Cohu Reports Third Quarter 2009 Operating Results

October 21, 2009 4:05 PM EDT

POWAY, Calif.--(BUSINESS WIRE)-- Cohu, Inc. (NASDAQ: COHU) today announced that net sales were $44.1 million for the third quarter ended September 26, 2009 compared to $48.0 million for the third quarter ended September 27, 2008 and $38.4 million for the second quarter ended June 27, 2009. The net loss for the third quarter of 2009 was $(71,000) or $(0.00) per share compared to net income of $37,000, or $0.00 per share for the third quarter of 2008 and a net loss of $(22.6) million or $(0.97) per share for the second quarter of 2009. As previously announced, the net loss for the second quarter ended June 27, 2009 includes a non-cash charge of $19.6 million, or $0.84 per share, for an increase in the valuation allowance against our deferred tax assets.

Net sales for the first nine months of 2009 were $119.1 million with a net loss of $(28.9) million or $(1.24) per share compared to net sales of $158.3 million with net income of $2.2 million or $0.09 per share for the first nine months of 2008.

On a non-GAAP basis, net income for the third quarter of 2009 was $1.7 million or $0.07 per share compared to net income of $1.2 million or $0.05 per share for the third quarter of 2008 and a net loss of $(1.4) million or $(0.06) per share for the second quarter of 2009. For the first nine months of 2009, net loss on a non-GAAP basis was $(4.4) million or $(0.19) per share compared to net income of $5.7 million or $0.24 per share in the previous year. These non-GAAP financial measures exclude charges and the related income tax effect for share-based compensation, the amortization of acquired intangible assets and the deferred tax asset valuation allowance.

Sales of semiconductor equipment accounted for 72% of third quarter 2009 sales. Microwave communications equipment and television cameras and related equipment contributed 20% and 8%, respectively, for the same period.

Orders were $55.0 million for the third quarter of 2009 and $45.6 million for the second quarter of 2009. Orders for semiconductor equipment were $46.9 million in the third quarter of 2009 compared to $33.3 million in the second quarter of 2009. Total consolidated backlog was $62.5 million at September 26, 2009 compared to $51.6 million at June 27, 2009. Cohu expects fourth quarter 2009 sales to be between $48 million and $53 million.

James A. Donahue, President and Chief Executive Officer, stated, "Cohu's financial results exceeded our expectations in the third quarter. Each of our three operating segments was profitable on a non-GAAP basis. Gross margin improved 440 basis points on a non-GAAP basis compared to the second quarter, as a result of higher sales, product mix and the results of cost reduction actions."

Donahue continued, "Net cash burn was $1.8 million, lower than our estimate of $5.5 million, due to improved collections and strong cash management."

Donahue concluded, "Third quarter orders for semiconductor equipment increased 41% compared to the second quarter. Amid growing indications that business conditions in the semiconductor industry are improving, customer forecasts strengthened as the quarter progressed and this trend has continued."

Cohu's Board of Directors approved a quarterly cash dividend of $0.06 per share payable on January 4, 2010 to shareholders of record on November 27, 2009. Cohu has paid consecutive quarterly cash dividends since 1977.

Use of Non-GAAP Financial Information:

Included within this press release are non-GAAP financial measures that supplement the Company's Condensed Consolidated Statements of Operations prepared under generally accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Company's actual results prepared under GAAP to exclude charges and the related income tax effect for share-based compensation, the amortization of acquired intangible assets and the deferred tax asset valuation allowance. Reconciliations of GAAP to non-GAAP amounts for the periods presented herein are provided in schedules accompanying this release and should be considered together with the Condensed Consolidated Statements of Operations.

These non-GAAP measures are not meant as a substitute for GAAP, but are included solely for informational and comparative purposes. The Company's management believes that this information can assist investors in evaluating the Company's operational trends, financial performance, and cash generating capacity. Management believes these non-GAAP measures allow investors to evaluate Cohu's financial performance using some of the same measures as management. However, the non-GAAP financial measures should not be regarded as a replacement for (or superior to) corresponding, similarly captioned, GAAP measures.

Forward Looking Statements:

Certain matters discussed in this release, including statements concerning Cohu's new products and expectations of business conditions, orders, sales, revenues and operating performance are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected or forecasted. Such risks and uncertainties include, but are not limited to, inventory, goodwill and other intangible asset write-downs; our ability to convert new products under development into production on a timely basis, support product development and meet customer delivery and acceptance requirements for next generation equipment; failure to obtain customer acceptance resulting in the inability to recognize revenue and accounts receivable collection problems; reduced demand for our products as a result of the global economic crisis; customer orders may be canceled or delayed; the concentration of our revenues from a limited number of customers; intense competition in the semiconductor test handler industry; our reliance on patents and intellectual property; compliance with U.S. export regulations; and the cyclical and unpredictable nature of capital expenditures by semiconductor manufacturers. These and other risks and uncertainties are discussed more fully in Cohu's filings with the Securities and Exchange Commission, including the most recently filed Form 10-K and Form 10-Q. Cohu assumes no obligation to update the information in this release.

About Cohu:

Cohu is a supplier of test handling, burn-in and thermal solutions used by the global semiconductor industry, microwave communications and closed circuit television equipment.

Cohu will be conducting their conference call on Wednesday, October 21, 2009 at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time. The call will be webcast at www.cohu.com. Replays of the call can be accessed at www.cohu.com.

For press releases and other information of interest to investors, please visit Cohu's website at www.cohu.com.

COHU, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

                   Three Months Ended (1)          Nine Months Ended (1)

                   September 26,   September 27,   September 26,   September 27,

                   2009            2008            2009            2008

Net sales          $ 44,062        $ 48,016        $ 119,068       $ 158,258

Cost and
expenses:

Cost of sales        27,845          30,458          83,128          101,453

Research and         8,284           9,140           24,022          29,582
development

Selling, general
and                  8,731           9,693           26,431          27,652
administrative

                     44,860          49,291          133,581         158,687

Loss from            (798   )        (1,275 )        (14,513 )       (429    )
operations

Interest and         302             1,391           1,128           4,282
other, net (2)

Income (loss)
before income        (496   )        116             (13,385 )       3,853
taxes

Income tax
provision            (425   )        79              15,553          1,690
(benefit) (3)

Net income (loss)  $ (71    )      $ 37            $ (28,938 )     $ 2,163

Income (loss) per
share:

Basic              $ (0.00  )      $ 0.00          $ (1.24   )     $ 0.09

Diluted            $ (0.00  )      $ 0.00          $ (1.24   )     $ 0.09

Weighted average
shares used in
computing income
(loss) per share
(4):

Basic                23,429          23,233          23,384          23,142

Diluted              23,429          23,477          23,384          23,380

(1) The three- and nine-month periods ended September 26, 2009 and September 27,
2008 each contain 13 weeks and 39 weeks, respectively. Total share-based
compensation recorded in the three-month period ended September 26, 2009 was
approximately $924,000 and is included in cost of sales ($94,000); research and
development ($351,000); and selling, general and administrative expense
($479,000). Total share-based compensation recorded in the nine-month period
ended September 27, 2009 was approximately $2,474,000 and is included in cost of
sales ($241,000); research and development ($825,000); and selling, general and
administrative expense ($1,408,000). Total share-based compensation recorded in
the three-month period ended September 26, 2008 was approximately $1,094,000 and
is included in cost of sales ($88,000); research and development ($331,000); and
selling, general and administrative expense ($675,000). Total share-based
compensation recorded in the nine-month period ended September 27, 2008 was
approximately $3,188,000 and is included in cost of sales ($266,000); research
and development ($951,000); and selling, general and administrative expense
($1,971,000).

(2) The nine-month period ended September 27, 2008 includes a short-term
investment loss of $350,000 recorded in the first fiscal quarter.

(3) During the second quarter of 2009, the Company recorded a charge of $19.6
million for an increase in the valuation allowance against deferred tax assets.

(4) For the three- and nine-month periods ended September 26, 2009, potentially
dilutive securities were excluded from the per share computations due to their
antidilutive effect.

COHU, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) (Unaudited)

                                                 September 26,   December 27,

                                                 2009            2008

Assets:

Current assets:

Cash and investments                             $ 87,273        $ 88,385

Accounts receivable                                34,898          31,945

Inventories                                        51,202          53,314

Deferred taxes and other                           10,049          25,620

Total current assets                               183,422         199,264

Property, plant & equipment, net                   38,541          39,429

Goodwill                                           62,492          60,820

Intangible assets, net                             37,776          40,993

Other assets                                       1,407           3,663

Total assets                                     $ 323,638       $ 344,169

Liabilities & Stockholders' Equity:

Current liabilities:

Deferred profit                                  $ 5,134         $ 4,434

Other current liabilities                          42,124          39,241

Total current liabilities                          47,258          43,675

Deferred taxes and other noncurrent liabilities    17,895          14,955

Stockholders' equity                               258,485         285,539

Total liabilities & stockholders' equity         $ 323,638       $ 344,169

COHU, INC.

Supplemental Reconciliation of GAAP Results to Non-GAAP Financial Measures
(Unaudited)

(in thousands, except per share amounts)

                                     Three Months Ended

                                     September 26,   September 27,   June 27,

                                     2009            2008            2009

Loss from operations - GAAP basis    $ (798  )       $ (1,275 )      $ (4,100  )
(a)

Non-GAAP adjustments:

Share-based compensation included
in (b):

Costs of goods sold                    94              88              89

Research and development               351             331             270

Selling, general and administrative    479             675             483

                                       924             1,094           842

Amortization of intangible assets
included in (c):

Costs of goods sold                    1,364           463             1,311

Research and development               -               -               -

Selling, general and administrative    216             48              208

                                       1,580           511             1,519

Income (loss) from operations -      $ 1,706         $ 330           $ (1,739  )
non-GAAP basis (d)

Net income (loss) - GAAP basis       $ (71   )       $ 37            $ (22,605 )

Non-GAAP adjustments (as scheduled     2,504           1,605           2,361
above)

Tax effect of non-GAAP adjustments     (756  )         (457   )        (682    )
(e)

Non-cash increase of valuation         -               -               19,551
allowance (f)

Net income (loss) - non-GAAP basis   $ 1,677         $ 1,185         $ (1,375  )

GAAP net loss per share - diluted    $ (0.00 )       $ 0.00          $ (0.97   )

Non-GAAP net income (loss) per       $ 0.07          $ 0.05          $ (0.06   )
share - diluted (g)

Management believes the presentation of these non-GAAP financial measures, when
taken together with the corresponding GAAP financial measures, provides
meaningful supplemental information regarding the Company's operating
performance. Our management uses these non-GAAP financial measures in assessing
the Company's operating results, as well as when planning, forecasting and
analyzing future periods and these non-GAAP measures allow investors to evaluate
the Company's financial performance using some of the same measures as
management. Management views share-based compensation as an expense that is
unrelated to the Company's operational performance as it does not require cash
payments and can vary in amount from period to period and the elimination of
amortization charges provides better comparability of pre and post-acquisition
operating results and to results of businesses utilizing internally developed
intangible assets. Additionally, management does not consider charges to the
deferred tax valuation allowance as related to the Company's operational
performance and, as such, has excluded them to provide a better understanding of
the company's underlying operational results and a more meaningful basis for
comparison with our historical and future results. However, the non-GAAP
financial measures should not be regarded as a replacement for corresponding,
similarly captioned, GAAP measures. The presentation of non-GAAP financial
measures above may not be comparable to similarly titled measures reported by
other companies and investors should be careful when comparing our non-GAAP
financial measures to those of other companies.

(a) (1.8)%, (2.7)% and (10.7)% of net sales, respectively.

(b) To eliminate compensation expense for employee stock options, restricted
stock units and our employee stock purchase plan.

(c) To eliminate the amortization of intangible assets acquired in the fiscal
2008 acquisition of Rasco, the fiscal 2007 acquisition of Tandberg Television
AVS GmbH and the fiscal 2006 acquisition of Unigen.

(d) 3.9%, 0.7% and (4.5)% of net sales, respectively.

(e) To adjust the provision (benefit) for income taxes related to the
adjustments described in notes (b) and (c) above based on applicable tax rates.

(f) To exclude the non-cash net impact on the tax provision pertaining to the
increase of the deferred asset valuation allowance.

(g) Computed using 23,631, 23,477 and 23,381 diluted shares outstanding for the
three-month periods ended September 26, 2009 September 27, 2008 and June 27,
2009, respectively. For the three-month period ended September 26, 2009 the
effect of dilutive securities was excluded from GAAP diluted common shares due
to the reported net loss under GAAP, but are included for non-GAAP diluted
common shares since the Company has non-GAAP net income.

COHU, INC.

Supplemental Reconciliation of GAAP Results to Non-GAAP Financial Measures
(Unaudited)

(in thousands, except per share amounts)

                                                 Nine Months Ended

                                                 September 26,   September 27,

                                                 2009            2008

Loss from operations - GAAP basis (a)            $ (14,513 )     $ (429   )

Non-GAAP adjustments:

Share-based compensation included in (b):

Costs of goods sold                                241             266

Research and development                           825             951

Selling, general and administrative                1,408           1,971

                                                   2,474           3,188

Amortization of intangible assets included in
(c):

Costs of goods sold                                3,978           1,611

Research and development                           -               -

Selling, general and administrative                631             145

                                                   4,609           1,756

Income (loss) from operations - non-GAAP basis   $ (7,430  )     $ 4,515
(d)

Net income (loss) - GAAP basis                   $ (28,938 )     $ 2,163

Non-GAAP adjustments (as scheduled above)          7,083           4,944

Tax effect of non-GAAP adjustments (e)             (2,143  )       (1,450 )

Non-cash increase of valuation allowance (f)       19,551          -

Net income (loss) - non-GAAP basis               $ (4,447  )     $ 5,657

GAAP net income (loss) per share - diluted       $ (1.24   )     $ 0.09

Non-GAAP net income (loss) per share - diluted   $ (0.19   )     $ 0.24
(g)

Management believes the presentation of these non-GAAP financial measures,
when taken together with the corresponding GAAP financial measures, provides
meaningful supplemental information regarding the Company's operating
performance. Our management uses these non-GAAP financial measures in
assessing the Company's operating results, as well as when planning,
forecasting and analyzing future periods and these non-GAAP measures allow
investors to evaluate the Company's financial performance using some of the
same measures as management. Management views share-based compensation as an
expense that is unrelated to the Company's operational performance as it does
not require cash payments and can vary in amount from period to period and the
elimination of amortization charges provides better comparability of pre and
post-acquisition operating results and to results of businesses utilizing
internally developed intangible assets. Additionally, management does not
consider charges to the deferred tax valuation allowance as related to the
Company's operational performance and, as such, has excluded them to provide a
better understanding of the company's underlying operational results and a
more meaningful basis for comparison with our historical and future results.
However, the non-GAAP financial measures should not be regarded as a
replacement for corresponding, similarly captioned, GAAP measures. The
presentation of non-GAAP financial measures above may not be comparable to
similarly titled measures reported by other companies and investors should be
careful when comparing our non-GAAP financial measures to those of other
companies.

(a) (12.2)% and (0.3)% of net sales, respectively.

(b) To eliminate compensation expense for employee stock options, restricted
stock units and our employee stock purchase plan.

(c) To eliminate the amortization of intangible assets acquired in the fiscal
2008 acquisition of Rasco, the fiscal 2007 acquisition of Tandberg Television
AVS GmbH, the fiscal 2006 acquisition of Unigen and the fiscal 2005
acquisition of KryoTech.

(d) (6.2)% and 2.9% of net sales, respectively.

(e) To adjust the provision (benefit) for income taxes related to the
adjustments described in notes (b) and (c) above based on applicable tax
rates.

(f) To exclude the non-cash net impact on the tax provision pertaining to the
increase of the deferred tax asset valuation allowance.

(g) Computed using number of GAAP diluted shares outstanding for each period
presented.

    Source: Cohu, Inc.

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