Note 3 - Borrowings and Credit Agreements

3 Months Ended

Mar. 28, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

3. Borrowings and Credit Agreements

The following table is a summary of our borrowings as of

March 28, 2020

and

December 28, 2019 (

in thousands)

:

	March 28,			December 28,
	2020			2019
Bank Term Loan under Credit Agreement	$	345,625		$	346,500
Bank Term Loans-Kita		3,745			3,830
Bank Term Loan-Xcerra		1,392			1,475
Construction Loan-Rasco		6,588			5,476
Lines of Credit		3,244			3,195
Total debt		360,594			360,476
Less: financing fees and discount		(7,151	)		(7,441	)
Less: current portion		(6,566	)		(6,517	)
Total long-term debt	$	346,877		$	346,518

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 to finance a portion of the Xcerra acquisition. Loans under the Credit Facility amortize in equal quarterly installments of

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

March 28, 2020,

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

$338.5

 million and

$2.3

 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets at both

March 28, 2020

and

December 28, 2019.

As of

March 28, 2020,

the fair value of the debt was

$259.2

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

March 28, 2020

and is considered a Level

2

fair value measurement. 

Under the terms of the Credit Agreement, the lender

may

accelerate the payment terms upon the occurrence of certain events of default set forth therein, which include: the failure of Cohu to make timely payments of amounts due under the Credit Agreement, the failure of Cohu to adhere to the representations and covenants set forth in the Credit Agreement, the failure to provide notice of any event that causes a material adverse effect or to provide other required notices, upon the event that related collateral agreements become ineffective, upon the event that certain legal judgments are entered against Cohu, the insolvency of Cohu, or upon the change of control of Cohu. As of

March 28, 2020,

we believe

no

such events of default have occurred.

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

March 28, 2020,

the outstanding loan balance was

$3.7

 million and

$0.3

 million and

$0.4

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

March 28, 2020

and

December 28, 2019,

respectively. The fair value of the debt approximates the carrying value at

March 28, 2020.

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 ending in

March 2024.

At

March 28, 2020,

the outstanding loan balance was

$1.4

 million and

$0.3

 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets at both

March 28, 2020

and

December 28, 2019.

The fair value of the debt approximates the carrying value at

March 28, 2020.

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.

Through

March 28, 2020,

we drew

€2.5

million under the

second

facility, which is payable over

15

years at an annual interest rate of

1.05%.

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

December 2019

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

May 2020.

Principal repayments will be made over

15

years starting at the end of

May 2020.

As of

March 28, 2020,

€2.7

million had

not

been drawn under the

second

facility and is expected to be drawn in the

first

half of

2020.

At

March 28, 2020

and

December 28, 2019,

total outstanding borrowings under the Loan Facilities was

$6.6

 million and

$5.5

 million with

$0.4

 million and

$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, respectively. 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

March 28, 2020.

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

$8.9

million. At

March 28, 2020,

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 condensed consolidated balance sheets.

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

March 28, 2020

and

December 28, 2019

no

amounts were outstanding under this line of credit.