COHU INC - 10-Q Summary (Quarter Ended March 31, 1995)
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for COHU, INC., a Delaware corporation, for the period ended March 31, 1995. The company manufactures semiconductor test handling equipment, television cameras, and metal detection/microwave equipment. Its results are heavily dependent on the semiconductor industry, specifically through its subsidiaries Delta Design and Daymarc Corporation (acquired June 1994).
Key Financial Metrics
| Metric | Q1 1995 | Q1 1994 |
|---|---|---|
| Net Sales | $32,182,000 | $17,518,000 |
| Cost of Sales | $19,359,000 | $10,452,000 |
| Gross Margin | ~40% | ~40% |
| Operating Income | $5,656,000 | $2,562,000 |
| Net Income | $3,480,000 | $1,631,000 |
| Diluted EPS | $0.74 | $0.39 |
| Cash from Operations | $3,111,000 | ($816,000) |
| Cash and Equivalents (End) | $4,640,000 | $2,114,000 |
| Working Capital | $40,401,000 | N/A |
| Long-Term Debt | $0 | $1,400,000 |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 84% year-over-year. Semiconductor test handling equipment sales rose 129%, driven by a 67% increase in Delta Design's pick and place equipment and the inclusion of Daymarc Corporation's results.
- Profitability: Net income surged 113% to $3.48 million. Gross margins remained stable at approximately 40%.
- Expense Management: R&D expenses as a percentage of sales dropped to 7% from 9% in 1994. SG&A expenses decreased to 15% from 17% due to cost containment and lower commissions.
- Balance Sheet: The company paid off its $1.4 million long-term note payable. Accounts receivable increased by $2.55 million and inventory by $2.3 million in anticipation of future sales.
Outlook, Risks, and Management Commentary
- Industry Cyclicality: Management notes that the semiconductor industry is subject to substantial cyclical swings. While currently in a period of relative strength, the company cannot predict the duration of this trend.
- Backlog Warning: The company expects its backlog to decline concurrently with or in advance of the next period of weakness in worldwide semiconductor demand.
- Liquidity: The company has $3 million available under a short-term line of credit and anticipates that current working capital and profitable operations will meet normal requirements and capital expenditures of approximately $2 million for 1995.
- Acquisition Contingency: The acquisition of Daymarc includes potential performance-based consideration totaling approximately $8 million over the next four years.
Investor Verification Checklist
- Verify the sustainability of the 129% growth in semiconductor test handling equipment sales given the cyclical nature of the industry.
- Monitor the company's backlog levels as an early indicator of potential demand weakness.
- Review the status of the performance-based consideration ($8 million potential) related to the Daymarc acquisition.
- Confirm the utilization of the $3 million credit line and the company's ability to fund the projected $2 million in capital expenditures without additional financing.