from 12 to 36 months following sale or acceptance. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical and projected experience by product and configuration.

Changes in accrued warranty were as follows

(

in thousands

)

:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Balance at beginning of period	$	4,886		$	5,848
Warranty expense accruals		1,820			1,267
Warranty payments		(1,488	)		(1,764	)
Balance at end of period	$	5,218		$	5,351

Accrued warranty amounts expected to be incurred after one year are included in noncurrent other accrued liabilities in the condensed consolidated balance sheet. These amounts total $1.0 million at March 26, 2016 and $1.1 million at December 26, 2015. 

Standby Letters of Credit

During the ordinary course of business, we provide standby letters of credit instruments to certain parties as required. As of March 26, 2016, the maximum potential amount of future payments that Cohu could be required to make under these standby letters of credit was $26,000. We have not recorded any liability in connection with these guarantee arrangements beyond that required to appropriately account for the underlying transaction being guaranteed. We do not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these arrangements.

Lines of Credit

One of our wholly owned subsidiaries has two available lines of credit which provide it with borrowings of up to a total of 2.5 million Swiss Francs. At March 26, 2016 and December 26, 2015 no amounts were outstanding under the lines of credit.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 26, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

Our fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. The condensed consolidated balance sheet at December 26, 2015 has been derived from our audited financial statements at that date. The interim condensed consolidated financial statements as of March 26, 2016 (also referred to as “the first quarter of fiscal 2016” and “the first three months of fiscal 2016”) and March 28, 2015 (also referred to as “the first quarter of fiscal 2015” and “the first three months of fiscal 2015”) are unaudited. However, in management’s opinion, these financial statements reflect all adjustments (consisting only of normal, recurring items) necessary to provide a fair presentation of our financial position, results of operations and cash flows for the periods presented. The first quarter of fiscal 2016 and 2015 were each comprised of 13 weeks.

Our interim results are not necessarily indicative of the results that should be expected for the full year. For a better understanding of Cohu, Inc. and our financial statements, we recommend reading these interim condensed consolidated financial statements in conjunction with our audited financial statements for the year ended December 26, 2015, which are included in our 2015 Annual Report on Form 10-K, filed with the U. S. Securities and Exchange Commission (“SEC”). In the following notes to our interim condensed consolidated financial statements, Cohu, Inc. is referred to as “Cohu”, “we”, “our” and “us”.

Discontinued Operations, Policy [Policy Text Block]

Discontinued Operations

On June 10, 2015 we sold our microwave communications equipment segment, Broadcast Microwave Services, Inc. (“BMS”). The operating results of BMS are being presented as discontinued operations and all prior period amounts have been reclassified accordingly. See Note 2, “Discontinued Operations” for additional information. Unless otherwise indicated, all amounts herein relate to continuing operations.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

Financial instruments that potentially subject us to significant credit risk consist principally of cash equivalents, short-term investments and trade accounts receivable. We invest in a variety of financial instruments and, by policy, limit the amount of credit exposure with any one issuer.

Trade accounts receivable are presented net of allowance for doubtful accounts of $0.1 million at both March 26, 2016 and December 26, 2015, respectively. Our customers include semiconductor manufacturers and semiconductor test subcontractors and other customers located throughout many areas of the world. While we believe that our allowance for doubtful accounts is adequate and represents our best estimate at March 26, 2016, we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates regarding collectability.

Segment Reporting, Policy [Policy Text Block]

Segment Information

We applied the provisions of Accounting Standards Codification (“ASC”) Topic 280,

Segment Reporting

, (“ASC 280”), which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, we have determined that our identified operating segments qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report in one segment, semiconductor equipment and the financial information disclosed herein materially represents all of the financial information related to our semiconductor equipment segment.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill, Other Intangible Assets and

Long-lived Assets

We evaluate goodwill for impairment annually on October 1st of each year and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. As a part of our annual assessment process for 2015 we performed a qualitative assessment to determine whether current events or changes in circumstances lead us to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of our reporting unit is less than its carrying amount. Under this approach, absent a qualitative determination that the fair value of our reporting unit is more likely than not to be less than its carrying value, we do not need to proceed to the traditional estimated fair value test for that asset, which would involve comparing the book value of net assets to the fair value of our identified reporting unit.

As of October 1, 2015, the results of our qualitative assessment indicated there was no impairment.

Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference between the assets carrying amount and estimated fair value.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

Assets and liabilities of our wholly owned foreign subsidiaries that use the U.S. Dollar as their functional currency are re-measured using exchange rates in effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and equipment, which are re-measured using historical exchange rates. Revenues and costs are re-measured using average exchange rates for the period, except for costs related to those balance sheet items that are re-measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized as incurred. Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue and expenses are translated using the average exchange rate for the period. During the three months ended March 26, 2016

we recognized foreign exchange losses of $0.5 million in our consolidated statement of operations. In the three months ended March 28, 2015

we recorded gains of $0.2 million. Cumulative translation adjustments resulting from the translation of the financial statements are included as a separate component of stockholders’ equity.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-Based Compensation

We measure and recognize all share-based compensation under the fair value method. Our estimate of share-based compensation expense requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), future forfeitures and related tax effects. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. Although we believe the assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could materially impact our reported financial results.

Reported share-based compensation is classified, in the condensed consolidated interim financial statements, as follows

(in thousands)

:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Cost of sales	$	(66	)	$	115
Research and development		416			331
Selling, general and administrative		1,607			1,252
Total share-based compensation		1,957			1,698
Income tax benefit		(40	)		(44	)
Total share-based compensation, net	$	1,917		$	1,654

Earnings Per Share, Policy [Policy Text Block]

Income (Loss) Per Share

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of outstanding restricted stock units and issuance of stock under our employee stock purchase plan using the treasury stock method. In loss periods, potentially dilutive securities are excluded from the per share computations due to their anti-dilutive effect.

For purposes of computing diluted income per share, stock options with exercise prices that exceed the average fair market value of our common stock for the period are excluded.

The following table reconciles the denominators used in computing basic and diluted income (loss) per share

(in thousands)

:

	Three Months Ended
	March 26,		March 28,
	2016		2015
Weighted average common shares		26,317		25,751
Effect of dilutive stock options		-		-
		26,317		25,751

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant. We recognize revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment. In circumstances where either title or risk of loss pass upon destination or acceptance, we defer revenue recognition until such events occur.

Revenue for established products that have previously satisfied a customer’s acceptance requirements and provide for full payment tied to shipment is generally recognized upon shipment and passage of title. In certain instances, customer payment terms may provide that a minority portion (e.g. up to 20%) of the equipment purchase price be paid only upon customer acceptance. In those situations, the majority portion (e.g. 80%) of revenue where the contingent payment is tied to shipment and the entire product cost of sale are recognized upon shipment and passage of title and the minority portion of the purchase price related to customer acceptance is deferred and recognized upon receipt of customer acceptance. In cases where a prior history of customer acceptance cannot be demonstrated or from sales where customer payment dates are not determinable and in the case of new products, revenue is deferred until customer acceptance has been received. Our post-shipment obligations typically include installation and standard warranties. The estimated fair value of installation related revenue is recognized in the period the installation is performed. Service revenue is recognized ratably over the period of the related contract or upon completion of the services if they are short-term in nature. Spares and kit revenue is generally recognized upon shipment.

Certain of our equipment sales are accounted for as multiple-element arrangements. A multiple-element arrangement is a transaction which may involve the delivery or performance of multiple products, services, or rights to use assets, and performance may occur at different points in time or over different periods of time. For arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment.

On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped. At March 26, 2016, we had deferred revenue totaling approximately $7.3 million and deferred profit of $5.6 

million. At December 26, 2015, we had deferred revenue totaling approximately $5.0 million and deferred profit of $3.7 million. The periodic increase is primarily a result of deferrals of revenue associated with product shipments made to our customers in accordance with our revenue recognition policy.

A small number of customers historically have been responsible for a significant portion of our net sales. Significant customer concentration information is as follows:

	Three Months Ended
	March 26,			March 28,
	2016			2015
Customers individually accounting for more than 10% of net sales		2			3
Percentage of net sales		32	%		47	%

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Loss

Our accumulated other comprehensive loss balance totaled approximately $19.3 million and $21.8 million at March 26, 2016 and December 26, 2015, respectively, and was attributed to all non-owner changes in stockholders’ equity and consists of, on an after-tax basis where applicable, foreign currency adjustments resulting from the translation of certain of our subsidiary accounts where the functional currency is not the U.S. Dollar

and adjustments related to postretirement benefits. Reclassification adjustments from accumulated other comprehensive income

during the three months of fiscal 2016 and 2015 were not significant.

Pension and Other Postretirement Plans, Policy [Policy Text Block]

Retiree Medical Benefits

We provide post-retirement health benefits to certain executives and directors under a noncontributory plan. The net periodic benefit cost incurred during the three months of fiscal 2016 and 2015 was not significant.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements –

In the first quarter of 2016 we adopted Accounting Standards Update (“ASU”) No. 2015-16 “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (ASU 2015-16). ASU 2015-16 requires an entity to: recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date; and present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The adoption of this authoritative guidance did not impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

– On March 31, 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, “Compensation – Stock Compensation” (Topic 718). The FASB issued this update to improve the accounting for employee share-based payments

and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to record most leases on their balance sheets. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expense related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. The standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. We are currently evaluating the impact of this new standard on our financial reporting, but recognizing the lease liabilities and related right-of-use assets will impact our balance sheet.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities”, which amends the guidance on the classification and measurement of financial instruments. The changes primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, equity investments in unconsolidated entities that are not accounted for under the equity method will generally be measured at fair value through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The guidance is effective for interim and annual periods beginning after December 15, 2017. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory”. ASU 2015-11 simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, in scope inventory should be

 measured at the lower of cost

 and

 net realizable value. The standard is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. We are evaluating the impact of the new standard on our consolidated financial statements and our timing for adoption.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This standard sets forth management’s responsibility to evaluate, each reporting period, whether there is substantial doubt about an entity’s ability to continue as a going concern, and if so, to provide related footnote disclosures. The standard is effective for interim and annual periods beginning after December 15, 2016. The Company does not believe that the adoption of this guidance will have any material impact on its financial position or results of operations.

In May 2014, the FASB issued new guidance on revenue from contracts with customers. The amended guidance outlines a single comprehensive revenue model for entities to use in accounting for revenue arising from contracts with customers. The guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. This guidance is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016. In April 2015, the FASB agreed to propose a one-year deferral of the revenue recognition standard's effective date for all entities, which would change the effectiveness to annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently evaluating the impact of the new guidance on our financial statements and have not yet determined which transition method we will utilize upon adoption or the potential impact of this new guidance on our consolidated financial statements.

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Note 1 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 26, 2016

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended
	March 26,			March 28,
	2016			2015
Cost of sales	$	(66	)	$	115
Research and development		416			331
Selling, general and administrative		1,607			1,252
Total share-based compensation		1,957			1,698
Income tax benefit		(40	)		(44	)
Total share-based compensation, net	$	1,917		$	1,654

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	March 26,		March 28,
	2016		2015
Weighted average common shares		26,317		25,751
Effect of dilutive stock options		-		-
		26,317		25,751

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Three Months Ended
	March 26,			March 28,
	2016			2015
Customers individually accounting for more than 10% of net sales		2			3
Percentage of net sales		32	%		47	%

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Note 2 - Discontinued Operations (Tables)

3 Months Ended

Mar. 26, 2016

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

	Three Months Ended
	March 26,		March 28,
	2016		2015
Net sales	$	-	$	4,621
Operating loss before income taxes	$	-	$	(914	)
Loss from sale of BMS		-		(100	)
Loss before taxes		-		(1,014	)
Income tax provision		-		6
Loss, net of tax	$	-	$	(1,020	)

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Note 3 - Goodwill and Purchased Intangible Assets (Tables)

3 Months Ended

Mar. 26, 2016

Notes Tables

Schedule of Goodwill [Table Text Block]

	Goodwill
Balance, December 27, 2014	$	63,132
Impact of currency exchange		(2,868	)
Balance, December 26, 2015		60,264
Impact of currency exchange		550
Balance, March 26, 2016	$	60,814

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	March 26, 2016						December 26, 2015
	Gross Carrying		Accumulated		Remaining		Gross Carrying		Accumulated
	Amount		Amortization		Useful Life (years)		Amount		Amortization
Rasco technology	$	27,371	$	25,018		0.7	$	26,904	$	23,776
Ismeca technology		27,294		11,269		4.8		27,043		10,329
Trade names		5,614		212		14.5		5,547		92
	$	60,279	$	36,499			$	59,494	$	34,197

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Note 4 - Financial Instruments Measured at Fair Value (Tables)

3 Months Ended

Mar. 26, 2016

Notes Tables

Available-for-sale Securities [Table Text Block]

	March 26, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Corporate debt securities	$	8,890	$	1	$	-	$	8,891
Foreign government security		661		-		-		661
Bank certificates of deposit		24		-		-		24
	$	9,575	$	1	$	-	$	9,576

	December 26, 2015
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Foreign government security	$	650	$	-	$	-	$	650
Bank certificates of deposit		1,002		-		-		1,002
	$	1,652	$	-	$	-	$	1,652

Investments Classified by Contractual Maturity Date [Table Text Block]

	March 26, 2016				December 26, 2015
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	9,575	$	9,576	$	1,450	$	1,450
Due after one year through three years		-		-		202		202
	$	9,575	$	9,576	$	1,652	$	1,652

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	Fair value measurements at March 26, 2016 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	75,674	$	-	$	-	$	75,674
Corporate debt securities		-		16,890		-		16,890
Money market funds		-		21,272		-		21,272
Bank certificates of deposit		-		24		-		24
Foreign government security		-		661		-		661
	$	75,674	$	38,847	$	-	$	114,521

	Fair value measurements at December 26, 2015 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	73,746	$	-	$	-	$	73,746
Foreign government security		-		650		-		650
Money market funds		-		41,624		-		41,624
Bank certificates of deposit		-		1,002		-		1,002
	$	73,746	$	43,276	$	-	$	117,022

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Note 8 - Guarantees and Other Obligations (Tables)

3 Months Ended

Mar. 26, 2016

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Three Months Ended
	March 26,			March 28,
	2016			2015
Balance at beginning of period	$	4,886		$	5,848
Warranty expense accruals		1,820			1,267
Warranty payments		(1,488	)		(1,764	)
Balance at end of period	$	5,218		$	5,351

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Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($)		3 Months Ended
	Oct. 01, 2015	Mar. 26, 2016	Mar. 28, 2015	Dec. 26, 2015
Allowance for Doubtful Accounts Receivable, Current		$ 100,000		$ 100,000
Number of Operating Segments		1
Foreign Currency Transaction Gain (Loss), Realized		$ (500,000)	$ 200,000
Percentage of Revenue Recognized upon Customer Acceptance		20.00%
Percentage of Revenue Recognized upon Shipment and Passage of Title		80.00%
Deferred Revenue		$ 7,300,000		5,000,000
Deferred Profit		5,564,000		3,730,000
Accumulated Other Comprehensive Income (Loss), Net of Tax		$ (19,284,000)		$ (21,772,000)
Goodwill and Intangible Asset Impairment	$ 0

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Note 1 - Reported Share-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Cost of Sales [Member]
Cost of Sales	$ (66)
Allocated share-based compensation		$ 115
Research and Development Expense [Member]
Allocated share-based compensation	416	331
Selling, General and Administrative Expenses [Member]
Allocated share-based compensation	1,607	1,252
Allocated share-based compensation	1,957	1,698
Income tax benefit	(40)	(44)
Total share-based compensation, net	$ 1,917	$ 1,654

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Note 1 - Computation of Basic and Diluted Income (Loss) Per Share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Weighted average common shares (in shares)	26,317	25,751
Effect of dilutive stock options (in shares)
(in shares)	26,317	25,751

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Note 1 - Customer Concentration (Details) - Sales Revenue, Net [Member] - Customer Concentration Risk [Member]	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Two Customers [Member]
Percentage of net sales	32.00%
Three Customers [Member]
Percentage of net sales		47.00%
Customers individually accounting for more than 10% of net sales	2	3

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Note 2 - Discontinued Operations (Details Textual) - Broadcast Microwave Services, Inc. (“BMS”) [Member] - USD ($) $ in Millions	1 Months Ended
	Jun. 27, 2015	Mar. 26, 2016
Fair Value, Inputs, Level 3 [Member]
Disposal Group, Including Discontinued Operation, Contingent Consideration	$ 0.2
Proceeds from Divestiture of Businesses	4.9
Disposal Group, Including Discontinued Operation, Contingent Consideration	$ 2.5
Contingent Consideration Receivable, Fair Value		$ 0.5

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Note 2 - Summary of Operating Results (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Broadcast Microwave Services, Inc. (“BMS”) [Member]
Net sales		$ 4,621
Operating loss before income taxes		(914)
Loss from sale of BMS		(100)
Loss before taxes		(1,014)
Income tax provision		6
Loss, net of tax		(1,020)
Loss, net of tax		$ (1,020)

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Note 3 - Goodwill and Purchased Intangible Assets (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Amortization of Intangible Assets	$ 1.8	$ 1.8

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Note 3 - Changes in Carrying Value of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 26, 2016		Dec. 26, 2015
Balance	$ 60,264	[1]	$ 63,132
Impact of currency exchange	550		(2,868)
Balance	$ 60,814		$ 60,264	[1]

[1] Derived from December 26, 2015 audited financial statements

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Note 3 - Purchased Intangible Assets, Subject to Amortization (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2016	Dec. 26, 2015
Rasco Technology [Member]
Gross Carrying Amount	$ 27,371	$ 26,904
Accumulated Amortization	$ 25,018	23,776
Remaining Useful Life	255 days
Ismeca Technology [Member]
Gross Carrying Amount	$ 27,294	27,043
Accumulated Amortization	$ 11,269	10,329
Remaining Useful Life	4 years 292 days
Trade Names [Member]
Gross Carrying Amount	$ 5,614	5,547
Accumulated Amortization	$ 212	92
Remaining Useful Life	14 years 182 days
Gross Carrying Amount	$ 60,279	59,494
Accumulated Amortization	$ 36,499	$ 34,197

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Note 4 - Short-term Investments by Security Type (Details) - USD ($)	Mar. 26, 2016	Dec. 26, 2015
Corporate Debt Securities [Member]
Amortized Cost	$ 8,890,000
Gross Unrealized Gains	$ 1,000
Gross Unrealized Losses
Short-term investments	$ 8,891,000
Foreign Government Debt Securities [Member]
Amortized Cost	$ 661,000	$ 650,000
Gross Unrealized Gains
Gross Unrealized Losses
Short-term investments	$ 661,000	$ 650,000
Certificates of Deposit [Member]
Amortized Cost	$ 24,000	$ 1,002,000
Gross Unrealized Gains
Gross Unrealized Losses
Short-term investments	$ 24,000	$ 1,002,000
Amortized Cost	9,575,000	$ 1,652,000
Gross Unrealized Gains	$ 1,000
Gross Unrealized Losses
Short-term investments	$ 9,576,000	$ 1,652,000	[1]

[1] Derived from December 26, 2015 audited financial statements

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Note 4 - Effective Maturities of Short-term Investments (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Dec. 26, 2015
Due in one year or less, amortized cost	$ 9,575	$ 1,450
Due in one year or less, estimated fair value	$ 9,576	1,450
Due after one year through three years, amortized cost		202
Due after one year through three years, estimated fair value		202
	$ 9,575	1,652
	$ 9,576	$ 1,652

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Note 4 - Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Dec. 26, 2015
Fair Value, Inputs, Level 1 [Member] | Cash [Member]
Assets fair value, recurring	$ 75,674	$ 73,746
Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 1 [Member] | Foreign Government Debt Securities [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 1 [Member] | Certificates of Deposit [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 1 [Member]
Assets fair value, recurring	$ 75,674	$ 73,746
Fair Value, Inputs, Level 2 [Member] | Cash [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Assets fair value, recurring	$ 16,890
Fair Value, Inputs, Level 2 [Member] | Foreign Government Debt Securities [Member]
Assets fair value, recurring	661	$ 650
Fair Value, Inputs, Level 2 [Member] | Money Market Funds [Member]
Assets fair value, recurring	21,272	41,624
Fair Value, Inputs, Level 2 [Member] | Certificates of Deposit [Member]
Assets fair value, recurring	24	1,002
Fair Value, Inputs, Level 2 [Member]
Assets fair value, recurring	$ 38,847	$ 43,276
Fair Value, Inputs, Level 3 [Member] | Cash [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 3 [Member] | Foreign Government Debt Securities [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 3 [Member] | Money Market Funds [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 3 [Member] | Certificates of Deposit [Member]
Assets fair value, recurring
Fair Value, Inputs, Level 3 [Member]
Assets fair value, recurring
Cash [Member]
Assets fair value, recurring	$ 75,674	$ 73,746
Corporate Debt Securities [Member]
Assets fair value, recurring	16,890
Foreign Government Debt Securities [Member]
Assets fair value, recurring	661	650
Money Market Funds [Member]
Assets fair value, recurring	21,272	41,624
Certificates of Deposit [Member]
Assets fair value, recurring	24	1,002
Assets fair value, recurring	$ 114,521	$ 117,022

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Note 5 - Employee Stpck Benefit Plans (Details Textual) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	12 Months Ended
	Mar. 26, 2016	Dec. 26, 2015	Dec. 29, 2012
Equity Incentive Plan 2005 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,698,099
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	811,063
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	85.00%
Stock Issued During Period, Shares, Employee Stock Purchase Plans	0
Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Employee Stock Option [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Restricted Stock Units (RSUs) [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock Units (RSUs) [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	391,522
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	1,108,652
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding	$ 12.7
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms	2 years 292 days
Equity Based Performance Stock Units [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Shares Available for Issue			0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Shares Earned			20.00%
Equity Based Performance Stock Units [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Shares Available for Issue			150.00%
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Shares Earned			200.00%
Equity Based Performance Stock Units [Member] | Share-based Compensation Award, Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		50.00%
Equity Based Performance Stock Units [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	100.00%	50.00%
Equity Based Performance Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	197,731
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	379,153
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding	$ 4.4
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms	1 year 328 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	1,965,176
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 11.25
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 3.2
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	4 years 73 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	1,839,166
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 11.35
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$ 3.0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term	4 years

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Note 6 - Income Taxes (Details Textual)	3 Months Ended
	Mar. 28, 2016	Mar. 28, 2015
Effective Income Tax Rate Reconciliation, Percent	13.10%	150.70%

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Note 8 - Guarantees and Other Obligations (Details Textual) SFr in Millions	3 Months Ended
	Mar. 26, 2016 CHF (SFr)	Mar. 26, 2016 USD ($)	Dec. 26, 2015 USD ($)
Minimum [Member]
Standard Product Warranty Term	1 year
Maximum [Member]
Standard Product Warranty Term	3 years
Non-current Other Accrued Liabilities [Member]
Product Warranty Accrual, Noncurrent		$ 1,000,000	$ 1,100,000
Long-term Line of Credit		0	$ 0
Guarantor Obligations, Maximum Exposure, Undiscounted		$ 26,000
Line of Credit Facility, Maximum Borrowing Capacity | SFr	SFr 2.5

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Note 8 - Changes in Accrued Warranty (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Balance at beginning of period	$ 4,886	$ 5,848
Warranty expense accruals	1,820	1,267
Warranty payments	(1,488)	(1,764)
Balance at end of period	$ 5,218	$ 5,351