Note 3 - Borrowings and Credit Agreements

3 Months Ended

Mar. 27, 2021

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 27, 2021 and December 26, 2020 (in thousands):

	March 27,			December 26,
	2021			2020
Bank Term Loan under Credit Agreement	$	204,880		$	306,630
Bank Term Loans-Kita		3,395			3,662
Construction Loan- Cohu GmbH		10,298			9,902
Lines of Credit		5,018			5,314
Total debt		223,591			325,508
Less: financing fees and discount		(3,558	)		(5,568	)
Less: current portion		(8,851	)		(8,389	)
Total long-term debt	$	211,182		$	311,551

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 in terms of the time-based interest period, at a floating annual rate equal to the selected LIBOR interest period plus a margin of 3.00%. At March 27, 2021, the outstanding loan balance, net of discount and deferred financing costs, was $201.3 million and $2.7 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 26, 2020, the outstanding loan balance, net of discount and deferred financing costs, was $301.1 million and $2.4 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. As of March 27, 2021, the fair value of the debt was $204.1 million. The measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of March 27, 2021 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 27, 2021, we believe no such events of default have occurred.

During the first quarter of 2021, we repurchased $100.0 million in principal of our Term Loan Facility for $100.0 million in cash. This resulted in a loss of $1.8 million reflected in other expense in our condensed consolidated statement of operations and a corresponding $1.8 million reduction in debt discounts and deferred financing costs in our condensed consolidated balance sheets. After the repurchase, approximately $204.9 million in principal of the Term Loan Facility remains outstanding as of March 27, 2021.

Kita Term Loans

Our wholly owned Kita subsidiary has outstanding 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 27, 2021, the outstanding loan balance was $3.4 million and $0.3 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 26, 2020, the outstanding loan balance was $3.6 million and $0.3 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. The fair value of the debt approximates the carrying value at March 27, 2021.

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

Construction Loans

In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series of construction loans (“Loan Facilities”) with a German financial institution providing it with total borrowings of €10.1 million. The Loan Facilities have terms of 10 years and 15 years. 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 the facility amounts as discussed below.

In August 2019, the initial €3.4 million was drawn under the first facility, which is payable over 10 years at a fixed annual interest rate of 0.8%. Interest only payments 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 December 2021.

As of March 2021, the full €5.2 million was drawn under the second facility, which is payable over 15 years at an annual interest rate of 1.05%, which is fixed until April 2027. 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 27, 2021, we have drawn €0.4 million under the third facility, which is payable over 10 years at an annual interest rate of 1.2%, which is fixed until May 2030. Interest payments are required to be made each month starting in March 2021 with principal and interest payments due each month starting in the month of May 2021. Principal repayments will be made over 10 years starting at the end of May 2021.

At March 27, 2021 and December 26, 2020, total outstanding borrowings under the Loan Facilities was $10.3 million and $9.9 million with $0.8 million and $0.4 million of the total outstanding balance being presented as current installments of long-term debt in our condensed 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 27, 2021.

Lines of Credit

Our wholly owned Kita subsidiary has outstanding 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 March 27, 2021, total borrowings outstanding under the revolving lines of credit were $5.0 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, a portion of which is reserved for tax guarantees. At March 27, 2021 and December 26, 2020 no amounts were outstanding under this line of credit.