Cohu Reports Fourth Quarter and Full Year 2010 Operating Results

Cohu, Inc. today reported fiscal 2010 fourth quarter net sales of $96.9 million and GAAP net income of $9.4 million or $0.39 per share. Net sales for the twelve months ended 2010 were $322.7 million and GAAP net income was $24.6 million or $1.02 per share.

The Company also reported non-GAAP results, with fourth quarter 2010 net income of $11.7 million or $0.48 per share and net income of $33.2 million or $1.38 per share for the twelve months ended 2010.

GAAP Results
			Q4 FY 2010		Q3 FY 2010		Q4 FY 2009
	Net sales		$ 96.9 million		$ 86.1 million		$ 52.2 million
	Net income		$ 9.4 million		$ 7.6 million		$ 0.8 million
	Income per share		$0.39		$0.32		$0.03
			12 Months 2010		12 Months 2009
	Net sales		$ 322.7 million		$ 171.3 million
	Net income (loss)		$ 24.6 million		$ (28.2) million
	Income (loss) per share		$1.02		$(1.20)
Non-GAAP Results
			Q4 FY 2010		Q3 FY 2010		Q4 FY 2009
	Non-GAAP net income		$ 11.7 million		$ 9.8 million		$ 2.5 million
	Non-GAAP income per share		$0.48		$0.41		$0.11
			12 Months 2010		12 Months 2009
	Non-GAAP net income (loss)		$ 33.2 million		$ (1.9) million
	Non-GAAP income (loss) per share		$1.38		$(0.08)

Sales of semiconductor equipment accounted for 79.0% of fiscal 2010 fourth quarter sales. Microwave communications equipment and video cameras and related equipment contributed 15.9% and 5.1%, respectively, for the same period.

Orders were $75.8 million for the fourth quarter of 2010 and $90.0 million for the third quarter of 2010. Orders for semiconductor equipment were $67.1 million in the fourth quarter of 2010 compared to $74.0 million in the third quarter of 2010. Total consolidated backlog was $99.6 million at December 25, 2010 compared to $120.8 million at September 25, 2010. Cohu expects first quarter 2011 sales to be between $85 million and $90 million.

James A. Donahue, Chairman, President and Chief Executive Officer stated, "Sales for the fourth quarter and fiscal 2010 set new records for Cohu and this was the fourth consecutive quarter of increased operating income and earnings per share, on a non-GAAP basis. For 2010, non-GAAP earnings per share increased to $1.38 from a loss of $0.08 in 2009. Sales for Cohu’s Semiconductor Equipment Group increased 128% year-over-year. Rasco achieved record sales, demonstrating the competitive strength of their product line and synergies that have been realized following our acquisition of the company in late 2008.”

Donahue concluded, “We are encouraged by last week’s report from SEMI, that showed December 2010 industry-wide orders for back-end semiconductor equipment increased sequentially for the first time since last July.”

Cohu's Board of Directors approved a quarterly cash dividend of $0.06 per share payable on April 22, 2011 to shareholders of record on March 8, 2011. 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, inventory step-up adjustments 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 results 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, 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; customer orders may be canceled or delayed; inventory, goodwill and other intangible asset write-downs; 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 video equipment.

Cohu will be conducting their conference call on Wednesday, January 26, 2011 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. Contact: Jeffrey D. Jones - Investor Relations (858) 848-8106

COHU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
		Three Months Ended (1)							Twelve Months Ended (1)
		December 25,			December 26,				December 25,			December 26,
		2010			2009				2010			2009
Net sales		$	96,902		$	52,193			$	322,667		$	171,261
Cost and expenses:
	Cost of sales		64,411			35,745				212,672			118,873
	Research and development		9,741			7,942				36,201			31,964
	Selling, general and administrative		12,252			9,088				44,117			35,519
			86,404			52,775				292,990			186,356
Income (loss) from operations			10,498			(582	)			29,677			(15,095	)
Interest and other, net			122			172				561			1,300
Income (loss) before income taxes			10,620			(410	)			30,238			(13,795	)
Income tax provision (benefit) (2)			1,192			(1,180	)			5,594			14,373
Net income (loss)		$	9,428		$	770			$	24,644		$	(28,168	)
Income (loss) per share:
	Basic	$	0.39		$	0.03			$	1.04		$	(1.20	)
	Diluted	$	0.39		$	0.03			$	1.02		$	(1.20	)
Weighted average shares used in
computing income (loss) per share (3):
	Basic		23,922			23,495				23,732			23,412
	Diluted		24,323			23,746				24,097			23,412

(1) The three-month periods ended December 25, 2010 and December 26, 2009 were each comprised of 13 weeks and both twelve-month periods are comprised of 52 weeks.

(2) The twelve-month period ended December 26, 2009 includes a provision of $20.6 million for an increase in the valuation allowance against deferred tax assets.

(3) For the twelve-month period ended December 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)
			December 25,			December 26,
			2010			2009
Assets:
Current assets:
	Cash and investments		$	98,175		$	84,906
	Accounts receivable			66,801			43,389
	Inventories			63,224			52,428
	Deferred taxes and other			12,017			12,827
		Total current assets		240,217			193,550
Property, plant & equipment, net				39,804			38,006
Goodwill				58,498			61,764
Intangible assets, net				26,523			35,483
Other assets				1,001			1,315
		Total assets	$	366,043		$	330,118
Liabilities & Stockholders’ Equity:
Current liabilities:
	Deferred profit		$	14,834		$	5,322
	Other current liabilities			56,700			48,631
		Total current liabilities		71,534			53,953
Deferred taxes and other noncurrent liabilities				19,784			18,916
Stockholders’ equity				274,725			257,249
		Total liabilities & stockholders’ equity	$	366,043		$	330,118

COHU, INC.
Supplemental Reconciliation of GAAP Results to Non-GAAP Financial Measures (Unaudited)
(in thousands, except per share amounts)
				Three Months Ended
				December 25,				September 25,				December 26,
				2010				2010				2009
Income (loss) from operations - GAAP basis (a)				$	10,498			$	8,781			$	(582	)
Non-GAAP adjustments:
	Share-based compensation included in (b):
		Cost of goods sold			64				84				106
		Research and development			334				321				320
		Selling, general and administrative			602				557				478
					1,000				962				904
	Amortization of intangible assets included in (c):
		Cost of goods sold			1,325				1,259				1,420
		Research and development			-				-				-
		Selling, general and administrative			210				200				226
					1,535				1,459				1,646
Income from operations - non-GAAP basis (d)				$	13,033			$	11,202			$	1,968
Net income - GAAP basis				$	9,428			$	7,611			$	770
	Non-GAAP adjustments (as scheduled above)				2,535				2,421				2,550
	Tax effect of non-GAAP adjustments (e)				(285	)			(261	)			(773	)
Net income - non-GAAP basis				$	11,678			$	9,771			$	2,547
GAAP net income per share - diluted				$	0.39			$	0.32			$	0.03
Non-GAAP net income per share - diluted (f)				$	0.48			$	0.41			$	0.11

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. 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) 10.8%, 10.2% and (1.1)% 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) 13.4%, 13.0% and 3.8% 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) Computed using number of GAAP diluted shares outstanding for each period presented.

COHU, INC.
Supplemental Reconciliation of GAAP Results to Non-GAAP Financial Measures (Unaudited)
(in thousands, except per share amounts)
			Twelve Months Ended
			December 25,				December 26,
			2010				2009
Income (loss) from operations - GAAP basis (a)			$	29,677			$	(15,095	)
Non-GAAP adjustments:
	Share-based compensation included in (b):
		Cost of goods sold		297				347
		Research and development		1,121				1,145
		Selling, general and administrative		2,125				1,886
				3,543				3,378
	Amortization of intangible assets included in (c):
		Cost of goods sold		5,229				5,398
		Research and development		-				-
		Selling, general and administrative		830				857
				6,059				6,255
	Inventory step-up included in costs of goods sold (d)			180				-
Income (loss) from operations - non-GAAP basis (e)			$	39,459			$	(5,462	)
Net income (loss) - GAAP basis			$	24,644			$	(28,168	)
	Non-GAAP adjustments (as scheduled above)			9,782				9,633
	Tax effect of non-GAAP adjustments (f)			(1,204	)			(2,916	)
	Non-cash increase of valuation allowance (g)			-				19,551
Net income (loss) - non-GAAP basis			$	33,222			$	(1,900	)
GAAP net income (loss) per share - diluted			$	1.02			$	(1.20	)
Non-GAAP net income (loss) per share - diluted (h)			$	1.38			$	(0.08	)

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. Management has excluded inventory step-up costs associated with our acquisition of Rasco, primarily because it is not reflective of our ongoing operating results, and is not used by management to assess the core profitability of our business operations. 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) 9.2% and (8.8)% 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) To eliminate the inventory step-up associated with certain semiconductor test systems sold.

(e) 12.2% and (3.2)% of net sales, respectively.

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

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

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