Note 6 - Employee Stock Benefit Plans

3 Months Ended

Mar. 27, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

6. Employee Stock Benefit Plans

Our 2005 Equity Incentive Plan (“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 stock units. We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of restricted stock units, and performance stock units with newly issued common shares. At March 27, 2021, there were 1,390,895 shares available for future equity grants under the 2005 Plan.

Stock Options

Stock options may be granted to employees, consultants and non-employee 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 vest and become exercisable in annual increments that range from one to four years from the date of grant. Stock options granted under the 2005 Plan have a maximum contractual term of ten years. In the three months of fiscal 2021 we did not grant any stock options and we issued 192,432 shares of our common stock on the exercise of options that were granted previously.

At March 27, 2021, we had 70,203 stock options exercisable and outstanding. These options had a weighted-average exercise price of $10.04 per share, an aggregate intrinsic value of approximately $2.2 million and the weighted average remaining contractual term was approximately 2.0 years.

Restricted Stock Units

We grant restricted stock units (“RSUs”) to certain employees, consultants and directors. RSUs vest in annual increments that range from one to four years from the date of grant. Prior to vesting, RSUs do not have dividend equivalent rights, do not have voting rights and the shares underlying the RSUs are not considered issued and outstanding. New shares of our common stock will be issued on the date the RSUs 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 at March 27, 2021.

In the first three months of fiscal 2021 we awarded 204,449 RSUs, we issued 409,690 shares of our common stock on vesting of previously granted awards and 4,406 shares were forfeited. At March 27, 2021, we had 1,205,125 RSUs outstanding with an aggregate intrinsic value of approximately $49.2 million and the weighted average remaining vesting period was approximately 1.6 years.

Performance Stock Units

We also grant performance stock units (“PSUs”) to senior executives as a part of our long-term equity compensation program. The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 25% to 200% of the number granted and is determined based on certain performance criteria over a three-year measurement period. The performance criteria for the PSUs are based on a combination of our annualized Total Shareholder Return (“TSR”) for the performance period and the relative performance of our TSR compared with the annualized TSR of certain peer companies or index for the performance period. PSUs granted vest 100% on the third anniversary of their grant, assuming achievement of the applicable performance criteria.

We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized ratably over the derived service period. New shares of our common stock will be issued on the date the PSUs vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees.

In the first three months of fiscal 2021, we awarded 92,719 PSUs, we issued 116,219 shares of our common stock on vesting of previously granted awards and 3,182 shares were forfeited. At March 27, 2021, we had 398,753 PSUs outstanding with an aggregate intrinsic value of approximately $16.3 million and the weighted average remaining vesting period was approximately 1.8 years.

Employee Stock Purchase Plan

The Cohu, Inc. 1997 Employee Stock Purchase Plan (“ESPP”) provides for the issuance of shares of our common stock. Under the ESPP, 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 three months of fiscal 2021, no shares of our common stock were sold to our employees under the ESPP leaving 668,704 shares available for future issuance.