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Note 6 - Employee Benefit Plans | 12 Months Ended
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Dec. 27, 2025
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
6. | Employee Benefit Plans
Defined Contribution Retirement Plans – Cohu maintains a defined contribution 401(k) retirement savings plan covering all salaried and hourly U.S. employees. Participation is voluntary and participants’ contributions are based on their eligible compensation. Participants in the Cohu plan receive matching contributions of 50% up to 8% of salary contributed, subject to various statutory limits. In fiscal 2025, 2024 and 2023, we made matching contributions to the plan of $2.2 million, $2.3 million and $2.5 million, respectively. Defined Benefit Retirement Plans – Some of our employees located in Europe and Asia participate in defined benefit retirement plans. Our largest defined benefit retirement plan is the Ismeca Europe Semiconductor BVG Pension Plan which covers our employees in Switzerland (“the Swiss Plan”) and the following discussion relates solely to the Swiss Plan, all other plans are not material to our financial statements. Net periodic benefit cost of the Swiss Plan was as follows:
(in thousands) |  | 2025 |  |  | 2024 |  |  | 2023 |
Service cost |  | $ | 603 |  |  | $ | 643 |  |  | $ | 551 |
Interest cost |  |  | 244 |  |  |  | 357 |  |  |  | 510 |
Expected return on assets |  |  | (236 | ) |  |  | (283 | ) |  |  | (331 | )
Curtailment |  |  | (2,159 | ) |  |  | - |  |  |  | - |
Settlements |  |  | (1,813 | ) |  |  | (277 | ) |  |  | (177 | )
Net periodic costs |  | $ | (3,361 | ) |  | $ | 440 |  |  | $ | 553 |
The following table sets forth the projected benefit obligation, the fair value of plan assets, the funded status and the liability we have recorded in our consolidated balance sheets related to the Swiss Plan:
(in thousands) |  | 2025 |  |  | 2024 |
Change in projected benefit obligation: |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  | $ | (21,511 | ) |  | $ | (24,884 | )
Service cost |  |  | (603 | ) |  |  | (643 | )
Interest cost |  |  | (244 | ) |  |  | (357 | )
Actuarial gain (loss) |  |  | 2,705 |  |  |  | 79 |
Participant contributions |  |  | (698 | ) |  |  | (988 | )
Benefits paid |  |  | 271 |  |  |  | 599 |
Plan change |  |  | (18 | ) |  |  | 203 |
Settlements |  |  | 8,296 |  |  |  | 2,820 |
Plan Curtailment |  |  | 1,496 |  |  |  | - |
Foreign currency exchange adjustment |  |  | (956 | ) |  |  | 1,660 |
Benefit obligation at end of year |  |  | (11,262 | ) |  |  | (21,511 | )
Change in plan assets: |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  |  | 17,458 |  |  |  | 19,700 |
Return on assets, net of actuarial gain/loss |  |  | (203 | ) |  |  | 732 |
Employer contributions |  |  | 639 |  |  |  | 783 |
Participant contributions |  |  | 698 |  |  |  | 988 |
Benefits paid |  |  | (271 | ) |  |  | (599 | )
Settlements |  |  | (8,296 | ) |  |  | (2,820 | )
Foreign currency exchange adjustment |  |  | 2,084 |  |  |  | (1,326 | )
Fair value of plan assets at end of year |  |  | 12,109 |  |  |  | 17,458 |
Net asset (liability) at end of year |  | $ | 847 |  |  | $ | (4,053 | )
At December 27, 2025, and December 28, 2024, the Swiss Plan’s net liability is included in noncurrent accrued retirement benefits. Amounts recognized in accumulated other comprehensive income (loss) net of tax related to the Swiss Plan consisted of an unrecognized net actuarial gains totaling $3.9 million and $4.0 million at December 27, 2025, and December 28, 2024, respectively. The actuarial gains of $2.7 million and $0.1 million for the years ended December 27, 2025, and December 28, 2024, respectively, were due to assumption changes as well as plan experience. Weighted-average actuarial assumptions used to determine the projected benefit obligation under the Swiss Plan are as follows:
|  | 2025 |  |  | 2024 |
Discount rate |  |  | 1.3 | % |  |  | 1.1 | %
Compensation increase |  |  | 2.2 | % |  |  | 1.0 | %
Weighted-average assumptions used to determine net periodic benefit cost of the Swiss Plan are as follows:
|  | 2025 |  |  | 2024 |  |  | 2023 |
Discount rate |  |  | 1.3 | % |  |  | 1.1 | % |  |  | 1.5 | %
Rate of return on assets |  |  | 1.3 | % |  |  | 1.3 | % |  |  | 1.5 | %
Compensation increase |  |  | 2.2 | % |  |  | 1.0 | % |  |  | 2.0 | %
During 2026 employer and employee contributions to the Swiss Plan are expected to total $0.4 million. Estimated benefit payments are expected to be as follows: 2026 - $0.9 million; 2027 - $1.0 million; 2028 - $0.6 million; 2029 - $0.5 million; 2030 - $0.5 million; and $3.6 million thereafter through 2035. As is customary with Swiss pension plans, the assets of the plan are invested in a collective fund with multiple employers. We have no investment authority over the assets of the plan that are held and invested by a Swiss insurance company. Investment holdings are made with respect to Swiss laws and target allocations for plan assets are 45% debt securities and cash, 24% real estate investments, 13% alternative investments and 18% equity securities. The valuation of the collective fund assets as a whole is a Level 3 measurement; however, the individual investments of the fund are generally Level 1 (equity securities), Level 2 (fixed income) and Level 3 (real estate and alternative) investments. We determine the fair value of the plan assets based on information provided by the collective fund, through review of the collective fund’s annual financial statements. See Note 5, “Financial Instruments Measured at Fair Value” for additional information on the three-tier fair value hierarchy. During the second quarter of fiscal 2025, we implemented headcount reductions in Switzerland as part of the 2025 Restructuring Program which resulted in a curtailment of future benefits for affected employees. In accordance with ASC 715, during the fiscal year ended December 27, 2025, we recognized pension curtailment gains totaling $2.2 million. These gains reflect the reduction in the projected benefit obligation due to the termination of future service accruals for impacted plan participants and are included in the consolidated statements of operations. We maintain other defined benefit plans for employees located outside the U.S. for which the majority of the obligations and net periodic benefit cost were determined to be immaterial for all periods presented. Retiree Medical Benefits – We provide post-retirement health benefits to certain executives and directors under a noncontributory plan. The net periodic benefit cost was $0.1 million in fiscal 2025, 2024 and 2023. We fund benefits as costs are incurred and as a result there are no plan assets. The weighted average discount rate used in determining the accumulated post-retirement benefit obligation was 5.1% in fiscal 2025, 5.4% in fiscal 2024 and 4.7% in fiscal 2023. The annual rates of increase of the cost of health benefits were assumed to be 10.7% in fiscal 2026 for post-65 participants. This rate was then assumed to decrease 0.69% per year for participants that have reached the age of 65 to 4.5% in fiscal 2035 and remain level thereafter. Contributions to the post-retirement health benefit plan are expected to total $0.1 million in fiscal 2026. Estimated benefit payments are expected to be as follows: fiscal 2026 - $0.1 million; fiscal 2027 - $0.1 million; fiscal 2028 - $0.1 million; fiscal 2029 - $0.1 million; fiscal 2030 - $0.1 million and $0.7 million thereafter through fiscal 2035. The following table sets forth the post-retirement benefit obligation, funded status and the liability we have recorded in our consolidated balance sheets:
(in thousands) |  | 2025 |  |  | 2024 |
Accumulated benefit obligation at beginning of year |  | $ | (1,592 | ) |  | $ | (1,651 | )
Interest cost |  |  | (82 | ) |  |  | (75 | )
Actuarial (gain) loss |  |  | (211 | ) |  |  | 25 |
Benefits paid |  |  | 118 |  |  |  | 109 |
Accumulated benefit obligation at end of year |  |  | (1,767 | ) |  |  | (1,592 | )
Plan assets at end of year |  |  | - |  |  |  | - |
Funded status |  | $ | (1,767 | ) |  | $ | (1,592 | )
Deferred Compensation – The Cohu, Inc. Deferred Compensation Plan allows certain of our officers to defer a portion of their current compensation. We have purchased life insurance policies on the participants with Cohu as the named beneficiary. Participant contributions, distributions and investment earnings and losses are accumulated in a separate account for each participant. At December 27, 2025, the payroll liability to participants, included in accrued compensation and benefits in the consolidated balance sheet, was approximately $0.4 million and the cash surrender value of the related life insurance policies included in other current assets was approximately $1.5 million. At December 28, 2024, the liability totaled $0.6 million and the corresponding assets were $1.4 million. Employee Stock Benefit Plans – Our 2005 Equity Incentive Plan (“2005 Plan”) and our 1997 Employee Stock Purchase Plan are broad-based, long-term retention programs intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. Awards that may be granted under the 2005 Plan 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 or treasury shares. At December 27, 2025, there were 1,841,531 shares available for future equity grants under the 2005 Plan and 353,581 shares available for purchase under the ESPP. Employee Stock Purchase Plan The ESPP provides for the issuance of a maximum of 3,750,000 shares of our common stock. Under the ESPP, eligible employees may purchase shares of common stock through payroll deductions. The price paid for the common stock is equal to 85% of the fair market value of our common stock on specified dates. During the last three years we issued shares under the ESPP as follows: 2025 - 274,735; 2024 - 171,353 and 2023 - 146,829. Stock Options Under the 2005 Plan stock options may be granted to employees, consultants and outside directors to purchase a fixed number of shares of our common stock at prices not less than 100% of the fair market value at the date of grant. Options generally vest and become exercisable after one year or in four annual increments beginning one year after the grant date and expire ten years from the grant date. We have historically issued new shares of Cohu common stock upon share option exercise. During fiscal 2025, 2024 and 2023 no stock options were granted. At December 27, 2025 and December 28, 2024, we had no stock options outstanding. Restricted Stock Units Under our equity incentive plans, restricted stock units (“RSUs”) may be granted to employees, consultants and outside directors. Restricted stock units vest over a one-year, two-year, three-year or a four-year period from the date of grant. Prior to vesting, restricted stock units do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock units are not considered issued and outstanding. New shares of our common stock or treasury shares will be issued on the date the restricted stock units vest net of the 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 December 27, 2025. Restricted stock unit activity under our share-based compensation plans was as follows:
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  |  |  |  |  | Wt. Avg. |  |  |  |  |  |  | Wt. Avg. |  |  |  |  |  |  | Wt. Avg. |
(in thousands, except per share data) |  | Units |  |  | Fair Value |  |  | Units |  |  | Fair Value |  |  | Units |  |  | Fair Value |
Outstanding, beginning of year |  |  | 885 |  |  | $ | 32.34 |  |  |  | 884 |  |  | $ | 30.52 |  |  |  | 969 |  |  | $ | 24.55 |
Granted |  |  | 905 |  |  | $ | 18.50 |  |  |  | 411 |  |  | $ | 31.76 |  |  |  | 365 |  |  | $ | 36.66 |
Released |  |  | (374 | ) |  | $ | 32.99 |  |  |  | (366 | ) |  | $ | 27.33 |  |  |  | (428 | ) |  | $ | 22.33 |
Cancelled |  |  | (76 | ) |  | $ | 28.01 |  |  |  | (44 | ) |  | $ | 31.92 |  |  |  | (22 | ) |  | $ | 28.62 |
Outstanding, end of year |  |  | 1,340 |  |  | $ | 23.10 |  |  |  | 885 |  |  | $ | 32.34 |  |  |  | 884 |  |  | $ | 30.52 |
Equity-Based Performance Stock Units We grant performance stock units (“PSUs”) to certain 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 0% 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 majority of 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 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 over the requisite service period. New shares of our common stock or treasury shares 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. PSU activity under our share-based compensation plans was as follows:
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  |  |  |  |  | Wt. Avg. |  |  |  |  |  |  | Wt. Avg. |  |  |  |  |  |  | Wt. Avg. |
(in thousands, except per share data) |  | Units |  |  | Fair Value |  |  | Units |  |  | Fair Value |  |  | Units |  |  | Fair Value |
Outstanding, beginning of year |  |  | 539 |  |  | $ | 39.64 |  |  |  | 408 |  |  | $ | 45.65 |  |  |  | 403 |  |  | $ | 28.64 |
Granted |  |  | 397 |  |  | $ | 13.84 |  |  |  | 203 |  |  | $ | 33.78 |  |  |  | 270 |  |  | $ | 39.97 |
Released |  |  | (70 | ) |  | $ | 33.38 |  |  |  | (63 | ) |  | $ | 57.39 |  |  |  | (258 | ) |  | $ | 13.18 |
Cancelled |  |  | (119 | ) |  | $ | 35.94 |  |  |  | (9 | ) |  | $ | 57.39 |  |  |  | (7 | ) |  | $ | 42.52 |
Outstanding, end of year |  |  | 747 |  |  | $ | 27.05 |  |  |  | 539 |  |  | $ | 39.64 |  |  |  | 408 |  |  | $ | 45.65 |
Share-based Compensation – We estimate the fair value of our employee stock purchase plan using the Black-Scholes valuation model. The assumptions for the Black-Scholes model include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award. The estimated fair value of PSUs is determined on the grant date using the Monte Carlo simulation valuation model. The Monte Carlo simulation model incorporates assumptions for the risk-free interest rate, Cohu and the selected peer group price volatility, the correlation between Cohu and the selected index, and dividend yields. Share-based compensation expense related to restricted stock unit awards is calculated based on the market price of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock unit. Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020. All awards granted in fiscal 2025, 2024 and 2023 exclude the assumption of dividend payments. The following weighted average assumptions were used to value share-based awards granted:
Employee Stock Purchase Plan |  | 2025 |  |  | 2024 |  |  | 2023 |
Expected volatility |  |  | 41.6 | % |  |  | 35.5 | % |  |  | 36.3 | %
Risk-free interest rate |  |  | 4.5 | % |  |  | 5.3 | % |  |  | 4.5 | %
Expected term (years) |  |  | 0.5 |  |  |  | 0.5 |  |  |  | 0.5 |
Weighted-average grant date fair value per share |  | $ | 6.19 |  |  | $ | 7.49 |  |  | $ | 8.54 |
Reported share-based compensation is classified in the consolidated financial statements as follows:
(in thousands) |  | 2025 |  |  | 2024 |  |  | 2023 |
Cost of sales |  | $ | 1,396 |  |  | $ | 1,049 |  |  | $ | 845 |
Research and development |  |  | 5,456 |  |  |  | 3,566 |  |  |  | 3,394 |
Selling, general and administrative |  |  | 16,190 |  |  |  | 16,125 |  |  |  | 12,998 |
Share-based compensation |  |  | 23,042 |  |  |  | 20,740 |  |  |  | 17,237 |
Income tax benefit |  |  | 137 |  |  |  | (211 | ) |  |  | (1,770 | )
Total share-based compensation, net of tax |  | $ | 23,179 |  |  | $ | 20,529 |  |  | $ | 15,467 |
We account for forfeitures of plan-based awards as they occur. At December 27, 2025, we had approximately $25.1 million of pre-tax unrecognized compensation cost related to unvested restricted stock units and performance stock units which is expected to be recognized over a weighted-average period of approximately 1.7 years.

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