Note 3 - Borrowings and Credit Agreements

9 Months Ended

Sep. 24, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

3. Borrowings and Credit Agreements

The following table is a summary of our borrowings (in thousands):

	September 24,			December 25,
	2022			2021
Bank Term Loan under Credit Agreement	$	67,827		$	103,130
Bank Term Loans-Kita		2,304			3,070
Construction Loan- Cohu GmbH		7,962			10,045
Lines of Credit		1,744			3,059
Total debt		79,837			119,304
Less: financing fees and discount		(831	)		(1,514	)
Less: current portion (1)		(6,029	)		(14,397	)
Total long-term debt	$	72,977		$	103,393

(1) On January 28, 2022, Cohu prepaid $7.0 million of its term loan B debt facility and this $7.0 million has been classified as current installments of long-term debt as of December 25, 2021.

Credit Agreement

On October 1, 2018, we entered into a Credit Agreement providing for a $350.0 million Term Loan Credit Facility and borrowed the full amount to finance a portion of the Xcerra acquisition. Loans under the Term Loan 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 Term Loan Credit Facility must be repaid on or before October 1, 2025. The loans under the Term Loan Credit Facility bear interest, at Cohu’s option, at a floating annual rate equal to LIBOR plus a margin of 3.00%. At September 24, 2022, the outstanding loan balance, net of discount and deferred financing costs, was $67.0 million and $3.2 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 25, 2021, the outstanding loan balance, net of discount and deferred financing costs, was $101.6 million and $10.1 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. As of September 24, 2022, the fair value of the debt was $67.1 million. The measurement of the fair value of debt is based on the average of the bid and ask trading quotes as of September 24, 2022 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 September 24, 2022, we believe no such events of default have occurred.

During the first nine months of 2022, we prepaid $31.8 million in principal of our Term Loan Credit Facility for $31.7 million in cash. We accounted for the prepayment as a debt extinguishment, which resulted in a loss of $0.3 million reflected in other expense, net, in our condensed consolidated statement of income and a $0.4 million reduction in debt discounts and deferred financing costs in our condensed consolidated balance sheets. During the first nine months of 2021, we repurchased $200.0 million in principal of our Term Loan Credit Facility for $200.0 million in cash. This resulted in a loss of $3.4 million reflected in other expense in our condensed consolidated statement of income and a corresponding $3.4 million reduction in debt discounts and deferred financing costs in our condensed consolidated balance sheets. Approximately $67.8 million in principal of the Term Loan Credit Facility remains outstanding as of September 24, 2022.

Kita Term Loans

We have a series of term loans with Japanese financial institutions primarily related to the expansion of our 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 September 24, 2022, the outstanding loan balance was $2.3 million and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 25, 2021, the outstanding loan balance was $3.1 million and $0.2 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 September 24, 2022.

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 initially providing it with total borrowings of up to €10.1 million. In May 2022, one of the construction loans was amended, reducing total borrowings provided under the loans to up to €9.5 million. The Loan Facilities were utilized to finance the expansion of our facility in Kolbermoor, Germany and are secured by the land and the existing building on the site. The Loan Facilities bear interest at agreed upon rates based on the facility amounts as discussed below.

The first facility totaling €3.4 million has been fully drawn and is payable over 10 years at a fixed annual interest rate of 0.8%. Principal and interest payments are due each quarter over the duration of the facility ending in September 2029. The second facility totaling €5.2 million has been fully drawn and is payable over 15 years at an annual interest rate of 1.05%, which is fixed until April 2027. Principal and interest payments are due each month over the duration of the facility ending in January 2034. The third facility totaling €0.9 million has been fully drawn and is payable over 10 years at an annual interest rate of 1.2%. Principal and interest payments are due each month over the duration of the facility ending in May 2030.

At September 24, 2022, total outstanding borrowings under the Loan Facilities was $8.0 million with $0.9 million of the total outstanding balance being presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 25, 2021, total outstanding borrowings under the Loan Facilities was $10.0 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our condensed consolidated balance sheets. 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 September 24, 2022.

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 960 million Japanese Yen of which 250 million Japanese Yen is drawn. At September 24, 2022, total borrowings outstanding under the revolving lines of credit were $1.7 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 subsidiary in Switzerland has one available line of credit which provides borrowings of up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees. At September 24, 2022 and December 25, 2021 no amounts were outstanding under this line of credit.