Note 4 - Borrowings and Credit Agreements

12 Months Ended

Dec. 28, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

4. Borrowings and Credit Agreements

The following table is a summary of our borrowings as of

December 28, 2019

and

December 29, 2018:

	Fiscal year ended
(in thousands)	December 28, 2019			December 29, 2018 (1)
Bank Term Loan under Credit Agreement	$	346,500		$	349,125
Bank Term Loans-Kita		3,830			4,576
Bank Term Loan-Xcerra		1,475			1,839
Construction Loan-Rasco		5,476			-
Lines of Credit		3,195			3,115
Total debt		360,476			358,655
Less: financing fees and discount		(7,441	)		(8,551	)
Less: current portion		(6,517	)		(6,676	)
Total long-term debt	$	346,518		$	343,428

( 1 ) Excludes financing lease obligations, which are included in long-term and short-term debt in our consolidated balance sheet, as they were not material at December 29, 2018.

The debt principal payments, excluding financing lease obligations, for the next

five

years and thereafter are as follows:

(in thousands)
2020	$	7,679
2021		4,636
2022		4,997
2023		5,001
2024		4,467
Thereafter		333,696
Total	$	360,476

Credit Agreement

On

October 1, 2018,

we entered into a Credit Agreement providing for a

$350.0

 million Credit Facility and borrowed the full amount. Loans under the Credit Facility amortize in equal quarterly installments equal to

0.25%

of the original principal amount, with the balance payable at maturity. All outstanding principal and interest in respect of the Credit Facility must be repaid on or before

October 1, 2025.

The loans under the Term Loan Facility bear interest, at Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of

3.00%.

At

December 28, 2019,

the outstanding loan balance, net of discount and deferred financing costs, was

$339.1

 million and

$2.3

million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. The outstanding loan balance as of

December 28, 2019

includes

$0.9

 million of principal that was paid subsequent to year-end on

December 31, 2019.

As of

December 28, 2019,

the fair value of the debt was

$344.8

 million. The measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of

December 28, 2019

and is considered a Level

2

fair value measurement. See Note

2,

“Business Acquisitions” for additional information on the Credit Facility.

Kita Term Loans

As a result of our acquisition of Kita, we assumed term loans from a series of Japanese financial institutions primarily related to the expansion of Kita’s facility in Osaka, Japan. The loans are collateralized by the facility and land, carry interest rates ranging from

0.05%

to

0.43%,

and expire at various dates through

2034.

At

December 28, 2019,

the outstanding loan balance was

$3.8

million and

$0.4

million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. The fair value of the debt approximates the carrying value at

December 28, 2019.

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

Xcerra Term Loan

As a result of our acquisition of Xcerra, we assumed a term loan related to the purchase of Xcerra’s facility in Rosenheim, Germany. The loan is payable over

10

years at an annual interest rate of

2.35%.

Principal plus accrued interest is due quarterly over the duration of the term loan. At

December 28, 2019,

the outstanding loan balance was

$1.5

million and

$0.3

million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. The fair value of the debt approximates the carrying value at

December 28, 2019.

The term loan is denominated in Euros and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.

Construction Loans

On

July 26, 2019,

one

of our wholly owned subsidiaries located in Germany entered into

two

construction loans (“Loan Facilities”) with a German financial institution providing total borrowing of

€8.6

 million. The Loan Facilities have

10

-year and

15

-year terms, which commenced on

August 1, 2019,

the initial draw-down date. The Loan Facilities are being utilized to finance the expansion of our facility in Kolbermoor, Germany, enabling us to combine the operations of multiple subsidiaries in

one

location as part of our previously announced strategic restructuring program. The Loan Facilities are secured by the land and the existing building on the site and bear interest at agreed upon rates based on separate

€3.4

 million and

€5.2

 million facility amounts.

On

August 1, 2019,

the full

€3.4

 million was drawn under the

first

facility, which is payable over

10

years at an annual interest rate of

0.8%.

Interest payments only are required to be made each quarter starting in

September 2019

with principal and interest payments due each quarter starting in the month of

December 2021.

Principal repayments will be made over

8

years starting at the end of

2021.

On

December 10, 2019,

we drew

€1.5

 million under the

second

facility, which is payable over

15

years at an annual interest rate of

1.05%.

Interest payments only are required to be made each quarter starting in

December 2019

with principal and interest payments due each quarter starting in the month of

May 2020.

Principal repayments will be made over

15

years starting at the end of

May 2020.

As of

December 28, 2019,

€3.7

 million had

not

been drawn under the

second

facility as is expected to be drawn in the

first

half of

2020.

At

December 28, 2019,

total outstanding borrowings under the Loan Facilities was

$5.5

 million with

$0.3

 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets based on contractual due dates. The loans are denominated in Euros and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates. The fair value of the debt approximates the carrying value at

December 28, 2019.

Lines of Credit

As a result of our acquisition of Kita, we assumed a series of revolving credit facilities with various financial institutions in Japan. The credit facilities renew monthly and provide Kita with access to working capital totaling up to

$8.8

 million. At

December 28, 2019,

total borrowings outstanding under the revolving lines of credit were

$3.2

 million. As these credit facility agreements renew monthly, they have been included in short-term borrowings in our consolidated balance sheet.

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

Our wholly owned Ismeca subsidiary has

one

available line of credit which provides it with borrowings of up to a total of

2.0

 million Swiss Francs. At

December 28, 2019,

and

December 29, 2018,

no

amounts were outstanding under this line of credit.