ALLEGRO MICROSYSTEMS, INC. 10-K

Item 9A. Controls and Procedures. Limitations on Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 25, 2022. Based on the evaluation of our disclosure controls and procedures as of March 25, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the three months ended March 25, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of March 25, 2022. Our independent auditor, Grant Thornton LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting. This attestation report appears below on page F-4. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. Certain of the information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 25, 2022. Pursuant to General Instruction G(3) of Form 10-K, additional information required hereunder relating to 75 our executive officers is contained in Part I of this Annual Report on Form 10-K under the caption "Information about our Executive Officers." Our board of directors has adopted a written Code of Business Conduct and Ethics that applies to our directors, officers and employees (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). A copy of the Code is posted on our website, www.allegromicro.com/en. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on our website at the address specified above. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K. Item 11. Executive Compensation. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 25, 2022. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 25, 2022, with the exception of the information regarding securities authorized for issuance under our equity compensation plans, which is set forth below. Equity Compensation Plan Information The following table sets forth information with respect to securities authorized for issuance under our equity compensation plans as of March 25, 2022: Plan Category Number of Securities to be issued upon Exercise of Outstanding Options, Warrants, and Rights (a) 2 Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity Compensation Plans Approved by Security Holders 1 2,656,090 — 3,887,023 Equity Compensation Plans Not Approved by Security Holders — — Total 2,656,090 3,887,023 1 As of March 25, 2022, there were 3,180,390 shares available for future issuance under the 2020 Omnibus Incentive Compensation Plan (the “2020 Plan”), 706,633 under the 2020 ESPP. 2 As of March 25, 2022, there were 465,732 PSUs issued at target and 1,344,717 RSUs included in this amount. 3 No exercise price has been derived as a result of all derivatives issued being PSUs and RSUs. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 25, 2022. Item 14. Principal Accountant Fees and Services. The information required hereunder is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A, which proxy statement is anticipated to be filed with the SEC within 120 days after March 25, 2022. 121 PART IV Item 15. Exhibit and Financial Statement Schedules. The following documents are filed as part of this Annual Report on Form 10-K: 1. Financial Statements. The following financial statements are included in this Form 10-K from page F-1 to page F-50: Reports of Independent Public Accounting Firm (PCAOB ID Number 248) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 2. Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown on the financial statements or notes thereto. 3. Exhibits. Exhibit No. Description of Exhibit 2.1 Master Transaction Agreement, dated as of March 25, 2020, by and among Polar Semiconductor, LLC, Allegro MicroSystems, Inc., Allegro MicroSystems, LLC and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 2.1 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 3.1 Third Amended and Restated Certificate of Incorporation of Allegro MicroSystems, Inc. (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 2, 2020) 3.2 Amended and Restated Bylaws of Allegro MicroSystems, Inc. (incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on November 2, 2020) 4.1 Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 4.2 Stockholders Agreement, dated as of September 30, 2020, by and among Allegro MicroSystems, Inc., Sanken Electric Co., Ltd. and OEP SKNA, L.P. (incorporated by reference from Exhibit 4.3 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 4.3 Addendum to Stockholders Agreement of Allegro MicroSystems, Inc., dated as of June 30, 2021, by and among Allegro MicroSystems, Inc., OEP SKNA, L.P. and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 1, 2021) 4.4 Amended and Restated Registration Rights Agreement, by and among the Company, Sanken Electric Co. and OEP SKNA, L.P. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 2, 2020) 4.5 Description of securities (incorporated by reference from Exhibit 4.4 to the Company’s Annual Report on Form 10-K on May 19, 2021) 4.6 Form of Indenture (incorporated by reference from Exhibit 4.3 to the Company’s Registration Statement on Form S-3ASR filed on November 1, 2021) 122 10.1 Amended and Restated Limited Liability Company Agreement of Polar Semiconductor, LLC, dated as of March 28, 2020, by and among Polar Semiconductor, LLC, Allegro MicroSystems, Inc. and Sanken Electric Co. Ltd. (incorporated by reference from Exhibit 2.1 (Exhibit B) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.2 Wafer Foundry Agreement, dated as of April 12, 2013, by and between Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 10.5 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.3 Amendment No. 1 to Wafer Foundry Agreement, dated as of March 28, 2020, by and between Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit C) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.4 Letter Agreement regarding FY21 Price Support, dated as of March 28, 2020, by and between Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit D) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.5 Letter Agreement regarding Consolidation of Technology Agreements, by and among Allegro MicroSystems, LLC, Sanken Electric Co., Ltd. and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit F) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.6 Distribution Agreement, dated as of July 5, 2007, by and between Allegro MicroSystems, Inc. and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 10.15 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 10.7 Amended and Restated Transfer Pricing Agreement, dated as of March 28, 2020, by and among Sanken Electric Co., Ltd., Allegro MicroSystems, Inc., Allegro MicroSystems, LLC and Polar Semiconductor, LLC (incorporated by reference from Exhibit 2.1 (Exhibit I) to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.8 Sales Representative Agreement, dated as of July 5, 2007, by and between Sanken Electric Co., Ltd. and Allegro MicroSystems, Inc. (incorporated by reference from Exhibit 10.17 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 10.9 Royalty Sharing Agreement, dated as of September 3, 2013, by and between Sanken Electric Co., Ltd. and Allegro MicroSystems, LLC (incorporated by reference from Exhibit 10.18 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 10.10 Sublease Agreement, by and between Allegro MicroSystems Business Development, Inc. and Sanken Electric Co., Ltd. (incorporated by reference from Exhibit 10.19 to the Company’s Registration Statement on Form S- filed on October 6, 2020) 10.11 Contract of Lease, dated as of April 1, 2004, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.20 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.12 Contract of Lease, dated as of May 23, 2008, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.21 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.13 Contract of Lease, dated as of February 10, 2010, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.14 Contract of Lease, dated as of December 29, 2017, by and between Allegro MicroSystems Phils. Realty, Inc. and Allegro MicroSystems Philippines, Inc. (incorporated by reference from Exhibit 10.23 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.15 Board Executive Advisor Agreement, dated as of September 28, 2017, by and between Allegro MicroSystems, Inc. and Reza Kazerounian (incorporated by reference from Exhibit 10.24 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 123 10.16 Amendment to Board Executive Advisor Agreement, dated as of June 28, 2018, by and between Allegro MicroSystems, Inc. and Reza Kazerounian (incorporated by reference from Exhibit 10.25 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) 10.17 Director Offer Letter, dated as of June 28, 2018, by and between Allegro MicroSystems, Inc. and Reza Kazerounian (incorporated by reference from Exhibit 10.26 to the Company’s Registration Statement on Form S-1 filed on October 6 , 2020) * 10.18 Amended and Restated Allegro MicroSystems, LLC Executive Deferred Compensation Plan, dated as of September 15, 2015 (incorporated by reference from Exhibit 10.30 to the Company’s Registration Statement on Form S-1/A filed on October 1 3 , 2020) * 10.19 Form of Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (incorporated by reference from Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed on October 30, 2020) * 10.20 Form of Restricted Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (Employees) (incorporated by reference from Exhibit 10. 31 to the Company’s Annual Report on Form 10- K filed on May 19 , 202 1 ) * 10.21 Form of Restricted Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (Board of Directors) (incorporated by reference from Exhibit 10.34 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) * 10.22 Form of Performance Stock Unit Agreement under Allegro MicroSystems, Inc. 2020 Omnibus Incentive Compensation Plan (incorporated by reference from Exhibit 10.3 3 to the Company’s Annual Report on Form 10-K filed on May 19, 2021) * 10.23 Form of Allegro MicroSystems, Inc. 2020 Employee Stock Purchase Plan (incorporated by reference from Exhibit 99.5 to the Company’s Registration Statement on Form S-8 filed on October 30, 2020) * 10.24 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Paul V. Walsh, Jr. (incorporated by reference from Exhibit 10.38 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) * 10.25 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Michael C. Doogue (incorporated by reference from Exhibit 10.39 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) * 10.26 Amended and Restated Severance Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, LLC, Allegro MicroSystems, Inc. and Max R. Glover (incorporated by reference from Exhibit 10.40 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) * 10.27 Offer Letter, dated as of June 21, 2019, by and between Allegro MicroSystems, Inc. and Max R. Glover (incorporated by reference from Exhibit 10.41 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) * 10.28 Offer Letter, dated as of October 15, 2021, by and between Allegro MicroSystems, Inc. and Sharon Briansky (incorporated by reference from Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.29 Offer Letter, dated January 6, 2022, by and between Allegro MicroSystems, Inc. and Derek D’Antilio (incorporated by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.30 Severance Agreement, dated as of January 10, 2022, by and between Allegro MicroSystems, Inc. and Derek D’Antilio (incorporated by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 124 10.31 Severance Agreement, dated as of dated as of December 6, 2021, by and between Allegro MicroSystems, Inc. and Sharon S. Briansky (incorporated by reference from Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.32 Consulting Agreement, dated as of January 10, 2022, by and between Allegro MicroSystems, Inc. and Paul V. Walsh, Jr. (incorporated by reference from Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) * 10.33 Summary of Allegro MicroSystems, Inc. Non-Employee Director Compensation * 10.34 Employment Agreement, dated May 2, 2022, by and between Allegro MicroSystems, Inc. and Vineet Nargolwala (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 9, 2022) * 10.35 Second Amended and Restated Severance Agreement, dated May 6, 2022, by and between Allegro MicroSystems, Inc. and Ravi Vig (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 9, 2022) * 10.36 Letter Agreement, dated May 6, 2022, between Allegro MicroSystems, Inc. and Ravi Vig (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 9, 2022) * 10.37 Form of Indemnification Agreement between Allegro MicroSystems, Inc. and its directors and officers (incorporated by reference from Exhibit 10.43 to the Company’s Registration Statement on Form S-1/A filed on October 21, 2020) 10.38 Term Loan Credit Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto (incorporated by reference from Exhibit 10.44 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) 10.39 Term Loan Security Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., the other grantors party thereto from time to time, and Credit Suisse AG, Cayman Islands Branch, as collateral agent (incorporated by reference from Exhibit 10.45 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) 10.40 Revolving Facility Credit Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto (incorporated by reference from Exhibit 10.46 to the Company’s Registration Statement on Form S-1/A filed on October 13 , 2020) 10.41 Revolving Facility Security Agreement, dated as of September 30, 2020, by and between Allegro MicroSystems, Inc., the other grantors party thereto from time to time, and Mizuho Bank, Ltd., as collateral agent (incorporated by reference from Exhibit 10.47 to the Company’s Registration Statement on Form S-1/A filed on October 13, 2020) 10.42 Loan Agreement, dated as of December 2, 2021, by and between Allegro MicroSystems, Inc. and Polar Semiconductor, LLC (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 2, 2022) 21.1 Subsidiaries of Allegro MicroSystems, Inc. 23.1 Consent of Grant Thornton LLP 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 125 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 101.INS Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith) *Indicates management contract or compensatory plan, contract or arrangement. ** Certification is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference. Item 16. Form 10-K Summary. None. 126 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on May 18, 2022. ALLEGRO MICROSYSTEMS, INC. By: /s/ Ravi Vig Ravi Vig Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints Derek P. D'Antilio and Sharon S. Briansky, and each or any of them, his or her true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements (including post-effective amendments) to this report, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Signature Title Date /s/ Ravi Vig President, Chief Executive Officer (Principal May 18, 2022 Ravi Vig Executive Officer) and Director /s/ Derek P. D’Antilio Chief Financial Officer (Principal Financial and May 18, 2022 Derek P. D’Antilio Accounting Officer) /s/ Yoshihiro (Zen) Suzuki Chairman of the Board of Directors May 18, 2022 Yoshihiro (Zen) Suzuki /s/ David Aldrich Director May 18, 2022 David Aldrich /s/ Andrew Dunn Director May 18, 2022 Andrew Dunn /s/ Noriharu Fujita Director May 18, 2022 Noriharu Fujita /s/ Reza Kazerounian Director May 18, 2022 Reza Kazerounian /s/ Richard R. Lury Director May 18, 2022 Richard R. Lury /s/ Susan Lynch Director May 18, 2022 Susan Lynch /s/ Joseph Martin Director May 18, 2022 Joseph Martin /s/ Paul Carl (Chip) Schorr IV Director May 18, 2022 Paul Carl (Chip) Schorr IV 127 Index to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F-2 Consolidated Balance Sheets F- 5 Consolidated Statements of Operations F- 6 Consolidated Statements of Comprehensive Income F- 7 Consolidated Statements of Changes in Equity F- 8 Consolidated Statements of Cash Flows F- 9 Notes to Consolidated Financial Statements F- 11 F-1 Report of Independent Public Accounting Firm Board of Directors and Shareholders Allegro MicroSystems, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Allegro MicroSystems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of March 25, 2022 and March 26, 2021, the related consolidated statements of operations, comprehensive income, changes of equity, and cash flows for each of the three years in the fiscal period ended March 25, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 25, 2022 and March 26, 2021, and the results of its operations and its cash flows for each of the three years in the fiscal period ended March 25, 2022, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 25, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated May 18, 2022 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for limited price concession provisions provided to distributors As described further in note 2 to the consolidated financial statements, sales recorded during the year include an estimate of the allowance for limited price protection provisions provided to distributors. The Company estimates potential future credits based on historical data from prior sales adjustments. We identified the estimate of the allowance as a critical audit matter. The principal considerations for our determination that the allowance for the limited price protection provisions provided to distributors is a critical audit matter is the significant judgment by management in estimating the mix of pre-approved price concessions on future claims. Changes in that assumption can have a material effect on the amount of revenue recognized, which in turn led to high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s assumption. Our audit procedures related to the allowance included the following, among others: • Tested the design and operating effectiveness of controls relating to establishing the allowance, • Evaluated management’s process for determining the expected value estimate for the allowance, • Evaluated the reasonableness of management’s estimate of the mix of approved price concessions on future claims in comparison to historical mix of price concessions through inspection of historical sales and claims data, and F-2 • Assessed the reasonableness of management’s estimated price concessions on future claims from prior periods by comparing to subsequent actual claim activity. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2020. Boston, Massachusetts May 18, 2022 F-3 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Allegro MicroSystems, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Allegro MicroSystems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of March 25, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 25, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the fiscal period ended March 25, 2022, and our report dated May 18, 2022 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Boston, Massachusetts May 18, 2022 F-4 ALLEGRO MICROSYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par value and share amounts) March 25, 2022 March 26, 2021 Assets Current assets: Cash and cash equivalents $ 282,383 $ 197,214 Restricted cash 7,416 6,661 Trade accounts receivable, net of provision for expected credit losses of $ 105 at March 25, 2022 and allowances for doubtful accounts $ 138 at March 26, 2021 87,359 69,500 Trade and other accounts receivable due from related party 27,360 23,832 Accounts receivable - other 4,144 1,516 Inventories 86,160 87,498 Prepaid expenses and other current assets 14,995 18,374 Current portion of related party note receivable 1,875 — Assets held for sale — 25,969 Total current assets 511,692 430,564 Property, plant and equipment, net 210,028 192,393 Operating lease right-of-use assets 16,049 — Deferred income tax assets 17,967 26,972 Goodwill 20,009 20,106 Intangible assets, net 35,970 36,366 Related party note receivable, less current portion 5,625 — Equity investment in related party 27,671 26,664 Other assets, net 47,609 14,613 Total assets $ 892,620 $ 747,678 Liabilities, Non-Controlling Interest and Stockholders' Equity Current liabilities: Trade accounts payable $ 29,836 $ 35,389 Amounts due to related party 5,222 2,353 Accrued expenses and other current liabilities 65,459 78,932 Current portion of operating lease liabilities 3,706 — Total current liabilities 104,223 116,674 Obligations due under Senior Secured Credit Facilities 25,000 25,000 Operating lease liabilities, less current portion 12,748 — Other long-term liabilities 15,286 19,133 Total liabilities 157,257 160,807 Commitments and contingencies Stockholders' Equity: Preferred Stock, $ 0.01 par value; 20,000,000 shares authorized, no shares issued or outstanding at March 25, 2022 and March 26, 2021 — — Common stock, $ 0.01 par value; 1,000,000,000 shares authorized, 190,473,595 shares issued and outstanding at March 25, 2022; 1,000,000,000 shares authorized, 189,588,161 issued and outstanding at March 26, 2021 1,905 1,896 Additional paid-in capital 627,792 592,170 Retained earnings 122,958 3,551 Accumulated other comprehensive loss ( 18,448 ) ( 11,865 ) Equity attributable to Allegro MicroSystems, Inc. 734,207 585,752 Non-controlling interests 1,156 1,119 Total stockholders' equity 735,363 586,871 Total liabilities, non-controlling interest and stockholders' equity $ 892,620 $ 747,678 The accompanying notes are an integral part of these consolidated financial statements. F-5 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Operations (in thousands, except share and per share amounts) Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Net sales $ 619,861 $ 486,546 $ 465,532 Net sales to related party 148,813 104,661 184,557 Total net sales 768,674 591,207 650,089 Cost of goods sold 361,214 312,305 388,813 Gross profit 407,460 278,902 261,276 Operating expenses: Research and development 121,873 108,649 102,052 Selling, general and administrative 150,937 153,476 106,396 Impairment of long-lived assets — 7,119 — Change in fair value of contingent consideration ( 2,000 ) ( 2,500 ) — Total operating expenses 270,810 266,744 208,448 Operating income 136,650 12,158 52,828 Other income (expense): Loss on debt extinguishment — ( 9,055 ) — Interest expense, net ( 1,057 ) ( 2,603 ) ( 110 ) Foreign currency transaction (loss) gain ( 568 ) ( 2,889 ) 1,391 Income in earnings of equity investment 1,007 1,413 — Other, net 4,714 ( 475 ) ( 831 ) Income (loss) before income taxes 140,746 ( 1,451 ) 53,278 Income tax provision (benefit) 21,191 ( 19,552 ) 16,173 Net income 119,555 18,101 37,105 Net income attributable to non-controlling interests 148 148 134 Net income attributable to Allegro MicroSystems, Inc. $ 119,407 $ 17,953 $ 36,971 Net income attributable to Allegro MicroSystems, Inc. per share: Basic $ 0.63 $ 0.22 $ 3.70 Diluted $ 0.62 $ 0.10 $ 3.70 Weighted average shares outstanding: Basic 189,748,427 83,448,055 10,000,000 Diluted 191,811,205 176,416,645 10,000,000 The accompanying notes are an integral part of these consolidated financial statements. F-6 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Comprehensive Income (in thousands) Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Net income $ 119,555 $ 18,101 $ 37,105 Net income attributable to non-controlling interest 148 148 134 Net income attributable to Allegro MicroSystems, Inc. 119,407 17,953 36,971 Other comprehensive income (loss): Foreign currency translation adjustment ( 8,110 ) 9,304 ( 3,153 ) Net actuarial gain (loss) amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax of $( 472 ), $ 391 and $ 233 in 2022, 2021 and 2020, respectively 1,416 ( 1,172 ) ( 543 ) Total other comprehensive (loss) income ( 6,694 ) 8,132 ( 3,696 ) Comprehensive income 112,713 26,085 33,275 Comprehensive income (loss) attributable to non-controlling interest 111 ( 21 ) ( 2 ) Comprehensive income attributable to Allegro MicroSystems, Inc. $ 112,824 $ 26,064 $ 33,273 The accompanying notes are an integral part of these consolidated financial statements. F-7 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Changes in Equity (in thousands, except share amounts) Common Stock, Class A Common Stock, Class L Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Non-controlling Interests Total Equity Shares Amount Shares Amount Shares Amount Shares Amount Balance at March 29, 2019 10,000,000 $ 100 607,620 $ 6 — $ — — $ — $ 447,762 $ 157,384 $ ( 16,278 ) $ 814 $ 589,788 Net income — — — — — — — — — 36,971 — 134 37,105 Issuance of Class L shares, net of forfeitures — — 14,850 — — — — — — — — — — Capital contribution — — — — — — — — 9,500 — — — 9,500 Stock-based compensation — — — — — — — — 1,435 — — — 1,435 Foreign currency translation adjustment — — — — — — — — — — ( 3,155 ) 2 ( 3,153 ) Net actuarial loss and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — ( 543 ) — ( 543 ) Balance at March 27, 2020 10,000,000 $ 100 622,470 $ 6 — $ — — $ — $ 458,697 $ 194,355 $ ( 19,976 ) $ 950 $ 634,132 Net income — — — — — — — — — 17,953 — 148 18,101 Issuance of Class L shares, net of forfeitures — — 15,828 — — — — — — — — — — Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries — — — — — — — — ( 19,165 ) — — — ( 19,165 ) Stock-based compensation — — — — — — 156,435 2 49,870 — — — 49,872 Issuance of common stock in connection with IPO, net of underwriting discounts and other offering costs — — — — — — 25,000,000 250 321,175 — — — 321,425 Conversion of Class A and Class L common stock into common stock in connection with the IPO ( 10,000,000 ) ( 100 ) ( 636,301 ) ( 6 ) — — 166,500,000 1,665 ( 1,559 ) — — — — Repurchase of Class A and Class L common stock to cover related taxes — — ( 1,997 ) — — — ( 2,068,274 ) ( 21 ) ( 27,686 ) — — — ( 27,707 ) Conversion of LTCIP/TRIP awards into restricted stock units in connection with the IPO — — — — — — — — 2,081 — — — 2,081 Cash dividend paid to holders of Class A common stock — — — — — — — — ( 191,243 ) ( 208,757 ) — — ( 400,000 ) Foreign currency translation adjustment — — — — — — — — — — 9,283 21 9,304 Net actuarial loss and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — ( 1,172 ) — ( 1,172 ) Balance at March 26, 2021 — $ — — $ — — $ — 189,588,161 $ 1,896 $ 592,170 $ 3,551 $ ( 11,865 ) $ 1,119 $ 586,871 Net income — — — — — — — — — 119,407 — 148 119,555 Employee stock purchase plan issuances — — — — — — 125,767 1 2,831 — — — 2,832 Stock-based compensation, net of forfeitures — — — — — — 759,667 8 33,429 — — — 33,437 Payments of taxes withheld on net settlement of equity awards — — — — — — — — ( 638 ) — — — ( 638 ) Foreign currency translation adjustment — — — — — — — — — — ( 7,999 ) ( 111 ) ( 8,110 ) Net actuarial gain and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax — — — — — — — — — — 1,416 — 1,416 Balance at Balance at March 25, 2022 — $ — — $ — — $ — 190,473,595 $ 1,905 $ 627,792 $ 122,958 $ ( 18,448 ) $ 1,156 $ 735,363 The accompanying notes are an integral part of these consolidated financial statements. F-8 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Cash Flows (in thousands) Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 119,555 $ 18,101 $ 37,105 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 48,527 48,307 64,048 Amortization of debt issuance costs 101 226 — Deferred income taxes 7,498 ( 18,931 ) ( 4,909 ) Stock-based compensation 33,548 49,870 1,435 (Gain) loss on disposal of assets ( 349 ) 269 698 Loss on debt extinguishment — 9,055 — Change in fair value of contingent consideration ( 2,000 ) ( 2,500 ) — Impairment of long-lived assets — 7,119 — Provisions for inventory and credit losses/bad debt 6,297 5,019 3,891 Unrealized gains on marketable securities ( 3,722 ) — — Changes in operating assets and liabilities: Trade accounts receivable ( 18,347 ) ( 9,303 ) 16,441 Accounts receivable - other ( 2,668 ) ( 28 ) 346 Inventories ( 4,471 ) 7,641 346 Prepaid expenses and other assets ( 19,450 ) ( 29,047 ) 2,629 Trade accounts payable ( 4,348 ) 15,099 ( 3,122 ) Due to/from related parties ( 659 ) 4,878 ( 23,946 ) Accrued expenses and other current and long-term liabilities ( 3,383 ) 14,795 ( 13,543 ) Net cash provided by operating activities 156,129 120,570 81,419 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 69,941 ) ( 40,673 ) ( 45,615 ) Acquisition of business, net of cash acquired ( 14,549 ) ( 11,555 ) — Proceeds from sales of property, plant and equipment 27,408 318 3,936 Investments in marketable securities ( 9,189 ) — — Contribution of cash balances due to divestiture of subsidiary — ( 16,335 ) — Net cash used in investing activities ( 66,271 ) ( 68,245 ) ( 41,679 ) CASH FLOWS FROM FINANCING ACTIVITIES: Related party note receivable ( 7,500 ) 51,377 30,000 Proceeds from initial public offering, net of underwriting discounts and other offering costs — 321,425 — Proceeds from issuance of common stock under equity award and purchase plans less payments for taxes related to net share settlement of equity awards 2,193 ( 27,707 ) — Dividends paid — ( 400,000 ) — Borrowings of senior secured debt, net of deferred financing costs — 315,719 43,000 Repayment of senior secured debt — ( 300,000 ) — Repayment of unsecured credit facilities — ( 33,000 ) — Capital contribution — — 9,500 Net cash (used in) provided by financing activities ( 5,307 ) ( 72,186 ) 82,500 Effect of exchange rate changes on Cash and cash equivalents and Restricted cash 1,373 3,860 ( 5,621 ) Net increase (decrease) in Cash and cash equivalents and Restricted cash 85,924 ( 16,001 ) 116,619 Cash and cash equivalents and Restricted cash at beginning of period 203,875 219,876 103,257 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD: $ 289,799 $ 203,875 $ 219,876 RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Cash and cash equivalents at beginning of period $ 197,214 $ 214,491 $ 99,743 Restricted cash at beginning of period 6,661 5,385 3,514 Cash and cash equivalents and Restricted cash at beginning of period $ 203,875 $ 219,876 $ 103,257 Cash and cash equivalents at end of period 282,383 197,214 214,491 Restricted cash at end of period 7,416 6,661 5,385 Cash and cash equivalents and Restricted cash at end of period $ 289,799 $ 203,875 $ 219,876 F-9 ALLEGRO MICROSYSTEMS, INC. Consolidated Statements of Cash Flows - continued (in thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 813 $ 2,746 $ 2,448 Cash paid for income taxes $ 22,195 $ 8,908 $ 15,873 Non-cash transactions: Changes in Trade accounts payable related to Property, plant and equipment, net $ ( 2,021 ) $ ( 3,226 ) $ ( 1,542 ) Assets held for sale transferred from property, plant and equipment, net $ — $ 25,969 $ — Loans to cover purchase of common stock under employee stock plan $ — $ 171 $ 232 Recognition of right of use assets and lease liability upon adoption of new accounting standard $ 356 $ — $ — The accompanying notes are an integral part of these consolidated financial statements. F-10 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements (Amounts in thousands, except share and per share amounts) 1. Nature of the Business and Basis of Presentation Allegro MicroSystems, Inc., together with its consolidated subsidiaries (“AMI” or the “Company”), is a global leader in designing, developing and manufacturing sensing and power solutions for motion control and energy-efficient systems in automotive and industrial markets. The Company was incorporated under the laws of Delaware on March 30, 2013 under the name of Sanken North America, Inc. (“SKNA”) as a wholly owned subsidiary of Sanken Electric Co., Ltd. (“Sanken”). In October 2017, Sanken sold 28.8 % of the common stock of SKNA to One Equity Partners (“OEP”). In April 2018, SKNA filed a certificate of amendment in the state of Delaware to change its name to Allegro MicroSystems, Inc. The Company is headquartered in Manchester, New Hampshire and has a global footprint with 16 locations across four continents. On November 2, 2020, the Company completed its Initial Public Offering (“IPO”) of 28,750,000 shares of its common stock at an offering price of $ 14.00 per share, of which 25,000,000 shares were sold by the Company and 3,750,000 shares were sold by selling stockholders, resulting in net proceeds to the Company of approximately $ 321,425 after deducting $ 20,125 of underwriting discounts and $ 8,450 of offering costs. The Company’s common stock is now listed on the Nasdaq Global Select Market under the ticker symbol “ALGM.” On March 28, 2020, the Company entered into an agreement to divest a majority of its ownership interest in Polar Semiconductor, Inc. (“PSL”) to Sanken, in order to better align with its fabless, asset-lite scalable manufacturing strategy (the “PSL Divestiture”). In order to affect this in-kind, non-cash transaction, Sanken contributed the forgiveness of the fair value of the entire related party notes payable of $ 42,700 owed to Sanken and the Company contributed the forgiveness of the fair value of $ 15,000 out of the $ 66,377 total debt owed by PSL to the Company, which was previously eliminated in consolidation. The entire net receivable balance of $ 51,377 plus accrued interest of $ 762 was repaid on October 14, 2020. Following the divestiture, Sanken held a 70 % majority share in PSL with the Company retaining a 30 % minority shareholder interest. The investment was recorded for the 30 %, totaling $ 25,250 at the divestiture date. Beginning with reporting periods on and after March 28, 2020, the investment is included on the Company’s balance sheet as an equity investment in a related party, including $ 1,007 and $ 1,413 of income earned during the fiscal years ended March 25, 2022 and March 26, 2021. In addition, the difference between the fair value contributed by both parties at the consummation of this transaction and the book value was treated as an adjustment of capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries within additional paid-in capital of $ 19,165 at March 26, 2021. This amount includes an estimated tax effect of $ 1,552 for the fiscal year ended March 26, 2021. On March 28, 2020, in connection with the divestiture described above, the Company also formally terminated its distribution agreement with Sanken to distribute Sanken’s products and entered into a transitional services agreement with PSL, which contracted with Sanken as its new channel for fulfillment of Sanken product sales in North America and Europe. Sanken will continue to provide distribution support for the Company’s products in Japan. See Note 21, “Related Party Transactions” for further discussion. Impact of the COVID-19 Pandemic On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic. The Company continues to monitor the rapidly evolving conditions and circumstances as well as guidance from international and domestic authorities, including public health authorities, and the Company may need to take additional actions based on their recommendations. There is considerable uncertainty regarding the impact on the Company’s business stemming from current measures and potential future measures that could restrict access to the Company’s facilities, limit manufacturing and support operations and place restrictions on the Company’s workforce and suppliers. The measures implemented by various authorities related to the COVID-19 pandemic have caused the Company to change its business practices, including those related to where employees work, the distance between employees in the Company’s facilities, limitations on the in-person meetings between employees and with customers, suppliers, service providers, and stakeholders, as well as restrictions on business travel to domestic and international locations or to attend trade shows, investor conferences and other events. The full extent to which the ongoing COVID-19 pandemic adversely affects the Company’s financial performance will depend on future developments, many of which are outside of the Company’s control, are highly uncertain and cannot be F-11 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the effectiveness of actions to contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions can resume. The COVID-19 pandemic could also result in additional governmental restrictions and regulations, which could adversely affect the Company’s business and financial results. In addition, a recession, depression or other sustained adverse market impact resulting from COVID-19 could materially and adversely affect the Company’s business and its access to needed capital and liquidity. Even after the COVID-19 pandemic has lessened or subsided, the Company may continue to experience adverse impacts on its business and financial performance as a result of its global economic impact. The COVID-19 pandemic may also heighten other risks. For example, if the business impacts of COVID-19 are prolonged, this could cause the Company to recognize impairments for goodwill and certain long-lived assets including amortizable intangible assets. The Company has taken actions to mitigate its financial risk given the uncertainty in global markets caused by the COVID-19 pandemic. During the fourth quarter of fiscal year 2020, the Company borrowed $ 43,000 under its revolving credit facilities. The borrowing was made as part of the Company’s ongoing efforts to preserve financial flexibility in light of the current uncertainty in the global markets and related effects on the Company’s business resulting from the COVID-19 pandemic. In connection with entering into a new revolving credit facility on September 30, 2020, the Company used cash on hand to repay all amounts outstanding under the line of credit and terminated all commitments thereunder. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) was signed into law. The CARES Act contains numerous tax provisions including a correction to the applicable depreciation rates available in the original Tax Cuts and Jobs Act of 2017 (“TCJA”) for Qualified Improvement Property (“QIP”), temporarily establishes a five-year carryback period for current net operating losses (“NOL”), and contains a provision for deferred payment of 2020 employer payroll taxes. The Company currently estimates cash tax benefits of the QIP adjustment and NOL carryback period to be $ 12.8 million. Financial Periods The Company’s fiscal year is the 52-week or 53-week period ending on the Friday closest to the last day in March. The Company’s 2022 fiscal year ended March 25, 2022 (“fiscal year 2022”), 2021 fiscal year ended March 26, 2021 (“fiscal year 2021”) and 2020 fiscal year ended March 27, 2020 (“fiscal year 2020”) were 52-week periods. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Such estimates relate to useful lives of fixed and intangible assets, allowances for doubtful accounts and customer returns and sales allowances. Such estimates could also relate to the net realizable value of inventory, accrued liabilities, the valuation of stock-based awards, deferred tax valuation allowances, and other reserves. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. Reclassifications Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications. Business Segment Information The Company operates in one segment which involves the design, development, production and distribution of various integrated circuits in various markets worldwide. The Company has a single, company-wide management team that administers all properties as a whole rather than as discrete operating segments. The chief operating decision maker, who is the Company’s chief executive officer, measures financial performance as a single enterprise and not on legal entity or end market basis. Throughout the year, the chief operating decision maker allocates capital resources on a project-by-project basis across the Company’s entire asset base to maximize profitability without regard to legal entity or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines through its business unit structure. F-12 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Foreign Currency Translation and Transactions The Company’s reporting currency is the U.S. Dollar. The financial statements of the Company’s foreign subsidiaries are translated from local currency into U.S. dollars using the current exchange rate at the balance sheet date for assets and liabilities, and the average exchange rate in effect during the period for net sales and expenses. The functional currency for the Company’s international subsidiaries is considered to be the local currency for each entity, and, accordingly, translation adjustments for these entities are included as a component of accumulated other comprehensive loss in the Company’s consolidated balance sheets. Non-Controlling Interest The Company, through one of its wholly owned subsidiaries, established an affiliated entity in Philippines for the primary purpose of purchasing, selling, leasing, developing and otherwise managing real estate acquired by the Company in the Philippines. The Company owns 40 % of the equity interest in this entity and the remaining 60 % is held in a trust for the benefit of its employee retirement fund. The portion of the results of operations of this entity is shown as net income attributable to the non-controlling interest in the Company’s consolidated statements of operations for fiscal 2022, 2021 and 2020. Additionally, the cumulative portion of the results of operations of this entity along with the interest in the net assets is shown as a component of non-controlling interest in the Company’s consolidated balance sheets. Cash Equivalents and Restricted Cash The Company considers all highly liquid instruments with original maturities of three months or less at the time of acquisition to be cash equivalents. At March 25, 2022 and March 26, 2021, the Company maintained investments in an interest-bearing cash account. Because of the investment’s short term to maturity and the investment’s relative price insensitivity to changes in market interest rates, the Company notes that cost approximates fair value for this investment. As a result, there were no realized or unrealized gains or losses for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020. The Company has restricted cash, the use of which is restricted to the benefit of employees through a deferred compensation program. Fair Value of Financial Instruments Certain assets and liabilities are carried at fair value under GAAP. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value, which are provided below: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or examination. The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s cash equivalents and restricted cash are carried at fair values as determined according to the fair value hierarchy described above (see Note 4, “Fair Value Measurements”). The carrying value of accounts receivable, assets held for sale, notes receivables, accounts payable and accrued expenses approximate their respective fair value due to the short-term nature of these assets and liabilities. The carrying value of outstanding borrowings under the line of credit agreements approximates fair value as it bears interest at a rate approximating a market interest rate. Related party note receivable was classified as held-for-investment based on management’s intent and ability to hold the loan for the foreseeable future or to maturity. Loans held-for investment are carried at amortized cost and reduced by a valuation allowance for estimated credit losses, as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, loan fees paid and received, using the interest method. The interest method is F-13 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Premiums and discounts are recognized as yield adjustments over the term of the related loans. A detailed description of fair value measurement of the assets of the non-U.S. defined benefit plan is included in Note 16, “Retirement Plans.” Trade accounts receivable, net A receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due). Accounts receivables are presented net of an allowance for doubtful accounts, which is an estimate of amounts that may not be collectible. The allowance for doubtful accounts is our estimate of current expected credit losses (“CECL”) based on historical loss experience. The Company periodically performs detailed reviews to assess the adequacy of the allowance. The Company exercises judgment in estimating the timing, frequency and severity of losses. The Company uses an aging schedule method to estimate current expected credit losses based on days of delinquency, including information about past events and current economic conditions, as well as future forecasts of economic conditions. The Company’s accounts receivable is separated int o two categories using a portfolio methodology to evaluate the allowance under the CECL impairment model based on sales categorization and similar credit quality and worthiness of the customers: original equipment manufacturers (“OEMs”) and distributors. The receivables in each category share similar risk characteristics. The Company increases the allowance for expected credits losses when the Company determines all or a portion of a receivable is uncollectible. The Company recognizes recoveries as a decrease to the allowance for expected credit losses. Adjustments to the allowance for doubtful accounts are recorded as selling, general and administrative expenses in the consolidated statements of operations. Inventories Inventories are stated at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis. The Company records inventory provisions when conditions exist that suggest that inventory may be in excess of anticipated demand, is obsolete based upon expected future demand for products and market conditions, or quality related rejections. These provisions are reported as a reduction to raw materials and supplies, work in process and finished goods. The Company regularly evaluates the ability to realize the value of inventory based on a combination of factors, including historical usage rates, forecasted sales or usage, and product end of life dates. Assumptions used in determining management’s estimates of future product demand may prove to be incorrect, in which case the provision required for excess and obsolete inventory would have to be adjusted in the future. Although the Company performs a detailed review of its forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the value of the Company’s inventory and reported operating results. Assets Held for Sale The Company classifies assets as held for sale when all of the following are met: (i) management has committed to a plan to sell the assets; (ii) the assets are available for immediate sale in their present condition; (iii) an active program to locate a buyer has been initiated; (iv) it is probable that a sale will occur within one year; (v) the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value; and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. If all held for sale criteria are met, the assets are reclassified and presented separately in the consolidated balance sheets as assets held for sale at the lower of the carrying value or the fair value, less cost to sell, and no longer depreciated or amortized. During the fourth quarter of fiscal year 2021, the Company entered into an agreement to sell the AMTC Facility in connection with its previously announced back-end facility consolidation plan. The AMTC Facility met the criteria to be classified as held for sale, and the Company was required to record these assets at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sales price. The sale of the AMTC Facility closed in August 2021 upon receipt of the necessary government approvals in Thailand and customary closing conditions. Property, Plant and Equipment, Net Property, plant and equipment, net, including improvements that significantly add to productive capacity or extend useful life, are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company capitalizes interest on certain projects with long-term construction periods. Maintenance and repairs expenditures are charged to expense as incurred. Estimated useful lives of the respective property, plant and equipment assets are as follows: F-14 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Asset Useful Life Buildings 31 years Building improvements Economic life of the building improvements Leasehold improvements The shorter of the remaining term of the lease or estimated useful life Machinery and equipment 3 - 10 years Office equipment 3 years Intangible assets, net Intangible assets, net primarily consist of capitalized costs to acquire and defend patent and trademark related awards. In addition, the Company holds technology, customer relationships, and non-compete agreements. The Company’s intangible assets are amortized using the straight-line method over their estimated useful lives, ranging from three to ten years . Impairment of Long-Lived Assets Long-lived assets consist of property, plant and equipment, finite-lived intangibles, such as patents and customer relationships and indefinite-lived intangible assets such as process technology and trademarks. Property, plant and equipment and finite-lived assets are tested for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. If such assets are not impaired, but their useful lives have decreased, the remaining net book value is amortized over the revised useful life. Indefinite-lived intangible assets are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The impairment test consists of a qualitative assessment to determine if events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If events occur, a comparison of the fair value of the intangible asset with its carrying value is performed. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company has elected the first business day of the fourth quarter of its fiscal year as the annual impairment testing date. The results of the annual impairment test did not indicate any impairments of indefinite-lived intangible assets for fiscal years 2022, 2021 and 2020. In the fourth quarter of fiscal year 2020, the Company initiated a process to conclude its operations at the AMTC facility with the intention of selling the AMTC Facility. On March 3, 2021, the Company entered into a definitive agreement to sell its AMTC facility for approximately $ 30,000 before fees and expenses. As a result of the execution of the definitive agreement, the Company reclassified the AMTC assets within its “Property, plant and equipment, net” to “Assets held for sale” and incurred an impairment charge to the book value of those assets of $ 7,119 in its fiscal fourth quarter ended March 26, 2021. Goodwill Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. The Company tests goodwill for impairment on an annual basis on the first business day of the fourth quarter or more frequently if there are indicators of impairment. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate, operational performance of the business or key personnel, and an adverse action or assessment by a regulator. The Company has determined that there is one reporting unit for purposes of testing goodwill for impairment. In testing goodwill for impairment, the Company has the option to first consider 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. Such qualitative factors F-15 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) include industry and market considerations, economic conditions, entity-specific financial performance and other events, such as changes in management, strategy and primary customer base. If based on the Company’s qualitative assessment it is more likely than not that the fair value of the reporting unit is less than its carrying amount, quantitative impairment testing is required. However, if the Company concludes otherwise, quantitative impairment testing is not required. The results of the Company’s qualitative goodwill impairment test performed on the first business day of fourth quarter for fiscal years 2022, 2021 and 2020 did not indicate any impairments. Product Warranties The Company provides warranties on its products to its customers, generally for one year from the date of shipment and in limited cases for longer periods. In the event of a failure of a product covered by these warranties, the Company must repair or replace the product or, if those remedies are insufficient, and at the discretion of the Company, provide a refund. In limited cases, the Company warrants its products to include significant liability beyond the cost of repairing or replacing the product or refunding the sales price of the product. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. If there is a material increase in the rate of customer claims, or the Company’s estimates of probable losses relating to specifically identified warranty exposures are inaccurate, the Company may need to record a charge against future cost of goods sold. There were minimal costs accrued in the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020. Deferred Rent The Company records rent expense on a straight-line basis using a constant periodic rate over the term of its lease agreements. The excess of the cumulative rent expense incurred over the cumulative amounts due under the lease agreements is deferred and recognized over the term of the leases. Leasehold improvement reimbursements from landlords are recorded as deferred rent and amortized as reductions to lease expense over the lease term. Revenue Recognition Revenue is recognized on contracts with customers when transfer of control to the customer occurs in exchange for an amount reflecting the consideration that the Company expects to be entitled. In order to achieve this core principle, the Company applies the following five step approach: (1) Identify the contract with a customer —The Company considers customer purchase orders, which in some cases are governed by master agreements, to be customer contracts. A contract exists when it is approved by both parties, each party’s rights and obligations are identified, payment terms are known, customer has the ability and intent to pay and the contract has commercial substance. The Company uses judgement in determining the customer’s ability and intent to pay, which is based on factors such as the customer’s historical payment experience or, for new customers, credit and financial information pertaining to the customers. (2) Identify the performance obligations in the contract —Performance obligations are identified as products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract. Substantially, all of the Company’s contracts with customers contain a single performance obligation, such as the sale of mixed-signal integrated circuit products or the sale of wafer fabricators. (3) Determine the transaction price —The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring products to the customer. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur. (4) Allocate the transaction price to the performance obligations in the contract —If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligations based on a relative standalone selling price (“SSP”). (5) Recognize revenue when a performance obligation is satisfied —Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs point in time at shipment. F-16 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Sales channels The Company sells products globally through its direct sales force, third-party distributors, independent sales representatives and consignment. The Company records revenue based on the amount of any discounted arrangement fee. When the Company transacts with a distributor, its contractual arrangement is with the distributor and not with the end customer. Whether the Company transacts business with and receives the order from a distributor or directly from an end customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are the same. The Company also uses independent sales representatives to assist in the sales process with certain customers. Sales representatives are not distributors. If a sales representative is engaged in the sales process, the Company receives the order directly from and sells the products directly to the end customer. The Company pays a commission to the sales representative, calculated as a percentage of the related customer payment. Sales representatives commissions are recorded as expenses when incurred and are classified as sales and marketing expenses in the Company’s consolidated statements of operations. For the consignment arrangements with distributors, delivery occurs and revenue is recognized when the distributor pulls product from consignment inventory that it is stored at designated distributor locations. Recognition is not contingent upon resale of the products to the distributors’ customers. Until the products are pulled for use or sale by the distributor, the Company retains control over the products’ disposition, including the right to pull back or relocate the products. Variable consideration Variable consideration includes sales in which the amount of consideration that the Company will receive is unknown as of the end of a reporting period. Such consideration primarily includes limited price protection provisions provided to distributors, sales under agreements that allow rights of return, referred to as stock rotation, provided to distributors, discounts and credits provided to distributors and returns provisions offered to direct customers. The Company estimates potential future returns, credits and sales allowances based on historical data from prior sales returns and credits issued and changes in product sales to customers. Practical expedients elected Revenue recognized is adjusted based on allowances, which are prepared on a portfolio basis using a most likely amount methodology. The length of time between revenue recognition and payment is not significant under any of the Company’s payment terms. Moreover, if the period between revenue recognition and when the customer pays is one year or less, the Company elected not to account for the significant financing component. Other Revenue Recognition Policies Prior to the end of fiscal year 2020, the Company acted as a distributor of Sanken products in North America, South America and Europe. The Company evaluated whether it is acting as the principal (i.e., report net sales on a gross basis) or agent (i.e., report net sales on a net basis) in these transactions. In doing so, the Company evaluated whether it controls the good or service before it is transferred to the customer. If the Company controls the good or service before it is transferred to the customer, it is acting as principal in the transaction. Generally, the Company controls the promised products before transferring the products to the customer and acts as the principal to the transaction, therefore the Company recognizes net sales gross. Shipping and handling activities are not considered a contract performance obligation. The Company records shipping and handling costs billed to customers as revenue with offsetting costs recorded as cost of sale. Contract Assets and Contract Liabilities Contract assets and contract liabilities (deferred revenue) are reported net at the contract level for each reporting period. Contract assets typically result from contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Contract assets are transferred to accounts receivable when the rights become unconditional. The Company had no contract assets as of March 25, 2022 and March 26, 2021. Contract Liabilities (Deferred Revenue)—Deferred revenue typically results from billings in excess of revenues recognized and relate to products shipped near the end of the reporting period for which the required revenue recognition criteria were not met. The Company had no significant contract liabilities as of March 25, 2022 and March 26, 2021. F-17 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Contract costs Certain costs, such as cost to obtain a contract or cost to fulfill a contract are required to be capitalized. The Company has immaterial contract costs, as such, no amounts were capitalized as of March 25, 2022 and March 26, 2021. Stock-Based Compensation The Company recognizes compensation costs for all stock-based compensation awards made to employees based upon the awards’ grant-date fair value. The Company estimates the fair value of stock-based compensation awards granted using the grant date fair value of the awards. Stock-based compensation expense is recognized evenly over the vesting period. The Company accounts for forfeitures as they occur. Determining the fair value of the stock-based compensation awards at the grant date requires judgment, including estimating the expected life of the stock awards and the volatility of the underlying market-based and projected future cash flow assumptions. Any changes to those estimates that the Company makes from time to time may have a significant impact on the stock-based compensation expense recorded and could materially impact the Company’s results of operations. Pension Obligations The Company, through its subsidiaries, has various foreign defined benefit plans as well as U.S. defined contribution plans. Accredited independent actuaries calculate related plan assets, liabilities and expenses. The Company is required to make certain assumptions to assign value to the plan assets and liabilities. These assumptions are reviewed annually, based on current plan information and consultations with independent investment advisors and actuaries. The selection of assumptions requires a high degree of judgment and may materially change from period to period. The Company does not offer other defined benefits associated with postretirement benefit plans other than pensions. The Company recognizes the funded status of a benefit plan on its consolidated balance sheets and recognizes gains, losses and prior service cost or credits that arise during the period that are not recognized as components of net periodic benefit cost as a component of other comprehensive income, net of tax. In addition, the Company measures defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end consolidated balance sheets and discloses in the notes to the consolidated financial statements the gains or losses, prior service costs or credits and transition asset or obligation. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by enacted tax rates anticipated to be in effect when these differences are expected to reverse. This method also requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is established. The Company recognizes a liability for potential payments of taxes to various tax authorities related to uncertain tax positions and other tax matters. The recorded liability is based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be realized. The amount of the benefit that may be recognized in the consolidated financial statements is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company establishes a liability, which is included in other long-term liabilities in the consolidated balance sheets, for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Company believes that certain positions might be challenged despite the Company’s belief that the tax return positions are fully supportable. The recorded liability is adjusted considering changes in the facts and circumstances. The provision for income taxes includes the impact of the recorded liability and changes thereto. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax provision in the consolidated statements of operations. Accrued interest and penalties are included in accrued income taxes in the consolidated balance sheets. Except for our AMTC Facility prior to its sale, all undistributed earnings of our foreign subsidiaries are permanently reinvested. F-18 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Accordingly, the Company does not provide for U.S. income taxes on such undistributed earnings. Advertising Costs Advertising costs are expensed, as incurred, as a component of sales expense. Advertising expense was $ 452 , $ 331 and $ 273 in fiscal years 2022, 2021 and 2020, respectively. Net Income Per Share The Company computes net income per share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Basic net income per share is computed by dividing net income attributable to stockholders of the Company by the weighted-average number of common shares outstanding during the reporting period. Diluted net income per share is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Information about potentially dilutive and antidilutive shares for the reporting period is provided in Note 18, “Net Income per Share.” As the Company maintained two classes of Common stock (Class A and Class L) in fiscal year 2020, earnings per basic and diluted shares were calculated under the two-class method. The two-class method includes an earnings allocation formula that determines earnings per share for each participating security according to dividends declared on undistributed earnings for the period. Earnings per diluted share is computed on the basis of the weighted-average number of common shares outstanding during the period plus the dilutive effect of any potential common shares outstanding during the period using the more dilutive of the two-class method or another dilutive method. For the fiscal year ended March 27, 2020, the Company did not allocate income to the Class L shares in accordance with ASC 260, because such classes of shares would not have shared in the distribution had all of the income for the periods been distributed. Accordingly, earnings per share calculations were provided only for the class A shares. Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with financial institutions, which management believes to be of a high credit quality. To manage credit risk related to accounts receivables, the Company evaluates its creditworthiness of its customers and maintains allowances, to the extend necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any significant credit losses to date. As of March 25, 2022 and March 26, 2021, Sanken accounted for 23.8 % and 23.2 % of the Company’s outstanding trade accounts receivable, net, respectively, including related party trade accounts receivable. No other customers accounted for 10% or more of outstanding trade accounts receivable, net as of such dates. For the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, Sanken accounted for 19.4 %, 17.7 % and 28.4 % of total net sales, respectively. No other customers accounted for 10% or more of total net sales for any of these periods. During the fiscal year ended March 25, 2022, sales from customers located outside of the United States in the aggregate accounted for 85.9 % of the Company’s total net sales, with Japan accounting for 19.4 %, Greater China accounting for 25.0 % and South Korea accounting for 10.5 %. No other countries accounted for greater than 10.0% of total net sales for the fiscal year ended March 25, 2022. During the fiscal year ended March 26, 2021, sales from customers located outside of the United States in the aggregate accounted for 86.1 % of the Company’s total net sales, with Japan accounting for 17.7 %, Greater China accounting for 26.6 % and South Korea accounting for 10.5 %. No other countries accounted for greater than 10.0% of total net sales for the fiscal year ended March 26, 2021. During the fiscal year ended March 27, 2020, sales from customers located outside of the United States in the aggregate accounted for 81.7 % of the Company’s total net sales, with Japan accounting for 28.4 % and Greater China accounting for 18.7 %. No other countries accounted for greater than 10.0% of total net sales for the fiscal year ended March 27, 2020. Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued its new lease accounting guidance in Accounting Standards Update (“ASU”) 2016‑02, “Leases (Topic 842)” (“ASU 2016-02”), which is codified as Accounting F-19 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Standard Codification (“ASC”) Topic 842 (“ASC 842”) and replaces ASC Topic 840, Leases (“ASC 840”). ASU 2016-02 and all subsequent amendments amend various aspects of existing guidance for leases and require significant additional quantitative and qualitative disclosures about lease arrangements. ASU 2016-02 requires lessees to recognize lease assets representing the right to use an underlying asset and lease liabilities representing the obligation to make lease payments over the lease term, measured on a discounted basis, for substantially all leases. ASU 2016-02 retains a distinction between finance leases and operating leases using classification criteria that are substantially similar to the previous lease guidance. Although the Company has elected to opt-in to the extended transition dates for new or revised accounting standards to align with nonpublic companies, the Company elected to early adopt ASU 2016-02 effective March 27, 2021. The Company used the optional transition method to the modified retrospective approach, which eliminates the requirement to restate the prior period financial statements. Under this transition provision, the Company has applied ASU 2016-02 to reporting periods beginning on March 27, 2021, while prior periods continue to be reported and disclosed in accordance with the legacy guidance under ASC 840. A number of practical expedients and policy elections are available under the new guidance to reduce the burden of adoption and ongoing compliance with ASC 842. The Company elected the “package of practical expedients,” which permitted the Company to retain lease classification and initial direct costs for any identified leases that existed prior to adoption of ASC 842. Under this transition guidance, the Company also did not reassess whether any existing contracts at March 27, 2021 are, or contain, leases and carried forward its initial determination under legacy lease guidance. The Company has elected not to adopt the “hindsight” practical expedient and, therefore, will measure the right-of-use (“ROU”) asset and lease liability using the remaining portion of the lease term at adoption on March 27, 2021. The Company made an accounting policy election available under the new lease standard to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. For all other leases, the initial measurement of the lease liability is based on the present value of future lease payments over the lease term at the application date or the commencement date of the lease. Lease payments may include fixed rent escalation clauses or payments that depend on an index or a rate (such as the consumer price index) measured using the index or applicable rate at lease commencement. Subsequent changes in the index or rate and any other variable payments, such as market-rate base rent adjustments, are recognized as variable lease expense in the period incurred. Payments for terminating a lease are included in lease payments only when it is probable they will be incurred. To determine the present value of lease payments, the Company uses its incremental borrowing rate, as the leases generally do not have a readily determinable implicit discount rate. The Company applies judgment in assessing factors such as Company-specific credit risk, lease term, nature and quality of the underlying collateral, currency and economic environment in determining the lease-specific incremental borrowing rate. The carrying value of the ROU assets at the application date equals the lease liability adjusted for any initial direct costs incurred and lease payments made at or before the commencement date and for any lease incentives. The Company’s leases generally include a non-lease component representing additional services transferred to the Company. The Company has made an accounting policy election to account for lease and non-lease components in its contacts as a single lease component for all asset classes. The non-lease components are usually variable in nature and recorded in variable lease expense in the period incurred. Adoption of ASC 842 resulted in ROU assets of $ 18,403 and lease liabilities of $ 18,759 related to the Company’s operating leases at March 27, 2021. The Company does not have any leases classified as finance leases. The adoption of ASC 842 did not materially impact the Company’s consolidated net income or consolidated cash flows and did not result in a cumulative-effect adjustment to the opening balance of retained earnings. In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which adds an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce complexity by decreasing the number of credit impairment models that entities use to account for debt instruments. The Company adopted ASU 2016-13 effective March 27, 2021 and concluded that adoption of this standard update did not have a material impact on either the financial position, results of operations, cash flows, or related disclosures. There was no impact on beginning balance retained earnings upon adoption of this ASU. The Company is exposed to credit losses primarily through trade and other financing receivables arising from revenue transactions. The Company uses an aging schedule method to estimate current expected credit losses based on days of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable is separated int o two categories using a portfolio methodology to evaluate the allowance under the CECL impairment model based on sales categorization and similar credit quality and worthiness of the customers: original equipment manufacturers F-20 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) (“OEMs”) and distributors. The receivables in each category share similar risk characteristics. The change to the CECL impairment model resulted in an immaterial increase in the provision for expected credit losses compared to the allowance for doubtful accounts under the previous incurred loss method. The Company increases the allowance for expected credits losses when the Company determines all or a portion of a receivable is uncollectible. The Company recognizes recoveries as a decrease to the allowance for expected credit losses. For the fiscal year ended March 25, 2022, no material changes in the allowance occurred. Recently Issued Accounting Standards Not Yet Adopted In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which eliminates the diversity in practice and inconsistency related to the accounting for acquired revenue contracts with customers in a business combination. The amendments in ASU 2021-08 require an acquiring entity to apply ASC Topic 606, Contracts with Customers (“ASC 606”), to recognize and measure contract assets and contract liabilities in a business combination as if the acquired contracts with customers were originated by the acquiring entity at the acquisition date. An acquirer may assess how the acquiree applied ASC 606 and generally should recognize and measure the acquired contract assets and contract liabilities consistent with the recognition and measurement in the acquiree’s financial statements as prepared in accordance with U.S. GAAP. If unable to rely on the acquiree’s accounting due to errors, noncompliance with U.S. GAAP, or differences in accounting policies, the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. The guidance is effective prospectively for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period as of the beginning of the fiscal year that includes that interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company is currently in the process of evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures, which will be dependent on the consummation of any future business combination. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”). ASU 2021-04 outlines how an entity should account for modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s own common stock. The guidance in the ASU requires an entity to treat a modification of an equity-classified written call option that does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or as termination of the original option and issuance of a new option. The guidance is effective prospectively for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period as of the beginning of the fiscal year that includes that interim period. The Company does not expect this new guidance to have an impact on the consolidated financial statements and the related disclosures at this time. Additionally, if the Company issues stock options under its 2020 Omnibus Incentive Compensation Plan (the “2020 Plan”) and subsequently makes modifications, the Company anticipates no material impact in future periods. 3. Revenue from Contracts with Customers The Company generates revenue from the sale of magnetic sensor integrated circuits (“ICs”), application-specific analog power semiconductors and photonics, for the year ended March 27, 2020, also from wafer foundry products and from the sale of Sanken related products. The following tables summarize net sales disaggregated by core end market and application, by product and by geography for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020. The categorization of net sales by core end market and application is determined using various characteristics of the product and the application into which the Company’s product will be incorporated. The categorization of net sales by geography is determined based on the location the products are being shipped to. F-21 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Net sales by core end market and application: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Core end market: Automotive $ 531,564 $ 398,298 $ 395,277 Industrial 133,187 94,872 78,399 Other 103,923 98,037 68,622 Other applications: Wafer foundry products — — 72,370 Distribution of Sanken products — — 35,421 Total net sales $ 768,674 $ 591,207 $ 650,089 Net sales by product: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Power integrated circuits (“PIC”) $ 268,381 $ 203,600 165,911 Magnetic sensors (“MS”) 498,561 386,372 376,387 Photonics 1,732 1,235 — Wafer foundry products — — 72,370 Distribution of Sanken products — — 35,421 Total net sales $ 768,674 $ 591,207 $ 650,089 Net sales by geography: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Americas: United States $ 108,396 $ 82,165 119,139 Other Americas 23,056 16,558 20,883 EMEA: Europe 134,537 103,128 110,126 Asia: Japan 148,813 104,661 184,557 Greater China 191,895 157,546 121,807 South Korea 80,451 62,075 54,707 Other Asia 81,526 65,074 38,870 Total net sales $ 768,674 $ 591,207 $ 650,089 The Company recognizes sales net of returns, credits issued, price protection adjustments and stock rotation rights. As of March 25, 2022 and March 26, 2021, these adjustments were $ 14,924 and $ 15,412 , respectively, and were netted against trade accounts receivable in the consolidated balance sheets. These amounts represent activity of income of $ 488 , income of $ 2,061 and charges of $ 423 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. The Company elected not to disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year. F-22 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) 4. Fair Value Measurements The following tables present information about the Company’s financial assets and liabilities as of March 25, 2022 and March 26, 2021 measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values: Fair Value Measurement at March 25, 2022 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market fund deposits $ 16,927 $ — $ — $ 16,927 Restricted cash: Money market fund deposits 7,416 — — 7,416 Other assets, net (long-term): Investments in marketable securities 12,346 — — 12,346 Total assets $ 36,689 $ — $ — $ 36,689 Liabilities: Other long-term liabilities: Contingent consideration $ — $ — $ 2,800 $ 2,800 Total liabilities $ — $ — $ 2,800 $ 2,800 Fair Value Measurement at March 26, 2021 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market fund deposits $ 16,327 $ — $ — $ 16,327 Restricted cash: Money market fund deposits 6,661 — — 6,661 Total assets $ 22,988 $ — $ — $ 22,988 Liabilities: Other long-term liabilities: Contingent consideration $ — $ — $ 4,800 $ 4,800 Total liabilities $ — $ — $ 4,800 $ 4,800 The following table represents the unrealized gains and losses on investments in marketable securities held with a readily determinable fair value for the fiscal year ended March 25, 2022: Net gains and losses recognized during the period on equity securities $ 3,722 Less: Net gains and losses recognized during the period on equity securities sold during the period — Unrealized gains and losses recognized during the reporting period on equity securities still held at the reporting date $ 3,722 In addition to the unrealized gains in the table above, the change in fair value of the equity securities was impacted by unrealized foreign currency exchange losses of $ 565 for the fiscal year ended March 25, 2022. In connection with the fiscal year 2021 purchase of Voxtel, Inc. (“Voxtel”), a privately held technology company located in Beaverton, Oregon, that develops, manufactures and supplies photonic and advanced 3D imaging technologies (the “Voxtel Acquisition”), the Company is required to make contingent payments, subject to the entity achieving certain sales and revenue thresholds. The contingent consideration payments are up to $ 15,000 . The fair value of the liabilities for the contingent payments recognized upon the Voxtel Acquisition as part of the purchase accounting opening balance sheet totaled $ 7,300 and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in this calculation were units sold, expected revenue, discount rate and various probability factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results F-23 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) of these financial measures. This liability is considered to be a Level 3 financial liability that is remeasured during each reporting period. The change in fair value of contingent consideration for the Acquisition is included in change in fair value of contingent consideration in the consolidated statements of operations. The following table shows the change in fair value of Level 3 contingent consideration for the fiscal years ended March 25, 2022 and March 26, 2021: Level 3 Contingent Consideration Balance at March 27, 2020 $ — Purchase price contingent consideration 7,300 Change in fair value of contingent consideration ( 2,500 ) Balance at March 26, 2021 $ 4,800 Change in fair value of contingent consideration ( 2,000 ) Balance at March 25, 2022 $ 2,800 Assets and liabilities measured at fair value on a recurring basis also consist of marketable securities, unit investment trust funds, loans, bonds, stock and other investments, which constitute the Company’s defined benefit plan assets. Fair value information for those assets and liabilities, including their classification in the fair value hierarchy, is included in Note 16, “Retirement Plans.” During the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, there were no transfers between Level 1, Level 2 and Level 3. 5. Trade Accounts Receivable, net Trade accounts receivable, net (including related party trade accounts receivable) consisted of the following: March 25, 2022 March 26, 2021 Trade accounts receivable $ 129,539 $ 108,546 Less: Provision for expected credit losses and allowance for doubtful accounts ( 105 ) ( 138 ) Returns and sales allowances ( 14,819 ) ( 15,274 ) Related party trade accounts receivable ( 27,256 ) ( 23,634 ) Total $ 87,359 $ 69,500 Changes in the Company’s provision for expected credit losses/allowance for doubtful accounts and returns and sales allowances were as follows: Description Allowance for Doubtful Accounts Returns and Sales Allowances Total Balance at March 29, 2019 $ 412 $ 17,607 $ 18,019 Charged to costs and expenses or revenue 262 118,719 118,981 Write-offs, net of recoveries ( 386 ) ( 119,141 ) ( 119,527 ) Balance at March 27, 2020 288 17,185 17,473 Charged to costs and expenses or revenue ( 150 ) 147,026 146,876 Write-offs, net of recoveries — ( 148,937 ) ( 148,937 ) Balance at March 26, 2021 138 15,274 15,412 Charged to costs and expenses or revenue ( 33 ) 144,318 144,285 Write-offs, net of recoveries — ( 144,773 ) ( 144,773 ) Balance at March 25, 2022 $ 105 $ 14,819 $ 14,924 F-24 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) 6. Inventories Inventories include material, labor and overhead and consisted of the following: March 25, 2022 March 26, 2021 Raw materials and supplies $ 11,941 $ 9,629 Work in process 55,855 50,095 Finished goods 18,364 27,774 Total $ 86,160 $ 87,498 The Company recorded inventory provisions totaling $ 5,809 , $ 4,464 and $ 3,345 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. The Company discontinued a product line manufactured by Voxtel and subsequently recognized impairment charges, which represented much of the increase in inventory provisions, for the related inventory of $ 3,106 for the fiscal year ended March 25, 2022. 7. Assets Held for Sale As of March 26, 2021, the Company had entered into a definitive agreement to sell its Thailand-based facility (the “AMTC Facility”) as it had already transferred production to the Manila, Philippines facility, which was reclassified from Property, plant and equipment, net to Assets held for sale in fiscal year 2021. The AMTC Facility met the criteria to be classified as held for sale, and the Company was required to record these assets at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sales price. The total amount of Assets held for sale was related to the AMTC Facility. The sale of the AMTC Facility was completed on August 3, 2021 following receipt of government approvals in Thailand and the fulfillment of customary closing conditions. The Company received cash of $ 27,405 , which with related selling costs, resulted in a gain on the final disposition of $ 370 during the fiscal year ended March 25, 2022. 8. Property, Plant and Equipment, net Property, plant and equipment, net is stated at cost, and consisted of the following: March 25, 2022 March 26, 2021 Land $ 15,775 $ 16,602 Buildings, building improvements and leasehold improvements 59,816 56,911 Machinery and equipment 542,745 491,025 Office equipment 6,247 6,281 Construction in progress 22,428 29,201 Total 647,011 600,020 Less accumulated depreciation ( 436,983 ) ( 407,627 ) Total $ 210,028 $ 192,393 The Company retired $ 10,976 , $ 63 and $ 9,418 of fully depreciated assets during the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. Total depreciation expense amounted to $ 44,178 , $ 44,845 and $ 62,118 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. F-25 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Long-lived assets include property, plant and equipment and related deposits on such assets, and capitalized tooling costs. The geographic locations of the Company's long-lived assets, net, based on physical location of the assets, as of March 25, 2022 and March 26, 2021 are as follows: March 25, 2022 March 26, 2021 United States $ 35,221 $ 36,529 Philippines 167,488 148,374 Thailand — 1,698 Other 7,746 7,190 Total $ 210,455 $ 193,791 Amortization of prepaid tooling costs amounted to $ 130 , $ 130 and $ 125 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. 9. Goodwill and Intangible Assets The table below summarizes the changes in the carrying amount of goodwill as follows: Total Balance at March 27, 2020 $ 1,285 Goodwill arising from acquisition 18,702 Currency translation 119 Balance at March 26, 2021 $ 20,106 Currency translation ( 97 ) Balance at March 25, 2022 $ 20,009 Intangible assets, net is as follows: March 25, 2022 Description Gross Accumulated Amortization Net Carrying Amount Weighted-Average Lives Patents $ 36,577 $ 15,304 $ 21,273 10 years Customer relationships 6,582 6,348 234 9 years Process technology 13,100 1,742 11,358 12 years Indefinite-lived and legacy process technology 4,050 1,650 2,400 Trademarks 200 64 136 5 years Legacy trademarks 627 58 569 Other 32 32 — Total $ 61,168 $ 25,198 $ 35,970 March 26, 2021 Description Gross Accumulated Amortization Net Carrying Amount Weighted-Average Lives Patents $ 32,751 $ 12,307 $ 20,444 10 years Customer relationships 6,193 5,865 328 9 years Process technology 13,100 651 12,449 12 years Indefinite-lived and legacy process technology 4,050 1,650 2,400 Trademarks 200 24 176 5 years Legacy trademarks 627 58 569 Other 32 32 — Total $ 56,953 $ 20,587 $ 36,366 F-26 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The Company completed the Voxtel Acquisition during the fiscal year ended March 26, 2021. The Company paid an amount of $ 34,980 to acquire Voxtel, which represents its fair value on that date. Any excess of the Voxtel Acquisition consideration over the fair value of the assets acquired and liabilities assumed was allocated to goodwill, which amounted to $ 18,702 . As a result of the Acquisition, the Company recorded finite-life intangible assets of $ 13,600 . In addition, as a result of the Acquisition, the Company recorded indefinite-life intangible assets of $ 2,400 . Intangible assets amortization expense was $ 4,219 , $ 3,332 and $ 1,805 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. The majority of the Company’s intangible assets are related to patents as noted above. The Company capitalizes external legal costs incurred in the defense of its patents when it believes that a significant, discernible increase in value will result from the defense and a successful outcome of the legal action is probable. When the Company capitalizes patent defense costs it amortizes these costs over the remaining estimated useful life of the patent, which is generally ten years . There were no significant costs capitalized during either of the fiscal years 2022 or 2021. As of March 25, 2022, annual amortization expense of intangible assets for the next five fiscal years is expected to be as follows: 2023 $ 3,741 2024 3,593 2025 3,356 2026 3,115 2027 2,807 Thereafter 19,358 Total $ 35,970 10. Other Assets, net The composition of other assets, net is as follows: March 25, 2022 March 26, 2021 VAT receivables long-term, net $ 6,386 $ 8,177 Income taxes receivable long-term 15,763 — Investments in marketable securities (1) 12,346 — Deposits 10,525 3,573 Prepaid contracts long-term 1,236 1,295 Deferred financing costs 49 149 Other 1,304 1,419 Total $ 47,609 $ 14,613 (1) Represents equity investments in an entity whose equity securities have a readily determinable fair value. These strategic investments represent less than a 20% ownership interest in the entity, and the Company does not maintain power over or control of the entity. These investments are measured at fair value with unrealized gains and losses related to changes in the entity’s stock price and the impact of changes in foreign exchange rates each included in the consolidated statements of operations. F-27 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) 11. Accrued Expenses and Other Current Liabilities The composition of accrued expenses and other current liabilities is as follows: March 25, 2022 March 26, 2021 Accrued management incentives 33,607 21,538 Accrued salaries and wages 14,699 15,060 Base acquisition purchase price due — 14,588 Deposits on AMTC facility — 14,531 Accrued vacation 5,715 5,739 Accrued severance 839 572 Accrued professional fees 1,252 2,029 Accrued income taxes 1,831 514 Accrued utilities 607 623 Other current liabilities 6,909 3,738 Total $ 65,459 $ 78,932 12. Management Long-Term Cash Incentive Plan On August 28, 2015 the Company’s Board of Directors approved a Long-Term Cash Incentive Plan (“LTCIP”) for certain employees. Under the LTCIP, employees receive cash payments upon achievement of certain performance metrics determined based on a three-year rolling performance period. The Company had executed individual agreements with employees to pay certain incentives upon achievement of the plan conditions at the end of each three-year performance period. In connection with its IPO, the Company offered certain employees (excluding its then named executive officers) who were eligible to receive cash bonuses under the Company’s LTCIP and/or Talent Retention Incentive Program (as amended, the “TRIP”) the opportunity to elect to receive restricted stock units (“RSUs”) under its 2020 Omnibus Incentive Compensation Plan in lieu of cash payouts under the LTCIP and/or TRIP, through the LTCIP/TRIP Award RSU Conversion Program (the “RSU Conversion Program”). The expense related to the LTCIP and TRIP awards elected to be exchanged in the RSU Conversion Program amounted to $ 607 and $ 421 , respectively. The number of RSUs granted to employees that elected to participate in the RSU Conversion Program is determined as a percentage of the employee’s target bonus under the LTCIP or TRIP, and amounted to 602,490 and 348,911 RSUs on behalf of the LTCIP and TRIP conversion, respectively, at a F-28 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) grant date fair value of $ 14.00 . If an employee elected not to participate in the RSU Conversion Program, the LTCIP or TRIP award will continue under its existing terms and conditions. The accrual activity, payments, removal due to divestitures and balances related to the LTCIP are as follows: Current Liabilities Long-Term Liabilities Balance at March 29, 2019 $ 17,115 $ 11,104 Reclassification 9,707 ( 9,706 ) Payments ( 17,836 ) — Accruals 2,502 1,041 Balance at March 27, 2020 $ 11,488 $ 2,439 Reclassification 1,004 ( 1,004 ) Payments ( 11,267 ) ( 111 ) RSU conversion ( 640 ) — Removal due to divestiture ( 378 ) ( 398 ) Accruals ( 149 ) ( 668 ) Balance at March 26, 2021 58 258 Payments ( 58 ) — Accruals — 259 Balance at March 25, 2022 $ — $ 517 The current and long-term portion of the liabilities associated with the LTCIP is included within accrued expenses and other current liabilities and other long-term liabilities in the Company’s consolidated balance sheets, respectively. 13. Leases The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The Company also considers whether its service arrangements include the right to control the use of an asset. The Company leases real estate, equipment and vehicles under operating lease agreements that have initial terms ranging from one to ten years . The Company does not have any leases classified as finance leases. Some leases include one or more options to exercise renewal terms, generally at the Company’s sole discretion, that can extend the lease term. Certain leases contain rights to terminate whereby those termination options are held by either the Company, the lessor, or both parties. These options to extend or terminate a lease are included in the lease term only when it is reasonably certain that the Company will exercise that option. The Company’s leases generally do not contain any material restrictive covenants. Operating lease cost is recognized on a straight-line basis over the lease term. Information regarding the Company’s leases are as follows: Fiscal Year Ended March 25, 2022 Lease costs: Operating lease expense $ 4,648 Short term lease expense 584 Other information: Operating cash flows from operating leases $ 5,289 Noncash lease liabilities arising from obtaining right-of-use assets 3,159 Weighted-average remaining lease term – operating leases 5.17 years Weighted-average discount rate – operating leases 4.5 % F-29 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Rent expense incurred under operating leas e agree ments was $ 5,720 , $ 4,385 and $ 5,456 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020 , respectively. As of March 25, 2022, expirations of lease obligations by fiscal year are expected as follows: 2023 $ 4,335 2024 3,956 2025 3,300 2026 2,592 2027 1,788 Thereafter 2,602 Total undiscounted lease payments $ 18,573 Less: present value adjustment ( 2,119 ) Total operating lease liabilities $ 16,454 Information as Lessee under ASC 840 Future minimum lease payments by fiscal year for noncancellable operating leases as reported under the previous lease guidance as of March 26, 2021 were as follows: 2022 $ 2,887 2023 2,726 2024 2,644 2025 2,172 2026 1,773 Thereafter 3,713 Total $ 15,915 14. Debt and Other Borrowings Components of Debt The following is a summary of obligations under the Company’s Senior Secured Credit Facilities and other borrowings as of March 25, 2022 and March 26, 2021: March 25, 2022 March 26, 2021 Senior Secured Term Loan $ 25,000 $ 25,000 Unsecured Revolving Credit Facilities — — Total Debt 25,000 25,000 Less debt payable within one year — — Debt payable after one year $ 25,000 $ 25,000 As of March 25, 2022, the principal maturities of debt obligations outstanding of $ 25,000 are due for repayment in fiscal year 2028. Senior Secured Credit Facilities On September 30, 2020, the Company entered into a term loan credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $ 325,000 senior secured term loan facility due in fiscal year 2028 (the “Term Loan Facility”). On September 30, 2020, the Company also entered into a revolving facility credit agreement with Mizuho Bank, Ltd., as administrative agent and collateral agent, and the other agents, arrangers and lenders party thereto, providing for a $ 50,000 senior secured revolving credit facility expiring in 2023 (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”). The Revolving Credit Facility is secured by a lien on the same collateral and on the same basis as the Term Loan Facility. Interest on the Term Loan Facility is calculated at LIBOR plus 3.75 % to 4.00 % based on the F-30 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Company’s net leverage ratio, and LIBOR is subject to a 0.5 % floor. The Company’s outstanding borrowings bore an interest rate of 4.25 % at March 25, 2022. The Company had no outstanding borrowings on the Revolving Credit Facility as of March 25, 2022. In connection with entering into the Revolving Credit Facility, the Company used cash on hand to repay all prior amounts outstanding under AML’s $ 25,000 and $ 8,000 line-of-credit agreements and terminated all commitments thereunder as discussed below. Included in the Term Loan Facility were deferred financing costs of $ 9,374 , which the Company has deducted from the carrying amount presented on its consolidated balance sheet and amortized into interest expense or recognized as loss on debt extinguishment. Included in the Revolving Credit Facility were deferred financing costs of $ 300 , which the Company classified the related short-term and long-term portions within “Prepaid expenses and other current assets” and “Other assets” on its consolidated balance sheet and is amortizing those costs over the term of the facility. The unamortized portion of the deferred financing costs associated with the Revolving Credit Facility was $ 149 and $ 249 as of March 25, 2022 and March 26, 2021, respectively . On November 25, 2020, the Company repaid $ 300,000 of the outstanding $ 325,000 Term Loan Facility using proceeds from the Company’s IPO. The repayment was accounted for as a debt extinguishment in accordance with provisions of ASC Topic 470-50, Debt Modifications and Extinguishments. The Company recognized a loss on partial debt extinguishment of $ 9,055 which was included within “Other (expense) income” in the consolidated statements of operations for the fiscal year ended March 26, 2021. The loss on debt extinguishment consisted of the unamortized balances of previously deferred original issue discount (“OID”) and debt issuance costs which the Company wrote off. Unsecured Revolving Credit Facilities On January 22, 2019, the Company, through its subsidiaries, entered into a revolving line-of-credit agreement, with a financial institution, that provided for a maximum borrowing capacity of $ 25,000 . The revolving line-of-credit bore interest at LIBOR on the day of the advance plus a 0.4 % spread payable upon maturity of the draws, and expired on January 22, 2021. During fiscal year 2021, the Company borrowed $ 25,000 under the revolving line-of-credit. As of March 27, 2020, the Company had a $ 25,000 outstanding balance under the revolving line-of-credit agreement with an original repayment date of June 19, 2020 at an interest rate of 1.7 %. In the first quarter of fiscal 2021, repayment of the $ 25,000 borrowings under the revolving line-of-credit was extended to December 18, 2020. The revolving line of credit was secured, for a one year period, by a non-refundable fee of $ 25 that w as paid to the financial institution. In connection with entering into a new revolving credit facility on September 30, 2020, the Company used cash on hand to repay all amounts outstanding under the line-of-credit and terminated all commitments thereunder. On March 27, 2006, the Company, through its PSL subsidiary, entered into a revolving line-of-credit agreement, with a financial institution, that provides for a maximum borrowing capacity of $ 10,000 . The revolving line-of-credit bore interest at LIBOR on the day of the advance plus 1.0 % spread payable upon maturity of the draws and was guaranteed by Sanken. Under the terms of the revolving line-of-credit agreement, the principal was due at various times during fiscal year 2021. During fiscal year 2020, the Company borrowed $ 10,000 under the revolving line of credit. As of March 27, 2020 , the Company had a $ 10,000 outstanding balance under the revolving line-of-credit agreement maturing on September 16, 2020, at an interest rate of 2.5 %. On March 28, 2020, in conjunction with the PSL Divestiture, the debt was deconsolidated. On December 5, 2001, the Company, through its subsidiaries, entered into a line-of-credit agreement with a financial institution that provides for a maximum borrowing capacity of $ 8,000 . On March 18, 2020, the Company borrowed $ 8,000 under the line-of-credit. As of March 27, 2020 , the Company had an $ 8,000 outstanding balance under the line-of-credit agreement maturing on June 18, 2020 at an interest rate of 1.9 %. In the first quarter of fiscal 2021, repayment of the $ 8,000 borrowings under the line-of-credit was extended to December 21, 2020. In connection with entering into a new revolving credit facility on September 30, 2020, the Company used cash on hand to repay all amounts outstanding under the line-of-credit and terminated all commitments thereunder. On November 26, 2019, t he Company, through its subsidiaries, entered into a line-of-credit agreement with a financial institution that provides for a maximum borrowing capacity of 60,000 Philippine pesos (approximately $ 1,145 at March 25, 2022) at the bank’s prevailing interest rate. The line-of-credit is due to expire on August 21, 2022. There were no borrowings outstanding under this line-of-credit as of March 25, 2022 and March 26, 2021. On November 20, 2019, the Company, through its subsidiaries, entered into a line-of-credit agreement with a financial institution that provides for a maximum capacity of 75,000 Philippine pesos (approximately $ 1,431 at March 25, 2022) at the F-31 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) bank’s prevailing interest rate. The line-of-credit is due to expire on June 30, 2022. There were no borrowings outstanding under this line-of-credit as of March 25, 2022 and March 26, 2021. 15. Other Long-Term Liabilities The composition of other long-term liabilities is as follows: March 25, 2022 March 26, 2021 Accrued management incentives 826 628 Accrued retirement 8,903 10,656 Accrued contingent consideration 2,800 4,800 Provision for uncertain tax positions (net) 2,757 2,774 Other — 275 Total $ 15,286 $ 19,133 16. Retirement Plans The Company recognizes the funded status (i.e., the difference between the fair value of plan assets and the benefit obligations) of its defined benefit pension plans in its consolidated balance sheets with a corresponding adjustment to accumulated other comprehensive income (“AOCI”), net of tax. These amounts will continue to be recognized as a component of future net periodic benefit costs consistent with the Company’s past practice. Further, actuarial gains and losses and prior service costs that arise in future periods and are not recognized as net periodic benefit costs in the same periods will be recognized as a component of other comprehensive income. Those amounts will also be recognized as a component of future net periodic benefit costs consistent with the Company’s past practice. The Company uses a measurement date for its defined benefit pension plans and other postretirement benefit plans that is equivalent to its fiscal year-end. Plan Descriptions Non-U.S. Defined Benefit Plan The Company, through its wholly owned subsidiary, Allegro MicroSystems Philippines, Inc. (“AMPI”), has a defined benefit pension plan, which is a noncontributory plan that covers substantially all employees of the respective subsidiary. The plan’s assets are invested in common trust funds, bonds and other debt instruments and stocks. Effect on the consolidated statements of operations Expense related to the non-U.S. defined benefit plan was as follows: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Service cost $ 1,554 $ 1,454 $ 961 Interest cost 637 628 674 Expected return on plan assets ( 304 ) ( 299 ) ( 331 ) Amortization of net transition asset — ( 1 ) ( 14 ) Amortization of prior service cost 1 8 8 Actuarial loss 205 179 96 Net periodic pension expense $ 2,093 $ 1,969 $ 1,394 F-32 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Changes in the benefit obligations and plan assets for the non-U.S. defined benefit plan were as follows: Fiscal Year Ended March 25, 2022 March 26, 2021 Obligation and funded status of plan: Benefit obligation at beginning of year $ 17,180 $ 12,595 Service cost 1,554 1,454 Interest cost 637 628 Prior service cost ( 108 ) — Benefits paid ( 1,180 ) ( 633 ) Actuarial loss ( 1,822 ) 2,502 Foreign currency exchange rate changes ( 1,181 ) 634 Benefit obligation at end of year $ 15,080 $ 17,180 Change in plan assets: Fair value of plan assets at beginning of year $ 7,644 $ 5,579 Actual return on plan assets ( 235 ) 1,421 Employer contributions 1,380 981 Benefits paid ( 1,146 ) ( 595 ) Foreign currency exchange rate changes ( 546 ) 258 Fair value of plan assets at end of year $ 7,097 $ 7,644 Underfunded status at end of year $ ( 7,983 ) $ ( 9,536 ) The underfunded plan amounts are recognized as a component of other long-term liabilities in the consolidated balance sheets. The following table presents the obligations and asset information for the non-U.S. defined benefit plan that has a projected benefit obligation in excess of plan assets: Fiscal Year Ended March 25, 2022 March 26, 2021 Projected benefit obligations $ 15,080 $ 17,180 Plan assets 7,097 7,644 Accumulated benefit obligations 9,216 10,353 The amounts recorded in AOCI for the non-U.S. defined benefit plan for the fiscal years ended March 25, 2022 and March 26, 2021 are further detailed below: Net Transition Obligation (Asset) Net Actuarial Loss Prior Service Costs Total Balance, March 27, 2020, net of tax $ 224 $ 2,017 5 $ 2,246 2021 change in AOCI for non-U.S. defined benefit plan 74 2,242 ( 4 ) 2,312 Amounts in AOCI before tax 298 4,259 1 4,558 Less tax expense 74 1,066 — 1,140 Balance, March 26, 2021, net of tax 224 3,193 1 3,418 2022 change in AOCI for non-U.S. defined benefit plan 20 ( 665 ) ( 104 ) ( 749 ) Amounts in AOCI before tax 244 2,528 ( 103 ) 2,669 Less tax expense 61 632 ( 26 ) 667 Balance, March 25, 2022, net of tax $ 183 $ 1,896 $ ( 77 ) $ 2,002 There is no actuarial net gain or loss included in AOCI as of March 25, 2022 that is expected to be amortized into net periodic benefit cost over the next fiscal year. As of March 25, 2022, the Company does not expect a return of plan assets during the next 12 months. F-33 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Assumptions and Investment Policies Weighted-Average Assumptions Used to Determine Projected Benefit Obligation March 25, 2022 March 26, 2021 Non-U.S. assumed discount rate 5.58 % 4.00 % Non-U.S. rate of compensation increase 5.50 % 5.00 % Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost March 25, 2022 March 26, 2021 March 27, 2020 Non-U.S. assumed discount rate 5.58 % 4.00 % 4.98 % Non-U.S. expected long-term return on plan assets 4.10 % 4.20 % 5.20 % Non-U.S. rate of compensation increase 5.50 % 5.00 % 5.00 % Information on Plan Assets The table below sets forth the fair value of the entity’s plan assets as of March 25, 2022 and March 26, 2021, using the same three-level hierarchy of fair value inputs described in Note 2, “Summary of Significant Accounting Policies”: Fair Value at March 25, 2022 Level 1 Level 2 Level 3 Assets of non-U.S. defined benefit plan: Government securities $ 1,920 $ 1,920 $ — $ — Unit investment trust fund 1,165 — 1,165 — Loans 553 — — 553 Bonds 676 — 676 — Stocks and other investments 2,783 1,716 2 1,065 Total $ 7,097 $ 3,636 $ 1,843 $ 1,618 Fair Value at March 26, 2021 Level 1 Level 2 Level 3 Assets of non-U.S. defined benefit plan: Government securities $ 1,646 $ 1,646 $ — $ — Unit investment trust fund 1,221 — 1,221 — Loans 584 — — 584 Bonds 1,112 — 1,112 — Stocks and other investments 3,081 1,947 1 1,133 Total $ 7,644 $ 3,593 $ 2,334 $ 1,717 F-34 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The following table shows the change in fair value of Level 3 plan assets for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020: Level 3 Non-U.S. Defined Plan Assets Loans Stocks Balance at March 29, 2019 $ 760 $ 353 Additions during the year 271 — Redemptions during the year ( 300 ) — Change in foreign currency exchange rates 25 11 Balance at March 27, 2020 $ 756 $ 364 Additions during the year 325 — Redemptions during the year ( 531 ) — Revaluation of equity securities — 753 Change in foreign currency exchange rates 34 16 Balance at March 26, 2021 $ 584 $ 1,133 Additions during the year 308 — Redemptions during the year ( 289 ) — Revaluation of equity securities ( 5 ) 13 Change in foreign currency exchange rates ( 45 ) ( 81 ) Balance at March 25, 2022 $ 553 $ 1,065 The investments in the Company’s major benefit plans largely consist of low-cost, broad-market index funds to mitigate risks of concentration within the market sectors. In recent years, the Company’s investment policy has shifted toward a closer matching of the interest-rate sensitivity of the plan assets and liabilities. The appropriate mix of equity and bond investments is determined primarily through the use of detailed asset-liability modeling studies that look to balance the impact of changes in the discount rate against the need to provide asset growth to cover future service cost. The Company, through its wholly-owned subsidiary, Allegro MicroSystems, LLC’s (“AML”), has added a greater proportion of fixed income securities to the non-U.S. defined benefit plan with return characteristics that are more closely aligned with changes in liabilities caused by discount rate volatility. There are no significant restrictions on the amount or nature of the investments that may be acquired or held by the plans. Cash Flows During the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, the Company contributed approximately $ 1,369 , $ 986 and $ 943 to its non-U.S. pension plan, respectively. The Company expects to contribute approximately $ 1,546 to its non-U.S. pension plan in fiscal year 2023. Estimated Future Benefit Payments The following table projects the benefits expected to be paid to participants from the plans in each of the following fiscal years. The majority of the payments will be paid from plan assets, not company assets. Pension Benefits 2023 $ 1,459 2024 953 2025 1,004 2026 1,014 2027 1,383 Thereafter 8,885 Total $ 14,698 F-35 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Other Defined Benefit Plan In December 1993, the Company commenced with a rollover pension promise agreement (“Pension Promise”) to offer a then European employee an insured annuity upon their retirement at age 65. The employee was the only eligible participant of the Pension Promise. The impact associated with the expense and related other income with the Pension Promise was insignificant in fiscal years 2022, 2021 and 2020. The total values of the Pension Promise in the amounts of 661 and 928 British Pounds Sterling at March 25, 2022 and March 26, 2021, respectively (approximately $ 875 and $ 1,272 at March 25, 2022 and March 26, 2021, respectively), were classified with other in other assets, net and accrued retirement in other long-term liabilities in the Company’s consolidated balance sheets. Defined Contribution Plan Eligible AML U.S. employees may contribute up to 50 % of their pretax compensation to a defined contribution plan, subject to certain limitations, and AML may match, at its discretion, 100 % of the participants’ pretax contributions, up to a maximum of 5 % of their eligible compensation. Matching contributions by AML totaled $ 4,074 , $ 3,687 and $ 3,792 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. The Company, through its AML subsidiary, Allegro MicroSystems Europe, Ltd. (“Allegro Europe”), also has a defined contribution plan (the “AME Plan”) covering substantially all employees of Allegro Europe. Contributions to the AME Plan by the Company totaled approximately $ 1,065 , $ 507 and $ 372 for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. The Company has a 401(k) plan that covers all U.S. employees meeting certain service and age requirements. Employees are eligible to participate in the plan upon hire when the service and age requirements are met. Employees may contribute up to 35 % of their compensation, subject to the maximum contribution allowed by the Internal Revenue Service (“IRS”). All employees are 100 % vested in their contributions at the time of plan entry. As of January 1, 2008, and until January 1, 2015, the Company’s former wholly-owned subsidiary, PSL, adopted and used a Safe Harbor provision, whereby PSL contributed 3 % of compensation each pay period for all eligible employees meeting the Safe Harbor criteria. As of January 1, 2015, PSL may match, at its discretion, 100 % of the employee’s contribution, up to a maximum of 5 % of their eligible compensation. 17. Commitments and Contingencies Noncancellable purchase obligations Future minimum payments under purchase obligations with suppliers as of March 25, 2022 totaled $ 53,717 , which are all expected to be procured in fiscal year 2023. Insurance The Company, through its subsidiaries, utilizes self-insured employee health programs for employees in the United States. The Company records estimated liabilities for its self-insured health programs based on information provided by the third-party plan administrators, historical claims experience and expected costs of claims incurred but not reported. The Company monitors its estimated liabilities on a quarterly basis. As facts change, it may become necessary to make adjustments that could be material to the Company’s consolidated financial position and results of operations. The accrued liability related to self-insurance wa s $ 417 and $ 1,518 as of March 25, 2022 and March 26, 2021, respectively, and was included in accrued expenses and other current liabilities in the Company’s consolidated balance sheets. Legal proceedings The Company is subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. The Company records an accrual for legal contingencies when it is determined that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, the Company evaluates, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, the ability to make a reasonable estimate of the loss. If the occurrence of liability is probable, the Company will disclose the nature of the contingency, and if estimable, will provide the likely amount of such loss or range of loss. Furthermore, the Company does not believe there are any matters that could have a material adverse effect on financial position, results of operations or cash flows. F-36 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Indemnification From time to time, the Company has agreed to indemnify and hold harmless certain customers for potential allegations of infringement of intellectual property rights and patents arising from the use of its products. To date, the Company has not incurred any costs in connection with such indemnification arrangements; therefore, there was no accrual of such amounts at March 25, 2022 or March 26, 2021. Environmental Matters The Company establishes accrued liabilities for environmental matters when it is probable that a liability has been incurred, and the amount of the liability can be reasonably estimated. If the contingency is resolved for an amount greater or less than the accrual, or the Company’s share of the contingency increases or decreases or other assumptions relevant to the development of the estimate were to change, the Company would recognize an additional expense or benefit in the consolidated statements of operations during the period such determination was made. No significant environmental accruals were established at March 25, 2022 or March 26, 2021. 18. Net Income per Share In connection with completion of the Company’s IPO on November 2, 2020 and immediately following the pricing of the IPO, all outstanding shares of Class A common stock and Class L common stock were automatically converted into an aggregate of 166,500,000 shares of common stock (the “Common Stock Conversion”). Additional detailed discussion is included in Note 19, “Common Stock and Stock-Based Compensation.” Prior to the Company’s IPO, Class A shares were entitled to a priority dividend of 8 %. After Class A shareholders received an annualized return on capital of 8 %, distributions of the remaining value were split between Class A and Class L shareholders based on the achievement of certain return targets. In determining income attributable to the Class A stockholders for computing basic and diluted earnings per share for the fiscal year ended March 27, 2020, the Company did not allocate income to the shares of Class L common stock in accordance with ASC 260, because such classes of shares would not have shared in the distribution had all of the income for the periods been distributed. Accordingly, earnings per share calculations were provided only for the Class A shares with a weighted average of 10,000,000 shares for the fiscal year ended March 27, 2020. The following table sets forth the basic and diluted net income attributable to Allegro MicroSystems, Inc. per share. The number of shares of common stock reflected in the calculation is the total shares of common stock (vested and unvested) held on the IPO date, after the Common Stock Conversion. Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Net income attributable to Allegro MicroSystems, Inc. $ 119,407 $ 17,953 $ 36,971 Net income attributable to common stockholders 119,555 18,101 37,105 Basic weighted average common shares 189,748,427 83,448,055 10,000,000 Dilutive effect of common stock equivalents 2,062,778 92,968,590 — Diluted weighted average common shares 191,811,205 176,416,645 10,000,000 Basic net income attributable to Allegro MicroSystems, Inc. per share $ 0.63 $ 0.22 $ 3.70 Basic net income attributable to common stockholders per share $ 0.63 $ 0.22 $ 3.71 Diluted net income attributable to Allegro MicroSystems, Inc. per share $ 0.62 $ 0.10 $ 3.70 Diluted net income attributable to common stockholders per share $ 0.62 $ 0.10 $ 3.71 The computed net income per share for the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020 does not assume conversion of securities that would have an antidilutive effect on income per share. There were 3,622 contingently issuable shares under the employee stock purchase plan excluded for the fiscal year ended March 25, 2022, as such securities would have an antidilutive effect on net income per share. There were 273 RSUs excluded for fiscal year ended March 26, 2021 as conversion of such securities would have an antidilutive effect on net income per share. There were no such convertible securities to consider for the fiscal year ended March 27, 2020. F-37 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The following represents issued and issuable weighted average share information for the respective periods: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Restricted stock units 1,066,406 308,811 — Performance stock units 996,372 218,678 — Employee stock purchase plan — 2,914 — Shares related to Common Stock Conversion — 92,438,187 — Total 2,062,778 92,968,590 — 19. Common Stock and Stock-Based Compensation On November 2, 2020, the Company closed its IPO of 28,750,000 shares of its common stock at an offering price of $ 14.00 per share, of which 25,000,000 shares were sold by the Company and 3,750,000 shares were sold by selling stockholders, resulting in net proceeds to the Company of approximately $ 321,425 , after deducting $ 20,125 of underwriting discounts and $ 8,450 of estimated offering costs. The Company’s common stock is now listed on the Nasdaq Global Select Market under the ticker symbol “ALGM.” Prior to the IPO, the Company had two classes of common stock, Class A common stock and Class L common stock. The Company’s Board of Directors authorized 12,500,000 shares of Class A common stock at par value of $ 0.01 , out of which the Company issued 6,720,000 to Sanken in exchange for its previous common shares. The previous single class of common stock was retired in full. The Company sold 2,880,000 of newly issued shares of Class A common stock, representing a 28.8 % ownership interest, to OEP SKNA, L.P. (the “OEP Investor”) for cash consideration of $ 291,000 . The stock issuance proceeds were recorded net of $ 9,260 of related transaction costs. The Company’s Board of Directors authorized 1,000,000 shares of Class L common stock at a par value of $ 0.01 . Both Class A and Class L common stock were entitled to dividends, when, and if declared by the Board of Directors. Holders of shares of Class A common stock were entitled to a priority dividend of 8 %. After holders of shares of Class A common stock receive an annualized return on capital of 8 %, distributions of the remaining value were split between holders of shares of Class A common stock and Class L common stock based on the achievement of certain return targets. Concurrent with the issuance of the Term Loan Facility on September 30, 2020 (as defined in Note 14, “Debt and Other Borrowings”), the Company paid a cash dividend in the aggregate amount of $ 400,000 to holders of the Company’s Class A common stock. Each outstanding share of Class A common stock entitled the holder to one vote on each matter submitted to a vote of the stockholders of the Company, including the election of the Board of Directors. Holders of Class L common stock were not entitled to vote. In the event of voluntary or involuntary liquidation, dissolution or winding-up of the Company, any amounts available for distribution by the Company were to be paid to the holders of Class A common stock and Class L common stock, as if such distribution were a dividend paid, factoring in the priorities as described above. Upon the earliest of (i) an IPO; (ii) change of control; (iii) the date OEP and its affiliates cease to own any shares of capital stock of the Company; or (iv) at the election of the Board of Directors, any merger transaction involving the Company or its subsidiaries, each outstanding share of Class L common stock would convert into Class A common stock. Also, in connection with the OEP transaction, the Company granted 400,000 unvested Class A shares and 597,400 of unvested Class L shares to certain Company employees. The Class A shares vest to the grantees over a service period of 60 months. However, they remain subject to the Company’s repurchase right at par value in the event that either (i) a change in control has not occurred or (ii) the Company has not consummated an IPO by the seventh anniversary of the OEP transaction. As of March 27, 2020, the Company was not able to determine whether such a change in control or IPO was probable, and therefore no amount of stock-based compensation was recognized for the unvested shares of Class A common stock at that time. As a result of the Company’s IPO closing on November 2, 2020, the unvested shares of Class A common stock immediately become vested and the Company recognized $ 40,440 of one-time stock-based compensation ( 400,000 shares to management at $ 101.10 per share) at that time. F-38 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The Class L unvested shares vested on a straight-line basis over a service period of four years . Class L unvested shares had no other vesting conditions. If an IPO occurred, 25 % of the unvested awards would accelerate vesting if 25 % or more of the awards are unvested at the time of the IPO. If a change in control occurs, 100 % of the then unvested awards would accelerate vesting. Accordingly, based on the Company’s IPO closing on November 2, 2020, the Company accelerated the vesting of the 25 % unvested awards at that time. Prior to the IPO, the Company issued 17,203 shares of Class L common stock with a weighted average price per share of $ 33.83 during fiscal 2021 and issued 30,300 shares of Class L common stock with a weighted average price per share of $ 26.93 during fiscal 2020. On October 2, 2020, the Company repurchased an aggregate of 1,997 shares of its Class L common stock from certain of its directors and one of its non-executive employees for an aggregate purchase price of $ 408 in connection with, (i) in the case of such directors, the settlement of certain outstanding promissory notes issued by the Company to such directors, and (ii) in the case of such non-executive employee, to satisfy certain withholding tax obligations triggered by the vesting of such shares in accordance with the terms of the applicable award agreement. Immediately following the pricing of the IPO on November 2, 2020, all outstanding shares of Class A common stock and Class L common stock were automatically converted into an aggregate of 166,500,000 shares of common stock. Outstanding shares of Class A and Class L common stock were converted to common stock in the Common Stock Conversion at conversion rates of approximately 15.822 and 13.010 shares of common stock to each share of Class A and Class L common stock, respectively. As part of the Common Stock Conversion, 2,066,468 and 1,766 shares of common stock were returned to the Company for tax payments made on behalf of holders of Class A common stock and Class L common stock, respectively, to withhold to cover tax transactions. Outstanding loan amounts related to Class L common stock in the aggregate amount of $ 753 were extinguished on October 2, 2020. The following table presents the respective number of shares of common stock and unvested restricted common stock issued in the Common Stock Conversion. The number of shares of common stock and unvested restricted common stock issuable are based upon the vesting provisions of the outstanding shares and reflect the shares vested and unvested at the date of conversion. Shares of Common Stock Shares of Unvested Restricted Common Stock Total Shares of Common Stock Class A common stock 156,155,403 — 156,155,403 Class L common stock 7,816,614 459,749 8,276,363 Total 163,972,017 459,749 164,431,766 Prior to the IPO, there were 638,298 shares of Class L common stock outstanding at a weighted average price per share of $ 11.99 . As noted in the above table, as part of the Common Stock Conversion, the Class L common stock was converted to 7,816,614 shares of common stock and 459,749 of unvested restricted common stock at weighted average prices per share of $ 14.00 . In connection with its IPO, the Company offered certain employees (excluding its named executive officers) who were eligible to receive cash bonuses under the Company’s LTCIP and TRIP the opportunity to elect to receive RSUs under its 2020 Omnibus Incentive Compensation Plan in lieu of cash payouts under the LTCIP and/or TRIP, through the RSU Conversion Program. Refer to Note 12, “Management Long-Term Cash Incentive Plan” for more details. F-39 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The following table summarizes RSU activity for the fiscal years ended March 25, 2022 and March 26, 2021: Number of Shares Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life (In years) Aggregate Intrinsic Value Outstanding - March 27, 2020 — $ — — $ — Granted 1,428,932 14.06 Vested ( 160,063 ) 14.00 Canceled ( 43,713 ) 14.00 Outstanding - March 26, 2021 1,225,156 $ 14.07 1.70 $ 30,960 Granted 1,344,717 26.00 Vested ( 622,508 ) 20.33 Canceled ( 246,358 ) 19.02 Outstanding - March 25, 2022 1,701,007 $ 20.50 1.27 $ 49,635 The weighted-average grant fair value per share for RSUs granted during the fiscal year ended March 25, 2022 was $ 26.00 , and the stock-based compensation expense related to non-vested awards not yet recorded at March 25, 2022 was $ 22,790 , which is expected to be recognized over a weighted-average of 1.27 years. During the fiscal year ended March 25, 2022, 622,508 shares vested. The Company also awards PSUs to its senior executive officers based on achievement of medium-term plans (“MTP”) approved in meetings of its Board of Directors for establishing target performances. Each award reflects a target number of shares (“Target Shares”) that may be issued to the award recipient. In fiscal year 2021, these awards are earned upon the completion of a three-year performance period ending March 31, 2023. Whether units are earned at the end of the performance period will be determined based on the achievement of certain performance objectives over the performance period. The performance objectives include achieving certain revenue improvement and cumulative EBITDA levels for the performance period, and also include a performance objective relating to relative total shareholder return (“TSR”). Depending on the results achieved during the three-year performance period, the actual number of shares that a grant recipient may receive at the end of the period ranges from 0 % to 200 % of the Target Shares granted. The weighted-average fair value of the PSUs was determined using the Monte Carlo simulation model incorporating the following weighted-average assumptions: Fiscal Year Ended March 26, 2021 Performance term 2.42 years Volatility 49.9 % Risk-free rate of return 0.17 % Dividend yield — % Weighted-average fair value per share $ 14.00 F-40 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The following table summarizes PSU activity for the fiscal years ended March 25, 2022 and March 26, 2021: Number of Shares Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life (In years) Aggregate Intrinsic Value Outstanding - March 27, 2020 — $ — — $ — Granted 650,302 15.05 Vested — — Canceled — — Outstanding - March 26, 2021 650,302 $ 15.05 2.65 $ 16,433 Granted 465,732 27.08 Vested — — Canceled ( 160,951 ) 19.19 Outstanding - March 25, 2022 955,083 $ 20.22 1.51 $ 27,869 PSUs are included at 100 % - 200 % of target goals. The intrinsic value of the unvested PSUs during the fiscal year ended March 25, 2022 was $ 27,869 . The total compensation cost related to unvested awards not yet recorded at March 25, 2022 was $ 12,893 , which is expected to be recognized over a weighted average of 1.51 years. No shares were vested during fiscal year ended March 25, 2022. The following table summarizes unvested restricted common stock activity for the fiscal years ended March 25, 2022 and March 26, 2021: Number of Shares Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding - March 27, 2020 — — — — Common stock conversion 459,749 14.00 Vested ( 50,170 ) 14.00 Canceled ( 3,252 ) 14.00 Outstanding - March 26, 2021 406,327 $ 14.00 1.79 $ — Vested ( 241,787 ) 14.00 Canceled ( 24,014 ) — Outstanding - March 25, 2022 140,526 $ 14.00 1.07 $ 4,101 In connection with the Company’s IPO, the Company had filed a registration statement on Form S-8 registering 1,545,891 shares of the Company’s common stock available for future issuance under an employee stock purchase plan (“ESPP”), which number consists of (a) 832,400 shares of common stock initially available for issuance under the ESPP, and (b) an additional 713,491 shares of common stock that may become issuable under the ESPP pursuant to its terms. The ESPP, which is maintained by the Company, allows employees to purchase the Company’s common stock at 85 % of the lesser of the stock price at the beginning or end of the offering period. Each offering period is six months in length. The Company’s first offering period started on January 1, 2021 and continued until June 30, 2021. F-41 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The weighted-average fair value of the ESPP shares was determined using the Black-Scholes model incorporating the following weighted-average assumptions: Fiscal Year Ended March 25, 2022 March 26, 2021 Performance term 0.50 years 0.50 years Volatility 48.10 % 55.02 % Risk-free rate of return 0.10 % 0.09 % Dividend yield — % — % Weighted-average fair value per share $ 8.25 $ 7.77 As of March 25, 2022, the total unrecognized compensation cost related to the ESPP was $ 272 and this amount is expected to be recognized over 0.27 years. For the fiscal year ended March 25, 2022, the Company recognized stock-based compensation charges of $ 19,918 , $ 11,997 , $ 424 , $ 1,099 and $ 110 for it s RSUs, PSUs, restricted common stock, ESPP and phantom stock, respectively. Upon completion of its IPO, the Company recognized one-time stock-based compensation charges of $ 40,440 in connection with the vesting of all outstanding shares of Class A common stock, $ 1,610 in connection with the automatic acceleration of 25 % of the standard vesting term of shares of Class L common stock an d $ 1,028 with the RSU Conversion Program (see above and Note 12, “Management Long-Term Cash Incentive Plan”). In addition, the Company recognized stock-based compensation charges of $ 1,169 for i ts Class L common stock for the fiscal year ended March 26, 2021 and stock-based compensation charges of $ 5,729 , $ 1,269 , $ 174 and $ 247 for it s RSUs, PSUs, restricted common stock and ESPP, respectively, for the fiscal year ended March 26, 2021. All stock-based compensation charges in fiscal 2020 related to expensing of the Company’s Class L common stock. The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Cost of sales $ 3,176 $ 5,158 $ 183 Research and development 3,933 3,573 87 Selling, general and administrative 26,439 41,139 1,165 Total stock-based compensation $ 33,548 $ 49,870 $ 1,435 Phantom Stock Grants On January 1, 2022, the Company issued an award of 5,733 restricted cash units to an employee of a professional employer organization that provides services to the Company. Each restricted cash unit represents the right of the grantee to receive cash payment, upon time-based vesting, equal to the market price of the Company’s common stock. The restricted cash units do not possess the rights of common stockholders of the Company, including voting and dividend rights, and cannot be exercised or traded for the Company’s common stock. Additionally, the carrying value of the restricted cash units fluctuates with the market price of the Company’s common stock and represents the expected cash value of the units at a point in time. Due to the cash settlement feature, the restricted cash units are classified as liabilities in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets for the current and long-term portions of the obligations, respectively. As of March 25, 2022, the restricted cash units will vest over a remaining period of 2.15 years. As of March 25, 2022, no restricted cash units had fully vested. F-42 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) 20. Income Taxes The components of income before income taxes include the following: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Income before provision for income taxes attributable to: Domestic operations $ 121,883 $ ( 2,288 ) $ 34,425 Foreign operations 18,863 837 18,853 Total $ 140,746 $ ( 1,451 ) $ 53,278 Significant components of the provision (benefit) for income taxes are as follows: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Current: Federal $ 7,779 $ ( 3,821 ) $ 15,146 State 1,553 1,085 1,468 Foreign 4,361 2,115 4,468 Total current 13,693 ( 621 ) 21,082 Deferred: Federal 7,892 ( 17,564 ) ( 4,431 ) State 371 ( 1,016 ) 18 Foreign ( 765 ) ( 351 ) ( 496 ) Total deferred 7,498 ( 18,931 ) ( 4,909 ) Total income tax provision $ 21,191 $ ( 19,552 ) $ 16,173 F-43 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) The difference between the tax provision at the statutory federal tax rate and the provision for income taxes is as follows: Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Tax provision at U.S. statutory rate $ 29,557 $ ( 305 ) $ 11,189 162(m) limitation 3,988 — — Stock based compensation ( 230 ) ( 13,303 ) — CARES carryback claim and amended returns ( 2,031 ) ( 3,834 ) — PSL Divestiture — ( 2,009 ) — Research and development tax credit ( 2,823 ) ( 2,162 ) ( 1,841 ) FDII ( 9,066 ) — ( 1,188 ) BEAT — — 1,694 GILTI — — 86 Transaction costs 307 1,498 — Foreign tax rate ( 157 ) 1,279 283 State income taxes, net of federal benefit 2,370 356 514 Deferred tax remeasurement — 309 — Subpart F income, net of credits 283 43 — Provision for uncertain tax positions ( 17 ) 26 361 Provision for IRS audit settlement — — 5,491 Gain on contingent purchase price reduction ( 420 ) ( 525 ) — Cumulative provision-to-return ( 590 ) ( 862 ) ( 186 ) Other 20 ( 63 ) ( 230 ) Total income tax provision $ 21,191 $ ( 19,552 ) $ 16,173 The increase in income tax expense in fiscal year 2022 as compared to fiscal year 2021 relates primary to tax impacts of the fiscal year 2021 IPO transaction. The fiscal year 2021 IPO transaction resulted in excess tax over financial reporting deductions related to a $ 40,440 stock-based compensation charge (and the related incremental tax deductions), a $ 16,000 one-time dividend treated as compensation expense for tax purposes, and the tax loss on the divestiture of PSL. The tax impacts of these transactions and other discrete transactions caused an overall U.S. NOL for fiscal year 2021 that will be carried back five years. Additional fluctuations in our effective income tax rate relate primarily to differences in our U.S. and foreign taxable income, estimated FDII benefits, GILTI income, research credits, non-deductible stock-based compensation charges, and discrete tax items. Except for AMTC prior to its sale, the Company has the ability and intent to permanently reinvest its foreign earnings based on expected future U.S. cash flows and specific and measurable plans to use its existing foreign cash to fund its working capital needs, invest in short-term and long-term capital projects, and to make investments and acquisitions. Since AMTC’s operations have ceased, the Company may receive future liquidating distributions; however, such distributions are estimated to result in no material incremental U.S. or local tax. Therefore, no deferred tax liability has been established with respect to outside basis difference in its foreign subsidiaries. F-44 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows: March 25, 2022 March 26, 2021 Deferred income tax assets: Net operating loss $ 2,106 $ 11,054 Bonuses, commissions and other compensation 11,137 9,304 Tax credits 6,454 8,698 Inventory and sales related 5,892 6,304 Stock-based compensation 2,837 821 Right-of-use liability 2,221 — Other accruals and reserves 2,067 2,050 Gross deferred income tax assets 32,714 38,231 Valuation allowance for deferred income tax assets ( 5,070 ) ( 5,025 ) Total deferred income tax assets 27,644 33,206 Deferred income tax liabilities: Fixed assets and intangibles ( 4,720 ) ( 4,366 ) Equity method and other investments ( 2,801 ) ( 1,868 ) Right-of-use asset ( 2,156 ) — Total deferred income tax liabilities ( 9,677 ) ( 6,234 ) Net deferred income tax assets $ 17,967 $ 26,972 As of March 25, 2022, the Company has $ 2,106 in NOLs related to our Thailand operations. Additionally, the Company has $ 3,490 and $ 2,964 in research credits related to its French subsidiary and state filings, respectively. In assessing the realizability of its deferred tax assets, the Company considered whether it was more likely than not that some portion or all of the deferred tax assets would not be realized. The realization of deferred tax assets depends upon the generation of future taxable income during the periods in which these temporary differences become deductible. The Company established a valuation allowance for its Thailand NOLs of $ 2,106 and state research credits of $ 2,964 because such assets will not to be utilized by the Company prior to expiration. The Company is completing carryback claim filings allowable under the CARES Act to utilize NOLs and carryover credits generated during fiscal year 2021. The filings will carryback $ 8,364 in Federal NOLs, $ 2,631 in U.S. research credits, and $ 305 in foreign tax credits to prior taxable periods. These amounts, along with an estimated rate benefit of $ 4,463 have all been classified as a long-term tax receivable as of March 25, 2022. Uncertain Tax Positions A s of March 25, 2022, the Compan y had $ 2,459 of gross unrecognized tax benefits, of which $ 2,433 would im pact the effective tax rate, if recognized. As of March 26, 2021, the Company had $ 2,554 of gross unrecognized tax benefits, of which $ 2,542 would impact the effective tax rate, if recognize d. As of March 27, 2020, the Company had $ 2,559 of gross unrecognized tax benefits, of which $ 2,501 would impact the effective tax rate, if recognized. F-45 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Fiscal Year Ended March 25, 2022 March 26, 2021 March 27, 2020 Beginning balance $ 2,554 $ 2,559 $ 6,264 Gross increases-tax positions in prior period — 55 4,863 Gross decreases-tax positions in prior period settlement — — ( 8,513 ) Lapse in statute of limitations ( 95 ) ( 60 ) ( 55 ) Balance at end of period $ 2,459 $ 2,554 $ 2,559 The Company classifies uncertain tax positions as a current liability, or as a reduction of the amount of a net operating loss carryforward or amount refundable, to the extent that the Company anticipates payment or receipt of cash for income taxes within one year. Likewise, the amount is classified as a long-term liability if the Company anticipates payment or receipt of cash for income taxes during a period beyond one year. The Company believes that all tax positions are adequately provided for; amounts asserted by tax authorities could be greater or less than the accrued position. Accordingly, the Company’s provisions for federal, state and foreign tax related matters to be recorded in the future might change as revised estimates are made, or the underlying matters are settled or otherwise resolved. The Company’s policy is to classify interest expense and penalties, if any, as components of the income tax provision in the consolidated statements of operations. The Company recorded net increases of $ 58 , $ 73 and $ 841 in interest, penalties and releases during fiscal years 2022, 2021 and 2020, respectively. As of March 25, 2022 and March 26, 2021, the amount of accrued interest and penalties totaled approximately $ 324 and $ 232 , respectively. Examinations by Tax Authorities The Company, through its subsidiaries, is subject to examination by taxing authorities in the United States, the Philippines, United Kingdom, Thailand, and the states in which the Company does business. The statute of limitations remains open for U.S. federal tax returns for 2017 and the following years. Audit activities related to the U.S. federal tax returns for 2016 and 2017 concluded during fiscal year 2020 resulting in a settlement related to transfer pricing for fiscal years 2016, 2017 and 2018 in the amount of $ 9,482 including interest. In non-U.S. jurisdictions, the years open to audit represent the years still open under the respective statute of limitations. With respect to the major jurisdictions outside the U.S., the subsidiaries are no longer subject to income tax audits for years before 2014. Capital Contribution In connection with the settlement noted above, Sanken agreed to make a one-time capital contribution in the amount of $ 9,500 to neutralize the cash impact to the Company. All ownership parties have agreed that this contribution would not result in an incremental ownership percentage change or increase in shares by Sanken. 21. Related Party Transactions Public Offering of the Company’s Common Stock by Certain Stockholders On February 2, 2021, the Company filed a Registration Statement on Form S-1 for the public offering of shares owned by certain selling stockholders, including Sanken, OEP and certain of the Company’s officers and directors. The selling stockholders sold 19,332,852 shares of the Company’s common stock, including 1,832,852 shares of common stock sold by OEP in connection with the underwriters’ exercise of their over-allotment option. The Company did not sell any shares of its common stock and did not receive any of the proceeds from the offering. However, the Company incurred expenses, costs and fees in connection with the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, in the amount of $ 1,790 for the fiscal year ended March 26, 2021, which are included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive income. Transactions Involving Sanken The Company sells products to, and purchases in-process products from Sanken. In addition, prior to March 28, 2020, the Company also sold products for Sanken. F-46 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Net sales of the Company’s products to Sanken totaled $ 148,813 , $ 104,661 and $ 184,557 during the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020, respectively. Trade accounts receivables, net of allowances from Sanken totaled $ 27,256 and $ 21,595 as of March 25, 2022 and March 26, 2021, respectively. Other accounts receivable from Sanken totaled $ 104 and $ 198 as of March 25, 2022 and March 26, 2021, respectively. During fiscal year 2020, the Company acted as a distributor of Sanken’s products. Net sales of Sanken’s products by the Company to third parties totaled $ 35,421 during the fiscal year ended March 27, 2020 . On March 28, 2020, the Company formally terminated its distribution agreement with Sanken to distribute Sanken’s products. Purchases of various products from Sanken totaled $ 31,917 for the fiscal year ended March 27, 2020 . Accounts payable to Sanken totaled $ 4,494 as of March 27, 2020 . Termination of Sanken Distribution Agreement In May 2022, the Company issued a letter of intent with Sanken to develop a plan to transition the supply chain and sales activity in Japan from Sanken to the Company. During the planning process, both parties will define the transition timeline and method for customer communication, supply chain transfer and sales coverage. Parties will also define a method to continue engagement with Sanken on the support of select customers. Joint Development Agreement (“Development Agreement”) The Company, through its former wholly owned subsidiary, PSL, entered into a Development Agreement with Sanken whereby the Company and Sanken jointly own a specific wafer technology and share the reimbursement of development costs incurred by the Company. Sanken reimbursed $ 1,440 in fiscal year ended March 27, 2020 . Sanken reimbursed no amounts in the fiscal years ended March 25, 2022 and March 26, 2021. Short-term Bridge Loan Receivable to Sanken I n March 2019, the Company entered into a short-term bridge loan to Sanken in the amount of $ 30,000 . The loan bore interest of 2.52 % and was repaid in April 2019. Inte rest income related to the loan to Sanken was $ 55 in the fiscal year ended March 27, 2020 . Notes Payable and Line-of credit from Sanken The Company, through PSL, its former wholly owned subsidiary, had related party debt owed to Sanken that includes three notes payable in the aggregate amount of $ 17,700 and two lines-of-credit agreements in the aggregate amount of $ 25,000 at March 27, 2020 . The interest rates on the related party debt were reset at the beginning of each calendar quarter to LIBOR on the last trading day of the previous month, plus a 1.0 % spread. Related party interest expense consisting of amounts due to Sanken for intercompany notes payable, lines-of-credit and miscellaneous charges for the fiscal year ended March 27, 2020 amounted to $ 1,444 , and related party interest paid for the same period amounted to $ 1,538 . In connection with the PSL Divestiture, the total $ 42,700 balance was contributed in-kind for the fair value of the 70 % interest that Sanken acquired. Transactions involving PSL In accordance with the PSL Divestiture, the Company had both intercompany accounts payable of $ 1,198 and accounts receivable of $ 3,368 that were previously eliminated in consolidation. The previous intercompany receivable balance of $ 3,368 was moved into trade and other accounts receivable due from related party as of March 28, 2020. In addition, as a result of PSL taking over the Sanken distribution business, as of March 26, 2021, the Company reflected a related accounts receivable balance of $ 767 . This amount includes reductions of $ 767 and $ 2,601 from payments made by PSL during the fiscal years ended March 25, 2022 and March 26, 2021, respectively. No accounts receivable balance was recorded as of March 25, 2022. In May 2009, the Company entered into a technology development agreement (the “IC Technology Development Agreement”) with Polar Semiconductor, Inc. (“PSI”) (subsequently changed to Polar Semiconductor, LLC), and Sanken, pursuant to which the parties agreed upon the general terms under which they may, from time to time, undertake certain activities (the “IC Process Development Activities”) to develop new technologies to be used by PSI to manufacture products for the Company and Sanken, as well as the ownership and use of such technologies following their development. The IC Technology Development Agreement provides that the expenses for all IC Process Development Activities will be shared equally by the Company and Sanken on an annual basis (subject to any exceptions upon which the parties may agree from time to time), with such expenses being paid to PSL by Sanken in the form of an up-front annual fee, with PSL being F-47 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) responsible for any expenses that exceed the amount of such fee. The IC Technology Development Agreement will continue in effect until such time as the Company, PSL and Sanken mutually agree to its termination or adopt a successor agreement, or in the event that the companies fail to agree upon the annual fee for that fiscal year within three months after the commencement of such fiscal year. During the fiscal year ended March 25, 2022 , the Company (through PSL) received no fees from Sanken and paid no fees to PSL pursuant to the IC Technology Development Agreement. During each of the fiscal years ended March 26, 2021 and March 27, 2020 , the Company (through PSL) received fees of $ 1,200 from Sanken pursuant to the IC Technology Development Agreement, and during the same periods the Company paid fees of $ 1,200 to PSL pursuant to the IC Technology Development Agreement. In April 2015, PSL and Sanken entered into a discrete technology development agreement (as amended, the “Discrete Technology Development Agreement”), pursuant to which the parties agreed upon the general terms under which they, from time to time, undertook certain activities (the “Discrete Development Activities”) to develop new technologies to be used by PSL to manufacture products for Sanken, as well as the ownership and use of such technologies following their development. In June 2018, the Company, PSL and Sanken entered into an amendment to the Discrete Technology Development Agreement pursuant to which the parties agreed to the assignment of all rights and obligations of PSL under such agreement to the Company and to certain amendments to the terms of such agreement. The Discrete Technology Development Agreement provided that the expenses for all Discrete Development Activities to be shared equally by the Company and Sanken on an annual basis (subject to any exceptions upon which the parties agreed to from time to time). As of March 26, 2021, the Company had accrued $ 614 included in amounts due to related party under this agreement, which was paid in the first quarter of fiscal year 2022. The Discrete Technology Development Agreement terminated on March 31, 2021 in accordance with its terms. The Company continues to purchase in-process products from PSL. Purchases of various products from PSL totaled $ 55,297 and $ 42,196 for the fiscal years ended March 25, 2022 and March 26, 2021, respectively. This amount includes none and $ 5,930 of price support payments made for the fiscal years ended March 25, 2022 and March 26, 2021, respectively. In accordance with the PSL Divestiture, the Company had intercompany accounts payable of $ 1,198 that was previously eliminated in consolidation. The previous intercompany payable balance of $ 1,198 was moved into amounts due to related party as of March 28, 2020. Accounts payable to PSL included in amounts due to related party totaled $ 5,222 and $ 1,739 as of March 25, 2022 and March 26, 2021, respectively. These amounts include reductions of $ 5,222 and $ 1,198 from payments made to PSL during the fiscal years ended March 25, 2022 and March 26, 2021, respectively. Notes Receivable from PSL On March 28, 2020, in connection with the PSL Divestiture, the Company contributed the forgiveness of the fair value of $ 15,000 out of the $ 66,377 total debt owed by PSL to the Company, which was previously eliminated in consolidation as of March 27, 2020 . As a result of the PSL Divestiture, on March 28, 2020, the $ 51,377 note receivable from PSL was classified on the Company’s balance sheet as related party note receivable. The related party note receivable held by the Company had a maturity date of March 28, 2027 and bore interest at a rate of 2.70 %, which was a market rate determined by IRS guidance at the time of the divestiture. The entire receivable of $ 51,377 plus accrued interest of $ 762 was repaid on October 14, 2020. On December 2, 2021, AML entered into a loan agreement with PSL wherein PSL provided an initial promissory note to AML for a principal amount of $ 7,500 (the “Initial PSL Loan”). The Initial PSL Loan will be repaid in equal installments, comprising of principal and interest accrued at 1.26 % per annum, over a term of four years with payments due on the first day of each calendar year quarter (April 1 st , July 1 st , October 1 st , and January 1 st ). In addition, PSL has the option of borrowing up to an additional $ 7,500 on or around January 1, 2023 under the same terms of the PSL Loan (the “Secondary PSL Loan” and, together with the Initial PSL Loan, the “PSL Promissory Notes”). PSL has informed the Company of its intent to elect its option of the Secondary PSL Loan during fiscal year 2023. The loan funds will be used by PSL to procure a deep ultraviolet scanner and other associated manufacturing tools necessary to increase wafer fabrication capacity in support of the Company’s increasing wafer demand. As of March 25, 2022, the outstanding balance of the PSL Promissory Notes was $ 7,500 . On April 1, 2022, PSL made a quarterly payment to AML of $ 500 , which included $ 31 of interest income. Transition Services Agreement As part of the PSL Divestiture, the Company, PSL and Sanken entered into the Transition Services Agreement (“TSA”), pursuant to which the Company agreed, among other things, to provide certain human resources, legal and distribution support services to PSL following the consummation of the PSL Divestiture. The TSA provides that the F-48 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) Company and its wholly owned subsidiaries AML and Allegro MicroSystems Europe Ltd. will provide such services in a manner generally consistent with the manner in which they were provided during the 12 months prior to the date of the TSA, and will not be obligated to perform any service in a manner that is materially more burdensome than the analogous services provided for or within its own organization or group during such 12 -month period. The services contemplated by the TSA include human resources, legal and distribution support services. The applicable service period for human resources and legal services is 12 months, and fees payable for such services are $ 50 per year, invoiced on a quarterly basis. The applicable service period for distribution support services is six months with respect to services provided in North America and South America, and nine months with respect to services provided in Europe. All distribution support services are to be provided on a cost plus 10 % basis. The Company received $ 25 under the TSA during each of the fiscal years ended March 25, 2022 and March 26, 2021. The TSA has an initial term of 12 months and may be extended for additional 12 -month terms on an annual basis if the parties so agree prior to the expiration of the then-current term. Unless the TSA otherwise provides, PSL may terminate a specific service prior to the end of the term by providing at least 60 days’ prior written notice. The North America and South America portion of this agreement was terminated as of March 26, 2021. Transactions involving Sanken Electric Europe Ltd. (“SEEL”) During fiscal year ended March 26, 2021 and after the PSL Divestiture, Sanken, through PSL formed SEEL to cover its distribution business in Europe. The Company in connection with the TSA agreement with Sanken and PSL paid certain costs on behalf of them, and, as such, had related party accounts receivable from SEEL of none and $ 1,272 as of March 25, 2022 and March 26, 2021, respectively. Sublease Agreement In 2014, the Company, through one of its subsidiaries, entered into a sublease agreement with Sanken pursuant to which it subleases certain office building space in Japan from Sanken. The sublease automatically renews on an annual basis unless either party provides notice to the other party otherwise and can be terminated by either party upon providing six months ’ notice. The Company made aggregate payments of approximately $ 200 to Sanken under the sublease agreement during each of the fiscal years 2022, 2021 and 2020. Consulting Agreement In September 2017 and prior to Reza Kazerounian becoming a member of the Company’s board of directors, the Company entered into a board executive advisor agreement, as amended in June 2018 (the “Consulting Agreement”), with Mr. Kazerounian, pursuant to which the Company engaged Mr. Kazerounian to serve as executive advisor to the board of directors and the office of Chief Executive Officer. The Consulting Agreement provides for a fee payable to Mr. Kazerounian on a monthly basis in exchange for his services (which fee was reduced from $ 30 per month to $ 19 per month in connection with Mr. Kazerounian’s appointment to the board of directors in June 2018), as well as a grant of 12,000 shares of the Company’s Class L common stock and a signing bonus of $ 54 in connection with the execution of the Consulting Agreement. The Consulting Agreement provides that if Mr. Kazerounian’s employment is terminated by the board of directors, he will be entitled to a severance payment in the amount of $ 180 as well as a six-month vesting acceleration of his shares of Class L common stock. The board of directors and Mr. Kazerounian each have the right to terminate the Consulting Agreement at any time. During the fiscal years ended March 25, 2022, March 26, 2021 and March 27, 2020 , the Company paid aggregate fees of $ 260 , $ 318 and $ 494 , respectively, to Mr. Kazerounian pursuant to the Consulting Agreement. 22. Subsequent Events Chief Executive Officer Transition On May 9, 2022, the Company announced via press release and a Current Report on Form 8-K that its President and Chief Executive Officer, Ravi Vig, provided notice of his retirement from the Company and its Board of Directors on May 6, 2022. Mr. Vig’s retirement will become effective on June 13, 2022. On May 7, 2022, the Board of Directors of the Company appointed Vineet Nargolwala to serve as President and Chief Executive Officer of the Company effective June 13, 2022. In addition, the Company’s Board of Directors elected Mr. Nargolwala as a Class I director of the Board to serve until the Company’s 2024 annual meeting of stockholders and until his successor is elected or appointed and qualified or until his earlier death, resignation, disqualification or removal. Mr. Vig will F-49 ALLEGRO MICROSYSTEMS, INC. Notes to Consolidated Financial Statements – (continued) (Amounts in thousands, except share and per share amounts) work closely with Mr. Nargolwala and will consult with the Company up to six months after his retirement date to ensure a smooth and orderly transition of responsibilities. Mr. Nargolwala is a technology executive with over 25 years of global executive leadership experience. Prior to joining Allegro, Mr. Nargolwala previously served as Executive Vice President of Sensing Solutions at Sensata Technologies (NYSE: ST), a leading industrial technology company that develops sensors and sensor-based solutions for the automotive, heavy vehicle and off-road, industrial, and aerospace industries, from March 2020 to May 2022. Mr. Nargolwala joined Sensata as Vice President, Sensors Americas in February 2013 and was later promoted to Senior Vice President, Performance Sensing, North America, Japan and Korea in April 2016. In February 2019, he was appointed Senior Vice President, General Manager, Global Safety & Mobility, and in September 2019, he was appointed Senior Vice President, Sensing Solutions. Prior to Sensata, he was with Honeywell International Inc. for over nine years in business strategy and P&L leadership roles of increasing responsibility. Prior to Honeywell, Mr. Nargolwala was at Nortel Networks in product management and engineering roles. Mr. Nargolwala holds a Bachelor’s degree in Electrical Engineering from Maharaja Sayajirao University in Baroda, India, a Master’s degree in Electrical Engineering from the University of Texas and a Master of Business Administration from Cornell University. F-50