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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 2020
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                    .
 
Commission File No. 0-121
KULICKE AND SOFFA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter) 
Pennsylvania
23-1498399
(State or other jurisdiction of incorporation)
(IRS Employer
 
Identification No.)
 
23A Serangoon North Avenue 5, #01-01 K&S Corporate Headquarters, Singapore 554369
(Address of principal executive offices and Zip Code)
(215) 784-6000
(Registrant's telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, Without Par Value
KLIC
The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
 
 
 
 
 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  

As of April 24, 2020, there were 62,427,723 shares of the Registrant's Common Stock, no par value, outstanding.



KULICKE AND SOFFA INDUSTRIES, INC.
 
FORM 10 – Q
 
March 28, 2020
 Index
 
 
 
Page Number
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
Item 1.
FINANCIAL STATEMENTS (Unaudited)
 
 
 
 
 
Consolidated Condensed Balance Sheets as of March 28, 2020 and September 28, 2019
 
 
 
 
Consolidated Condensed Statements of Operations for the three and six months ended March 28, 2020 and March 30, 2019
 
 
 
 
Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and six months ended March 28, 2020 and March 30, 2019
 
 
 
 
Consolidated Condensed Statements of Changes in Shareholders' Equity for the three and six months ended March 28, 2020 and March 30, 2019
 
 
 
 
Consolidated Condensed Statements of Cash Flows for the six months ended March 28, 2020 and March 30, 2019
 
 
 
 
Notes to Consolidated Condensed Financial Statements
 
 
 
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
 
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 
 
Item 4.
CONTROLS AND PROCEDURES
 
 
 
PART II - OTHER INFORMATION
 
 
 
Item 1A.
RISK FACTORS
 
 
 
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 
 
Item 6.
EXHIBITS
 
 
 
 
SIGNATURES





PART I. - FINANCIAL INFORMATION
Item 1. – FINANCIAL STATEMENTS
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(in thousands)
 
As of
 
March 28, 2020
 
September 28, 2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
392,307

 
$
364,184

Short-term investments
248,000

 
229,000

Accounts and other receivable, net of allowance for doubtful accounts of $501 and $597, respectively
199,793

 
195,830

Inventories, net
106,178

 
89,308

Prepaid expenses and other current assets
24,149

 
15,429

     Total current assets
970,427

 
893,751

Property, plant and equipment, net
55,647

 
72,370

Operating right-of-use assets
22,692

 

Goodwill
55,946

 
55,691

Intangible assets, net
39,757

 
42,651

Deferred tax assets
6,975

 
6,409

Equity investments
7,427

 
6,250

Other assets
2,027

 
2,494

     TOTAL ASSETS
$
1,160,898

 
$
1,079,616

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Current liabilities:
 

 
 

Short-term debt
$
115,617

 
$
60,904

Accounts payable
50,530

 
36,711

Operating lease liabilities
5,236

 

Income tax payable
12,358

 
12,494

Accrued expenses and other current liabilities
78,296

 
64,533

     Total current liabilities
262,037

 
174,642

Financing obligation

 
14,207

Deferred tax liabilities
33,690

 
32,054

Income tax payable
74,469

 
80,290

Operating lease liabilities
18,550

 

Other liabilities
9,754

 
9,360

     TOTAL LIABILITIES
$
398,500

 
$
310,553

 
 
 
 
Commitments and contingent liabilities (Note 15)


 


 
 
 
 
Shareholders' equity:
 

 
 

Preferred stock, without par value: Authorized 5,000 shares; issued - none
$

 
$

Common stock, without par value: Authorized 200,000 shares; issued 85,448 and 85,364, respectively; outstanding 62,997 and 63,172 shares, respectively
532,912

 
533,590

Treasury stock, at cost, 22,451 and 22,192 shares, respectively
(365,095
)
 
(349,212
)
Retained earnings
604,013

 
594,625

Accumulated other comprehensive loss
(9,432
)
 
(9,940
)
     TOTAL SHAREHOLDERS' EQUITY
$
762,398

 
$
769,063

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
1,160,898

 
$
1,079,616

The accompanying notes are an integral part of these consolidated condensed financial statements.


1


KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
 
Three months ended
 
Six months ended
 
March 28, 2020
 
March 30, 2019
 
March 28, 2020
 
March 30, 2019
Net revenue
$
150,741

 
$
115,908

 
$
295,038

 
$
273,116

Cost of sales
81,438

 
60,335

 
155,371

 
142,744

Gross profit
69,303

 
55,573

 
139,667

 
130,372

Selling, general and administrative
29,160

 
28,461

 
57,818

 
58,902

Research and development
29,067

 
29,577

 
57,359

 
59,380

Operating expenses
58,227

 
58,038

 
115,177

 
118,282

Income/(loss) from operations
11,076

 
(2,465
)
 
24,490

 
12,090

Interest income
2,675

 
3,865

 
5,514

 
7,691

Interest expense
(661
)
 
(254
)
 
(1,244
)
 
(505
)
Income before income taxes
13,090

 
1,146

 
28,760

 
19,276

Provision for income taxes
1,162

 
4,672

 
3,295

 
15,242

Share of results of equity-method investee, net of tax
40

 
29

 
100

 
72

Net income/(loss)
$
11,888

 
$
(3,555
)
 
$
25,365

 
$
3,962

 
 
 
 
 
 
 
 
Net income/(loss) per share:
 

 
 

 
 

 
 

Basic
$
0.19

 
$
(0.05
)
 
$
0.40

 
$
0.06

Diluted
$
0.19

 
$
(0.05
)
 
$
0.39

 
$
0.06

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 

 
 

 
 

 
 

Basic
63,679

 
65,930

 
63,675

 
66,530

Diluted
64,219

 
65,930

 
64,266

 
67,344

 The accompanying notes are an integral part of these consolidated condensed financial statements.
 


2


KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in thousands)
 
Three months ended
 
Six months ended
 
March 28, 2020
 
March 30, 2019
 
March 28, 2020
 
March 30, 2019
Net income/(loss)
$
11,888

 
$
(3,555
)
 
$
25,365

 
$
3,962

Other comprehensive (loss)/income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(835
)
 
(409
)
 
1,679

 
(1,388
)
Unrecognized actuarial (loss)/gain on pension plan, net of tax
(41
)
 
18

 
(66
)
 
22

 
(876
)
 
(391
)
 
1,613

 
(1,366
)
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Unrealized (loss)/gain on derivative instruments, net of tax
(1,981
)
 
161

 
(1,374
)
 
88

Reclassification adjustment for loss on derivative instruments recognized, net of tax
72

 
267

 
269

 
1,132

Net (decrease)/increase from derivatives designated as hedging instruments, net of tax
(1,909
)
 
428

 
(1,105
)
 
1,220

 
 
 
 
 
 
 
 
Total other comprehensive (loss)/gain
(2,785
)
 
37

 
508

 
(146
)
 
 
 
 
 
 
 
 
Comprehensive income/(loss)
$
9,103

 
$
(3,518
)
 
$
25,873

 
$
3,816

The accompanying notes are an integral part of these consolidated condensed financial statements.













3


KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(in thousands)
 
 Common Stock
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Shareholders' Equity
 
Shares
 
Amount
 
 
 
 
Balances as of September 28, 2019
63,173

 
$
533,590

 
$
(349,212
)
 
$
594,625

 
$
(9,940
)
 
$
769,063

Issuance of stock for services rendered
9

 
131

 
91

 

 

 
222

Repurchase of common stock
(224
)
 

 
(5,369
)
 

 

 
(5,369
)
Issuance of shares for equity-based compensation
800

 
(7,653
)
 
7,653

 

 

 

Equity-based compensation

 
3,387

 

 

 

 
3,387

Cumulative effect of accounting changes

 

 

 
(769
)
 

 
(769
)
Cash dividend declared

 

 

 
(7,651
)
 

 
(7,651
)
Components of comprehensive income:
 
 
 
 
 
 
 
 
 
 

Net income

 

 

 
13,477

 

 
13,477

Other comprehensive income

 

 

 

 
3,293

 
3,293

Total comprehensive income

 

 

 
13,477

 
3,293

 
16,770

Balances as of December 28, 2019
63,758

 
$
529,455

 
$
(346,837
)
 
$
599,682

 
$
(6,647
)
 
$
775,653

Issuance of stock for services rendered
8

 
142

 
79

 

 

 
221

Repurchase of common stock
(872
)
 

 
(18,522
)
 

 

 
(18,522
)
Issuance of shares for equity-based compensation
103

 
(185
)
 
185

 

 

 

Equity-based compensation

 
3,500

 

 

 

 
3,500

Cash dividend declared

 

 

 
(7,557
)
 

 
(7,557
)
Components of comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
11,888

 

 
11,888

Other comprehensive loss

 

 

 

 
(2,785
)
 
(2,785
)
Total comprehensive income/(loss)

 

 

 
11,888

 
(2,785
)
 
9,103

Balances as of March 28, 2020
62,997

 
$
532,912

 
$
(365,095
)
 
$
604,013

 
$
(9,432
)
 
$
762,398





4


 
 Common Stock
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Shareholders' Equity
 
Shares
 
Amount
 
 
 
 
Balances as of September 29, 2018
67,143

 
$
519,244

 
$
(248,664
)
 
$
613,529

 
$
(3,902
)
 
$
880,207

Issuance of stock for services rendered
8

 
195

 

 

 

 
195

Repurchase of common stock
(1,233
)
 

 
(25,485
)
 

 

 
(25,485
)
Issuance of shares for equity-based compensation
642

 

 

 

 

 

Equity-based compensation

 
3,678

 

 

 

 
3,678

Cumulative effect of accounting changes

 

 

 
534

 

 
534

Cash dividend declared

 

 

 
(8,055
)
 

 
(8,055
)
Components of comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
7,517

 

 
7,517

Other comprehensive loss

 

 

 

 
(182
)
 
(182
)
Total comprehensive income/(loss)

 

 

 
7,517

 
(182
)
 
7,335

Balances as of December 29, 2018
66,560

 
$
523,117

 
$
(274,149
)
 
$
613,525

 
$
(4,084
)
 
$
858,409

Issuance of stock for services rendered
10

 
195

 

 

 

 
195

Repurchase of common stock
(1,225
)
 

 
(26,922
)
 

 

 
(26,922
)
Issuance of shares for equity-based compensation
4

 

 

 

 

 

Equity-based compensation

 
3,107

 

 

 

 
3,107

Cash dividend declared

 

 

 
(8,057
)
 

 
(8,057
)
Components of comprehensive (loss)/income:
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 

 
(3,555
)
 

 
(3,555
)
Other comprehensive income

 

 

 

 
37

 
37

Total comprehensive (loss)/income

 

 

 
(3,555
)
 
37

 
(3,518
)
Balances as of March 30, 2019
65,349

 
$
526,419

 
$
(301,071
)
 
$
601,913

 
$
(4,047
)
 
$
823,214


 The accompanying notes are an integral part of these consolidated condensed financial statements.



5


KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
 
Six months ended
 
March 28, 2020
 
March 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income
$
25,365

 
$
3,962

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
9,528

 
10,006

Equity-based compensation and employee benefits
7,330

 
7,175

Adjustment for doubtful accounts
(95
)
 
(385
)
Adjustment for inventory valuation
2,176

 
1,164

Deferred income taxes
1,081

 
(665
)
Loss on disposal of property, plant and equipment
808

 
4

Unrealized foreign currency translation
842

 
270

Share of results of equity-method investee
100

 
72

Changes in operating assets and liabilities:
 

 
 

Accounts and other receivable
(3,821
)
 
104,898

Inventories
(19,013
)
 
11,421

Prepaid expenses and other current assets
(8,721
)
 
1,235

Accounts payable, accrued expenses and other current liabilities
29,645

 
(54,850
)
Income tax payable
(5,958
)
 
(1,341
)
Other, net
(184
)
 
369

Net cash provided by operating activities
39,083

 
83,335

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property, plant and equipment
(4,691
)
 
(6,311
)
Purchase of equity investments
(1,288
)
 
(5,000
)
Purchase of short-term investments
(169,000
)
 
(340,000
)
Maturity of short-term investments
150,000

 
425,000

Net cash (used in)/provided by investing activities
(24,979
)
 
73,689

 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payment on debts

 
(378
)
Payment for finance lease
(28
)
 

Repurchase of common stock
(25,194
)
 
(52,606
)
Common stock cash dividends paid
(15,233
)
 
(16,112
)
Proceeds from short-term debt
54,713

 
10,004

Net cash provided by/(used in) financing activities
14,258

 
(59,092
)
Effect of exchange rate changes on cash and cash equivalents
(239
)
 
257

Changes in cash, cash equivalents and restricted cash
28,123

 
98,189

Cash, cash equivalents and restricted cash at beginning of period
364,184

 
321,148

Cash, cash equivalents and restricted cash at end of period
$
392,307

 
$
419,337

 
 
 
 
CASH PAID FOR:
 

 
 

Interest
$
26

 
$
505

Income taxes, net of refunds
$
8,987

 
$
16,689

The accompanying notes are an integral part of these consolidated condensed financial statements. 


6

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited



NOTE 1: BASIS OF PRESENTATION
These consolidated condensed financial statements include the accounts of Kulicke and Soffa Industries, Inc. and its subsidiaries (the “Company”), with appropriate elimination of intercompany balances and transactions.
The interim consolidated condensed financial statements are unaudited and, in management's opinion, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair statement of results for these interim periods. The interim consolidated condensed financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 2019, filed with the Securities and Exchange Commission, which includes Consolidated Balance Sheets as of September 28, 2019 and September 29, 2018, and the related Consolidated Statements of Operations, Statements of Other Comprehensive Income, Changes in Shareholders' Equity and Cash Flows for each of the years in the three-year period ended September 28, 2019. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full year.
Fiscal Year    
Each of the Company's first three fiscal quarters end on the Saturday that is 13 weeks after the end of the immediately preceding fiscal quarter. The fourth quarter of each fiscal year ends on the Saturday closest to September 30. Fiscal 2020 quarters end on December 28, 2019, March 28, 2020, June 27, 2020 and October 3, 2020. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. Fiscal 2019 quarters ended on December 29, 2018, March 30, 2019, June 29, 2019 and September 28, 2019.
Nature of Business
The Company designs, manufactures and sells capital equipment and tools as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. The Company's operating results depend upon the capital and operating expenditures of semiconductor device manufacturers, integrated device manufacturers, outsourced semiconductor assembly and test providers (“OSATs”), and other electronics manufacturers including automotive electronics suppliers, worldwide which, in turn, depend on the current and anticipated market demand for semiconductors and products utilizing semiconductors. The semiconductor industry is highly volatile and experiences downturns and slowdowns which can have a severe negative effect on the semiconductor industry's demand for semiconductor capital equipment, including assembly equipment manufactured and sold by the Company and, to a lesser extent, tools, including those sold by the Company. These downturns and slowdowns have in the past adversely affected the Company's operating results. The Company believes such volatility will continue to characterize the industry and the Company's operations in the future.
Use of Estimates
The preparation of consolidated condensed financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of contingent assets and liabilities as of the date of the consolidated condensed financial statements. On an ongoing basis, management evaluates estimates, including but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory, carrying value and lives of fixed assets, goodwill and intangible assets, the valuation estimates and assessment of impairment and observable price adjustments, income taxes, equity-based compensation expense, and warranties. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable. As a result, management makes judgments regarding the carrying values of the Company's assets and liabilities that are not readily apparent from other sources. Authoritative pronouncements, historical experience and assumptions also are used as the basis for making estimates, and on an ongoing basis, management evaluates these estimates. Actual results may differ from these estimates.
Due to the Coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of March 28, 2020. While there was not a material impact to our consolidated financial statements as of and for the quarter ended March 28, 2020, these estimates may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 that could result in material impacts to our consolidated financial statements in future reporting periods.


7

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Vulnerability to Certain Concentrations
Financial instruments which may subject the Company to concentrations of credit risk as of March 28, 2020 and September 28, 2019 consisted primarily of trade receivables. The Company manages credit risk associated with investments by investing its excess cash in highly rated debt instruments of the U.S. government and its agencies, financial institutions, and corporations. The Company has established investment guidelines relative to diversification and maturities designed to maintain safety and liquidity. These guidelines are periodically reviewed and modified as appropriate. The Company does not have any exposure to sub-prime financial instruments or auction rate securities.
The Company's trade receivables result primarily from the sale of semiconductor equipment, related accessories and replacement parts, and tools to a relatively small number of large manufacturers in a highly concentrated industry. Write-offs of uncollectible accounts have historically not been significant. The Company actively monitors its customers' financial strength to reduce the risk of loss.
The Company's products are complex and require raw materials, components and subassemblies having a high degree of reliability, accuracy and performance. The Company relies on subcontractors to manufacture many of these components and subassemblies and it relies on sole source suppliers for some important components and raw material inventory.
Foreign Currency Translation and Remeasurement
The majority of the Company's business is transacted in U.S. dollars; however, the functional currencies of some of the Company's subsidiaries are their local currencies. In accordance with ASC No. 830, Foreign Currency Matters (“ASC 830”), for a subsidiary of the Company that has a functional currency other than the U.S. dollar, gains and losses resulting from the translation of the functional currency into U.S. dollars for financial statement presentation are not included in determining net income, but are accumulated in the cumulative translation adjustment account as a separate component of shareholders' equity (accumulated other comprehensive income / (loss)). Under ASC 830, cumulative translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. Gains and losses resulting from foreign currency transactions are included in the determination of net income.
The Company's operations are exposed to changes in foreign currency exchange rates due to transactions denominated in currencies other than the location's functional currency. The Company is also exposed to foreign currency fluctuations that impact the remeasurement of net monetary assets of those operations whose functional currency, the U.S. dollar, differs from their respective local currencies, most notably in Israel, Singapore and Switzerland. In addition to net monetary remeasurement, the Company has exposures related to the translation of subsidiary financial statements from their functional currency, the local currency, into its reporting currency, the U.S. dollar, most notably in the Netherlands, China, Taiwan, Japan and Germany. The Company's U.S. operations also have foreign currency exposure due to net monetary assets denominated in currencies other than the U.S. dollar.
Derivative Financial Instruments
The Company’s primary objective for holding derivative financial instruments is to manage the fluctuation in foreign exchange rates and accordingly is not speculative in nature. The Company’s international operations are exposed to changes in foreign exchange rates as described above. The Company has established a program to monitor the forecasted transaction currency risk to protect against foreign exchange rate volatility. Generally, the Company uses foreign exchange forward contracts in these hedging programs. These instruments, which have maturities of up to twelve months, are recorded at fair value and are included in prepaid expenses and other current assets, or accrued expenses and other current liabilities.
Our accounting policy for derivative financial instruments is based on whether they meet the criteria for designation as a cash flow hedge. A designated hedge with exposure to variability in the functional currency equivalent of the future foreign currency cash flows of a forecasted transaction is referred to as a cash flow hedge. The criteria for designating a derivative as a cash flow hedge include the assessment of the instrument’s effectiveness in risk reduction, matching of the derivative instrument to its underlying transaction, and the assessment of the probability that the underlying transaction will occur. For derivatives with cash flow hedge accounting designation, we report the after-tax gain / (loss) from the effective portion of the hedge as a component of accumulated other comprehensive income / (loss) and reclassify it into earnings in the same period in which the hedged transaction affects earnings and in the same line item on the Consolidated Condensed Statement of Operations as the impact of the hedged transaction. Derivatives that we designate as cash flow hedges are classified in the Consolidated Condensed Statement of Cash Flows in the same section as the underlying item, primarily within cash flows from operating activities.
The hedge effectiveness of these derivative instruments is evaluated by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the fair value of the forecasted cash flows of the hedged item.


8

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


If a cash flow hedge is discontinued because it is no longer probable that the original hedged transaction will occur as previously anticipated, the cumulative unrealized gain or loss on the related derivative is reclassified from accumulated other comprehensive income / (loss) into earnings. Subsequent gain / (loss) on the related derivative instrument is recognized into earnings in each period until the instrument matures, is terminated, is re-designated as a qualified cash flow hedge, or is sold. Ineffective portions of cash flow hedges, as well as amounts excluded from the assessment of effectiveness, are recognized in earnings.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash equivalents are measured at fair value based on level one measurement, or quoted market prices, as defined by ASC No. 820, Fair Value Measurements and Disclosures.
Equity Investments
The Company invests in equity securities in companies to promote business and strategic objectives. Equity investments are measured and recorded as follows:
Equity method investments are equity securities in investees that provide the Company with the ability to exercise significant influence in which it lacks a controlling financial interest. Our proportionate share of the income or loss is recognized on a one-quarter lag and is recorded as share of results of equity-method investee, net of tax.
Non-marketable equity securities are equity securities without readily determinable fair value that are measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from its customers' failure to make required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. If global or regional economic conditions deteriorate or political conditions were to change in some of the countries where the Company does business, it could have a significant impact on the results of operations, and the Company's ability to realize the full value of its accounts receivable.
Inventories
Inventories are stated at the lower of cost (on a first-in first-out basis) or net realizable value. The Company generally provides reserves for obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as 18 months forecasted future consumption for equipment, 24 months forecasted future consumption for spare parts, and 12 months forecasted future consumption for tools. Forecasted consumption is based upon internal projections, historical sales volumes, customer order activity and a review of consumable inventory levels at customers' facilities. The Company communicates forecasts of its future consumption to its suppliers and adjusts commitments to those suppliers accordingly. If required, the Company reserves the difference between the carrying value of its inventory and the lower of cost or net realizable value, based upon projections about future consumption, and market conditions. If actual market conditions are less favorable than projections, additional inventory reserves may be required.
Inventory reserve provision for certain subsidiaries is determined based on management's estimate of future consumption for equipment and spare parts. This estimate is based on historical sales volumes, internal projections and market developments and trends.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. The cost of additions and those improvements which increase the capacity or lengthen the useful lives of assets are capitalized, while repair and maintenance costs are expensed as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives as follows: buildings 25 years; machinery, equipment, furniture and fittings 3 to 10 years; toolings 1 year; and leasehold improvements are based on the shorter of the life of lease or life of asset. Purchased computer software costs related to business and financial systems are amortized over a five-year period on a straight-line basis. Land is not depreciated.
Valuation of Long-Lived Assets
In accordance with ASC No. 360, Property, Plant & Equipment ("ASC 360"), the Company's property, plant and equipment is tested for impairment based on undiscounted cash flows when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. ASC 360 also provides a single accounting model for long-lived assets


9

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


to be disposed of by sale and establishes additional criteria that would have to be met to classify an asset as held for sale. The carrying amount of an asset or asset group is not recoverable to the extent it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Estimates of future cash flows used to test the recoverability of a long-lived asset or asset group must incorporate the entity's own assumptions about its use of the asset or asset group and must factor in all available evidence.
ASC 360 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Such events include significant under-performance relative to historical internal forecasts or projected future operating results; significant changes in the manner of use of the assets; significant negative industry or economic trends; or significant changes in market capitalization. During the three and six months ended March 28, 2020, no "triggering" events occurred.
Accounting for Impairment of Goodwill
ASC No. 350, Intangibles-Goodwill and Other ("ASC 350") requires goodwill and other intangible assets with indefinite lives to be reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment. We assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, a company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the goodwill impairment test. Following the Company's early adoption of ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment in the third quarter of fiscal 2017, the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment (i.e. step 2 of the goodwill impairment test) was eliminated. Accordingly, the Company's impairment test is performed by comparing the fair value of a reporting unit with its carrying value, and determining if the carrying amount exceeds its fair value.
As part of the annual evaluation, the Company performs an impairment test of its goodwill in the fourth quarter of each fiscal year to coincide with the completion of its annual forecasting and refreshing of its business outlook processes. On an ongoing basis, the Company monitors if a “triggering” event has occurred that may have the effect of reducing the fair value of a reporting unit below its respective carrying value. Adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in a non-cash impairment charge in the future.
Impairment assessments inherently involve judgment as to the assumptions made about the expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact the assumptions as to prices, costs, growth rates or other factors that may result in changes in the estimates of future cash flows. Although the Company believes the assumptions that it has used in testing for impairment are reasonable, significant changes in any one of the assumptions could produce a significantly different result. Indicators of potential impairment may lead the Company to perform interim goodwill impairment assessments, including significant and unforeseen customer losses, a significant adverse change in legal factors or in the business climate, a significant adverse action or assessment by a regulator, a significant stock price decline or unanticipated competition.
For further information on goodwill and other intangible assets, see Note 3 below.
Revenue Recognition
In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.
The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon resale of the products.
Our business is subject to contingencies related to customer orders, including:
Right of Return: A large portion of our revenue comes from the sale of equipment used in the semiconductor assembly process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally maintained at low stock levels at customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.


10

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Warranties: Our equipment is generally shipped with a one-year warranty against manufacturing defects. We establish reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management's estimate of future expenses, including product parts replacement, freight charges and labor costs expected to be incurred to correct product failures during the warranty period.
Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in accordance with customer specifications or when installed at the customer's facility. In such cases, if the terms of acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon shipment. If the terms of acceptance are satisfied at our customers' facilities, the revenue for the equipment will not be recognized until acceptance, which is typically obtained after installation and testing, is received from the customer.
Service revenue is generally recognized over time as the services are performed. For the three and six months ended March 28, 2020, and March 30, 2019, the service revenue is not material.
The Company measures revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Any variable consideration such as sales incentives are recognized as a reduction of net revenue at the time of revenue recognition.
The length of time between invoicing and payment is not significant under our payment terms. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component.
Shipping and handling costs billed to customers are recognized in net revenue. Shipping and handling costs paid by the Company are included in cost of sales.
Research and Development
The Company charges research and development costs associated with the development of new products to expense when incurred. In certain circumstances, pre-production machines that the Company intends to sell are carried as inventory until sold.
Income Taxes
In accordance with ASC No. 740, Income Taxes, deferred income taxes are determined using the balance sheet method. The Company records a valuation allowance to reduce its deferred tax assets to the amount expected, on a more likely than not basis, to be realized. While the Company has considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, if it were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to deferred tax assets would increase income in the period when such determination is made. Likewise, should the Company determine it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to deferred tax assets would decrease income in the period when such determination is made.
The Company determines the amount of unrecognized tax benefit with respect to uncertain tax positions taken or expected to be
taken on its income tax returns in accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”). Under ASC 740.10, the Company utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition, requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon examination solely based on its technical merit. Step two, or measurement, is based on the largest amount of benefit, which is more likely than not to be realized on settlement with the taxing authority, including resolution of related appeals or litigation processes, if any.
Equity-Based Compensation
The Company accounts for equity-based compensation under the provisions of ASC No. 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 requires the recognition of the fair value of the equity-based compensation in net income. Compensation expense associated with Relative TSR Performance Share Units is determined using a Monte-Carlo valuation model, and compensation expense associated with time-based and Special/Growth Performance Share Units is determined based on the number of shares granted and the fair value on the date of grant. See Note 10 for a summary of the terms of these performance-based awards. The fair value of the Company's stock option awards is estimated using a Black-Scholes option valuation model. The fair value of equity-based awards is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of ASC 718.


11

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Earnings per Share
Earnings per share (“EPS”) are calculated in accordance with ASC No. 260, Earnings per Share. Basic EPS include only the weighted average number of common shares outstanding during the period. Diluted EPS include the weighted average number of common shares and the dilutive effect of stock options, restricted stock awards, performance share units and restricted share units outstanding during the period, when such instruments are dilutive.
Accounting for Business Acquisitions
The Company accounts for business acquisitions in accordance with ASC No. 805, Business Combinations. The fair value of the net assets acquired and the results of operations of the acquired businesses are included in the Unaudited Consolidated Condensed Financial Statements from the acquisition date forward. The Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property, plant and equipment, deferred revenue, intangible assets and related deferred income taxes, useful lives of property, plant and equipment, and amortizable lives of acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change materially between the preliminary allocation and end of the purchase price allocation period.
Restructuring Charges
Restructuring charges may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs due to exit activities. We recognize voluntary termination benefits when an employee accepts the offered benefit arrangement. We recognize involuntary severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. If the former, we recognize the charges once they are probable and the amounts are estimable. If the latter, we recognize the charges once the benefits have been communicated to employees.
Recent Accounting Pronouncements
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP.
Subsequently in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, provides additional information concerning the new leases standard in ASU 2016-02, Leases (Topic 842). The targeted improvements provide entities with additional and optional transition methods.
In November 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors. This ASU provides guidance in several areas, including the accounting policy election for sales taxes and other similar taxes collected from lessees, accounting for certain lessor costs and accounting for variable payments for contracts with lease and nonlease components.
We adopted these ASUs utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of fiscal 2020. In addition, we elected the package of practical expedients permitted under the transition guidance that allowed us to apply prior conclusions related to lease definition, classification and initial direct costs. Additionally, the lease previously identified as build-to-suit leasing arrangement under legacy lease accounting (ASC 840), was derecognized pursuant to the transition guidance provided for build-to-suit leases in ASC 842 (see Note 9 below). Accordingly, the lease has been reassessed as an operating lease as of the adoption date under ASC 842, and is included on the Consolidated Condensed Balance Sheets. The adoption of these ASUs has resulted in an increase of approximately $23.8 million in operating lease liabilities and $22.2 million in right-of-use assets, decrease of approximately $14.5 million in financing obligation, decrease of approximately $15.3 million in property, plant and equipment, and an adjustment of $0.8 million to retained earnings after income tax effects on our Consolidated Condensed Balance Sheets.
Financial Instruments
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the impairment methodology in current GAAP, which delays recognition of credit losses until it is probable a loss has been incurred, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU will be effective for us beginning in our first quarter of fiscal 2021. We are currently evaluating the impact of the adoption of this ASU on our consolidated condensed financial statements.


12

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815). The new guidance expands and refines hedge accounting for both financial and non-financial risks. The new guidance also modifies disclosure requirements for hedging activities. We adopted this ASU as of the beginning of the first quarter of 2020. The adoption of this ASU did not have a material impact on our consolidated condensed financial statements.
Collaborative Arrangements
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808). This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. This ASU will be effective for us in the first quarter of 2021 with early adoption permitted. This ASU requires retrospective adoption to the date we adopted ASC 606 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented. We are currently evaluating the timing and the effects of the adoption of this ASU on our consolidated condensed financial statements.
Income Taxes
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the “TCJA”) and requires entities to provide certain disclosures regarding these stranded tax effects, if any. We adopted this ASU in the first quarter of 2020. The adoption did not have a material impact on our consolidated condensed financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarify and amend existing guidance. This ASU will be effective for us in the first quarter of 2022 with early adoption permitted. We are currently evaluating the timing and the effects of the adoption of this ASU on our consolidated condensed financial statements.


13

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


NOTE 2: BALANCE SHEET COMPONENTS
The following tables reflect the components of significant balance sheet accounts as of March 28, 2020 and September 28, 2019:
 
As of
(in thousands)
March 28, 2020
 
September 28, 2019
 
 
 
 
Short-term investments, available-for-sale(1)
$
248,000

 
$
229,000

 
 
 
 
Inventories, net:
 

 
 

Raw materials and supplies
$
60,181

 
$
52,853

Work in process
33,798

 
32,026

Finished goods
42,764

 
33,742

 
136,743

 
118,621

Inventory reserves
(30,565
)
 
(29,313
)
 
$
106,178

 
$
89,308

Property, plant and equipment, net:
 

 
 

Land
$
2,182

 
$
2,182

Buildings and building improvements
22,284

 
41,961

Leasehold improvements
22,712

 
24,441

Data processing equipment and software
37,082

 
36,302

Machinery, equipment, furniture and fixtures
73,957

 
71,465

Construction in progress
7,082

 
6,512

 
165,299

 
182,863

Accumulated depreciation
(109,652
)
 
(110,493
)
 
$
55,647

 
$
72,370

Accrued expenses and other current liabilities:
 

 
 

Accrued customer obligations (2)
$
33,766

 
$
26,292

Wages and benefits
23,419

 
18,188

Dividend payable
7,557

 
7,582

Commissions and professional fees
2,606

 
2,024

Deferred rent

 
1,721

Severance
880

 
1,500

Other
10,068

 
7,226

 
$
78,296

 
$
64,533

(1)
All short-term investments were classified as available-for-sale and were measured at fair value based on level one measurement, or quoted market prices, as defined by ASC 820. The Company did not recognize any realized gains or losses on the sale of investments during the three and six months ended March 28, 2020 and March 30, 2019.
(2)
Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.

NOTE 3: GOODWILL AND INTANGIBLE ASSETS
Goodwill
Intangible assets classified as goodwill are not amortized. The goodwill established in connection with our acquisitions represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and recognized individually. The goodwill also includes the value of expected future cash flows from the acquisitions, expected synergies with our other affiliates and other unidentifiable intangible assets. The Company performs an annual impairment test of its goodwill


14

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


during the fourth quarter of each fiscal year, which coincides with the completion of its annual forecasting and refreshing of business outlook process.
The Company performed its annual impairment test in the fourth quarter of fiscal 2019 and concluded that no impairment charge was required. Any future adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in a noncash impairment in the future.
During the three and six months ended March 28, 2020, the Company reviewed qualitative factors to ascertain if a "triggering" event may have taken place that may have the effect of reducing the fair value of the reporting unit below its carrying value and concluded that no triggering event had occurred. While we have concluded that a triggering event did not occur during the quarter ended March 28, 2020, a prolonged COVID-19 pandemic could impact the results of operations due to changes to assumptions utilized in the determination of the estimated fair values of the reporting units that could be significant enough to trigger an impairment. Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our products. The discount rate utilized in our valuation model could also be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital.
The following table summarizes the Company's recorded goodwill by reporting segments as of March 28, 2020 and September 28, 2019:
 
As of
(in thousands)
March 28, 2020
 
September 28, 2019
Capital Equipment
$
29,681

 
$
29,480

Aftermarket Products and Services ("APS")
26,265

 
26,211

Total goodwill
$
55,946

 
$
55,691


 
 
 
 
 
Intangible Assets
Intangible assets with determinable lives are amortized over their estimated useful lives. The Company's intangible assets consist primarily of developed technology, customer relationships and trade and brand names.
The following table reflects net intangible assets as of March 28, 2020 and September 28, 2019
 
As of
 
Average estimated
(dollar amounts in thousands)
March 28, 2020
 
September 28, 2019
 
useful lives (in years)
Developed technology
$
88,184

 
$
87,209

 
7.0 to 15.0
Accumulated amortization
(51,124
)
 
(48,718
)
 
 
Net developed technology
$
37,060

 
$
38,491

 
 
 
 
 
 
 
 
Customer relationships
$
35,466

 
$
35,180

 
5.0 to 6.0
Accumulated amortization
(33,435
)
 
(31,862
)
 
 
Net customer relationships
$
2,031

 
$
3,318

 
 
 
 
 
 
 
 
Trade and brand names
$
7,265

 
$
7,219

 
7.0 to 8.0
Accumulated amortization
(6,599
)
 
(6,377
)
 
 
Net trade and brand names
$
666

 
$
842

 
 
 
 
 
 
 
 
Other intangible assets
$
2,500

 
$
2,500

 
1.9
Accumulated amortization
(2,500
)
 
(2,500
)
 
 
Net other intangible assets
$

 
$

 
 
 
 
 
 
 
 
Net intangible assets
$
39,757

 
$
42,651

 
 



15

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


The following table reflects estimated annual amortization expense related to intangible assets as of March 28, 2020:
 
As of
(in thousands)
March 28, 2020
Remaining fiscal 2020
$
3,663

Fiscal 2021
5,306

Fiscal 2022
4,348

Fiscal 2023
4,252

Fiscal 2024
4,252

Thereafter
17,936

Total amortization expense
$
39,757

 

NOTE 4: CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. In general, these investments are free of trading restrictions.
Cash, cash equivalents, and short-term investments consisted of the following as of March 28, 2020:
(in thousands)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Current assets:
 
 
 
 
 
 
 
Cash
$
225,849

 
$

 
$

 
$
225,849

Cash equivalents:
 
 
 
 
 
 
 
Money market funds (1)
166,451

 

 

 
166,451

Time deposits (2)
7

 

 

 
7

Total cash and cash equivalents
$
392,307

 
$

 
$

 
$
392,307

Short-term investments (2):
 
 
 
 
 
 
 
Time deposits
149,000

 

 

 
149,000

Deposits (3)
99,000

 

 

 
99,000

Total short-term investments
$
248,000

 
$

 
$

 
$
248,000

Total cash, cash equivalents, and short-term investments
$
640,307

 
$

 
$

 
$
640,307

(1)
The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.
(2)
Fair value approximates cost basis.
(3)
Represents deposits that require a notice period of three months for withdrawal.


16

KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of September 28, 2019:
(in thousands)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Current assets:
 
 
 
 
 
 
 
Cash
$
201,005

 
$

 
$

 
$
201,005

Cash equivalents:
 
 
 
 
 
 
 
Money market funds (1)
163,172

 

 

 
163,172

Time deposits (2)
7

 

 

 
7

Total cash and cash equivalents
$
364,184

 
$

 
$

 
$
364,184

Short-term investments (2):
 
 
 
 
 
 
 
Time deposits
130,000

 

 

 
130,000

Deposits (3)
99,000

 

 

 
99,000

Total short-term investments
$
229,000

 
$

 
$

 
$
229,000

Total cash, cash equivalents, restricted cash and short-term investments
$
593,184

 
$

 
$

 
$
593,184


(1)
The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.
(2)
Fair value approximates cost basis.
(3)
Represents deposits that require a notice period of three months for withdrawal.

NOTE 5: EQUITY INVESTMENTS
Equity investments consisted of the following as of March 28, 2020 and September 28, 2019:
 
As of
(in thousands)
March 28, 2020
 
September 28, 2019
Non-marketable equity securities(1)
$
6,278

 
$
5,000

Equity method investments
1,149

 
1,250

Total equity investments
$
7,427

 
$
6,250