10-Q

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 June 29, 2019

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) 

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. (Check one):

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 ☒

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

As of July 29, 2019, there were 63,407,840 shares of the Registrant's Common Stock, no par value, outstanding.

KULICKE AND SOFFA INDUSTRIES, INC.

FORM 10 – Q

June 29, 2019

 Index

		Page Number
PART I - FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS (Unaudited)
	Consolidated Condensed Balance Sheets as of June 29, 2019 and September 29, 2018	1
	Consolidated Condensed Statements of Operations for the three and nine months ended June 29, 2019 and June 30, 2018	2
	Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and nine months ended June 29, 2019 and June 30, 2018	3
	Consolidated Condensed Statements of Shareholders' Equity for the three and nine months ended June 29, 2019 and June 30, 2018	4
	Consolidated Condensed Statements of Cash Flows for the nine months ended June 29, 2019 and June 30, 2018	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
Item 4.	CONTROLS AND PROCEDURES	39
PART II - OTHER INFORMATION
Item 1A.	RISK FACTORS	40
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES	41
Item 6.	EXHIBITS	42
	SIGNATURES	43

PART I. - FINANCIAL INFORMATION

Item 1. – FINANCIAL STATEMENTS

KULICKE AND SOFFA INDUSTRIES, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

Unaudited

	As of
	June 29, 2019			September 29, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	395,538		$	320,630
Restricted cash	474			518
Short-term investments	248,000			293,000
Accounts and other receivable, net of allowance for doubtful accounts of $0 and $385, respectively	151,246			243,373
Inventories, net	98,049			115,191
Prepaid expenses and other current assets	25,133			14,561
Total current assets	918,440			987,273
Property, plant and equipment, net	74,851			76,067
Goodwill	56,248			56,550
Intangible assets, net	46,198			52,871
Deferred income taxes	8,159			9,017
Equity investments	6,301			1,373
Other assets	2,372			2,589
TOTAL ASSETS	$	1,112,569		$	1,185,740
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term debt	$	71,194		$	—
Accounts payable	42,337			48,527
Accrued expenses and other current liabilities	63,465			105,978
Income taxes payable	12,258			19,571
Total current liabilities	189,254			174,076
Financing obligation	14,701			15,187
Deferred income taxes	27,154			25,591
Income taxes payable	84,617			81,491
Other liabilities	9,408			9,188
TOTAL LIABILITIES	$	325,134		$	305,533
Commitments and contingent liabilities (Note 14)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value:
Authorized 5,000 shares; issued - none	$	—		$	—
Common stock, no par value:
Authorized 200,000 shares; issued 85,349 and 84,659, respectively; outstanding 63,837 and 67,143 shares, respectively	530,016			519,244
Treasury stock, at cost, 21,512 and 17,516 shares, respectively	(334,248		)	(248,664		)
Retained earnings	595,803			613,529
Accumulated other comprehensive loss	(4,136		)	(3,902		)
TOTAL SHAREHOLDERS' EQUITY	$	787,435		$	880,207
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,112,569		$	1,185,740

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

1

KULICKE AND SOFFA INDUSTRIES, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Unaudited

	Three months ended						Nine months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Net revenue	$	127,109		$	268,834		$	400,225		$	704,297
Cost of sales	68,329			141,865			211,073			380,679
Gross profit	58,780			126,969			189,152			323,618
Selling, general and administrative	28,724			32,532			87,626			92,679
Research and development	28,229			29,974			87,609			88,881
Operating expenses	56,953			62,506			175,235			181,560
Income from operations	1,827			64,463			13,917			142,058
Interest income	3,956			3,459			11,647			8,420
Interest expense	(632		)	(263		)	(1,137		)	(799		)
Income before income taxes	5,151			67,659			24,427			149,679
Income tax expense	3,864			7,282			19,106			122,494
Share of results of equity-method investee, net of tax	—			121			72			144
Net income	$	1,287		$	60,256		$	5,249		$	27,041
Net income per share:
Basic	$	0.02		$	0.87		$	0.08		$	0.39
Diluted	$	0.02		$	0.86		$	0.08		$	0.38
Weighted average shares outstanding:
Basic	64,683			69,125			65,914			70,019
Diluted	65,431			70,302			66,597			71,113

 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

(in thousands)

Unaudited

	Three months ended						Nine months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Net income	$	1,287		$	60,256		$	5,249		$	27,041
Other comprehensive (loss)/income:
Foreign currency translation adjustment	(42		)	(8,409		)	(1,430		)	(817		)
Unrecognized actuarial (loss)/gain on pension plan, net of tax	(31		)	61			(9		)	36
	(73		)	(8,348		)	(1,439		)	(781		)
Derivatives designated as hedging instruments:
Unrealized (loss)/gain on derivative instruments, net of tax	(49		)	(1,542		)	39			(513		)
Reclassification adjustment for loss/(gain) on derivative instruments recognized, net of tax	33			(344		)	1,165			(1,884		)
Net (increase)/decrease from derivatives designated as hedging instruments, net of tax	(16		)	(1,886		)	1,204			(2,397		)
Total other comprehensive loss	(89		)	(10,234		)	(235		)	(3,178		)
Comprehensive income	$	1,198		$	50,022		$	5,014		$	23,863

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

(in thousands)

Unaudited

	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 market-based restricted stock and time-based restricted stock	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 market-based restricted stock and time-based restricted stock	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
Issuance of stock for services rendered	10		222		—			—			—			222
Repurchase of common stock	(1,538	)	—		(33,177		)	—			—			(33,177		)
Issuance of shares for market-based restricted stock and time-based restricted stock	16		—		—			—			—			—
Equity-based compensation	—		3,375		—			—			—			3,375
Cash dividend declared	—		—		—			(7,397		)	—			(7,397		)
Components of comprehensive income/(loss):
Net income	—		—		—			1,287			—			1,287
Other comprehensive loss	—		—		—			—			(89		)	(89		)
Total comprehensive income / (loss)	—		—		—			1,287			(89		)	1,198
Balances as of June 29, 2019	63,837		$	530,016	$	(334,248	)	$	595,803		$	(4,136	)	$	787,435

4

KULICKE AND SOFFA INDUSTRIES, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(in thousands)

Unaudited

	Common Stock				Treasury Stock			Retained earnings			Accumulated Other Comprehensive income			Shareholders' Equity
	Shares		Amount
Balances as of September 30, 2017	70,197		$	506,515	$	(157,604	)	$	569,080		$	2,039		$	920,030
Issuance of stock for services rendered	9		195		—			—			—			195
Repurchase of common stock	(148	)	—		(3,280		)	—			—			(3,280		)
Exercise of stock options	6		55		—			—			—			55
Issuance of shares for market-based restricted stock and time-based restricted stock	540		—		—			—			—			—
Equity-based compensation	—		2,557		—			—			—			2,557
Cumulative effect of accounting changes	—		1,414		—			4,006			—			5,420
Components of comprehensive (loss)/income:
Net loss	—		—		—			(69,528		)	—			(69,528		)
Other comprehensive income	—		—		—			—			1,825			1,825
Total comprehensive (loss)/income	—		—		—			(69,528		)	1,825			(67,703		)
Balances as of December 30, 2017	70,604		$	510,736	$	(160,884	)	$	503,558		$	3,864		$	857,274
Issuance of stock for services rendered	8		195		—			—			—			195
Repurchase of common stock	(898	)	—		(21,470		)	—			—			(21,470		)
Issuance of shares for market-based restricted stock and time-based restricted stock	73		—		—			—			—			—
Equity-based compensation	—		2,384		—			—			—			2,384
Components of comprehensive income:
Net income	—		—		—			36,313			—			36,313
Other comprehensive income	—		—		—			—			5,231			5,231
Total comprehensive income	—		—		—			36,313			5,231			41,544
Balances as of March 31, 2018	69,787		$	513,315	$	(182,354	)	$	539,871		$	9,095		$	879,927
Issuance of stock for services rendered	8		195		—			—			—			195
Repurchase of common stock	(1,793	)	—		(42,584		)	—			—			(42,584		)
Issuance of shares for market-based restricted stock and time-based restricted stock	4		—		—			—			—			—
Equity-based compensation	—		2,698		—			—			—			2,698
Cash dividend declared	—		—		—			(8,176		)	—			(8,176		)
Components of comprehensive income/(loss):
Net income	—		—		—			60,256			—			60,256
Other comprehensive loss	—		—		—			—			(10,234		)	(10,234		)
Total comprehensive income / (loss)	—		—		—			60,256			(10,234		)	50,022
Balances as of June 30, 2018	68,006		$	516,208	$	(224,938	)	$	591,951		$	(1,139	)	$	882,082

 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

(in thousands)

Unaudited

	Nine months ended
	June 29, 2019			June 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,249		$	27,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,001			14,163
Equity-based compensation and employee benefits	10,772			8,224
Excess tax benefits from stock-based compensation	—			(50		)
Adjustment for doubtful accounts	(385		)	675
Adjustment for inventory valuation	2,059			3,419
Deferred income taxes	2,450			21,480
Gain on disposal of property, plant and equipment	(19		)	(421		)
Unrealized foreign currency translation	117			606
Share of results of equity-method investee	72			144
Changes in operating assets and liabilities:
Accounts and other receivable	92,696			(58,949		)
Inventory	15,960			(5,141		)
Prepaid expenses and other current assets	(10,623		)	2,702
Accounts payable, accrued expenses and other current liabilities	(48,148		)	(1,893		)
Income taxes payable	(3,655		)	84,105
Other, net	1,635			(2,262		)
Net cash provided by operating activities	83,181			93,843
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(9,665		)	(16,152		)
Proceeds from sales of property, plant and equipment	39			625
Purchase of equity investments	(5,000		)	—
Purchase of short-term investments	(489,000		)	(487,000		)
Maturity of short-term investments	534,000			445,000
Net cash provided by /(used in) investing activities	30,374			(57,527		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on debts	(574		)	(526		)
Proceeds from exercise of common stock options	—			55
Repurchase of common stock	(85,469		)	(65,334		)
Dividend payment	(23,902		)	—
Proceeds from short term debt	71,194			—
Net cash used in financing activities	(38,751		)	(65,805		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	60			(251		)
Changes in cash, cash equivalents and restricted cash	74,864			(29,740		)
Cash, cash equivalents and restricted cash at beginning of period	321,148			392,940
Cash, cash equivalents and restricted cash at end of period	$	396,012		$	363,200
CASH PAID FOR:
Interest	$	747		$	799
Income taxes, net of refunds	$	21,373		$	9,500

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 29, 2018, filed with the Securities and Exchange Commission, which includes Consolidated Balance Sheets as of September 29, 2018 and September 30, 2017, 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 29, 2018. 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 2019 quarters end on December 29, 2018, March 30, 2019, June 29, 2019 and September 28, 2019. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. Fiscal 2018 quarters ended on December 30, 2017, March 31, 2018, June 30, 2018 and September 29, 2018.

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, valuation allowances for deferred tax assets and deferred tax liabilities, repatriation of un-remitted foreign subsidiary earnings, 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.

Vulnerability to Certain Concentrations

Financial instruments which may subject the Company to concentrations of credit risk as of June 29, 2019 and September 29, 2018 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

7

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

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.

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.

8

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

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 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.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

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 nine months ended June 29, 2019, 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 two-step impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. If the carrying value of a reporting unit exceeds its fair value in the first step of the test, then a company is required to perform the second step of the goodwill impairment test to measure the amount of the reporting unit's goodwill impairment loss, if any. 

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under this guidance, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning in our first quarter of 2021 and early adoption is permitted. During the third quarter of 2017, we elected to prospectively adopt ASU2017-04. This eliminates the requirement to perform step 2 of the goodwill impairment test.

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 equipments 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 our customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.

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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 nine months ended June 29, 2019, and June 30, 2018, 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 any of 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 it expects is more likely than not to be realized. While the Company has considered future taxable income and its 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 the deferred tax asset 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 net deferred tax assets in the future, an adjustment to the deferred tax asset would decrease income in the period when such determination is made.

In accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”), the Company accounts for uncertain tax positions taken or expected to be taken in its income tax return. 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.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

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 9 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.

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 tax liabilities, 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

Income Taxes

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The new guidance is effective for the Company beginning fiscal 2019 and requires the tax effects of intercompany transactions (other than transfers of inventory) to be recognized currently. The Company has adopted the modified retrospective approach for the transition based on the new guidance and, as of the beginning of the period of adoption, has recorded the cumulative effect of adjustments related to intra-entity transfers of intangible and fixed assets of $0.5 million in prior years as an increase to retained earnings.

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.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

The Company will adopt these ASUs utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of its first quarter of 2020. In addition, we will elect 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. The adoption of these ASUs will result in an increase in our consolidated balance sheets for these right of use assets and corresponding liabilities. However, the ultimate impact of adopting these ASUs will depend on the Company's lease portfolio as of the adoption date. We are currently evaluating the effects of the adoption of these ASUs on our financial statements.

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 financial statements.

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. The new guidance will be effective for us beginning in our first quarter of fiscal 2020, and early adoption is permitted in any interim period. We do not expect the adoption of this ASU to have a material impact on our financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.

Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”); and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20” and collectively, the “new revenue standards”).

The Company has performed an evaluation of this ASU and its impact on the financial statements. This included tasks such as identifying contracts, performance obligations and reviewing the applicable revenue streams. We have completed our assessment and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. The new standard was adopted in the first quarter of fiscal 2019 using a modified retrospective approach.

Based on our review of all our customer agreements for the affected periods, our revenue from sales of our products, such as equipment and spare parts, will continue to be recognized at a point in time, generally upon shipment or delivery to customers or distributors, depending upon the terms of the sales order, consistent with our current revenue recognition model. Revenue related to the sale of services will generally continue to be recognized over time as the services are performed. In certain instances, where collection of consideration is not probable, recognition of revenue may occur later under the new model after we have completed all of our obligations under the contract. However, when adopting the new standard, we did not identify any balances where collection of consideration is not probable. This ASU did not have a material impact on the amount and timing of revenue recognized in the Company’s consolidated 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 financial statements.

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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 June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019			September 29, 2018
Short term investments, available-for-sale(1)	$	248,000		$	293,000
Inventories, net:
Raw materials and supplies	$	58,336		$	63,894
Work in process	31,590			37,829
Finished goods	35,890			40,357
	125,816			142,080
Inventory reserves	(27,767		)	(26,889		)
	$	98,049		$	115,191
Property, plant and equipment, net:
Land	$	2,182		$	2,182
Buildings and building improvements (2)	42,125			41,616
Leasehold improvements (2)	24,125			23,561
Data processing equipment and software	36,027			35,469
Machinery, equipment, furniture and fixtures	74,189			68,666
Construction in progress	6,576			6,940
	185,224			178,434
Accumulated depreciation	(110,373		)	(102,367		)
	$	74,851		$	76,067
Accrued expenses and other current liabilities:
Accrued customer obligations (3)	$	27,491		$	34,918
Wages and benefits	16,623			44,505
Dividend payable	7,664			8,057
Commissions and professional fees	2,024			5,549
Deferred rent	1,763			1,847
Severance	355			1,415
Other	7,545			9,687
	$	63,465		$	105,978

(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 nine months ended June 29, 2019 and June 30, 2018.

(2) Certain balances as at September 29, 2018 relating to Property, plant and equipment have been reclassified. These reclassifications have no impact to the Consolidated Balance Sheet as at September 29, 2018.

(3) 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

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

individually. The goodwill also includes the value of expected future cash flows of the acquisitions, expected synergies with our other affiliates and other unidentifiable intangible assets. The Company performs an annual impairment test of its goodwill 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 2018 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 nine months ended June 29, 2019, 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.

The following table summarizes the Company's recorded goodwill as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019		September 29, 2018
Capital Equipment	$	29,920	$	30,159
APS	26,328		26,391
Total goodwill	$	56,248	$	56,550

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 June 29, 2019 and September 29, 2018: 

	As of						Average estimated
(dollar amounts in thousands)	June 29, 2019			September 29, 2018			useful lives (in years)
Developed technology	$	89,334		$	90,500		7.0 to 15.0
Accumulated amortization	(48,243		)	(45,229		)
Net developed technology	$	41,091		$	45,271
Customer relationships	$	35,805		$	36,131		5.0 to 6.0
Accumulated amortization	(31,670		)	(29,820		)
Net customer relationships	$	4,135		$	6,311
Trade and brand names	$	7,321		$	7,377		7.0 to 8.0
Accumulated amortization	(6,349		)	(6,088		)
Net trade and brand names	$	972		$	1,289
Other intangible assets	$	2,500		$	2,500		1.9
Accumulated amortization	(2,500		)	(2,500		)
Net other intangible assets	$	—		$	—
Net intangible assets	$	46,198		$	52,871

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

The following table reflects estimated annual amortization expense related to intangible assets as of June 29, 2019:

	As of
(in thousands)	June 29, 2019
Remaining fiscal 2019	$	1,870
Fiscal 2020	7,479
Fiscal 2021	5,417
Fiscal 2022	4,439
Fiscal 2023 and onwards	26,993
Total amortization expense	$	46,198

 

NOTE 4: CASH, CASH EQUIVALENTS, RESTRICTED CASH 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, restricted cash and short-term investments consisted of the following as of June 29, 2019:

(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	261,806	$	—	$	—	$	261,806
Cash equivalents:
Money market funds (1)	123,726		—		—		123,726
Time deposits (2)	10,006		—		—		10,006
Total cash and cash equivalents	$	395,538	$	—	$	—	$	395,538
Restricted Cash (2)	474		—		—		474
Total cash, cash equivalents, and restricted cash	$	396,012	$	—	$	—	$	396,012
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, restricted cash and short-term investments	$	644,012	$	—	$	—	$	644,012

(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.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of September 29, 2018:

(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	42,446	$	—	$	—		$	42,446
Cash equivalents:
Money market funds (1)	209,172		—		(5		)	209,167
Time deposits (2)	69,017		—		—			69,017
Total cash and cash equivalents	$	320,635	$	—	$	(5	)	$	320,630
Restricted Cash (2)	518		—		—			518
Total cash, cash equivalents, and restricted cash	$	321,153	$	—	$	(5	)	$	321,148
Short-term investments (2):
Time deposits	197,000		—		—			197,000
Deposits (3)	96,000		—		—			96,000
Total short-term investments	$	293,000	$	—	$	—		$	293,000
Total cash, cash equivalents, restricted cash and short-term investments	$	614,153	$	—	$	(5	)	$	614,148

(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 June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019		September 29, 2018
Non-marketable equity securities(1)	$	5,000	$	—
Equity method investments	1,301		1,373
Total	$	6,301	$	1,373

(1) On January 30, 2019, the Company made a $5.0 million investment in one of our collaborative partners, over which the Company does not have significant influence. During the three and nine months ended June 29, 2019, there was no impairment or adjustment to the observable price.

NOTE 6: FAIR VALUE MEASUREMENTS

Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis 

We measure certain financial assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during the three and nine months ended June 29, 2019.

Fair Value Measurements on a Nonrecurring Basis

Our non-financial assets such as intangible assets and property, plant and equipment are carried at cost unless impairment is deemed to have occurred. Our equity method investments are recorded at fair value only if an impairment is recognized.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

Fair Value of Financial Instruments

Amounts reported as accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value.

NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s international operations are exposed to changes in foreign exchange rates due to transactions denominated in currencies other than U.S. dollars. Most of the Company’s revenue and cost of materials are transacted in U.S. dollars. However, a significant amount of the Company’s operating expenses are denominated in local currencies, primarily in Singapore.

The foreign currency exposure of our operating expenses is generally hedged with foreign exchange forward contracts. The Company’s foreign exchange risk management programs include using foreign exchange forward contracts with cash flow hedge accounting designation to hedge exposures to the variability in the U.S. dollar equivalent of forecasted non-U.S. dollar-denominated operating expenses. These instruments generally mature within twelve months. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the Consolidated Condensed Statements of Operations as the impact of the hedged transaction.

The fair value of derivative instruments on our Consolidated Condensed Balance Sheet as of June 29, 2019 and September 29, 2018 was as follows:

	As of
(in thousands)	June 29, 2019				September 29, 2018
	Notional Amount		Fair Value Asset Derivatives(1)		Notional Amount		Fair Value (Liability) Derivatives(2)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts (3)	$	34,806	$	134	$	43,095	$	(1,071	)
Total derivatives	$	34,806	$	134	$	43,095	$	(1,071	)

(1) The fair value of derivative assets is measured using level 2 fair value inputs and is included in prepaid expenses and other current assets on our Consolidated Condensed Balance Sheet.

(2) The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Condensed Balance Sheet.

(3) Hedged amounts expected to be recognized to income within the next twelve months.

The effects of derivative instruments designated as cash flow hedges in our Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended June 29, 2019 and June 30, 2018 are as follows:

(in thousands)	Three months ended						Nine months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Foreign exchange forward contract in cash flow hedging relationships:
Net (loss)/gain recognized in OCI, net of tax(1)	$	(49	)	$	(1,542	)	$	39		$	(513	)
Net (loss)/gain reclassified from accumulated OCI into income, net of tax(2)	$	(33	)	$	344		$	(1,165	)	$	1,884

(1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

(2) Effective portion classified as selling, general and administrative expense.

NOTE 8: DEBT AND OTHER OBLIGATIONS

Financing Obligation

On December 1, 2013, Kulicke & Soffa Pte Ltd. (“Pte”), the Company's wholly owned subsidiary, signed a lease with DBS Trustee Limited as trustee of Mapletree Industrial Trust (the “Landlord”) to lease from the Landlord approximately 198,000 square feet,

18

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

representing approximately 70% of a building in Singapore as our corporate headquarters, as well as a manufacturing, technology, sales and service center (the “Building”). The lease has a 10-year non-cancellable term (the "Initial Term") and contains options to renew for 2 further 10-year terms. The annual rent and service charge for the Initial Term range from $4 million to $5 million Singapore dollars.

Pursuant to ASC No. 840, Leases ("ASC 840"), we have classified the Building on our balance sheet as property, plant and equipment, which we are depreciating over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. At the inception of the lease, the asset and financing obligation recorded on the balance sheet was $20.0 million, which was based on an interest rate of 6.3% over the Initial Term.  As of June 29, 2019, the financing obligation related to the Building is $15.5 million, which approximates fair value (Level 2). The financing obligation will be settled through a combination of periodic cash rental payments and the return of the leased property at the expiration of the lease. We do not report rent expense for the property, which is deemed owned for accounting purposes. Rather, rental payments required under the lease are considered debt service and applied to the deemed landlord financing obligation and interest expense. The Building and financing obligation are being amortized in a manner that will not generate a gain or loss upon lease termination.

Credit Facilities and Bank Guarantees

On November 22, 2013, the Company obtained a $5.0 million credit facility with Citibank in connection with the issuance of bank guarantees for operational purposes. As of June 29, 2019, the outstanding amount is $3.2 million.

On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company with an overdraft facility of up to $100.0 million (the “Overdraft Facility”) for general corporate purposes. Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days written demand by the Bank. Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the overnight U.S. Dollar LIBOR rate plus a margin of 1.5% per annum. The Overdraft Facility is an unsecured facility per the terms of the Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation, covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of one of its subsidiaries (the "Subsidiary"), or encumber its assets with material security interests (including any pledge of monies in the Subsidiary’s cash deposit account with the Bank). The Facility Agreements also contain typical events of default, including, without limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company or any breach of a representation or warranty under the Facility Agreements. As of June 29, 2019, the outstanding amount under the Facility Agreements is $71.2 million.

In addition, the Company has other bank guarantees for operational purposes which are secured with corresponding deposits placed with the issuer banks. These amounts are shown as restricted cash in the Consolidated Condensed Balance Sheets.

NOTE 9: SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

Common Stock and 401(k) Retirement Plan

The Company has a 401(k) retirement plan (the “Plan”) for eligible U.S. employees. The Plan allows for employee contributions and matching Company contributions from 4% to 6% based upon terms and conditions of the 401(k) Plan.

The following table reflects the Company’s contributions to the Plan during the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Cash	$	428	$	408	$	1,291	$	1,261

Stock Repurchase Program

On August 15, 2017, the Company’s Board of Directors authorized a program (the "Program") to repurchase up to $100 million of the Company’s common stock on or before August 1, 2020. On July 10, 2018, the Board of Directors increased the share repurchase authorization under the Program to $200 million. On January 31, 2019, the Board of Directors further increased the share repurchase under the Program to $300 million. The Company has entered into a written trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be suspended or discontinued at any time and is funded using the Company's available cash, cash equivalents and short-term investments. Under the Program, shares may be

19

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations. During the three and nine months ended June 29, 2019, the Company repurchased a total of 1.5 million and 4.0 million shares of common stock under the Program at a cost of $33.2 million and $85.6 million, respectively. The stock repurchases were recorded in the periods they were delivered and accounted for as treasury stock in the Company's Consolidated Condensed Balance Sheet. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital. If the Company reissues treasury stock at an amount below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings. As of June 29, 2019, our remaining stock repurchase authorization under the Program was approximately $112.1 million.

Dividends

On May 20, 2019, February 28, 2019 and December 12, 2018, the Board of Directors declared a quarterly dividend of $0.12 per share of common stock. Dividends paid during the three and nine months ended June 29, 2019 totaled $7.8 million and $23.9 million, respectively. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company's stockholders.

Accumulated Other Comprehensive Income

The following table reflects accumulated other comprehensive loss reflected on the Consolidated Condensed Balance Sheets as of June 29, 2019 and September 29, 2018: 

	As of
(in thousands)	June 29, 2019			September 29, 2018
Loss from foreign currency translation adjustments	$	(2,641	)	$	(1,211	)
Unrecognized actuarial loss on pension plan, net of tax	(1,629		)	(1,620		)
Unrealized gain/(loss) on hedging	134			(1,071		)
Accumulated other comprehensive loss	$	(4,136	)	$	(3,902	)

Equity-Based Compensation

The Company has stockholder-approved equity-based employee compensation plans (the “Employee Plans”) and director compensation plans (the “Director Plans”) (collectively, the “Equity Plans”). As of June 29, 2019, 4.0 million shares of common stock are available for grant to its employees and directors under the 2017 Equity Plan, including previously registered shares that have been carried forward for issuance from the 2009 Equity Plan.

• In general, stock options and Time-based Restricted Share Units ("Time-based RSUs") awarded to employees vest annually over a three-year period provided the employee remains employed by the Company. The Company follows the non-substantive vesting method for stock options and recognizes compensation expense immediately for awards granted to retirement eligible employees, or over the period from the grant date to the date retirement eligibility is achieved.

• Relative TSR Performance Share Units ("Relative TSR PSUs") entitles the employee to receive common shares of the Company on the award vesting date, if market performance objectives that measure relative total shareholder return (“TSR”) are attained. Relative TSR is calculated based upon the 90-calendar day average price of the Company's stock as compared to specific peer companies that comprise the GICS (45301020) Semiconductor Index. TSR is measured for the Company and each peer company over a performance period, which is generally three years. Vesting percentages range from 0% to 200% of awards granted. The provisions of the Relative TSR PSUs are reflected in the grant date fair value of the award; therefore, compensation expense is recognized regardless of whether the market condition is ultimately satisfied. Compensation expense is reversed if the award is forfeited prior to the vesting date.

• Special/Growth Performance Share Units (“Special/Growth PSUs”) entitles the employee to receive common shares of the Company on the three-year anniversary of the grant date (if employed by the Company) if revenue growth targets set by the Management Development and Compensation Committee (“MDCC”) of the Board of Directors on the date of grant are met. If revenue growth targets are not met, the Special/Growth PSUs do not vest. Certain Special/Growth PSUs

20

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

vest based on achievement of strategic goals over a certain time period or periods set by the MDCC. If the strategic goals are not achieved, the Special/Growth PSUs do not vest.

Equity-based compensation expense recognized in the Consolidated Condensed Statements of Operations for the three and nine months ended June 29, 2019 and June 30, 2018 was based upon awards ultimately expected to vest, forfeitures have been accounted for when they occur.

The following table reflects Time-based RSUs, Relative TSR PSUs, Special/Growth PSUs and common stock granted during the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended		Nine months ended
(shares in thousands)	June 29, 2019	June 30, 2018	June 29, 2019	June 30, 2018
Time-based RSUs	2	3	521	452
Relative TSR PSUs	1	1	166	154
Special/Growth PSUs	1	—	56	59
Common stock	10	8	28	25
Equity-based compensation in shares	14	12	771	690

The following table reflects total equity-based compensation expense, which includes Time-based RSUs, Relative TSR PSUs, Special/Growth PSUs and common stock, included in the Consolidated Condensed Statements of Operations during the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Cost of sales	$	161	$	126	$	471	$	384
Selling, general and administrative	2,616		2,111		7,871		5,877
Research and development	820		656		2,430		1,963
Total equity-based compensation expense	$	3,597	$	2,893	$	10,772	$	8,224

The following table reflects equity-based compensation expense, by type of award, for the three and nine months ended June 29, 2019 and June 30, 2018:  

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Time-based RSUs	$	2,182	$	1,662	$	6,455	$	5,475
Relative TSR PSUs	1,020		935		3,213		1,910
Special/Growth PSUs	173		101		492		254
Common stock	222		195		612		585
Total equity-based compensation expense	$	3,597	$	2,893	$	10,772	$	8,224

NOTE 10: REVENUE AND CONTRACT LIABILITIES

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. Service revenue is generally recognized over time as the services are performed. For the three and nine months ended June 29, 2019, and June 30, 2018, the service revenue is not material. Please refer to Note 1: Basis of Presentation- Revenue Recognition, for disclosure on the Company's revenue recognition.

The Company disaggregates revenue based on our reportable segments. The Company believes that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Please refer to Note 13: Segment information, for disclosure of disaggregated revenue.

21

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

Contract Liabilities

Our contract liabilities are primarily related to advance payments received from customers to secure product in future periods where we have received amounts in advance of satisfying performance obligations and are reported in the accompanying consolidated condensed balance sheets within accrued expenses and other current liabilities.

Contract liabilities increase as a result of receiving new advance payments from customers and decrease as revenue is recognized from customers purchasing product under advance payment arrangements upon meeting the performance obligations.

The following table shows the changes in contract liability balances during the three and nine months ended June 29, 2019:

	Three months ended			Nine months ended
(in thousands)	June 29, 2019			June 29, 2019
Contract liabilities, beginning of period	$	581		$	997
Revenue recognized	(1,392		)	(6,909		)
Additions	1,806			6,907
Contract liabilities, end of period	$	995		$	995

NOTE 11: EARNINGS PER SHARE

Basic income per share is calculated using the weighted average number of shares of common stock outstanding during the period. Stock options and restricted stock are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive.

The following tables reflect a reconciliation of the shares used in the basic and diluted net income per share computation for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended
(in thousands, except per share data)	June 29, 2019				June 30, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	1,287	$	1,287	$	60,256	$	60,256
DENOMINATOR:
Weighted average shares outstanding - Basic	64,683		64,683		69,125		69,125
Dilutive effect of Equity Plans			748				1,177
Weighted average shares outstanding - Diluted			65,431				70,302
EPS:
Net income per share - Basic	$	0.02	$	0.02	$	0.87	$	0.87
Effect of dilutive shares			—				(0.01		)
Net income per share - Diluted			$	0.02			$	0.86

  

22

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

	Nine months ended
(in thousands, except per share data)	June 29, 2019				June 30, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	5,249	$	5,249	$	27,041	$	27,041
DENOMINATOR:
Weighted average shares outstanding - Basic	65,914		65,914		70,019		70,019
Dilutive effect of Equity Plans			683				1,094
Weighted average shares outstanding - Diluted			66,597				71,113
EPS:
Net income per share - Basic	$	0.08	$	0.08	$	0.39	$	0.39
Effect of dilutive shares			—				(0.01		)
Net income per share - Diluted			$	0.08			$	0.38

NOTE 12: INCOME TAXES

The following table reflects the provision for income taxes and the effective tax rate for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(dollar amounts in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Income tax expense	$	3,864		$	7,282		$	19,106		$	122,494
Effective tax rate	75.0		%	10.8		%	78.2		%	81.9		%

For the nine months ended June 29, 2019, the effective income tax rate differed from the federal statutory tax rate primarily due to tax expense related to adjustments to the one-time transition tax, valuation allowances recorded against certain tax credits and loss carryforwards, foreign withholding taxes, and tax liabilities from foreign operations, partially offset by tax benefits from profits generated in foreign operations subject to a lower statutory tax rate than the federal rate, tax credits, and the impact of tax holidays.

For the nine months ended June 30, 2018, the effective income tax rate differed from the federal statutory tax rate primarily due to tax expense related to the enactment of the Tax Cuts and Jobs Act of 2017 (the "Act"), valuation allowances recorded against certain tax loss carryforwards, foreign withholding taxes, and tax liabilities from foreign operations, partially offset by tax benefits from profits generated in foreign operations subject to a lower statutory tax rate than the federal rate, tax credits, and the impact of tax holidays.

The decrease in tax expense for the three months ended June 29, 2019 of $3.9 million from the tax expense for the three months ended June 30, 2018 of $7.3 million was primarily related to a decrease in profits in fiscal 2019. The decrease in tax expense for the nine months ended June 29, 2019 of $19.1 million from the tax expense for the nine months ended June 30, 2018 of $122.5 million was primarily related to the enactment of the Act in fiscal 2018 and a decrease in profits in fiscal 2019, partially offset by $10.2 million of tax expense related to adjustments to the one-time transition tax. The Company's future effective tax rate would be affected by the decrease in earnings in countries where it has lower statutory rates or increase in earnings in countries where it has higher statutory rates, by changes in the valuation of its deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof.

As of June 29, 2019, the Company’s undistributed foreign earnings are no longer deemed to be indefinitely reinvested outside the U.S. The Company recorded $0.7 million of tax expense in the second quarter of fiscal 2019 as part of the initial change in assertion.

It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months due to the expected lapse of statutes of limitation and / or settlements of tax examinations. The Company is under income tax examination by tax authorities in certain foreign jurisdictions.

23

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

In accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), the accounting for the tax effects for the Act was completed in the first quarter of fiscal 2019. In addition, the Company has made an accounting policy election to record tax effects of its global intangible low-taxed income as a period cost in the period the tax is incurred.

NOTE 13: SEGMENT INFORMATION

Reportable segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance. The Company's Chief Executive Officer is the Company's chief operating decision maker. The chief operating decision maker does not review discrete asset information. The Company operates two reportable segments consisting of: (i) Capital Equipment; and (ii) Aftermarket Products and Services ("APS").

The following table reflects operating information by segment for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended					Nine months ended
(in thousands)	June 29, 2019			June 30, 2018		June 29, 2019			June 30, 2018
Net revenue:
Capital Equipment	$	89,860		$	229,462	$	286,364		$	578,197
APS	37,249			39,372		113,861			126,100
Net revenue	127,109			268,834		400,225			704,297
(Loss)/income from operations:
Capital Equipment	(6,449		)	57,771		(10,563		)	116,615
APS	8,276			6,692		24,480			25,443
Income from operations	$	1,827		$	64,463	$	13,917		$	142,058

The following tables reflect capital expenditures, depreciation expense and amortization expense for the three and nine months ended June 29, 2019 and June 30, 2018.

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Capital expenditures:
Capital Equipment	$	646	$	999	$	4,118	$	4,878
APS	1,490		3,072		5,194		11,603
	$	2,136	$	4,071	$	9,312	$	16,481

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Depreciation expense:
Capital Equipment	$	1,800	$	1,926	$	5,540	$	5,601
APS	1,352		1,063		3,872		2,635
	$	3,152	$	2,989	$	9,412	$	8,236
Amortization expense:
Capital Equipment	$	989	$	1,053	$	2,999	$	3,188
APS	854		909		2,590		2,739
	$	1,843	$	1,962	$	5,589	$	5,927

24

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

NOTE 14: COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

Warranty Expense

The Company's equipment is generally shipped with a one-year warranty against manufacturing defects. The Company establishes 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 warranty costs, including product part replacement, freight charges and labor costs incurred in correcting product failures during the warranty period.

The following table reflects the reserve for warranty activity for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Reserve for warranty, beginning of period	$	13,885		$	14,197		$	14,475		$	13,796
Provision for warranty	3,143			3,204			8,874			9,384
Utilization of reserve	(3,073		)	(3,027		)	(9,394		)	(8,806		)
Reserve for warranty, end of period	$	13,955		$	14,374		$	13,955		$	14,374

Other Commitments and Contingencies

The following table reflects obligations not reflected on the Consolidated Condensed Balance Sheet as of June 29, 2019:

			Payments due by fiscal year
(in thousands)	Total		2019		2020		2021		2022		thereafter
Inventory purchase obligation (1)	$	85,829	$	85,829	$	—	$	—	$	—	$	—
Operating lease obligations (2)	17,534		1,051		4,215		2,672		2,156		7,440
Total	$	103,363	$	86,880	$	4,215	$	2,672	$	2,156	$	7,440

(1) The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancellable, however, some orders impose varying penalties and charges in the event of cancellation.

(2) The Company has minimum rental commitments under various leases (excluding taxes, insurance, maintenance and repairs, which are also paid by the Company) primarily for various facility and equipment leases, which expire periodically through 2027 (not including lease extension options, if applicable).

Pursuant to ASC No. 840, Leases, for lessee's involvement in asset construction, the Company was considered the owner of the Building during the construction phase. The Building was completed on December 1, 2013 and Pte signed an agreement with the Landlord to lease from the Landlord approximately 198,000 square feet, representing approximately 70% of the Building. Following the completion of construction, we performed a sale-leaseback analysis pursuant to ASC 840-40 and determined that because of our continuing involvement, ASC 840-40 precluded us from derecognizing the asset and associated financing obligation. As such, we reclassified the asset from construction in progress to property, plant and equipment and began to depreciate the building over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. As of June 29, 2019, we recorded a financing obligation related to the Building of $15.5 million (see Note 8 above). The financing obligation is not reflected in the table above.

Concentrations

The following table reflects significant customer concentrations as a percentage of net revenue for the nine months ended June 29, 2019 and June 30, 2018.

	Nine months ended
	June 29, 2019		June 30, 2018
Micron Technology, Inc	10.9	%	*
Haoseng Industrial Company Limited (1)	*		12.8	%

* Represented less than 10% of total net revenue

25

KULICKE AND SOFFA INDUSTRIES, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited (continued)

The following table reflects significant customer concentrations as a percentage of total accounts receivable as of June 29, 2019 and June 30, 2018:

	As of
	June 29, 2019		June 30, 2018
Super Power International (1)	15.8	%	13.0	%
Forehope Electronic (Ningbo) Co Ltd	14.4	%	*
Micron Technology, Inc	10.2	%	*
Haoseng Industrial Company Limited (1)	*		27.6	%

(1) Distributor of the Company's products.

* Represented less than 10% of total accounts receivable

NOTE 15: SUBSEQUENT EVENTS

On July 29, 2019, the Company entered into foreign exchange forward contracts with notional amount of $13.6 million. The Company entered into these foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated expenses in the normal course of business and, accordingly, they are not speculative in nature. These foreign exchange forward contracts have maturities of up to twelve months.

26

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

In addition to historical information, this filing contains statements relating to future events or our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor provisions created by statute. Such forward-looking statements include, but are not limited to, our future revenue, sustained, increasing, continuing or strengthening, or decreasing or weakening, demand for our products, replacement demand, our research and development efforts, our ability to identify and realize new growth opportunities, our ability to control costs and our operational flexibility as a result of (among other factors):

• projected growth rates in the overall semiconductor industry, the semiconductor assembly equipment market, and the market for semiconductor packaging materials; and

• projected demand for ball, wedge bonder, advanced packaging and electronic assembly equipment and for tools, spare parts and services.

Generally, words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,” “continue,” “goal” and “believe,” or the negative of or other variations on these and other similar expressions identify forward-looking statements. These forward-looking statements are made only as of the date of this filing. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements are based on current expectations and involve risks and uncertainties. Our future results could differ significantly from those expressed or implied by our forward-looking statements. These risks and uncertainties include, without limitation, those described below and under the heading “Risk Factors” in this report and in our Annual Report on Form 10-K for the fiscal year ended September 29, 2018 (the “Annual Report”) and our other reports and registration statements filed from time to time with the Securities and Exchange Commission. This discussion should be read in conjunction with the Consolidated Condensed Financial Statements and Notes included in this report, as well as our audited financial statements included in the Annual Report.

We operate in a rapidly changing and competitive environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. Future events and actual results, performance and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements, which speak only as of the date on which they were made. Except as required by law, we assume no obligation to update or revise any forward-looking statement to reflect actual results or changes in, or additions to, the factors affecting such forward-looking statement. Given those risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictions of actual results.

OVERVIEW

Kulicke and Soffa Industries, Inc. ("We", the "Company" or "K&S") designs, manufactures and sells capital equipment and tools used to assemble semiconductor devices, including integrated circuits (“ICs”), high and low powered discrete devices, light-emitting diodes (“LEDs”), and power modules. In addition, we have a portfolio of equipment that are used to assemble components onto electronic circuit boards. We also service, maintain, repair and upgrade our equipment. Our customers primarily consist of semiconductor device manufacturers, integrated device manufacturers ("IDMs"), outsourced semiconductor assembly and test providers (“OSATs”), other electronics manufacturers and automotive electronics suppliers.

Our goal is to be the technology leader and the most competitive supplier in terms of cost and performance in each of our major product lines. Accordingly, we invest in research and engineering projects intended to enhance our position as a leader in the semiconductor assembly technology. We also remain focused on our cost structure through continuous improvement and optimization of operations. Cost reduction efforts are an important part of our normal ongoing operations and are intended to generate savings without compromising overall product quality and service levels.

The Company operates two reportable segments consisting of: Capital Equipment and Aftermarket Products and Services ("APS"). The Company has aggregated twelve operating segments as of June 29, 2019, with six operating segments within the Capital Equipment reportable segment and six operating segments within APS reportable segment.

Our Capital Equipment segment is comprised of the manufacturing and selling of ball bonders, wafer level bonders, wedge bonders, advanced packaging and electronic assembly solutions to semiconductor device manufacturers, IDMs, OSATs, other electronics manufacturers and automotive electronics suppliers. Our APS segment is comprised of the manufacturing and selling of a variety

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of tools for a broad range of semiconductor packaging applications, spare parts, equipment repair, maintenance and servicing, training services, refurbishment and upgrades for our equipment.

Business Environment

The semiconductor business environment is highly volatile and is driven by internal dynamics, both cyclical and seasonal, in addition to macroeconomic forces. Over the long term, semiconductor consumption has historically grown, and is forecast to continue to grow. This growth is driven, in part, by regular advances in device performance and by price declines that result from improvements in manufacturing technology. In order to exploit these trends, semiconductor manufacturers, both IDMs and OSATs, periodically invest aggressively in latest generation capital equipment. This buying pattern often leads to periods of excess supply and reduced capital spending—the so-called semiconductor cycle. Within this broad semiconductor cycle there are also, generally weaker, seasonal effects that are specifically tied to annual, end-consumer purchasing patterns. Typically, semiconductor manufacturers prepare for heightened demand by adding or replacing equipment capacity by the end of the September quarter. Occasionally, this results in subsequent reductions in the December quarter. This annual seasonality can be overshadowed by effects of the broader semiconductor cycle. Macroeconomic factors also affect the industry, primarily through their effect on business and consumer demand for electronic devices, as well as other products that have significant electronic content such as automobiles, white goods, and telecommunication equipment.

The U.S. and other foreign countries have levied tariffs on certain goods and have introduced retaliatory measures or other trade restrictions, which has resulted in uncertainties in the semiconductor, LED, memory and automotive markets. While the Company anticipates long-term growth in semiconductor consumption, the softening in demand, which began in the fourth quarter of fiscal 2018, is expected to continue through fiscal 2019.

Our Capital Equipment segment is primarily affected by the industry's internal cyclical and seasonal dynamics in addition to broader macroeconomic factors that can positively or negatively affect our financial performance. The sales mix of IDM and OSAT customers in any period also impacts financial performance, as changes in this mix can affect our products' average selling prices and gross margins due to differences in volume purchases and machine configurations required by each customer type.

Our APS segment has historically been less volatile than our Capital Equipment segment. APS sales are more directly tied to semiconductor unit consumption rather than capacity requirements and production capability improvements. 

We continue to position our business to leverage our research and development leadership and innovation and to focus our efforts on mitigating volatility, improving profitability and ensuring longer-term growth. We remain focused on operational excellence, expanding our product offerings and managing our business efficiently throughout the business cycles. Our visibility into future demand is generally limited, forecasting is difficult, and we generally experience typical industry seasonality.

To limit potential adverse cyclical, seasonal and macroeconomic effects on our financial position, we have continued our efforts to maintain a strong balance sheet. As of June 29, 2019, our total cash, cash equivalents, restricted cash and short-term investments, net of bank overdraft, were $572.8 million, a $41.3 million decrease from the prior fiscal year end. The bank overdraft allows us to meet our short-term funding needs, while we align our cash balances with our long term capital allocation strategy. We believe this strong cash position will allow us to continue to invest in product development and pursue non-organic opportunities.

Technology Leadership

We compete largely by offering our customers advanced equipment and expendable tools available for the interconnect processes. We believe our technology leadership contributes to the strong market positions of our ball bonder, wedge bonder and expendable tools products. To maintain our competitive advantage, we invest in product development activities designed to produce improvements to existing products and to deliver next-generation products. These investments often focus as much on improvements in the semiconductor assembly process as on specific pieces of assembly equipment or expendable tools. In order to generate these improvements, we typically work in close collaboration with customers, end users, and other industry members. In addition to producing technical advances, these collaborative development efforts strengthen customer relationships and enhance our reputation as a technology leader and solutions provider.

In addition to gold, silver alloy wire and aluminum wire, our leadership in the industry's use of copper wire for the bonding process is an example of the benefits of our collaborative efforts. By working with customers, material suppliers, and other equipment suppliers, we have developed a series of robust, high-yielding production processes, which have made copper wire widely accepted and significantly reduced the cost of assembling an integrated circuit.

Our leadership also has allowed us to maintain a competitive position in the latest generations of ball bonders. Gen-S is our smart bonder series and RAPID™ is the first product in the series to address the Industry 4.0 requirements. The key features of this series include Real-time Process & Performance Monitoring, Real-time Equipment Health Monitoring, Advanced Data Analytics & Traceability, Predictive Maintenance Monitoring & Analysis, and Detection & Enhanced Post bond Inspection.

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We optimize our bonder platforms to deliver variants of our products to serve emerging high-growth markets. For example, we have developed extensions of our Gen-S platforms (Rapid™ MEM) to address opportunities in memory assembly, in particular for NAND Flash storage.   

Our leading technology for wedge bonder equipment uses ribbon or heavy wire for different applications such as power electronics, automotive and semiconductor applications. The advanced interconnect capabilities of PowerFusion^PS improve the processing of high-density power packages, due to an expanded bondable area, wider leadframe capability, indexing accuracy and teach mode. In all cases, we are making a concerted effort to develop commonality of subsystems and design practices, in order to improve performance and design efficiencies. We believe this will benefit us as it increases synergies between the various engineering product groups. Furthermore, we continually research adjacent market segments where our technologies could be used. Although many of these initiatives are in the early stages of development, some have already yielded results such as the Asterion™ hybrid wedge bonder which is built on an enhanced architecture that includes an expanded bond area, new robust pattern recognition capabilities and extremely tight process controls. Another example of our developing equipment for high-growth niche markets is our AT Premier PLUS. This machine utilizes a modified wire bonding process to mechanically place bumps on devices in a wafer format, for variants of the flip chip assembly process. Typical applications include complementary metal-oxide semiconductor (“CMOS”) image sensors, surface acoustical wave (“SAW”) filters and high brightness LEDs. These applications are commonly used in most, if not all, smartphones available in the market. We also have expanded the use of AT Premier PLUS for wafer level wire bonding for micro-electro-mechanical systems (“MEMS”) and other sensors.

Our technology leadership and bonding process know-how have enabled us to develop highly function-specific equipment with high throughput and accuracy. This forms the foundation for our advanced packaging equipment development. We established a dedicated team to develop and manufacture advanced packaging bonders for the emerging 2.5 dimensional integrated circuit (“2.5D IC”) and 3 dimensional integrated circuit (“3D IC”) markets. By reducing the interconnect dimensions, 2.5D ICs and 3D ICs are expected to provide form factor, performance and power efficiency enhancements over traditional flip-chip packages in production today. High-performance processing and memory applications, in addition to mobile devices such as smartphones and tablets, are anticipated to be earlier adopters of this new packaging technology.

We have also broadened our advanced packaging solutions for mass reflow to include flip chip, wafer level packaging ("WLP"), fan-out wafer level packaging ("FOWLP"), advanced package-on-package, embedded die, and System-in-Package ("SiP"). These solutions enable us to diversify our business while further expanding market reach into the automotive, LED lighting, medical and industrial segments with electronic assembly solutions.

We bring the same technology focus to our APS business, driving tool design and manufacturing technology to optimize the performance and process capability of the equipment in which our tools are used. For all our equipment products, expendable tools are an integral part of their process capability. We believe our unique ability to simultaneously develop both equipment and tools, spare parts and services is a core strength supporting our products' technological differentiation.

Products and Services

The following tables reflect net revenue by business segment for the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended
	June 29, 2019				June 30, 2018
(dollar amounts in thousands)	Net revenues		% of total net revenue		Net revenues		% of total net revenue
Capital Equipment	$	89,860	70.7	%	$	229,462	85.4	%
APS	37,249		29.3	%	39,372		14.6	%
	$	127,109	100.0	%	$	268,834	100.0	%

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	Nine months ended
	June 29, 2019				June 30, 2018
(dollar amounts in thousands)	Net revenues		% of total net revenue		Net revenues		% of total net revenue
Capital Equipment	$	286,364	71.6	%	$	578,197	82.1	%
APS	113,861		28.4	%	126,100		17.9	%
	$	400,225	100.0	%	$	704,297	100.0	%

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RESULTS OF OPERATIONS

The following tables reflect our income from operations for the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended
(dollar amounts in thousands)	June 29, 2019		June 30, 2018		$ Change			% Change
Net revenue	$	127,109	$	268,834	$	(141,725	)	(52.7	)%
Cost of sales	68,329		141,865		(73,536		)	(51.8	)%
Gross profit	58,780		126,969		(68,189		)	(53.7	)%
Selling, general and administrative	28,724		32,532		(3,808		)	(11.7	)%
Research and development	28,229		29,974		(1,745		)	(5.8	)%
Operating expenses	56,953		62,506		(5,553		)	(8.9	)%
(Loss)/income from operations	$	1,827	$	64,463	$	(62,636	)	(97.2	)%

	Nine months ended
(dollar amounts in thousands)	June 29, 2019		June 29, 2018		$ Change			% Change
Net revenue	$	400,225	$	704,297	$	(304,072	)	(43.2	)%
Cost of sales	211,073		380,679		(169,606		)	(44.6	)%
Gross profit	189,152		323,618		(134,466		)	(41.6	)%
Selling, general and administrative	87,626		92,679		(5,053		)	(5.5	)%
Research and development	87,609		88,881		(1,272		)	(1.4	)%
Operating expenses	175,235		181,560		(6,325		)	(3.5	)%
Income/(loss) from operations	$	13,917	$	142,058	$	(128,141	)	(90.2	)%

Our net revenues for the three and nine months ended June 29, 2019 decreased as compared to our net revenues for the three and nine months ended June 30, 2018. The decrease in net revenue was primarily due to lower volume as a result of lower demand from our customers, particularly in our Capital Equipment segment.

The semiconductor industry is volatile and our operating results are adversely impacted by volatile worldwide economic conditions. Though the semiconductor industry's cycle can be independent of the general economy, global economic conditions may have a direct impact on demand for semiconductor units and ultimately demand for semiconductor capital equipment and expendable tools. Accordingly, our business and financial performance is impacted, both positively and negatively, by fluctuations in the macroeconomic environment. Our visibility into future demand is generally limited and forecasting is difficult. There can be no assurances regarding levels of demand for our products and we believe historic industry-wide volatility will persist.

The U.S. and other foreign countries have levied tariffs on certain goods and have introduced retaliatory measures or other trade restrictions, which has resulted in uncertainties in the semiconductor, LED, memory and automotive markets. While the Company anticipates long-term growth in semiconductor consumption, the softening in demand, which began in the fourth quarter of fiscal 2018, is expected to continue through fiscal 2019.

Net Revenue

Approximately 93.2% and 94.2% of our net revenue for the three months ended June 29, 2019 and June 30, 2018, respectively, was for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. In the Asia/Pacific region, our customer base has also become more geographically concentrated as a result of economic and industry conditions. Approximately 49.0% and 49.9% of our net revenue for the three months ended June 29, 2019 and June 30, 2018, respectively, was for shipments to customers located in China.

Approximately 93.6% and 91.6% of our net revenue for the nine months ended June 29, 2019 and June 30, 2018, respectively, was for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region. Within the Asia/Pacific region, our customer base has also become more geographically concentrated as a result of economic and industry conditions. Approximately 42.1% and 45.6% of our net revenue for the nine months ended June 29, 2019 and June 30, 2018, respectively, was for shipments to customers located in China.

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The following tables reflect net revenue by business segment for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended
(dollar amounts in thousands)	June 29, 2019		June 30, 2018		$ Change			% Change
Capital Equipment	$	89,860	$	229,462	$	(139,602	)	(60.8	)%
APS	37,249		39,372		(2,123		)	(5.4	)%
Total net revenue	$	127,109	$	268,834	$	(141,725	)	(52.7	)%

	Nine months ended
(dollar amounts in thousands)	June 29, 2019		June 30, 2018		$ Change			% Change
Capital Equipment	$	286,364	$	578,197	$	(291,833	)	(50.5	)%
APS	113,861		126,100		(12,239		)	(9.7	)%
Total net revenue	$	400,225	$	704,297	$	(304,072	)	(43.2	)%

Capital Equipment

The following table reflects the components of Capital Equipment net revenue change between the three and nine months ended June 29, 2019 and June 30, 2018: 

	June 29, 2019 vs. June 30, 2018
	Three months ended									Nine months ended
(in thousands)	Price			Volume			$ Change			Price			Volume			$ Change
Capital Equipment	$	(70	)	$	(139,532	)	$	(139,602	)	$	(2,035	)	$	(289,798	)	$	(291,833	)

For the three and nine months ended June 29, 2019, the lower Capital Equipment net revenue as compared to the prior year period was primarily due to lower volume. The lower volume was primarily due to decrease in customer investments as a result of uncertainties in semiconductor, LED, memory and automotive markets.

APS

The following table reflects the components of APS net revenue change between the three and nine months ended June 29, 2019 and June 30, 2018: 

	June 29, 2019 vs. June 30, 2018
	Three months ended								Nine months ended
(in thousands)	Price			Volume		$ Change			Price			Volume			$ Change
APS	$	(2,314	)	$	191	$	(2,123	)	$	(7,045	)	$	(5,194	)	$	(12,239	)

For the three months ended June 29, 2019, the lower APS net revenue as compared to prior year period was due to lower price. The lower price was due to competition and unfavorable product mix in the capillaries business.

For the nine months ended June 29, 2019, the lower APS net revenue as compared to prior year period was due to lower price and lower volume. The lower price was due to competition and unfavorable product mix in the capillaries business. The lower volume was due to lower utilization of our products.

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Gross Profit

The following tables reflect gross profit by reportable segment for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended
(dollar amounts in thousands)	June 29, 2019		June 29, 2018		$ Change			% Change
Capital Equipment	$	38,127	$	104,847	$	(66,720	)	(63.6	)%
APS	20,653		22,122		(1,469		)	(6.6	)%
Total gross profit	$	58,780	$	126,969	$	(68,189	)	(53.7	)%

	Nine months ended
(dollar amounts in thousands)	June 29, 2019		June 30, 2018		$ Change			% Change
Capital Equipment	$	124,906	$	254,158	$	(129,252	)	(50.9	)%
APS	64,246		69,460		(5,214		)	(7.5	)%
Total gross profit	$	189,152	$	323,618	$	(134,466	)	(41.6	)%

The following tables reflect gross profit as a percentage of net revenue by reportable segments for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended				Basis Point
	June 29, 2019		June 30, 2018		Change
Capital Equipment	42.4	%	45.7	%	(330	)
APS	55.4	%	56.2	%	(80	)
Total gross margin	46.2	%	47.2	%	(100	)

	Nine months ended				Basis Point
	June 29, 2019		June 30, 2018		Change
Capital Equipment	43.6	%	44.0	%	(40	)
APS	56.4	%	55.1	%	130
Total gross margin	47.3	%	45.9	%	140

For the three months ended June 29, 2019, the lower gross profit margin as compared to the prior year period was primarily due to lower gross margin from Capital Equipment as a result of unfavorable product mix, partially offset by a higher proportion of sales in APS, which generally have a higher gross margin.

For the nine months ended June 29, 2019, the higher gross profit margin as compared to the prior year period was primarily due to a higher proportion of sales in APS, which generally have a higher gross margin.

Capital Equipment

The following table reflects the components of Capital Equipment gross profit change between the three and nine months ended June 29, 2019 and June 30, 2018: 

	June 29, 2019 vs. June 30, 2018
	Three months ended												Nine months ended
(in thousands)	Price			Cost			Volume			$ Change			Price			Cost			Volume			$ Change
Capital Equipment	$	(70	)	$	(1,624	)	$	(65,026	)	$	(66,720	)	$	(2,035	)	$	(1,235	)	$	(125,982	)	$	(129,252	)

For the three and nine months ended June 29, 2019, the lower Capital Equipment gross profit as compared to the prior year period was primarily due to lower volume and higher cost. The lower volume was primarily due to decrease in customer investments as a result of uncertainties in semiconductor, LED, memory and automotive markets. The higher cost was primarily due to the lower absorption of the fixed manufacturing costs.

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APS

The following table reflects the components of APS gross profit change between the three and nine months ended June 29, 2019 and June 30, 2018: 

	June 29, 2019 vs. June 30, 2018
	Three months ended										Nine months ended
(in thousands)	Price			Cost		Volume		$ Change			Price			Cost		Volume			$ Change
APS	$	(2,314	)	$	650	$	195	$	(1,469	)	$	(7,045	)	$	2,182	$	(351	)	$	(5,214	)

For the three and nine months ended June 29, 2019, the lower APS gross profit as compared to prior year period was primarily due to lower price as a result of competition and unfavorable product mix in the capillaries business. This was partially offset by the favorable cost impact mainly due to efficiency from factory automation in capillary manufacturing.

Operating Expenses

The following tables reflect operating expenses as a percentage of net revenue for the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended				Basis point
	June 29, 2019		June 30, 2018		change
Selling, general & administrative	22.6	%	12.1	%	1,050
Research & development	22.2	%	11.1	%	1,110
Total	44.8	%	23.2	%	2,160

	Nine months ended				Basis point
	June 29, 2019		June 30, 2018		change
Selling, general & administrative	21.9	%	13.2	%	870
Research & development	21.9	%	12.6	%	930
Total	43.8	%	25.8	%	1,800

Selling, General and Administrative (“SG&A”)

For the three months ended June 29, 2019, lower SG&A expenses as compared to prior year period were primarily due to $6.2 million lower staff costs mainly as a result of decrease in incentive compensation. This was partially offset by $1.4 million net unfavorable variance in foreign exchange and $0.6 million higher severance expense.

For the nine months ended June 29, 2019, lower SG&A expenses as compared to the prior year period were primarily due to $6.9 million lower staff costs mainly as a result of decrease in incentive compensation, $1.3 million lower severance and restructuring expenses, and $1.1 million of net favorable change in doubtful debt. These were partially offset by $3.4 million net unfavorable variance in foreign exchange.

Research and Development (“R&D”)

For the three and nine months ended June 29, 2019, lower R&D expenses as compared to the prior year period was primarily due to lower staff costs mainly as a result of decrease in incentive compensation. This was partially offset by higher investment in the development of advanced packaging products.

Interest Income and Expense

The following tables reflect interest income and interest expense for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended
(dollar amounts in thousands)	June 29, 2019			June 30, 2018			$ Change			% Change
Interest income	$	3,956		$	3,459		$	497		14.4	%
Interest expense	$	(632	)	$	(263	)	$	(369	)	140.3	%

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	Nine months ended
(dollar amounts in thousands)	June 29, 2019			June 30, 2018			$ Change			% Change
Interest income	$	11,647		$	8,420		$	3,227		38.3	%
Interest expense	$	(1,137	)	$	(799	)	$	(338	)	42.3	%

For the three and nine months ended June 29, 2019, interest income was higher as compared to the prior year period. This was primarily due to higher interest rates.

Interest expense for the three and nine months ended June 29, 2019 and June 30, 2018 was primarily attributable to the interest on the financing obligation relating to our corporate headquarters, which was incurred subsequent to the completion of the building in December 2013, as well as interest on the overdraft facility. (Refer to Note 8 of Item 1)

Provision for Income Taxes

The following table reflects the provision for income taxes and the effective tax rate for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(dollar amounts in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Income tax expense	$	3,864		$	7,282		$	19,106		$	122,494
Effective tax rate	75.0		%	10.8		%	78.2		%	81.9		%

Please refer to Note 12 of Item 1 for discussion on the provision for income taxes and the effective tax rate for the three and nine months ended June 29, 2019 and June 30, 2018.

LIQUIDITY AND CAPITAL RESOURCES

The following table reflects total cash, cash equivalents, restricted cash and short-term investments as of June 29, 2019 and September 29, 2018:

	As of
(dollar amounts in thousands)	June 29, 2019			September 29, 2018			Change
Cash and cash equivalents	$	395,538		$	320,630		$	74,908
Restricted cash	474			518			(44		)
Short-term investments	248,000			293,000			(45,000		)
Total cash, cash equivalents, restricted cash and short-term investments	$	644,012		$	614,148		$	29,864
Percentage of total assets	57.9		%	51.8		%

The following table reflects a summary of the Consolidated Condensed Statement of Cash Flow information for the nine months ended June 29, 2019 and June 30, 2018:

	Nine months ended
(in thousands)	June 29, 2019			June 30, 2018
Net cash provided by operating activities	$	83,181		$	93,843
Net cash provided by/(used in) investing activities	30,374			(57,527		)
Net cash used in financing activities	(38,751		)	(65,805		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	60			(251		)
Changes in cash, cash equivalents and restricted cash	$	74,864		$	(29,740	)
Cash, cash equivalents and restricted cash, beginning of period	321,148			392,940
Cash, cash equivalents and restricted cash, end of period	$	396,012		$	363,200

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Nine months ended June 29, 2019

Net cash provided by operating activities was primarily due to the increase in net change in operating assets and liabilities of $47.9 million, non-cash adjustments to net income of $30.1 million and net income of $5.2 million. The increase in net change in operating assets and liabilities was primarily driven by a decrease in accounts and notes receivable of $92.7 million related to the lower sales and a decrease in inventory of $16.0 million. This was partially offset by a decrease in accounts payable, accrued expenses and other current liabilities of $48.1 million, also related to the lower sales, an increase in prepaid expenses and other assets of $10.6 million, and a decrease in income tax payable of $3.7 million.

The decrease in accounts receivable was due to higher sales in the fourth quarter of fiscal 2018 as compared to the third quarter of fiscal 2019 as well as timing of collections. The decrease in inventory was due to decreased manufacturing activities in third quarter of fiscal 2019 as compared to the fourth quarter of fiscal 2018 in response to lower sales levels in fiscal 2019. The lower accounts payable, accrued expenses and other current liabilities were primarily due to lower accruals on incentive compensation and other bonuses as a result of payment made in fiscal 2019 and lower purchases due to lower manufacturing activities. The decrease in income tax payable was mainly due to payment of tax during fiscal 2019.

Net cash provided by investing activities was due to net redemption of short-term investments of $45.0 million. This was partially offset by capital expenditures of $9.7 million and an equity investment of $5.0 million in one of our collaborative partners.

Net cash used in financing activities was primarily due to common stock repurchases of $85.5 million and dividend payment of $23.9 million. These were partially offset by an overdraft of $71.2 million.

Nine months ended June 30, 2018

Net cash provided by operating activities was primarily due to the combination of non-cash adjustments to net income of $48.2 million, increase in net change in operating assets and liabilities of $18.6 million and net income of $27.0 million. The increase in net change in operating assets and liabilities was primarily driven by an increase in income tax payable of $84.1 million. This was partially offset by an increase in accounts and notes receivable of $58.9 million, increase in inventory of $5.1 million, and a decrease in accounts payable, accrued expenses and other current liabilities of $1.9 million.

The increase in income tax payable was mainly due to additional tax payable on the repatriation of foreign earnings subsequent to the enactment of the Tax Cuts and Jobs Act (the "Act"). The increase in accounts receivables was due to higher sales in the third quarter of fiscal 2018 as compared to the fourth quarter of fiscal 2017 as well as timing of collections. The increase in net inventories was primarily due to variations in the timing of our customer orders.

Net cash used in investing activities was due to purchases of short-term investments of $487.0 million, and capital expenditures of $16.2 million. This was offset by the proceeds from the maturity of short-term investments of $445.0 million.

Net cash used in financing activities was primarily due to common stock repurchases of $65.3 million.

Fiscal 2019 Liquidity and Capital Resource Outlook

We expect our aggregate fiscal 2019 capital expenditures to be between $11.0 million and $13.0 million, of which approximately $9.3 million has been incurred through the third quarter. The actual amounts for 2019 will vary depending on market conditions. Expenditures are anticipated to be primarily used for R&D projects, enhancements to our manufacturing operations in Asia, improvements to our information technology infrastructure and leasehold improvements for our facilities.

We believe that our existing cash and investments and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements for at least the next twelve months. Our liquidity is affected by many factors, some based on normal operations of our business and others related to global economic conditions and industry uncertainties, which we cannot predict. We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries. We intend to continue to use our cash for working capital needs and for general corporate purposes.

We may seek, as we believe appropriate, additional debt or equity financing that would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions. The timing and amount of potential capital requirements cannot be determined at this time and will depend on a number of factors, including our actual and projected demand for our products, semiconductor and semiconductor capital equipment industry conditions, competitive factors, and the condition of financial markets.

As of June 29, 2019 and September 29, 2018, approximately $637.2 million and $545.0 million of cash, cash equivalents, and short-term investments were held by the Company's foreign subsidiaries, respectively. As a result of the Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017, the cash amount as of June 29, 2019 is expected to be available for use in the U.S. without incurring additional income tax.

36

Share Repurchase Program

On August 15, 2017, the Company’s Board of Directors authorized a program (the "Program") to repurchase up to $100 million in total of the Company’s common stock on or before August 1, 2020. On July 10, 2018, the Board of Directors increased the share repurchase authorization under the Program to $200 million. On January 31, 2019, the Board of Directors further increased the share repurchase under the Program to $300 million. The Company has entered into a written trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be suspended or discontinued at any time and is funded using the Company's available cash, cash equivalents and short-term investments. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations. During the three and nine months ended June 29, 2019, the Company repurchased a total of 1.5 million and 4.0 million shares of common stock under the Program at a cost of $33.2 million and $85.6 million, respectively. As of June 29, 2019, our remaining stock repurchase authorization under the Program was approximately $112.1 million.

Dividends

On May 20, 2019, February 28, 2019, and December 12, 2018, the Board of Directors declared a quarterly dividend of $0.12 per share of common stock. Dividends paid during the three and nine months ended June 29, 2019 totaled $7.8 million and $23.9 million, respectively. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company's stockholders.

Other Obligations and Contingent Payments

In accordance with U.S. generally accepted accounting principles, certain obligations and commitments are not required to be included in the Consolidated Condensed Balance Sheets and Statements of Operations. These obligations and commitments, while entered into in the normal course of business, may have a material impact on our liquidity. Certain of the following commitments as of June 29, 2019 are appropriately not included in the Consolidated Condensed Balance Sheets and Statements of Operations included in this Form 10-Q; however, they have been disclosed in the table below for additional information.

The Company’s other non-current liabilities in the Consolidated Condensed Balance Sheets consist primarily of deferred tax liabilities, gross long-term tax payable and retirement obligations. As of June 29, 2019, the Company had deferred tax liabilities of $27.2 million and long-term tax payable of $20.5 million of which the Company is unable to make a reasonably reliable estimate of the timing of payments due to uncertainties in the timing of tax audit outcomes; therefore, such amounts are not included in the below contractual obligation table. In addition, the Company has retirement obligations and other severances of $7.7 million which are payable on employee departures.

The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of June 29, 2019:

			Payments due in
(in thousands)	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Inventory purchase obligations (1)	$	85,829	$	85,829	$	—	$	—	$	—
Operating lease obligations (2)	17,534		4,343		5,255		3,857		4,079
Long-term tax payable (3) (reflected on our Balance Sheets)	64,099		—		13,684		19,671		30,744
Asset retirement obligations (4) (reflected on our Balance Sheets)	1,612		87		365		1,038		122
Total	$	169,074	$	90,259	$	19,304	$	24,566	$	34,945

(1) We order inventory components in the normal course of our business. A portion of these orders are non-cancellable and a portion may have varying penalties and charges in the event of cancellation.

(2) Represents minimum rental commitments under various leases (excluding taxes, insurance, maintenance and repairs, which are also paid by us) primarily for various facility and equipment leases, which expire periodically through 2027 (not including lease extension options, if applicable).

The annual rent and service charge for our corporate headquarters range from $4 million to $5 million Singapore dollars and is not included in the table above.

37

In accordance with ASC No. 840, Leases ("ASC 840"), the Company was considered to be the owner of its headquarters during the construction phase due to its involvement in the asset construction. As a result of the Company's continued involvement during the lease term, the Company did not fulfill the criteria to apply sale-leaseback accounting under ASC 840. Therefore, at completion, the building remained on the Consolidated Condensed Balance Sheet, and the corresponding financing obligation was reclassified to long-term liability. As of June 29, 2019, we recorded a financing obligation of $15.5 million. The financing obligation is not reflected in the table above.

(3) Associated with the one-time transition tax of our foreign subsidiaries in relation to the Act. (Refer to Note 12 of Item 1).

(4) Asset retirement obligations are associated with commitments to return the property to its original condition upon lease termination at various sites.

Off-Balance Sheet Arrangements

Credit facilities and Bank Guarantees

On November 22, 2013, the Company obtained a $5.0 million credit facility with Citibank in connection with the issuance of bank guarantees for operational purposes. As of June 29, 2019, the outstanding amount is $3.2 million.

On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company with an overdraft facility of up to $100.0 million (the “Overdraft Facility”) for general corporate purposes. Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days written demand by the Bank. Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the overnight U.S. Dollar LIBOR rate plus a margin of 1.5% per annum. The Overdraft Facility is an unsecured facility per the terms of the Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation, covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of one of its subsidiaries (the "Subsidiary"). or encumber its assets with material security interests (including any pledge of monies in the Subsidiary’s cash deposit account with the Bank). The Facility Agreements also contain typical events of default, including, without limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company or any breach of a representation or warranty under the Facility Agreements. As of June 29, 2019, the outstanding amount is $71.2 million.

In addition, the Company has other bank guarantees for operational purposes which are secured with corresponding deposits placed with the issuer banks. These amounts are shown as restricted cash in the Consolidated Condensed Balance Sheets.

As of June 29, 2019, we did not have any other off-balance sheet arrangements, such as contingent interests or obligations associated with variable interest entities.

Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our available-for-sale securities, if applicable, may consist of short-term investments in highly rated debt instruments of the U.S. Government and its agencies, financial institutions, and corporations. We continually monitor our exposure to changes in interest rates and credit ratings of issuers with respect to any available-for-sale securities and target an average life to maturity of less than 18 months. Accordingly, we believe that the effects on us of changes in interest rates and credit ratings of issuers are limited and would not have a material impact on our financial condition or results of operations.

Foreign Currency Risk

Our international operations are exposed to changes in foreign currency exchange rates due to transactions denominated in currencies other than the location's functional currency. Our international operations are 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, we have 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. Our U.S. operations also have foreign currency exposure due to net monetary assets denominated in currencies other than the U.S. dollar.

Based on our foreign currency exposure as of June 29, 2019, a 10.0% fluctuation could impact our financial position, results of operations or cash flows by $1.0 to $2.0 million. Our attempts to hedge against these risks may not be successful and may result in a material adverse impact on our financial results and cash flow.

We enter into foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated expenses in the normal course of business and, accordingly, they are not speculative in nature. These instruments generally mature within

38

twelve months. We have foreign exchange forward contracts with a notional amount of $34.8 million outstanding as of June 29, 2019.

Item 4. - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 29, 2019. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 29, 2019 our disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

In connection with the evaluation by our management, including with the participation of our Chief Executive Officer and Chief Financial Officer, of our internal control over financial reporting, no changes during the three months ended June 29, 2019 were identified to have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

39

PART II. - OTHER INFORMATION 

Item 1A. - RISK FACTORS

Certain Risks Related to Our Business

There have been no material changes from the risk factors discussed in Part I, Item 1A, “Risk Factors”, of our 2018 Annual Report on Form 10-K, except as follows:

Substantially all of our sales and manufacturing operations are located outside of the U.S., and we rely on independent foreign distribution channels for certain product lines, all of which subject us to risks, including risks from changes in trade regulations, currency fluctuations, political instability and conflicts.

Approximately 92.3%, 92.9%, and 92.4% of our net revenue for fiscal 2018, 2017, and 2016, respectively, was for shipments to customers located outside of the U.S., primarily in the Asia/Pacific region. In the Asia/Pacific region, our customer base is also becoming more geographically concentrated as a result of economic and industry conditions. Approximately 46.0%, 40.0% and 33.7% of our net revenue for the fiscal 2018, 2017, and 2016 was for shipments to customers located in China.We expect our future performance to depend on our ability to continue to compete in foreign markets, particularly in the Asia/Pacific region. Some of these economies have been highly volatile, resulting in significant fluctuation in local currencies, and political and economic instability. These conditions may continue or worsen, which may materially and adversely affect our business, financial condition and operating results.We also rely on non-U.S. suppliers for materials and components used in our products, and substantially all of our manufacturing operations are located in countries other than the U.S. We manufacture our ball, wedge and APAMA bonders in Singapore, our Hybrid and Electronic Assembly solutions in the Netherlands, our dicing blades, capillaries and bonding wedges in China and capillary blanks in Israel. In addition, our corporate headquarters is in Singapore and we have sales, service and support personnel in Singapore, Israel, Taiwan, China, Korea, Malaysia, the Philippines, Japan, Thailand, the U.S., Germany, Mexico, Switzerland and the Netherlands. We also rely on independent foreign distribution channels for certain of our product lines. As a result, a major portion of our business is subject to the risks associated with international, and particularly Asia/Pacific, commerce, such as:

• risks of war and civil disturbances or other events that may limit or disrupt manufacturing and markets;

• seizure of our foreign assets, including cash;

• longer payment cycles in foreign markets;

• foreign exchange restrictions and capital controls;

• restrictions on the repatriation of our assets, including cash;

• significant foreign and U.S. taxes on repatriated cash;

• difficulties of staffing and managing dispersed international operations;

• possible disagreements with tax authorities;

• episodic events outside our control such as, for example, outbreaks of influenza or other illnesses;

• natural disasters such as earthquakes, fires or floods;

• tariff and currency fluctuations;

• changing political conditions;

• labor work stoppages and strikes in our factories or the factories of our suppliers;

• foreign governments' monetary policies and regulatory requirements;

• less protective foreign intellectual property laws;

• new laws and regulations; and

• legal systems which are less developed and may be less predictable than those in the U.S.

In addition, there is a potential risk of conflict and instability in the relationship between Taiwan and China. Conflict or instability could disrupt the operations of our customers and/or suppliers in both Taiwan and China. Additionally, our manufacturing operations in China could be disrupted by any conflict.

Our international operations also depend upon favorable trade relations between the U.S. and those foreign countries in which our customers, subcontractors and materials suppliers have operations. A protectionist trade environment in either the U.S. or those foreign countries in which we do business, such as a change in the current tariff structures, export compliance or other trade policies, may materially and adversely affect our ability to sell our products in foreign markets.

40

The U.S. and other foreign countries have levied tariffs on certain goods and have introduced retaliatory measures or other trade restrictions that may impact our customer investment in manufacturing equipment, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies. We cannot predict what further actions may ultimately be taken with respect to tariffs or trade relations between the U.S. and other countries, what products may be subject to such actions, or what actions may be taken by other countries in retaliation. Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials, may limit our ability to produce products, increase our selling and/or manufacturing costs, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition.

Item 2. - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the repurchases of common stock during the three months ended June 29, 2019 (in millions, except number of shares, which are reflected in thousands, and per share amounts):

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
March 31, 2019 to April 27, 2019	307	$	23.71	307	$	138.0
April 28, 2019 to June 1, 2019	666	$	20.60	666	$	124.3
June 2, 2019 to June 29, 2019	565	$	21.53	565	$	112.1
For the three months ended June 29, 2019	1,538			1,538

(1) On August 15, 2017, the Company's Board of Directors authorized a program (the "Program") to repurchase of up to $100 million in total of the Company's common stock on or before August 1, 2020. On July 10, 2018, the Board of Directors increased the share repurchase authorization under the Program to $200 million. On January 31, 2019, the Board of Directors further increased the share repurchase under the Program to $300 million. The Company may purchase shares of its common stock through open market and privately negotiated transactions at prices deemed appropriate by management. The Company has entered into a written trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be suspended or discontinued at any time and will be funded using the Company's available cash, cash equivalents and short-term investments. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations.

41

Item 6. -     EXHIBITS

Exhibit No.	Description
31.1	Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2	Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1	Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

42

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KULICKE AND SOFFA INDUSTRIES, INC.
Date: August 2, 2019	By:	/s/ LESTER WONG
		Lester Wong
		Senior Vice President, Chief Financial Officer and General Counsel

43

EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to Rule 13a-14(a) or Rule15d-14(a).
31.2	Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1	Certification of Fusen Chen, Chief Executive Officer of Kulicke and Soffa Industries, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Lester Wong, Chief Financial Officer of Kulicke and Soffa Industries, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

44

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Fusen Chen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kulicke and Soffa Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 2, 2019	By:	/s/ FUSEN CHEN
		Fusen Chen
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Lester Wong, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kulicke and Soffa Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 2, 2019	By:	/s/ LESTER WONG
		Lester Wong
		Senior Vice President, Chief Financial Officer and General Counsel

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Fusen Chen, President and Chief Executive Officer of Kulicke and Soffa Industries, Inc., do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. the Quarterly Report on Form 10-Q of Kulicke and Soffa Industries, Inc. for the period ended June 29, 2019 (the “June 29, 2019 Form 10-Q”), as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. the information contained in the June 29, 2019 Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Kulicke and Soffa Industries, Inc.

Date: August 2, 2019	By:	/s/ FUSEN CHEN
		Fusen Chen
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Lester Wong, Senior Vice President, Chief Financial Officer and General Counsel of Kulicke and Soffa Industries, Inc., do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. the Quarterly Report on Form 10-Q of Kulicke and Soffa Industries, Inc. for the period ended June 29, 2019 (the “June 29, 2019 Form 10-Q”), as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. the information contained in the June 29, 2019 Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Kulicke and Soffa Industries, Inc.

Date: August 2, 2019	By:	/s/ LESTER WONG
		Lester Wong
		Senior Vice President, Chief Financial Officer and General Counsel

XML

DOCUMENT AND ENTITY INFORMATION - shares	9 Months Ended
	Jun. 29, 2019	Jul. 29, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-121
Entity Registrant Name	KULICKE & SOFFA INDUSTRIES INC
Entity Central Index Key	0000056978
Amendment Flag	false
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-1498399
Entity Address, Address Line One	23A Serangoon North Avenue 5
Entity Address, Address Line Two	#01-01
Entity Address, Address Line Three	K&S Corporate Headquarters
Entity Address, City or Town	Singapore
Entity Address, Country	SG
Entity Address, Postal Zip Code	554369
City Area Code	215
Local Phone Number	784-6000
Title of 12(b) Security	Common Stock, Without Par Value
Trading Symbol	KLIC
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--09-28
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Document Period End Date	Jun. 29, 2019
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		63,407,840

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Jun. 29, 2019		Sep. 29, 2018
Current assets:
Cash and cash equivalents		$ 395,538		$ 320,630
Restricted cash		474	[1]	518	[2]
Short-term investments	[3]	248,000		293,000
Accounts and other receivable, net of allowance for doubtful accounts of $0 and $385, respectively		151,246		243,373
Inventories, net		98,049		115,191
Prepaid expenses and other current assets		25,133		14,561
Total current assets		918,440		987,273
Property, plant and equipment, net		74,851		76,067
Goodwill		56,248		56,550
Intangible assets, net		46,198		52,871
Deferred income taxes		8,159		9,017
Equity investments		6,301		1,373
Other assets		2,372		2,589
TOTAL ASSETS		1,112,569		1,185,740
Current liabilities:
Short term debt		71,194		0
Accounts payable		42,337		48,527
Accrued expenses and other current liabilities		63,465		105,978
Income taxes payable		12,258		19,571
Total current liabilities		189,254		174,076
Financing obligation		14,701		15,187
Deferred income taxes		27,154		25,591
Income taxes payable		84,617		81,491
Other liabilities		9,408		9,188
TOTAL LIABILITIES		325,134		305,533
Commitments and contingent liabilities (Note 14)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value: Authorized 5,000 shares; issued - none		0		0
Authorized 200,000 shares; issued 85,349 and 84,659, respectively; outstanding 63,837 and 67,143 shares, respectively		530,016		519,244
Treasury stock, at cost, 21,512 and 17,516 shares, respectively		(334,248)		(248,664)
Retained earnings		595,803		613,529
Accumulated other comprehensive loss		(4,136)		(3,902)
TOTAL SHAREHOLDERS' EQUITY		787,435		880,207
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$ 1,112,569		$ 1,185,740

[1] Fair value approximates cost basis.

[2] Fair value approximates cost basis.

[3] 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 nine months ended June 29, 2019 and June 30, 2018.

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CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Consolidated Balance Sheets Parenthetical [Abstract]
Allowance for doubtful accounts and notes receivable	$ 0	$ 385
Preferred stock, without par value (usd per share)	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, no par value (usd per share)	$ 0	$ 0
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	85,349,000	84,659,000
Common stock, shares outstanding	63,837,000	67,143,000
Treasury stock, shares	21,512,000	17,516,000

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Revenues	$ 127,109	$ 268,834	$ 400,225	$ 704,297
Cost of sales	68,329	141,865	211,073	380,679
Gross profit	58,780	126,969	189,152	323,618
Selling, general and administrative	28,724	32,532	87,626	92,679
Research and development	28,229	29,974	87,609	88,881
Operating expenses	56,953	62,506	175,235	181,560
(Loss)/income from operations	1,827	64,463	13,917	142,058
Interest income	3,956	3,459	11,647	8,420
Interest expense	(632)	(263)	(1,137)	(799)
Income before income taxes	5,151	67,659	24,427	149,679
Income tax expense	3,864	7,282	19,106	122,494
Share of results of equity-method investee, net of tax	0	121	72	144
Net (loss)/income	$ 1,287	$ 60,256	$ 5,249	$ 27,041
Net (loss)/income per share:
Basic (in dollars per share)	$ 0.02	$ 0.87	$ 0.08	$ 0.39
Diluted (in dollars per share)	$ 0.02	$ 0.86	$ 0.08	$ 0.38
Weighted average shares outstanding:
Basic (in shares)	64,683	69,125	65,914	70,019
Diluted (in shares)	65,431	70,302	66,597	71,113

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income/(loss)	$ 1,287	$ 60,256	$ 5,249	$ 27,041
Other comprehensive (loss)/income:
Foreign currency translation adjustment	(42)	(8,409)	(1,430)	(817)
Unrecognized actuarial gain/(loss) on pension plan, net of tax	(31)	61	(9)	36
Foreign currency translation and pension plan, net of tax	(73)	(8,348)	(1,439)	(781)
Derivatives designated as hedging instruments:
Unrealized gain on derivative instruments, net of tax	(49)	(1,542)	39	(513)
Reclassification adjustment for loss/(gain) on derivative instruments recognized, net of tax	33	(344)	1,165	(1,884)
Net decrease/(increase) from derivatives designated as hedging instruments, net of tax	(16)	(1,886)	1,204	(2,397)
Total other comprehensive income/(loss)	(89)	(10,234)	(235)	(3,178)
Comprehensive (loss)/income	$ 1,198	$ 50,022	$ 5,014	$ 23,863

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CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Treasury Stock	Retained earnings	Accumulated Other Comprehensive loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting changes	$ 5,420	$ 1,414		$ 4,006
Beginning balance at Sep. 30, 2017	920,030	$ 506,515	$ (157,604)	569,080	$ 2,039
Beginning balance (shares) at Sep. 30, 2017		70,197
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock for services rendered (shares)		9
Issuance of stock for services rendered	195	$ 195
Repurchase of common stock (shares)		(148)
Repurchase of common stock	(3,280)		(3,280)
Exercise of stock options (shares)		6
Exercise of stock options	55	$ 55
Issuance of shares for market-based restricted stock and time-based restricted stock (shares)		540
Issuance of shares for market-based restricted stock and time-based restricted stock	0
Equity-based compensation	2,557	$ 2,557
Net income/(loss)	(69,528)			(69,528)
Other comprehensive loss	1,825				1,825
Total comprehensive income/(loss)	(67,703)			(69,528)	1,825
Ending balance (shares) at Dec. 30, 2017		70,604
Ending balance at Dec. 30, 2017	857,274	$ 510,736	(160,884)	503,558	3,864
Beginning balance at Sep. 30, 2017	920,030	$ 506,515	(157,604)	569,080	2,039
Beginning balance (shares) at Sep. 30, 2017		70,197
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income/(loss)	27,041
Other comprehensive loss	(3,178)
Total comprehensive income/(loss)	23,863
Ending balance (shares) at Jun. 30, 2018		68,006
Ending balance at Jun. 30, 2018	882,082	$ 516,208	(224,938)	591,951	(1,139)
Beginning balance at Dec. 30, 2017	857,274	$ 510,736	(160,884)	503,558	3,864
Beginning balance (shares) at Dec. 30, 2017		70,604
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock for services rendered (shares)		8
Issuance of stock for services rendered	195	$ 195
Repurchase of common stock (shares)		(898)
Repurchase of common stock	(21,470)		(21,470)
Issuance of shares for market-based restricted stock and time-based restricted stock (shares)		73
Issuance of shares for market-based restricted stock and time-based restricted stock	0
Equity-based compensation	2,384	$ 2,384
Net income/(loss)	36,313			36,313
Other comprehensive loss	5,231				5,231
Total comprehensive income/(loss)	41,544			36,313	5,231
Ending balance (shares) at Mar. 31, 2018		69,787
Ending balance at Mar. 31, 2018	879,927	$ 513,315	(182,354)	539,871	9,095
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock for services rendered (shares)		8
Issuance of stock for services rendered	195	$ 195
Repurchase of common stock (shares)		(1,793)
Repurchase of common stock	(42,584)		(42,584)
Issuance of shares for market-based restricted stock and time-based restricted stock (shares)		4
Issuance of shares for market-based restricted stock and time-based restricted stock	0
Equity-based compensation	2,698	$ 2,698
Net income/(loss)	60,256			60,256
Other comprehensive loss	(10,234)				(10,234)
Total comprehensive income/(loss)	50,022			60,256	(10,234)
Ending balance (shares) at Jun. 30, 2018		68,006
Ending balance at Jun. 30, 2018	882,082	$ 516,208	(224,938)	591,951	(1,139)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting changes	534
Beginning balance at Sep. 29, 2018	880,207	$ 519,244	(248,664)	613,529	(3,902)
Beginning balance (shares) at Sep. 29, 2018		67,143
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock for services rendered (shares)		8
Issuance of stock for services rendered	195	$ 195
Repurchase of common stock (shares)		(1,233)
Repurchase of common stock	(25,485)		(25,485)
Issuance of shares for market-based restricted stock and time-based restricted stock (shares)		642
Issuance of shares for market-based restricted stock and time-based restricted stock	0
Equity-based compensation	3,678	$ 3,678
Cash dividend declared	(8,055)			(8,055)
Net income/(loss)	7,517			7,517
Other comprehensive loss	(182)				(182)
Total comprehensive income/(loss)	7,335			7,517	(182)
Ending balance (shares) at Dec. 29, 2018		66,560
Ending balance at Dec. 29, 2018	858,409	$ 523,117	(274,149)	613,525	(4,084)
Beginning balance at Sep. 29, 2018	$ 880,207	$ 519,244	(248,664)	613,529	(3,902)
Beginning balance (shares) at Sep. 29, 2018		67,143
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (shares)	(4,000)
Repurchase of common stock	$ (85,600)
Net income/(loss)	5,249
Other comprehensive loss	(235)
Total comprehensive income/(loss)	5,014
Ending balance (shares) at Jun. 29, 2019		63,837
Ending balance at Jun. 29, 2019	787,435	$ 530,016	(334,248)	595,803	(4,136)
Beginning balance at Dec. 29, 2018	858,409	$ 523,117	(274,149)	613,525	(4,084)
Beginning balance (shares) at Dec. 29, 2018		66,560
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock for services rendered (shares)		10
Issuance of stock for services rendered	195	$ 195
Repurchase of common stock (shares)		(1,225)
Repurchase of common stock	(26,922)		(26,922)
Issuance of shares for market-based restricted stock and time-based restricted stock (shares)		4
Issuance of shares for market-based restricted stock and time-based restricted stock	0
Equity-based compensation	3,107	$ 3,107
Cash dividend declared	(8,057)			(8,057)
Net income/(loss)	(3,555)			(3,555)
Other comprehensive loss	37				37
Total comprehensive income/(loss)	(3,518)			(3,555)	37
Ending balance (shares) at Mar. 30, 2019		65,349
Ending balance at Mar. 30, 2019	823,214	$ 526,419	(301,071)	601,913	(4,047)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock for services rendered (shares)		10
Issuance of stock for services rendered	$ 222	$ 222
Repurchase of common stock (shares)	(1,500)	(1,538)
Repurchase of common stock	$ (33,177)		(33,177)
Issuance of shares for market-based restricted stock and time-based restricted stock (shares)		16
Issuance of shares for market-based restricted stock and time-based restricted stock	0
Equity-based compensation	3,375	$ 3,375
Cash dividend declared	(7,397)			(7,397)
Net income/(loss)	1,287			1,287
Other comprehensive loss	(89)				(89)
Total comprehensive income/(loss)	1,198			1,287	(89)
Ending balance (shares) at Jun. 29, 2019		63,837
Ending balance at Jun. 29, 2019	$ 787,435	$ 530,016	$ (334,248)	$ 595,803	$ (4,136)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Net income/(loss)	$ 5,249	$ 27,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,001	14,163
Equity-based compensation and employee benefits	10,772	8,224
Excess tax benefits from stock-based compensation	0	(50)
Adjustment for doubtful accounts	(385)	675
Adjustment for inventory valuation	2,059	3,419
Deferred income taxes	2,450	21,480
Loss/(gain) on disposal of property, plant and equipment	(19)	(421)
Unrealized foreign currency translation	117	606
Share of results of equity-method investee	72	144
Changes in operating assets and liabilities:
Accounts and other receivable	92,696	(58,949)
Inventory	15,960	(5,141)
Prepaid expenses and other current assets	(10,623)	2,702
Accounts payable, accrued expenses and other current liabilities	(48,148)	(1,893)
Income taxes payable	(3,655)	84,105
Other, net	1,635	(2,262)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	83,181	93,843
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(9,665)	(16,152)
Proceeds from sales of property, plant and equipment	39	625
Purchase of equity investments	(5,000)	0
Purchase of short-term investments	(489,000)	(487,000)
Maturity of short-term investments	534,000	445,000
Net cash provided by /(used in) investing activities	30,374	(57,527)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on debts	(574)	(526)
Proceeds from exercise of common stock options	0	55
Repurchase of common stock	(85,469)	(65,334)
Dividend payment	(23,902)	0
Proceeds from Short-term Debt	71,194	0
Net cash used in financing activities	(38,751)	(65,805)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	60	(251)
Changes in cash, cash equivalents and restricted cash	74,864	(29,740)
Cash, cash equivalents and restricted cash at beginning of period	321,148	392,940
Cash, cash equivalents and restricted cash at end of period	396,012	363,200
CASH PAID FOR:
Interest	747	799
Income taxes, net of refunds	$ 21,373	$ 9,500

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BASIS OF PRESENTATION

9 Months Ended

Jun. 29, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

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 29, 2018, filed with the Securities and Exchange Commission, which includes Consolidated Balance Sheets as of September 29, 2018 and September 30, 2017, 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 29, 2018. 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 2019 quarters end on December 29, 2018, March 30, 2019, June 29, 2019 and September 28, 2019. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. Fiscal 2018 quarters ended on December 30, 2017, March 31, 2018, June 30, 2018 and September 29, 2018.

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, valuation allowances for deferred tax assets and deferred tax liabilities, repatriation of un-remitted foreign subsidiary earnings, 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.

Vulnerability to Certain Concentrations

Financial instruments which may subject the Company to concentrations of credit risk as of June 29, 2019 and September 29, 2018 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.

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 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 nine months ended June 29, 2019, 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 two-step impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. If the carrying value of a reporting unit exceeds its fair value in the first step of the test, then a company is required to perform the second step of the goodwill impairment test to measure the amount of the reporting unit's goodwill impairment loss, if any. 

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under this guidance, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning in our first quarter of 2021 and early adoption is permitted. During the third quarter of 2017, we elected to prospectively adopt ASU2017-04. This eliminates the requirement to perform step 2 of the goodwill impairment test.

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 equipments 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 our customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.

• 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 nine months ended June 29, 2019, and June 30, 2018, 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 any of 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 it expects is more likely than not to be realized. While the Company has considered future taxable income and its 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 the deferred tax asset 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 net deferred tax assets in the future, an adjustment to the deferred tax asset would decrease income in the period when such determination is made.

In accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”), the Company accounts for uncertain tax positions taken or expected to be taken in its income tax return. 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 9 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.

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 tax liabilities, 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

Income Taxes

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The new guidance is effective for the Company beginning fiscal 2019 and requires the tax effects of intercompany transactions (other than transfers of inventory) to be recognized currently. The Company has adopted the modified retrospective approach for the transition based on the new guidance and, as of the beginning of the period of adoption, has recorded the cumulative effect of adjustments related to intra-entity transfers of intangible and fixed assets of $0.5 million in prior years as an increase to retained earnings.

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.

The Company will adopt these ASUs utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of its first quarter of 2020. In addition, we will elect 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. The adoption of these ASUs will result in an increase in our consolidated balance sheets for these right of use assets and corresponding liabilities. However, the ultimate impact of adopting these ASUs will depend on the Company's lease portfolio as of the adoption date. We are currently evaluating the effects of the adoption of these ASUs on our financial statements.

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 financial statements.

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. The new guidance will be effective for us beginning in our first quarter of fiscal 2020, and early adoption is permitted in any interim period. We do not expect the adoption of this ASU to have a material impact on our financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.

Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”); and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20” and collectively, the “new revenue standards”).

The Company has performed an evaluation of this ASU and its impact on the financial statements. This included tasks such as identifying contracts, performance obligations and reviewing the applicable revenue streams. We have completed our assessment and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. The new standard was adopted in the first quarter of fiscal 2019 using a modified retrospective approach.

Based on our review of all our customer agreements for the affected periods, our revenue from sales of our products, such as equipment and spare parts, will continue to be recognized at a point in time, generally upon shipment or delivery to customers or distributors, depending upon the terms of the sales order, consistent with our current revenue recognition model. Revenue related to the sale of services will generally continue to be recognized over time as the services are performed. In certain instances, where collection of consideration is not probable, recognition of revenue may occur later under the new model after we have completed all of our obligations under the contract. However, when adopting the new standard, we did not identify any balances where collection of consideration is not probable. This ASU did not have a material impact on the amount and timing of revenue recognized in the Company’s consolidated 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 financial statements.

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BALANCE SHEET COMPONENTS

9 Months Ended

Jun. 29, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BALANCE SHEET COMPONENTS

BALANCE SHEET COMPONENTS

The following tables reflect the components of significant balance sheet accounts as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019			September 29, 2018
Short term investments, available-for-sale(1)	$	248,000		$	293,000
Inventories, net:
Raw materials and supplies	$	58,336		$	63,894
Work in process	31,590			37,829
Finished goods	35,890			40,357
	125,816			142,080
Inventory reserves	(27,767		)	(26,889		)
	$	98,049		$	115,191
Property, plant and equipment, net:
Land	$	2,182		$	2,182
Buildings and building improvements (2)	42,125			41,616
Leasehold improvements (2)	24,125			23,561
Data processing equipment and software	36,027			35,469
Machinery, equipment, furniture and fixtures	74,189			68,666
Construction in progress	6,576			6,940
	185,224			178,434
Accumulated depreciation	(110,373		)	(102,367		)
	$	74,851		$	76,067
Accrued expenses and other current liabilities:
Accrued customer obligations (3)	$	27,491		$	34,918
Wages and benefits	16,623			44,505
Dividend payable	7,664			8,057
Commissions and professional fees	2,024			5,549
Deferred rent	1,763			1,847
Severance	355			1,415
Other	7,545			9,687
	$	63,465		$	105,978

(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 nine months ended June 29, 2019 and June 30, 2018.

(2) Certain balances as at September 29, 2018 relating to Property, plant and equipment have been reclassified. These reclassifications have no impact to the Consolidated Balance Sheet as at September 29, 2018.

(3)

Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Jun. 29, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

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 of the acquisitions, expected synergies with our other affiliates and other unidentifiable intangible assets. The Company performs an annual impairment test of its goodwill 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 2018 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 nine months ended June 29, 2019, 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.

The following table summarizes the Company's recorded goodwill as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019		September 29, 2018
Capital Equipment	$	29,920	$	30,159
APS	26,328		26,391
Total goodwill	$	56,248	$	56,550

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 June 29, 2019 and September 29, 2018: 

	As of						Average estimated
(dollar amounts in thousands)	June 29, 2019			September 29, 2018			useful lives (in years)
Developed technology	$	89,334		$	90,500		7.0 to 15.0
Accumulated amortization	(48,243		)	(45,229		)
Net developed technology	$	41,091		$	45,271
Customer relationships	$	35,805		$	36,131		5.0 to 6.0
Accumulated amortization	(31,670		)	(29,820		)
Net customer relationships	$	4,135		$	6,311
Trade and brand names	$	7,321		$	7,377		7.0 to 8.0
Accumulated amortization	(6,349		)	(6,088		)
Net trade and brand names	$	972		$	1,289
Other intangible assets	$	2,500		$	2,500		1.9
Accumulated amortization	(2,500		)	(2,500		)
Net other intangible assets	$	—		$	—
Net intangible assets	$	46,198		$	52,871

The following table reflects estimated annual amortization expense related to intangible assets as of June 29, 2019:

	As of
(in thousands)	June 29, 2019
Remaining fiscal 2019	$	1,870
Fiscal 2020	7,479
Fiscal 2021	5,417
Fiscal 2022	4,439
Fiscal 2023 and onwards	26,993
Total amortization expense	$	46,198

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS

9 Months Ended

Jun. 29, 2019

Cash and Cash Equivalents [Abstract]

CASH AND CASH EQUIVALENTS

CASH, CASH EQUIVALENTS, RESTRICTED CASH 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, restricted cash and short-term investments consisted of the following as of June 29, 2019:

(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	261,806	$	—	$	—	$	261,806
Cash equivalents:
Money market funds (1)	123,726		—		—		123,726
Time deposits (2)	10,006		—		—		10,006
Total cash and cash equivalents	$	395,538	$	—	$	—	$	395,538
Restricted Cash (2)	474		—		—		474
Total cash, cash equivalents, and restricted cash	$	396,012	$	—	$	—	$	396,012
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, restricted cash and short-term investments	$	644,012	$	—	$	—	$	644,012

(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.

Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of September 29, 2018:

(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	42,446	$	—	$	—		$	42,446
Cash equivalents:
Money market funds (1)	209,172		—		(5		)	209,167
Time deposits (2)	69,017		—		—			69,017
Total cash and cash equivalents	$	320,635	$	—	$	(5	)	$	320,630
Restricted Cash (2)	518		—		—			518
Total cash, cash equivalents, and restricted cash	$	321,153	$	—	$	(5	)	$	321,148
Short-term investments (2):
Time deposits	197,000		—		—			197,000
Deposits (3)	96,000		—		—			96,000
Total short-term investments	$	293,000	$	—	$	—		$	293,000
Total cash, cash equivalents, restricted cash and short-term investments	$	614,153	$	—	$	(5	)	$	614,148

(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.

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EQUITY INVESTMENTS

9 Months Ended

Jun. 29, 2019

Equity Method Investments [Abstract]

EQUITY INVESTMENTS

EQUITY INVESTMENTS

Equity investments consisted of the following as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019		September 29, 2018
Non-marketable equity securities(1)	$	5,000	$	—
Equity method investments	1,301		1,373
Total	$	6,301	$	1,373

(1)

On January 30, 2019, the Company made a $5.0 million investment in one of our collaborative partners, over which the Company does not have significant influence. During the three and nine months ended June 29, 2019, there was no impairment or adjustment to the observable price.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Jun. 29, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASURMENTS

FAIR VALUE MEASUREMENTS

Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis 

We measure certain financial assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during the three and nine months ended June 29, 2019.

Fair Value Measurements on a Nonrecurring Basis

Our non-financial assets such as intangible assets and property, plant and equipment are carried at cost unless impairment is deemed to have occurred. Our equity method investments are recorded at fair value only if an impairment is recognized.

Fair Value of Financial Instruments

Amounts reported as accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value.

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DERIVATIVES FINANCIAL INSTRUMENTS (Notes)

9 Months Ended

Jun. 29, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s international operations are exposed to changes in foreign exchange rates due to transactions denominated in currencies other than U.S. dollars. Most of the Company’s revenue and cost of materials are transacted in U.S. dollars. However, a significant amount of the Company’s operating expenses are denominated in local currencies, primarily in Singapore.

The foreign currency exposure of our operating expenses is generally hedged with foreign exchange forward contracts. The Company’s foreign exchange risk management programs include using foreign exchange forward contracts with cash flow hedge accounting designation to hedge exposures to the variability in the U.S. dollar equivalent of forecasted non-U.S. dollar-denominated operating expenses. These instruments generally mature within twelve months. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the Consolidated Condensed Statements of Operations as the impact of the hedged transaction.

The fair value of derivative instruments on our Consolidated Condensed Balance Sheet as of June 29, 2019 and September 29, 2018 was as follows:

	As of
(in thousands)	June 29, 2019				September 29, 2018
	Notional Amount		Fair Value Asset Derivatives(1)		Notional Amount		Fair Value (Liability) Derivatives(2)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts (3)	$	34,806	$	134	$	43,095	$	(1,071	)
Total derivatives	$	34,806	$	134	$	43,095	$	(1,071	)

(1) The fair value of derivative assets is measured using level 2 fair value inputs and is included in prepaid expenses and other current assets on our Consolidated Condensed Balance Sheet.

(2) The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Condensed Balance Sheet.

(3) Hedged amounts expected to be recognized to income within the next twelve months.

The effects of derivative instruments designated as cash flow hedges in our Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended June 29, 2019 and June 30, 2018 are as follows:

(in thousands)	Three months ended						Nine months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Foreign exchange forward contract in cash flow hedging relationships:
Net (loss)/gain recognized in OCI, net of tax(1)	$	(49	)	$	(1,542	)	$	39		$	(513	)
Net (loss)/gain reclassified from accumulated OCI into income, net of tax(2)	$	(33	)	$	344		$	(1,165	)	$	1,884

(1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

(2)

Effective portion classified as selling, general and administrative expense.

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DEBT AND OTHER OBLIGATIONS DEBT AND OTHER OBLIGATIONS (Notes)

9 Months Ended

Jun. 29, 2019

Debt Disclosure [Abstract]

Debt and Other Obligations

DEBT AND OTHER OBLIGATIONS

Financing Obligation

On December 1, 2013, Kulicke & Soffa Pte Ltd. (“Pte”), the Company's wholly owned subsidiary, signed a lease with DBS Trustee Limited as trustee of Mapletree Industrial Trust (the “Landlord”) to lease from the Landlord approximately 198,000 square feet,

representing approximately 70% of a building in Singapore as our corporate headquarters, as well as a manufacturing, technology, sales and service center (the “Building”). The lease has a 10-year non-cancellable term (the "Initial Term") and contains options to renew for 2 further 10-year terms. The annual rent and service charge for the Initial Term range from $4 million to $5 million Singapore dollars.

Pursuant to ASC No. 840, Leases ("ASC 840"), we have classified the Building on our balance sheet as property, plant and equipment, which we are depreciating over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. At the inception of the lease, the asset and financing obligation recorded on the balance sheet was $20.0 million, which was based on an interest rate of 6.3% over the Initial Term.  As of June 29, 2019, the financing obligation related to the Building is $15.5 million, which approximates fair value (Level 2). The financing obligation will be settled through a combination of periodic cash rental payments and the return of the leased property at the expiration of the lease. We do not report rent expense for the property, which is deemed owned for accounting purposes. Rather, rental payments required under the lease are considered debt service and applied to the deemed landlord financing obligation and interest expense. The Building and financing obligation are being amortized in a manner that will not generate a gain or loss upon lease termination.

Credit Facilities and Bank Guarantees

On November 22, 2013, the Company obtained a $5.0 million credit facility with Citibank in connection with the issuance of bank guarantees for operational purposes. As of June 29, 2019, the outstanding amount is $3.2 million.

On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company with an overdraft facility of up to $100.0 million (the “Overdraft Facility”) for general corporate purposes. Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days written demand by the Bank. Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the overnight U.S. Dollar LIBOR rate plus a margin of 1.5% per annum. The Overdraft Facility is an unsecured facility per the terms of the Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation, covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of one of its subsidiaries (the "Subsidiary"), or encumber its assets with material security interests (including any pledge of monies in the Subsidiary’s cash deposit account with the Bank). The Facility Agreements also contain typical events of default, including, without limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company or any breach of a representation or warranty under the Facility Agreements. As of June 29, 2019, the outstanding amount under the Facility Agreements is $71.2 million.

In addition, the Company has other bank guarantees for operational purposes which are secured with corresponding deposits placed with the issuer banks. These amounts are shown as restricted cash in the Consolidated Condensed Balance Sheets.

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS

9 Months Ended

Jun. 29, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

Common Stock and 401(k) Retirement Plan

The Company has a 401(k) retirement plan (the “Plan”) for eligible U.S. employees. The Plan allows for employee contributions and matching Company contributions from 4% to 6% based upon terms and conditions of the 401(k) Plan.

The following table reflects the Company’s contributions to the Plan during the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Cash	$	428	$	408	$	1,291	$	1,261

Stock Repurchase Program

On August 15, 2017, the Company’s Board of Directors authorized a program (the "Program") to repurchase up to $100 million of the Company’s common stock on or before August 1, 2020. On July 10, 2018, the Board of Directors increased the share repurchase authorization under the Program to $200 million. On January 31, 2019, the Board of Directors further increased the share repurchase under the Program to $300 million. The Company has entered into a written trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program. The Program may be suspended or discontinued at any time and is funded using the Company's available cash, cash equivalents and short-term investments. Under the Program, shares may be

repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations. During the three and nine months ended June 29, 2019, the Company repurchased a total of 1.5 million and 4.0 million shares of common stock under the Program at a cost of $33.2 million and $85.6 million, respectively. The stock repurchases were recorded in the periods they were delivered and accounted for as treasury stock in the Company's Consolidated Condensed Balance Sheet. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital. If the Company reissues treasury stock at an amount below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings. As of June 29, 2019, our remaining stock repurchase authorization under the Program was approximately $112.1 million.

Dividends

On May 20, 2019, February 28, 2019 and December 12, 2018, the Board of Directors declared a quarterly dividend of $0.12 per share of common stock. Dividends paid during the three and nine months ended June 29, 2019 totaled $7.8 million and $23.9 million, respectively. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company's stockholders.

Accumulated Other Comprehensive Income

The following table reflects accumulated other comprehensive loss reflected on the Consolidated Condensed Balance Sheets as of June 29, 2019 and September 29, 2018: 

	As of
(in thousands)	June 29, 2019			September 29, 2018
Loss from foreign currency translation adjustments	$	(2,641	)	$	(1,211	)
Unrecognized actuarial loss on pension plan, net of tax	(1,629		)	(1,620		)
Unrealized gain/(loss) on hedging	134			(1,071		)
Accumulated other comprehensive loss	$	(4,136	)	$	(3,902	)

Equity-Based Compensation

The Company has stockholder-approved equity-based employee compensation plans (the “Employee Plans”) and director compensation plans (the “Director Plans”) (collectively, the “Equity Plans”). As of June 29, 2019, 4.0 million shares of common stock are available for grant to its employees and directors under the 2017 Equity Plan, including previously registered shares that have been carried forward for issuance from the 2009 Equity Plan.

• In general, stock options and Time-based Restricted Share Units ("Time-based RSUs") awarded to employees vest annually over a three-year period provided the employee remains employed by the Company. The Company follows the non-substantive vesting method for stock options and recognizes compensation expense immediately for awards granted to retirement eligible employees, or over the period from the grant date to the date retirement eligibility is achieved.

• Relative TSR Performance Share Units ("Relative TSR PSUs") entitles the employee to receive common shares of the Company on the award vesting date, if market performance objectives that measure relative total shareholder return (“TSR”) are attained. Relative TSR is calculated based upon the 90-calendar day average price of the Company's stock as compared to specific peer companies that comprise the GICS (45301020) Semiconductor Index. TSR is measured for the Company and each peer company over a performance period, which is generally three years. Vesting percentages range from 0% to 200% of awards granted. The provisions of the Relative TSR PSUs are reflected in the grant date fair value of the award; therefore, compensation expense is recognized regardless of whether the market condition is ultimately satisfied. Compensation expense is reversed if the award is forfeited prior to the vesting date.

• Special/Growth Performance Share Units (“Special/Growth PSUs”) entitles the employee to receive common shares of the Company on the three-year anniversary of the grant date (if employed by the Company) if revenue growth targets set by the Management Development and Compensation Committee (“MDCC”) of the Board of Directors on the date of grant are met. If revenue growth targets are not met, the Special/Growth PSUs do not vest. Certain Special/Growth PSUs

vest based on achievement of strategic goals over a certain time period or periods set by the MDCC. If the strategic goals are not achieved, the Special/Growth PSUs do not vest.

Equity-based compensation expense recognized in the Consolidated Condensed Statements of Operations for the three and nine months ended June 29, 2019 and June 30, 2018 was based upon awards ultimately expected to vest, forfeitures have been accounted for when they occur.

The following table reflects Time-based RSUs, Relative TSR PSUs, Special/Growth PSUs and common stock granted during the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended		Nine months ended
(shares in thousands)	June 29, 2019	June 30, 2018	June 29, 2019	June 30, 2018
Time-based RSUs	2	3	521	452
Relative TSR PSUs	1	1	166	154
Special/Growth PSUs	1	—	56	59
Common stock	10	8	28	25
Equity-based compensation in shares	14	12	771	690

The following table reflects total equity-based compensation expense, which includes Time-based RSUs, Relative TSR PSUs, Special/Growth PSUs and common stock, included in the Consolidated Condensed Statements of Operations during the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Cost of sales	$	161	$	126	$	471	$	384
Selling, general and administrative	2,616		2,111		7,871		5,877
Research and development	820		656		2,430		1,963
Total equity-based compensation expense	$	3,597	$	2,893	$	10,772	$	8,224

The following table reflects equity-based compensation expense, by type of award, for the three and nine months ended June 29, 2019 and June 30, 2018:  

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Time-based RSUs	$	2,182	$	1,662	$	6,455	$	5,475
Relative TSR PSUs	1,020		935		3,213		1,910
Special/Growth PSUs	173		101		492		254
Common stock	222		195		612		585
Total equity-based compensation expense	$	3,597	$	2,893	$	10,772	$	8,224

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REVENUE AND CONTRACT LIABILITIES

9 Months Ended

Jun. 29, 2019

Revenue from Contract with Customer [Abstract]

REVENUE AND CONTRACT LIABILITIES

REVENUE AND CONTRACT LIABILITIES

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. Service revenue is generally recognized over time as the services are performed. For the three and nine months ended June 29, 2019, and June 30, 2018, the service revenue is not material. Please refer to Note 1: Basis of Presentation- Revenue Recognition, for disclosure on the Company's revenue recognition.

The Company disaggregates revenue based on our reportable segments. The Company believes that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Please refer to Note 13: Segment information, for disclosure of disaggregated revenue.

Contract Liabilities

Our contract liabilities are primarily related to advance payments received from customers to secure product in future periods where we have received amounts in advance of satisfying performance obligations and are reported in the accompanying consolidated condensed balance sheets within accrued expenses and other current liabilities.

Contract liabilities increase as a result of receiving new advance payments from customers and decrease as revenue is recognized from customers purchasing product under advance payment arrangements upon meeting the performance obligations.

The following table shows the changes in contract liability balances during the three and nine months ended June 29, 2019:

	Three months ended			Nine months ended
(in thousands)	June 29, 2019			June 29, 2019
Contract liabilities, beginning of period	$	581		$	997
Revenue recognized	(1,392		)	(6,909		)
Additions	1,806			6,907
Contract liabilities, end of period	$	995		$	995

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EARNINGS PER SHARE

9 Months Ended

Jun. 29, 2019

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic income per share is calculated using the weighted average number of shares of common stock outstanding during the period. Stock options and restricted stock are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive.

The following tables reflect a reconciliation of the shares used in the basic and diluted net income per share computation for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended
(in thousands, except per share data)	June 29, 2019				June 30, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	1,287	$	1,287	$	60,256	$	60,256
DENOMINATOR:
Weighted average shares outstanding - Basic	64,683		64,683		69,125		69,125
Dilutive effect of Equity Plans			748				1,177
Weighted average shares outstanding - Diluted			65,431				70,302
EPS:
Net income per share - Basic	$	0.02	$	0.02	$	0.87	$	0.87
Effect of dilutive shares			—				(0.01		)
Net income per share - Diluted			$	0.02			$	0.86

  

	Nine months ended
(in thousands, except per share data)	June 29, 2019				June 30, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	5,249	$	5,249	$	27,041	$	27,041
DENOMINATOR:
Weighted average shares outstanding - Basic	65,914		65,914		70,019		70,019
Dilutive effect of Equity Plans			683				1,094
Weighted average shares outstanding - Diluted			66,597				71,113
EPS:
Net income per share - Basic	$	0.08	$	0.08	$	0.39	$	0.39
Effect of dilutive shares			—				(0.01		)
Net income per share - Diluted			$	0.08			$	0.38

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INCOME TAXES

9 Months Ended

Jun. 29, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table reflects the provision for income taxes and the effective tax rate for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(dollar amounts in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Income tax expense	$	3,864		$	7,282		$	19,106		$	122,494
Effective tax rate	75.0		%	10.8		%	78.2		%	81.9		%

For the nine months ended June 29, 2019, the effective income tax rate differed from the federal statutory tax rate primarily due to tax expense related to adjustments to the one-time transition tax, valuation allowances recorded against certain tax credits and loss carryforwards, foreign withholding taxes, and tax liabilities from foreign operations, partially offset by tax benefits from profits generated in foreign operations subject to a lower statutory tax rate than the federal rate, tax credits, and the impact of tax holidays.

For the nine months ended June 30, 2018, the effective income tax rate differed from the federal statutory tax rate primarily due to tax expense related to the enactment of the Tax Cuts and Jobs Act of 2017 (the "Act"), valuation allowances recorded against certain tax loss carryforwards, foreign withholding taxes, and tax liabilities from foreign operations, partially offset by tax benefits from profits generated in foreign operations subject to a lower statutory tax rate than the federal rate, tax credits, and the impact of tax holidays.

The decrease in tax expense for the three months ended June 29, 2019 of $3.9 million from the tax expense for the three months ended June 30, 2018 of $7.3 million was primarily related to a decrease in profits in fiscal 2019. The decrease in tax expense for the nine months ended June 29, 2019 of $19.1 million from the tax expense for the nine months ended June 30, 2018 of $122.5 million was primarily related to the enactment of the Act in fiscal 2018 and a decrease in profits in fiscal 2019, partially offset by $10.2 million of tax expense related to adjustments to the one-time transition tax. The Company's future effective tax rate would be affected by the decrease in earnings in countries where it has lower statutory rates or increase in earnings in countries where it has higher statutory rates, by changes in the valuation of its deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof.

As of June 29, 2019, the Company’s undistributed foreign earnings are no longer deemed to be indefinitely reinvested outside the U.S. The Company recorded $0.7 million of tax expense in the second quarter of fiscal 2019 as part of the initial change in assertion.

It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months due to the expected lapse of statutes of limitation and / or settlements of tax examinations. The Company is under income tax examination by tax authorities in certain foreign jurisdictions.

In accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), the accounting for the tax effects for the Act was completed in the first quarter of fiscal 2019. In addition, the Company has made an accounting policy election to record tax effects of its global intangible low-taxed income as a period cost in the period the tax is incurred.

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SEGMENT INFORMATION

9 Months Ended

Jun. 29, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Reportable segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance. The Company's Chief Executive Officer is the Company's chief operating decision maker. The chief operating decision maker does not review discrete asset information. The Company operates two reportable segments consisting of: (i) Capital Equipment; and (ii) Aftermarket Products and Services ("APS").

The following table reflects operating information by segment for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended					Nine months ended
(in thousands)	June 29, 2019			June 30, 2018		June 29, 2019			June 30, 2018
Net revenue:
Capital Equipment	$	89,860		$	229,462	$	286,364		$	578,197
APS	37,249			39,372		113,861			126,100
Net revenue	127,109			268,834		400,225			704,297
(Loss)/income from operations:
Capital Equipment	(6,449		)	57,771		(10,563		)	116,615
APS	8,276			6,692		24,480			25,443
Income from operations	$	1,827		$	64,463	$	13,917		$	142,058

The following tables reflect capital expenditures, depreciation expense and amortization expense for the three and nine months ended June 29, 2019 and June 30, 2018.

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Capital expenditures:
Capital Equipment	$	646	$	999	$	4,118	$	4,878
APS	1,490		3,072		5,194		11,603
	$	2,136	$	4,071	$	9,312	$	16,481

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Depreciation expense:
Capital Equipment	$	1,800	$	1,926	$	5,540	$	5,601
APS	1,352		1,063		3,872		2,635
	$	3,152	$	2,989	$	9,412	$	8,236
Amortization expense:
Capital Equipment	$	989	$	1,053	$	2,999	$	3,188
APS	854		909		2,590		2,739
	$	1,843	$	1,962	$	5,589	$	5,927

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Notes)

9 Months Ended

Jun. 29, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

Warranty Expense

The Company's equipment is generally shipped with a one-year warranty against manufacturing defects. The Company establishes 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 warranty costs, including product part replacement, freight charges and labor costs incurred in correcting product failures during the warranty period.

The following table reflects the reserve for warranty activity for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Reserve for warranty, beginning of period	$	13,885		$	14,197		$	14,475		$	13,796
Provision for warranty	3,143			3,204			8,874			9,384
Utilization of reserve	(3,073		)	(3,027		)	(9,394		)	(8,806		)
Reserve for warranty, end of period	$	13,955		$	14,374		$	13,955		$	14,374

Other Commitments and Contingencies

The following table reflects obligations not reflected on the Consolidated Condensed Balance Sheet as of June 29, 2019:

			Payments due by fiscal year
(in thousands)	Total		2019		2020		2021		2022		thereafter
Inventory purchase obligation (1)	$	85,829	$	85,829	$	—	$	—	$	—	$	—
Operating lease obligations (2)	17,534		1,051		4,215		2,672		2,156		7,440
Total	$	103,363	$	86,880	$	4,215	$	2,672	$	2,156	$	7,440

(1) The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancellable, however, some orders impose varying penalties and charges in the event of cancellation.

(2) The Company has minimum rental commitments under various leases (excluding taxes, insurance, maintenance and repairs, which are also paid by the Company) primarily for various facility and equipment leases, which expire periodically through 2027 (not including lease extension options, if applicable).

Pursuant to ASC No. 840, Leases, for lessee's involvement in asset construction, the Company was considered the owner of the Building during the construction phase. The Building was completed on December 1, 2013 and Pte signed an agreement with the Landlord to lease from the Landlord approximately 198,000 square feet, representing approximately 70% of the Building. Following the completion of construction, we performed a sale-leaseback analysis pursuant to ASC 840-40 and determined that because of our continuing involvement, ASC 840-40 precluded us from derecognizing the asset and associated financing obligation. As such, we reclassified the asset from construction in progress to property, plant and equipment and began to depreciate the building over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. As of June 29, 2019, we recorded a financing obligation related to the Building of $15.5 million (see Note 8 above). The financing obligation is not reflected in the table above.

Concentrations

The following table reflects significant customer concentrations as a percentage of net revenue for the nine months ended June 29, 2019 and June 30, 2018.

	Nine months ended
	June 29, 2019		June 30, 2018
Micron Technology, Inc	10.9	%	*
Haoseng Industrial Company Limited (1)	*		12.8	%

* Represented less than 10% of total net revenue

The following table reflects significant customer concentrations as a percentage of total accounts receivable as of June 29, 2019 and June 30, 2018:

	As of
	June 29, 2019		June 30, 2018
Super Power International (1)	15.8	%	13.0	%
Forehope Electronic (Ningbo) Co Ltd	14.4	%	*
Micron Technology, Inc	10.2	%	*
Haoseng Industrial Company Limited (1)	*		27.6	%

(1) Distributor of the Company's products.

* Represented less than 10% of total accounts receivable

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SUBSEQUENT EVENTS

9 Months Ended

Jun. 29, 2019

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

On July 29, 2019, the Company entered into foreign exchange forward contracts with notional amount of $13.6 million. The Company entered into these foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated expenses in the normal course of business and, accordingly, they are not speculative in nature. These foreign exchange forward contracts have maturities of up to twelve months.

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Jun. 29, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidation

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 29, 2018, filed with the Securities and Exchange Commission, which includes Consolidated Balance Sheets as of September 29, 2018 and September 30, 2017, 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 29, 2018. 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

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 2019 quarters end on December 29, 2018, March 30, 2019, June 29, 2019 and September 28, 2019. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. Fiscal 2018 quarters ended on December 30, 2017, March 31, 2018, June 30, 2018 and September 29, 2018.

Nature of Business

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

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, valuation allowances for deferred tax assets and deferred tax liabilities, repatriation of un-remitted foreign subsidiary earnings, 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.

Vulnerability to Certain Concentrations

Vulnerability to Certain Concentrations

Financial instruments which may subject the Company to concentrations of credit risk as of June 29, 2019 and September 29, 2018 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

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

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.

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

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.

Investments

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

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

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

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

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 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 nine months ended June 29, 2019, no "triggering" events occurred.

Accounting for Impairment of Goodwill

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 two-step impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. If the carrying value of a reporting unit exceeds its fair value in the first step of the test, then a company is required to perform the second step of the goodwill impairment test to measure the amount of the reporting unit's goodwill impairment loss, if any. 

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under this guidance, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning in our first quarter of 2021 and early adoption is permitted. During the third quarter of 2017, we elected to prospectively adopt ASU2017-04. This eliminates the requirement to perform step 2 of the goodwill impairment test.

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

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 equipments 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 our customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.

• 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 nine months ended June 29, 2019, and June 30, 2018, 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 any of 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

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

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 it expects is more likely than not to be realized. While the Company has considered future taxable income and its 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 the deferred tax asset 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 net deferred tax assets in the future, an adjustment to the deferred tax asset would decrease income in the period when such determination is made.

In accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”), the Company accounts for uncertain tax positions taken or expected to be taken in its income tax return. 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

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 9 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.

Earnings per Share

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.

Business Combinations

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 tax liabilities, 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.

Costs Associated with Exit or Disposal Activities or Restructurings

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

Recent Accounting Pronouncements

Income Taxes

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The new guidance is effective for the Company beginning fiscal 2019 and requires the tax effects of intercompany transactions (other than transfers of inventory) to be recognized currently. The Company has adopted the modified retrospective approach for the transition based on the new guidance and, as of the beginning of the period of adoption, has recorded the cumulative effect of adjustments related to intra-entity transfers of intangible and fixed assets of $0.5 million in prior years as an increase to retained earnings.

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.

The Company will adopt these ASUs utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of its first quarter of 2020. In addition, we will elect 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. The adoption of these ASUs will result in an increase in our consolidated balance sheets for these right of use assets and corresponding liabilities. However, the ultimate impact of adopting these ASUs will depend on the Company's lease portfolio as of the adoption date. We are currently evaluating the effects of the adoption of these ASUs on our financial statements.

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 financial statements.

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. The new guidance will be effective for us beginning in our first quarter of fiscal 2020, and early adoption is permitted in any interim period. We do not expect the adoption of this ASU to have a material impact on our financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.

Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”); and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20” and collectively, the “new revenue standards”).

The Company has performed an evaluation of this ASU and its impact on the financial statements. This included tasks such as identifying contracts, performance obligations and reviewing the applicable revenue streams. We have completed our assessment and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. The new standard was adopted in the first quarter of fiscal 2019 using a modified retrospective approach.

Based on our review of all our customer agreements for the affected periods, our revenue from sales of our products, such as equipment and spare parts, will continue to be recognized at a point in time, generally upon shipment or delivery to customers or distributors, depending upon the terms of the sales order, consistent with our current revenue recognition model. Revenue related to the sale of services will generally continue to be recognized over time as the services are performed. In certain instances, where collection of consideration is not probable, recognition of revenue may occur later under the new model after we have completed all of our obligations under the contract. However, when adopting the new standard, we did not identify any balances where collection of consideration is not probable. This ASU did not have a material impact on the amount and timing of revenue recognized in the Company’s consolidated 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 financial statements.

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BALANCE SHEET COMPONENTS (Tables)

9 Months Ended

Jun. 29, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Components of significant balance sheet accounts

The following tables reflect the components of significant balance sheet accounts as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019			September 29, 2018
Short term investments, available-for-sale(1)	$	248,000		$	293,000
Inventories, net:
Raw materials and supplies	$	58,336		$	63,894
Work in process	31,590			37,829
Finished goods	35,890			40,357
	125,816			142,080
Inventory reserves	(27,767		)	(26,889		)
	$	98,049		$	115,191
Property, plant and equipment, net:
Land	$	2,182		$	2,182
Buildings and building improvements (2)	42,125			41,616
Leasehold improvements (2)	24,125			23,561
Data processing equipment and software	36,027			35,469
Machinery, equipment, furniture and fixtures	74,189			68,666
Construction in progress	6,576			6,940
	185,224			178,434
Accumulated depreciation	(110,373		)	(102,367		)
	$	74,851		$	76,067
Accrued expenses and other current liabilities:
Accrued customer obligations (3)	$	27,491		$	34,918
Wages and benefits	16,623			44,505
Dividend payable	7,664			8,057
Commissions and professional fees	2,024			5,549
Deferred rent	1,763			1,847
Severance	355			1,415
Other	7,545			9,687
	$	63,465		$	105,978

(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 nine months ended June 29, 2019 and June 30, 2018.

(2) Certain balances as at September 29, 2018 relating to Property, plant and equipment have been reclassified. These reclassifications have no impact to the Consolidated Balance Sheet as at September 29, 2018.

(3)

Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Jun. 29, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table summarizes the Company's recorded goodwill as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019		September 29, 2018
Capital Equipment	$	29,920	$	30,159
APS	26,328		26,391
Total goodwill	$	56,248	$	56,550

Net intangible assets

The following table reflects net intangible assets as of June 29, 2019 and September 29, 2018: 

	As of						Average estimated
(dollar amounts in thousands)	June 29, 2019			September 29, 2018			useful lives (in years)
Developed technology	$	89,334		$	90,500		7.0 to 15.0
Accumulated amortization	(48,243		)	(45,229		)
Net developed technology	$	41,091		$	45,271
Customer relationships	$	35,805		$	36,131		5.0 to 6.0
Accumulated amortization	(31,670		)	(29,820		)
Net customer relationships	$	4,135		$	6,311
Trade and brand names	$	7,321		$	7,377		7.0 to 8.0
Accumulated amortization	(6,349		)	(6,088		)
Net trade and brand names	$	972		$	1,289
Other intangible assets	$	2,500		$	2,500		1.9
Accumulated amortization	(2,500		)	(2,500		)
Net other intangible assets	$	—		$	—
Net intangible assets	$	46,198		$	52,871

Estimated annual amortization expense related to intangible assets

The following table reflects estimated annual amortization expense related to intangible assets as of June 29, 2019:

	As of
(in thousands)	June 29, 2019
Remaining fiscal 2019	$	1,870
Fiscal 2020	7,479
Fiscal 2021	5,417
Fiscal 2022	4,439
Fiscal 2023 and onwards	26,993
Total amortization expense	$	46,198

 

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS (Tables)

9 Months Ended

Jun. 29, 2019

Cash and Cash Equivalents [Abstract]

Cash, cash equivalents, restricted cash and short-term investments

Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of June 29, 2019:

(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	261,806	$	—	$	—	$	261,806
Cash equivalents:
Money market funds (1)	123,726		—		—		123,726
Time deposits (2)	10,006		—		—		10,006
Total cash and cash equivalents	$	395,538	$	—	$	—	$	395,538
Restricted Cash (2)	474		—		—		474
Total cash, cash equivalents, and restricted cash	$	396,012	$	—	$	—	$	396,012
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, restricted cash and short-term investments	$	644,012	$	—	$	—	$	644,012

(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.

Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of September 29, 2018:

(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	42,446	$	—	$	—		$	42,446
Cash equivalents:
Money market funds (1)	209,172		—		(5		)	209,167
Time deposits (2)	69,017		—		—			69,017
Total cash and cash equivalents	$	320,635	$	—	$	(5	)	$	320,630
Restricted Cash (2)	518		—		—			518
Total cash, cash equivalents, and restricted cash	$	321,153	$	—	$	(5	)	$	321,148
Short-term investments (2):
Time deposits	197,000		—		—			197,000
Deposits (3)	96,000		—		—			96,000
Total short-term investments	$	293,000	$	—	$	—		$	293,000
Total cash, cash equivalents, restricted cash and short-term investments	$	614,153	$	—	$	(5	)	$	614,148

(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.

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EQUITY INVESTMENTS (Tables)

9 Months Ended

Jun. 29, 2019

Equity Method Investments [Abstract]

Equity investments

Equity investments consisted of the following as of June 29, 2019 and September 29, 2018:

	As of
(in thousands)	June 29, 2019		September 29, 2018
Non-marketable equity securities(1)	$	5,000	$	—
Equity method investments	1,301		1,373
Total	$	6,301	$	1,373

(1)

On January 30, 2019, the Company made a $5.0 million investment in one of our collaborative partners, over which the Company does not have significant influence. During the three and nine months ended June 29, 2019, there was no impairment or adjustment to the observable price.

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DERIVATIVES FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Jun. 29, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The fair value of derivative instruments on our Consolidated Condensed Balance Sheet as of June 29, 2019 and September 29, 2018 was as follows:

	As of
(in thousands)	June 29, 2019				September 29, 2018
	Notional Amount		Fair Value Asset Derivatives(1)		Notional Amount		Fair Value (Liability) Derivatives(2)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts (3)	$	34,806	$	134	$	43,095	$	(1,071	)
Total derivatives	$	34,806	$	134	$	43,095	$	(1,071	)

(1) The fair value of derivative assets is measured using level 2 fair value inputs and is included in prepaid expenses and other current assets on our Consolidated Condensed Balance Sheet.

(2) The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Condensed Balance Sheet.

(3)

Hedged amounts expected to be recognized to income within the next twelve months.

Derivative Instruments, Gain (Loss)

The effects of derivative instruments designated as cash flow hedges in our Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended June 29, 2019 and June 30, 2018 are as follows:

(in thousands)	Three months ended						Nine months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Foreign exchange forward contract in cash flow hedging relationships:
Net (loss)/gain recognized in OCI, net of tax(1)	$	(49	)	$	(1,542	)	$	39		$	(513	)
Net (loss)/gain reclassified from accumulated OCI into income, net of tax(2)	$	(33	)	$	344		$	(1,165	)	$	1,884

(1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

(2) Effective portion classified as selling, general and administrative expense.

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS (Tables)

9 Months Ended

Jun. 29, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Company’s matching contributions to the Plan

The following table reflects the Company’s contributions to the Plan during the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Cash	$	428	$	408	$	1,291	$	1,261

Accumulated other comprehensive income reflected on the Consolidated Balance Sheets

The following table reflects accumulated other comprehensive loss reflected on the Consolidated Condensed Balance Sheets as of June 29, 2019 and September 29, 2018: 

	As of
(in thousands)	June 29, 2019			September 29, 2018
Loss from foreign currency translation adjustments	$	(2,641	)	$	(1,211	)
Unrecognized actuarial loss on pension plan, net of tax	(1,629		)	(1,620		)
Unrealized gain/(loss) on hedging	134			(1,071		)
Accumulated other comprehensive loss	$	(4,136	)	$	(3,902	)

Restricted stock and common stock granted

The following table reflects Time-based RSUs, Relative TSR PSUs, Special/Growth PSUs and common stock granted during the three and nine months ended June 29, 2019 and June 30, 2018:

	Three months ended		Nine months ended
(shares in thousands)	June 29, 2019	June 30, 2018	June 29, 2019	June 30, 2018
Time-based RSUs	2	3	521	452
Relative TSR PSUs	1	1	166	154
Special/Growth PSUs	1	—	56	59
Common stock	10	8	28	25
Equity-based compensation in shares	14	12	771	690

Equity-based compensation expense

The following table reflects total equity-based compensation expense, which includes Time-based RSUs, Relative TSR PSUs, Special/Growth PSUs and common stock, included in the Consolidated Condensed Statements of Operations during the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Cost of sales	$	161	$	126	$	471	$	384
Selling, general and administrative	2,616		2,111		7,871		5,877
Research and development	820		656		2,430		1,963
Total equity-based compensation expense	$	3,597	$	2,893	$	10,772	$	8,224

The following table reflects equity-based compensation expense, by type of award, for the three and nine months ended June 29, 2019 and June 30, 2018:  

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Time-based RSUs	$	2,182	$	1,662	$	6,455	$	5,475
Relative TSR PSUs	1,020		935		3,213		1,910
Special/Growth PSUs	173		101		492		254
Common stock	222		195		612		585
Total equity-based compensation expense	$	3,597	$	2,893	$	10,772	$	8,224

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REVENUE AND CONTRACT LIABILITIES (Tables)

9 Months Ended

Jun. 29, 2019

Revenue from Contract with Customer [Abstract]

Contract Liabilities

The following table shows the changes in contract liability balances during the three and nine months ended June 29, 2019:

	Three months ended			Nine months ended
(in thousands)	June 29, 2019			June 29, 2019
Contract liabilities, beginning of period	$	581		$	997
Revenue recognized	(1,392		)	(6,909		)
Additions	1,806			6,907
Contract liabilities, end of period	$	995		$	995

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EARNINGS PER SHARE (Tables)

9 Months Ended

Jun. 29, 2019

Earnings Per Share [Abstract]

Reconciliation of shares used in the basic and diluted net income per share computation

The following tables reflect a reconciliation of the shares used in the basic and diluted net income per share computation for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended
(in thousands, except per share data)	June 29, 2019				June 30, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	1,287	$	1,287	$	60,256	$	60,256
DENOMINATOR:
Weighted average shares outstanding - Basic	64,683		64,683		69,125		69,125
Dilutive effect of Equity Plans			748				1,177
Weighted average shares outstanding - Diluted			65,431				70,302
EPS:
Net income per share - Basic	$	0.02	$	0.02	$	0.87	$	0.87
Effect of dilutive shares			—				(0.01		)
Net income per share - Diluted			$	0.02			$	0.86

  

	Nine months ended
(in thousands, except per share data)	June 29, 2019				June 30, 2018
	Basic		Diluted		Basic		Diluted
NUMERATOR:
Net income	$	5,249	$	5,249	$	27,041	$	27,041
DENOMINATOR:
Weighted average shares outstanding - Basic	65,914		65,914		70,019		70,019
Dilutive effect of Equity Plans			683				1,094
Weighted average shares outstanding - Diluted			66,597				71,113
EPS:
Net income per share - Basic	$	0.08	$	0.08	$	0.39	$	0.39
Effect of dilutive shares			—				(0.01		)
Net income per share - Diluted			$	0.08			$	0.38

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INCOME TAXES (Tables)

9 Months Ended

Jun. 29, 2019

Income Tax Disclosure [Abstract]

Provision for income taxes and the effective tax rate

The following table reflects the provision for income taxes and the effective tax rate for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(dollar amounts in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Income tax expense	$	3,864		$	7,282		$	19,106		$	122,494
Effective tax rate	75.0		%	10.8		%	78.2		%	81.9		%

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SEGMENT INFORMATION (Tables)

9 Months Ended

Jun. 29, 2019

Segment Reporting [Abstract]

Operating information by segment

The following table reflects operating information by segment for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended					Nine months ended
(in thousands)	June 29, 2019			June 30, 2018		June 29, 2019			June 30, 2018
Net revenue:
Capital Equipment	$	89,860		$	229,462	$	286,364		$	578,197
APS	37,249			39,372		113,861			126,100
Net revenue	127,109			268,834		400,225			704,297
(Loss)/income from operations:
Capital Equipment	(6,449		)	57,771		(10,563		)	116,615
APS	8,276			6,692		24,480			25,443
Income from operations	$	1,827		$	64,463	$	13,917		$	142,058

Capital expenditures, depreciation and amortization expense

The following tables reflect capital expenditures, depreciation expense and amortization expense for the three and nine months ended June 29, 2019 and June 30, 2018.

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Capital expenditures:
Capital Equipment	$	646	$	999	$	4,118	$	4,878
APS	1,490		3,072		5,194		11,603
	$	2,136	$	4,071	$	9,312	$	16,481

	Three months ended				Nine months ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Depreciation expense:
Capital Equipment	$	1,800	$	1,926	$	5,540	$	5,601
APS	1,352		1,063		3,872		2,635
	$	3,152	$	2,989	$	9,412	$	8,236
Amortization expense:
Capital Equipment	$	989	$	1,053	$	2,999	$	3,188
APS	854		909		2,590		2,739
	$	1,843	$	1,962	$	5,589	$	5,927

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Tables)

9 Months Ended

Jun. 29, 2019

Commitments and Contingencies Disclosure [Abstract]

Reserve for product warranty activity

The following table reflects the reserve for warranty activity for the three and nine months ended June 29, 2019 and June 30, 2018: 

	Three months ended						Nine months ended
(in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Reserve for warranty, beginning of period	$	13,885		$	14,197		$	14,475		$	13,796
Provision for warranty	3,143			3,204			8,874			9,384
Utilization of reserve	(3,073		)	(3,027		)	(9,394		)	(8,806		)
Reserve for warranty, end of period	$	13,955		$	14,374		$	13,955		$	14,374

Obligations not reflected on the Consolidated Balance Sheet

The following table reflects obligations not reflected on the Consolidated Condensed Balance Sheet as of June 29, 2019:

			Payments due by fiscal year
(in thousands)	Total		2019		2020		2021		2022		thereafter
Inventory purchase obligation (1)	$	85,829	$	85,829	$	—	$	—	$	—	$	—
Operating lease obligations (2)	17,534		1,051		4,215		2,672		2,156		7,440
Total	$	103,363	$	86,880	$	4,215	$	2,672	$	2,156	$	7,440

(1) The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancellable, however, some orders impose varying penalties and charges in the event of cancellation.

(2) The Company has minimum rental commitments under various leases (excluding taxes, insurance, maintenance and repairs, which are also paid by the Company) primarily for various facility and equipment leases, which expire periodically through 2027 (not including lease extension options, if applicable).

Pursuant to ASC No. 840, Leases, for lessee's involvement in asset construction, the Company was considered the owner of the Building during the construction phase. The Building was completed on December 1, 2013 and Pte signed an agreement with the Landlord to lease from the Landlord approximately 198,000 square feet, representing approximately 70% of the Building. Following the completion of construction, we performed a sale-leaseback analysis pursuant to ASC 840-40 and determined that because of our continuing involvement, ASC 840-40 precluded us from derecognizing the asset and associated financing obligation. As such, we reclassified the asset from construction in progress to property, plant and equipment and began to depreciate the building over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. As of June 29, 2019, we recorded a financing obligation related to the Building of $15.5 million (see Note 8 above). The financing obligation is not reflected in the table above.

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

The following table reflects significant customer concentrations as a percentage of net revenue for the nine months ended June 29, 2019 and June 30, 2018.

	Nine months ended
	June 29, 2019		June 30, 2018
Micron Technology, Inc	10.9	%	*
Haoseng Industrial Company Limited (1)	*		12.8	%

* Represented less than 10% of total net revenue

Significant customer concentrations as a percentage of total accounts receivable

The following table reflects significant customer concentrations as a percentage of total accounts receivable as of June 29, 2019 and June 30, 2018:

	As of
	June 29, 2019		June 30, 2018
Super Power International (1)	15.8	%	13.0	%
Forehope Electronic (Ningbo) Co Ltd	14.4	%	*
Micron Technology, Inc	10.2	%	*
Haoseng Industrial Company Limited (1)	*		27.6	%

(1) Distributor of the Company's products.

* Represented less than 10% of total accounts receivable

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BASIS OF PRESENTATION (Inventories) (Narrative) (Details)	9 Months Ended
	Jun. 29, 2019
Equipment [Member]
Inventory [Line Items]
Reserves For Inventory In Excess Of Demand Inventory Future Consumption Period	18 months
Spare Parts [Member]
Inventory [Line Items]
Reserves For Inventory In Excess Of Demand Inventory Future Consumption Period	24 months
Expendable Tools [Member]
Inventory [Line Items]
Reserves For Inventory In Excess Of Demand Inventory Future Consumption Period	12 months

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BASIS OF PRESENTATION (Property, Plant and Equipment) (Narrative) (Details)	9 Months Ended
	Jun. 29, 2019
Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	25 years
Leaseholds and Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Estimated Useful Lives	based on the shorter of the life of lease or life of asset
Software and Software Development Costs [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Tools, Dies and Molds [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	1 year
Minimum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years

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BASIS OF PRESENTATION (Recent Accounting Pronouncements) (Narrative) (Details) - USD ($) $ in Thousands	Sep. 29, 2018	Sep. 30, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of new accounting principle in period of adoption	$ (534)	$ (5,420)
Retained earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of new accounting principle in period of adoption		$ (4,006)
Retained earnings | Accounting Standards Update 2016-16 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of new accounting principle in period of adoption	$ (534)

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BALANCE SHEET COMPONENTS (Components of significant balance sheet accounts) (Details) - USD ($) $ in Thousands		Jun. 29, 2019	Sep. 29, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Short-term investments	[1]	$ 248,000	$ 293,000
Inventories, net:
Raw materials and supplies		58,336	63,894
Work in process		31,590	37,829
Finished goods		35,890	40,357
Inventory, gross		125,816	142,080
Inventory reserves		(27,767)	(26,889)
Inventories, net		98,049	115,191
Property, plant and equipment, net:
Land		2,182	2,182
Buildings and building improvements (2)		42,125	41,616	[2]
Leasehold improvements (2)		24,125	23,561	[2]
Data processing equipment and software		36,027	35,469
Machinery, equipment, furniture and fixtures		74,189	68,666
Construction in progress		6,576	6,940
Property, plant and equipment, gross		185,224	178,434
Accumulated depreciation		(110,373)	(102,367)
Property, plant and equipment, net		74,851	76,067
Accrued expenses and other current liabilities:
Accrued customer obligations (3)	[3]	27,491	34,918
Wages and benefits		16,623	44,505
Dividend payable		7,664	8,057
Commissions and professional fees		2,024	5,549
Deferred rent		1,763	1,847
Severance		355	1,415
Other		7,545	9,687
Accrued expenses and other current liabilities		$ 63,465	$ 105,978

[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 nine months ended June 29, 2019 and June 30, 2018.

[2] Certain balances as at September 29, 2018 relating to Property, plant and equipment have been reclassified. These reclassifications have no impact to the Consolidated Balance Sheet as at September 29, 2018.

[3] Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.

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GOODWILL AND INTANGIBLE ASSETS (Summary of Goodwill) (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Goodwill [Line Items]
Goodwill	$ 56,248	$ 56,550
Capital Equipment [Member]
Goodwill [Line Items]
Goodwill	29,920	30,159
Aftermarket Products and Services [Member]
Goodwill [Line Items]
Goodwill	$ 26,328	$ 26,391

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GOODWILL AND INTANGIBLE ASSETS (Net intangible assets) (Details) - USD ($) $ in Thousands	9 Months Ended
	Jun. 29, 2019	Sep. 29, 2018
Finite-Lived Intangible Assets [Line Items]
Net intangible assets	$ 46,198	$ 52,871
Developed technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	89,334	90,500
Accumulated amortization	(48,243)	(45,229)
Net intangible assets	41,091	45,271
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	35,805	36,131
Accumulated amortization	(31,670)	(29,820)
Net intangible assets	4,135	6,311
Trade name [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	7,321	7,377
Accumulated amortization	(6,349)	(6,088)
Net intangible assets	972	1,289
Other intangible assets [Member]
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	2,500	2,500
Accumulated amortization	(2,500)	(2,500)
Net intangible assets	$ 0	$ 0
Average estimated useful lives (in years)	1 year 10 months 24 days
Minimum [Member] | Developed technology [Member]
Finite-Lived Intangible Assets [Line Items]
Average estimated useful lives (in years)	7 years
Minimum [Member] | Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Average estimated useful lives (in years)	5 years
Minimum [Member] | Trade name [Member]
Finite-Lived Intangible Assets [Line Items]
Average estimated useful lives (in years)	7 years
Maximum [Member] | Developed technology [Member]
Finite-Lived Intangible Assets [Line Items]
Average estimated useful lives (in years)	15 years
Maximum [Member] | Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Average estimated useful lives (in years)	6 years
Maximum [Member] | Trade name [Member]
Finite-Lived Intangible Assets [Line Items]
Average estimated useful lives (in years)	8 years

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GOODWILL AND INTANGIBLE ASSETS (Estimated annual amortization expense) (Details) $ in Thousands	Jun. 29, 2019 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Remaining fiscal 2019	$ 1,870
Fiscal 2020	7,479
Fiscal 2021	5,417
Fiscal 2022	4,439
Fiscal 2023 and onwards	26,993
Total amortization expense	$ 46,198

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS (Details) - USD ($) $ in Thousands		Jun. 29, 2019		Sep. 29, 2018		Jun. 30, 2018	Sep. 30, 2017
Cash, Cash Equivalents, Restricted Cash and Short-Term Investments [Line Items]
Cash		$ 261,806		$ 42,446
Cash and Cash Equivalents, Amortized Cost		395,538		320,635
Cash and Cash Equivalents, Unrealized Gain		0		0
Cash and Cash Equivalents, Unrealized Loss		0		(5)
Cash and Cash Equivalents, Estimated Fair Value		395,538		320,630
Restricted Cash		474	[1]	518	[2]
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Amortized Cost		396,012		321,153
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents		396,012		321,148		$ 363,200	$ 392,940
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Unrealized Gain		0		0
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Unrealized Loss		0		(5)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Estimated Fair Value		396,012		321,148
Short-term Investments, Unrealized Gain		0		0
Short-term Investments, Unrealized Loss		0		0
Short-term Investments, Estimated Fair Value		248,000		293,000
Short-term investments	[3]	248,000		293,000
Cash, Cash Equivalents, Restricted Cash, Restricted Cash Equivalents, and Short-Term Investments, Amortized Cost		644,012		614,153
Cash, Cash Equivalents, Restricted Cash, Restricted Cash Equivalents, and Short-Term Investments, Unrealized Gain		0		0
Cash, Cash Equivalents, Restricted Cash, Restricted Cash Equivalents, and Short-Term Investments, Unrealized Loss		0		(5)
Cash, Cash Equivalents, Restricted Cash, Restricted Cash Equivalents, and Short-Term Investments, Estimated Fair Value		644,012		614,148
Money market funds
Cash, Cash Equivalents, Restricted Cash and Short-Term Investments [Line Items]
Cash Equivalents, Amortized Cost		123,726		209,172
Cash Equivalents, Unrealized Gain		0		0
Cash Equivalents, Unrealized Loss		0		(5)
Cash Equivalents, Estimated Fair Value		123,726	[4]	209,167	[5]
Time deposits
Cash, Cash Equivalents, Restricted Cash and Short-Term Investments [Line Items]
Cash Equivalents, Amortized Cost		10,006		69,017
Cash Equivalents, Unrealized Gain		0		0
Cash Equivalents, Unrealized Loss		0		0
Cash Equivalents, Estimated Fair Value		10,006	[1]	69,017	[2]
Short-term Investments, Unrealized Gain		0		0
Short-term Investments, Unrealized Loss		0		0
Short-term Investments, Estimated Fair Value		149,000	[1]	197,000	[5]
Short-term investments		149,000		197,000
Deposits
Cash, Cash Equivalents, Restricted Cash and Short-Term Investments [Line Items]
Short-term Investments, Unrealized Gain		0		0
Short-term Investments, Unrealized Loss		0		0
Short-term Investments, Estimated Fair Value		99,000	[1],[6]	96,000	[2],[7]
Short-term investments		$ 99,000	[6]	$ 96,000	[7]

[1] Fair value approximates cost basis.

[2] Fair value approximates cost basis.

[3] 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 nine months ended June 29, 2019 and June 30, 2018.

[4] 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.

[5] 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.

[6] Represents deposits that require a notice period of three months for withdrawal.

[7] Represents deposits that require a notice period of three months for withdrawal.

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EQUITY INVESTMENTS (Details) - USD ($) $ in Thousands	Jun. 29, 2019		Jan. 30, 2019	Sep. 29, 2018
Equity Method Investments [Abstract]
Non-marketable equity securities	$ 5,000	[1]	$ 5,000	$ 0
Equity method investments	1,301			1,373
Equity investments	$ 6,301			$ 1,373

[1] On January 30, 2019, the Company made a $5.0 million investment in one of our collaborative partners, over which the Company does not have significant influence. During the three and nine months ended June 29, 2019, there was no impairment or adjustment to the observable price.

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DERIVATIVES FINANCIAL INSTRUMENTS (Fair value of derivative instruments) (Details) - USD ($) $ in Thousands		9 Months Ended
		Jun. 29, 2019	Sep. 29, 2018
Derivatives, Fair Value [Line Items]
Derivative Instruments, Gain (Loss) Reclassification from Accumulated OCI to Income, Estimate of Time to Transfer		12 months
Total derivative, Notional Amount		$ 34,806	$ 43,095
Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member]
Derivatives, Fair Value [Line Items]
Foreign exchange forward contract, term of contract		12 months
Total derivative, Notional Amount		$ 34,806	43,095
Prepaid Expenses And Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value, Gross Asset	[1],[2]	134
Prepaid Expenses And Other Current Assets [Member] | Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member]
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value, Gross Asset	[1],[2]	$ 134
Accrued Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability, Fair Value, Gross Liability	[1],[3]		(1,071)
Accrued Liabilities [Member] | Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability, Fair Value, Gross Liability	[1],[3]		$ (1,071)

[1] Hedged amounts expected to be recognized to income within the next twelve months.

[2] The fair value of derivative assets is measured using level 2 fair value inputs and is included in prepaid expenses and other current assets on our Consolidated Condensed Balance Sheet.

[3] The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Condensed Balance Sheet.

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DERIVATIVES FINANCIAL INSTRUMENTS (Gain (loss) of derivative instruments) (Details) - Foreign Exchange Forward [Member] - Designated as Hedging Instrument [Member] - Cash Flow Hedging [Member] - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Other Comprehensive Income (Loss) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) recognized in OCI, net of tax	[1]	$ (49)	$ (1,542)	$ 39	$ (513)
Selling, General and Administrative Expenses [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) reclassified from accumulated OCI into income, net of tax	[2]	$ (33)	$ 344	$ (1,165)	$ 1,884

[1] Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

[2] Effective portion classified as selling, general and administrative expense.

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DEBT AND OTHER OBLIGATIONS DEBT AND OTHER OBLIGATIONS (Details) $ in Thousands, $ in Millions		9 Months Ended
	Dec. 01, 2013 SGD ($) renewal_option	Jun. 29, 2019 USD ($)	Feb. 15, 2019 USD ($)	Sep. 29, 2018 USD ($)	Dec. 01, 2013 USD ($) ft²	Nov. 22, 2013 USD ($)
Capital Leased Assets [Line Items]
Area of Land | ft²					198,000
Financing obligation		$ 14,701		$ 15,187	$ 20,000
Short term debt		$ 71,194		$ 0
K&S Corporate Headquarters [Member]
Capital Leased Assets [Line Items]
Lease Agreement Term	10 years	10 years
Lessee Leasing Arrangements, Capital Leases, Number of Renewal Options | renewal_option	2
Lessee Leasing Arrangements, Capital Leases, Renewal Term	10 years
Annual Rent and Service Charge Minimum Range	$ 4
Annual Rent and Service Charge Maximum Range	$ 5
Area of Land | ft²					198,000
Percentage Of Building Area To Be Leased From Landlord					70.00%
Capital Lease Obligations, Interest Rate, Effective Percentage					6.30%
Citibank [Member]
Capital Leased Assets [Line Items]
Capacity under credit facility						$ 5,000
Outstanding amounts under credit facility		$ 3,200
Current and Noncurrent Portion [Member]
Capital Leased Assets [Line Items]
Financing obligation		$ 15,500
Facility Agreements [Member] | MUFG Bank, Ltd., Singapore Branch [Member]
Capital Leased Assets [Line Items]
Capacity under credit facility			$ 100,000
London Interbank Offered Rate (LIBOR) [Member] | Facility Agreements [Member] | MUFG Bank, Ltd., Singapore Branch [Member]
Capital Leased Assets [Line Items]
Debt instrument, basis spread on variable rate		1.50%
Building [Member]
Capital Leased Assets [Line Items]
Property, Plant and Equipment, Useful Life		25 years

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions				3 Months Ended						9 Months Ended
	May 20, 2019	Feb. 28, 2019	Dec. 12, 2018	Jun. 29, 2019	Mar. 30, 2019	Dec. 29, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 30, 2017	Jun. 29, 2019	Jun. 30, 2018	Jan. 31, 2019	Jul. 10, 2018	Aug. 15, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Description Of Maximum Percentage Of Employee Contributions and Matching Contributions Based Upon Years Of Service										employee contributions and matching Company contributions from 4% to 6%
Stock repurchase program, authorized amount												$ 300,000	$ 200,000	$ 100,000
Shares repurchased in period (shares)				(1.5)						(4.0)
Value of shares acquired				$ 33,177	$ 26,922	$ 25,485	$ 42,584	$ 21,470	$ 3,280	$ 85,600
Remaining repurchase authorized amount				112,100						112,100
Cash dividends declared per share (in dollars per share)	$ 0.12	$ 0.12	$ 0.12
Dividend payment				$ (7,800)						$ (23,902)	$ 0
Relative Total Shareholder Return Average Stock Price Calculation Period										90 days
Total Shareholder Return Award Performance Measurement Period										3 years
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay										4.00%
Share Based Compensation Arrangement By Share Based Payment Award Vesting Percentage				0.00%						0.00%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay										6.00%
Share Based Compensation Arrangement By Share Based Payment Award Vesting Percentage				200.00%						200.00%
Equity Incentive Plan 2017 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant				4.0						4.0

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS (Matching contributions to the Plan) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
401(k) Cash Contributions
Cash	$ 428	$ 408	$ 1,291	$ 1,261

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS (Accumulated other comprehensive income) (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Loss from foreign currency translation adjustments	$ (2,641)	$ (1,211)
Unrecognized actuarial loss on pension plan, net of tax	(1,629)	(1,620)
Unrealized gain/(loss) on hedging	134	(1,071)
Accumulated other comprehensive loss	$ (4,136)	$ (3,902)

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS (Restricted stock and common stock granted) (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation in shares	14	12	771	690
Relative TSR PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation in shares	1	1	166	154
Time-based RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation in shares	2	3	521	452
Special/Growth PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation in shares	1	0	56	59
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation in shares	10	8	28	25

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SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS (Total equity-based compensation expense) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	$ 3,597	$ 2,893	$ 10,772	$ 8,224
Relative TSR PSU [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	1,020	935	3,213	1,910
Time-based RSUs
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	2,182	1,662	6,455	5,475
Special/Growth PSUs
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	173	101	492	254
Common Stock
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	222	195	612	585
Cost of sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	161	126	471	384
Selling, general and administrative (1) [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	2,616	2,111	7,871	5,877
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity-based compensation expense	$ 820	$ 656	$ 2,430	$ 1,963

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REVENUE AND CONTRACT LIABILITIES (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 29, 2019	Jun. 29, 2019
Change in Contract with Customer, Liability [Roll Forward]
Contract liabilities, beginning of period	$ 581	$ 997
Revenue recognized	1,392	6,909
Additions	1,806	6,907
Contract liabilities, end of period	$ 995	$ 995

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EARNINGS PER SHARE (Reconciliation of the shares used in the basic and diluted net income per share computation) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Jun. 29, 2019	Mar. 30, 2019	Dec. 29, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 30, 2017	Jun. 29, 2019	Jun. 30, 2018
NUMERATOR:
Net income/(loss)	$ 1,287	$ (3,555)	$ 7,517	$ 60,256	$ 36,313	$ (69,528)	$ 5,249	$ 27,041
DENOMINATOR:
Weighted average shares outstanding - Basic (in shares)	64,683			69,125			65,914	70,019
Dilutive Securities, Effect on Basic Earnings Per Share, Options and Restrictive Stock Units	$ 748			$ 1,177			$ 683	$ 1,094
Weighted average shares outstanding - Diluted	65,431			70,302			66,597	71,113
EPS:
Net income per share - Basic (in dollars per share)	$ 0.02			$ 0.87			$ 0.08	$ 0.39
Effect of dilutive shares (in dollars per share)	0			0.01			0	0.01
Net income per share - Diluted (in dollars per share)	$ 0.02			$ 0.86			$ 0.08	$ 0.38

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INCOME TAXES (Provision for income taxes and the effective tax rate) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense	$ 3,864	$ 7,282	$ 19,106	$ 122,494
Effective tax rate	75.00%	10.80%	78.20%	81.90%

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INCOME TAXES (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense	$ 3,864	$ 7,282	$ 19,106	$ 122,494
Tax cuts and jobs act of 2017 income tax expense (benefit)			$ 10,200
Income tax expense due to reassessment	$ 700

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SEGMENT INFORMATION (Operating information by segment) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Net revenue:
Revenues	$ 127,109	$ 268,834	$ 400,225	$ 704,297
Income from operations:
Income from operations	1,827	64,463	13,917	142,058
Capital Equipment [Member]
Net revenue:
Revenues	89,860	229,462	286,364	578,197
Income from operations:
Income from operations	(6,449)	57,771	(10,563)	116,615
Aftermarket Products and Services (APS) [Member]
Net revenue:
Revenues	37,249	39,372	113,861	126,100
Income from operations:
Income from operations	$ 8,276	$ 6,692	$ 24,480	$ 25,443

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SEGMENT INFORMATION (Capital expenditures, depreciation and amortization expense by segment) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Capital expenditures:
Capital expenditures	$ 2,136	$ 4,071	$ 9,312	$ 16,481
Depreciation and amortization expense:
Depreciation expense	3,152	2,989	9,412	8,236
Amortization expense	1,843	1,962	5,589	5,927
Capital Equipment [Member]
Capital expenditures:
Capital expenditures	646	999	4,118	4,878
Depreciation and amortization expense:
Depreciation expense	1,800	1,926	5,540	5,601
Amortization expense	989	1,053	2,999	3,188
Aftermarket Products and Services (APS) [Member]
Capital expenditures:
Capital expenditures	1,490	3,072	5,194	11,603
Depreciation and amortization expense:
Depreciation expense	1,352	1,063	3,872	2,635
Amortization expense	$ 854	$ 909	$ 2,590	$ 2,739

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SEGMENT INFORMATION (Narrative) (Details)	9 Months Ended
	Jun. 29, 2019 segment
Segment Reporting Information [Line Items]
Number of reportable segments	2

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Reserve for product warranty activity) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Reserve for warranty, beginning of period	$ 13,885	$ 14,197	$ 14,475	$ 13,796
Provision for warranty	3,143	3,204	8,874	9,384
Utilization of reserve	(3,073)	(3,027)	(9,394)	(8,806)
Reserve for warranty, end of period	$ 13,955	$ 14,374	$ 13,955	$ 14,374

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Obligations not reflected on the Consolidated Balance Sheet) (Details) $ in Thousands	Jun. 29, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Inventory purchase obligation	$ 85,829	[1]
Inventory purchase obligation, Payments due by fiscal year 2019	85,829	[1]
Inventory purchase obligation, Payments due by fiscal year 2020	0	[1]
Inventory purchase obligation, Payments due by fiscal year 2021	0	[1]
Inventory purchase obligation, Payments due by fiscal year 2022	0	[1]
Inventory purchase obligation, Payments due by fiscal year thereafter	0
Operating lease obligations	17,534	[2]
Operating lease obligations, Payments due by fiscal year 2019	1,051	[2]
Operating lease obligations, Payments due by fiscal year 2020	4,215	[2]
Operating lease obligations, Payments due by fiscal year 2021	2,672	[2]
Operating lease obligations, Payments due by fiscal year 2022	2,156	[2]
Operating lease obligations, Payments due by fiscal year thereafter	7,440	[2]
Total	103,363
Total, Payments due by fiscal year 2019	86,880
Total, Payments due by fiscal year 2020	4,215
Total, Payments due by fiscal year 2021	2,672
Total, Payments due by fiscal year 2022	2,156
Total, Payments due by fiscal year thereafter	$ 7,440

[1] The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancellable, however, some orders impose varying penalties and charges in the event of cancellation.

[2] The Company has minimum rental commitments under various leases (excluding taxes, insurance, maintenance and repairs, which are also paid by the Company) primarily for various facility and equipment leases, which expire periodically through 2027 (not including lease extension options, if applicable). Pursuant to ASC No. 840, Leases, for lessee's involvement in asset construction, the Company was considered the owner of the Building during the construction phase. The Building was completed on December 1, 2013 and Pte signed an agreement with the Landlord to lease from the Landlord approximately 198,000 square feet, representing approximately 70% of the Building. Following the completion of construction, we performed a sale-leaseback analysis pursuant to ASC 840-40 and determined that because of our continuing involvement, ASC 840-40 precluded us from derecognizing the asset and associated financing obligation. As such, we reclassified the asset from construction in progress to property, plant and equipment and began to depreciate the building over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. As of June 29, 2019, we recorded a financing obligation related to the Building of $15.5 million (see Note 8 above). The financing obligation is not reflected in the table above.

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Significant customer concentrations as a percentage of net revenue) (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member]		9 Months Ended
		Jun. 29, 2019	Jun. 30, 2018
Micron Technology, Inc
Concentration Risk [Line Items]
Customer concentrations risk percentage		10.90%
Haoseng Industrial Company Limited
Concentration Risk [Line Items]
Customer concentrations risk percentage	[1]		12.80%

[1] Distributor of the Company's products.

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Significant customer concentrations as a percentage of total accounts receivable) (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member]		9 Months Ended
		Jun. 29, 2019	Jun. 30, 2018
Super Power International
Concentration Risk [Line Items]
Customer concentrations risk percentage	[1]	15.80%	13.00%
Haoseng Industrial Company Limited
Concentration Risk [Line Items]
Customer concentrations risk percentage	[1]		27.60%
Forehope Electronic (Ningbo) Co Ltd [Member]
Concentration Risk [Line Items]
Customer concentrations risk percentage		14.40%
Micron Technology, Inc [Member] [Member]
Concentration Risk [Line Items]
Customer concentrations risk percentage		10.20%

[1] Distributor of the Company's products.

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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Narrative) (Details) $ in Thousands	9 Months Ended
	Jun. 29, 2019 USD ($)	Sep. 29, 2018 USD ($)	Dec. 01, 2013 USD ($) ft²
Other Commitments [Line Items]
Area of Land | ft²			198,000
Percentage Of Building Area Agreed To Lease From Landlord			70.00%
Lessee, Operating Lease, Term of Contract	10 years
Period Of Warranty For Manufacturing Defects	1 year
Lease Expiration Year	2027
Financing obligation	$ 14,701	$ 15,187	$ 20,000
Current and Noncurrent Portion [Member]
Other Commitments [Line Items]
Financing obligation	$ 15,500
Building [Member]
Other Commitments [Line Items]
Property, Plant and Equipment, Useful Life	25 years

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SUBSEQUENT EVENTS (Details) - USD ($) $ in Thousands		9 Months Ended
	Jul. 29, 2019	Jun. 29, 2019	Sep. 29, 2018
Subsequent Event [Line Items]
Total derivative, Notional Amount		$ 34,806	$ 43,095
Foreign Exchange Forward [Member] | Designated as Hedging Instrument [Member]
Subsequent Event [Line Items]
Total derivative, Notional Amount		$ 34,806	$ 43,095
Foreign exchange forward contract, term of contract		12 months
Foreign Exchange Forward [Member] | Designated as Hedging Instrument [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Total derivative, Notional Amount	$ 13,600
Foreign exchange forward contract, term of contract	12 months