3 unchanged sentences
Changes in Internal Control over Financial Reporting
−Removed: There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year ended December 28, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
−Removed: On October 9, 2019, we acquired FRT GmbH and are integrating the acquired business into our overall internal control over financial reporting process.
+Added: There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) except ad described below that occurred during the fiscal year ended December 26, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: On July 30, 2020, we completed the acquisition of the probe card assets of Advantest Corporation ("Baldwin Park"), located in Baldwin Park, California, and on October 19, 2020, we acquired 100% of the shares of High Precision Devices, Inc.
+Added: located in Boulder, Colorado, and are integrating the acquired businesses into our overall internal control over financial reporting process.
Our management is in the process of assessing the internal control over financial reporting and is implementing or revising internal controls where necessary.
7 unchanged sentences
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.
−Removed: We acquired FRT GmbH on October 9, 2019, and we have not yet completed the process of integrating the acquired business’ internal control over financial reporting into our overall internal control over financial reporting process.
−Removed: Accordingly, we excluded from our assessment of internal control over financial reporting as of December 28, 2019, the internal control over financial reporting of FRT GmbH.
−Removed: Associated with FRT GmbH are total assets of $35.2 million, including goodwill and identified intangibles, and net revenues of $ 3.9 million included in our consolidated financial statements as of and for the fiscal year ended December 28, 2019.
+Added: We acquired Baldwin Park and HPD on July 30, 2020 and October 19, 2020, respectively, and have not yet completed the process of integrating the acquired business’ internal control over financial reporting into our overall internal control over financial reporting process.
+Added: Accordingly, excluded from our assessment of internal control over financial reporting as of December 26, 2020 are the internal controls of Baldwin Park and HPD.
+Added: Baldwin Park's total assets, including goodwill and identified intangibles, and total revenues represented approximately 4% and less than 1%, respectively, of the Consolidated Financial Statement amounts as of and for the year ended December 26, 2020.
+Added: HPD's total assets, including goodwill and identified intangibles, and total revenues represented approximately 3% and less than 1%, respectively, of the Consolidated Financial Statement amounts as of and for the year ended December 26, 2020.
Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 26, 2020.
9 unchanged sentences
The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
−Removed: Over time, controls
−Removed: may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
+Added: Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
CEO and CFO Certifications
33 unchanged sentences
Description of Securities — — — — X
−Removed: Credit Agreement among FormFactor, Inc.
−Removed: as Borrower, the Guarantors that are from time to time parties thereto, HSBC Bank USA, National Association, as Administrative Agent, Lead Lender, Co-Lead Arranger, Sole Bookrunner, Syndication Agent and Lender, the Lenders that are from time to time parties thereto, and Silicon Valley Bank, as Co-Lead Arranger and Documentation Agent, dated as of June 24, 2016 8-K 000-50307 6/28/2016 10.1
−Removed: First Amendment to Credit Agreement dated April 19, 2017 among FormFactor, Inc.
−Removed: and HSBC Bank USA, National Association.
−Removed: 10-K 000-50307 2/27/2018 10.2
Form of Indemnity Agreement S-1/A 333-86738 5/28/2002 10.01
Form of Change of Control Severance Agreement 10-K 000-50307 3/14/2005 10.48
−Removed: Employee Incentive Plan, as amended and restated effective October 1, 2019 — — — — X
+Added: Employee Incentive Plan, as amended and restated effective October 1, 2019 10-K 000-50307 2/21/2020 10.9
Equity Incentive Plan, as amended and restated effective May 15, 2020 DEF 14A 000-50307 4/3/2020 Appendix A
19 unchanged sentences
and FormFactor, Inc., as amended 8-K 000-50307 10/2/2018 10.2
−Removed: Lease Agreements I and II between Amberjack, Ltd.
−Removed: and Cascade Microtech, Inc.
−Removed: dated August 20, 1997, and Amendment No.
−Removed: 2 to Lease Agreement I dated July 23, 1998, and Amendment No.
−Removed: 2 to Lease Agreement II dated April 12, 1999.
−Removed: S-1 333-47100 10/2/2000 10.9
−Removed: Third Amendment dated August 11, 2006 to Lease Agreement I dated August 20, 1997 between Amberjack, LTD.
−Removed: and Cascade Microtech, Inc.
−Removed: 10-Q 000-51072 11/9/2006 10.2
−Removed: Third Amendment dated August 11, 2006 to Lease Agreement II dated August 20, 1997 between Amberjack, LTD.
−Removed: and Cascade Microtech, Inc.
−Removed: 10-Q 000-51072 11/9/2006 10.3
−Removed: Assignment, Assumption and Amendment of Lease dated as of September 22, 2011 by and among Cascade Microtech, Inc.
−Removed: and R&D Sockets, Inc.
−Removed: 8-K 000-51072 9/26/2011 10.1
Rental Agreement by and between Cascade Microtech Dresden GmbH and Süss Grundstücksverwaltungs GbR dated as of June 17, 2011.
10-Q 000-51072 8/10/2011 10.3
−Removed: Lease dated April 2, 1999 between Spieker Properties, L.P.
−Removed: and Cascade Microtech, Inc.
−Removed: S-1 333-47100 10/2/2000 10.8
First Amendment to Lease dated January 10, 2007, between Nimbus Center LLC (as successor in interest to Spieker Properties, L.P.) and Cascade Microtech, Inc.
12 unchanged sentences
CEO Change of Control and Severance Agreement, dated April 28, 2016 by and between Mike Slessor and the Registrant 10-K 000-50307 3/15/2017 10.35
−Removed: Change of Control and Severance Agreement, dated April 28, 2016 by and between Michael Ludwig and the Registrant 10-K 000-50307 3/15/2017 10.36
Employment Offer Letter, dated February 15, 2018 to Shai Shahar 10-Q 000-50307 5/8/2018 10.1
58 unchanged sentences
and subsidiaries (the Company) as of December 26, 2020 and December 28, 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 26, 2020, and the related notes (collectively, the consolidated financial statements).
−Removed: We also have audited the Company’s internal control over financial reporting as of December 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: We also have audited the Company’s internal control over financial reporting as of December 26, 2020, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 26, 2020 and December 28, 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 26, 2020, in conformity with U.S.
generally accepted accounting principles.
−Removed: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: The Company acquired FRT GmbH during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 28, 2019, FRT GmbH’s internal control over financial reporting associated with total assets of $35.2 million and total revenues of $3.9 million included in the consolidated financial statements of the Company as of and for the year ended December 28, 2019.
−Removed: Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of FRT GmbH.
+Added: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2020, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: The Company acquired the probe card assets of Advantest Corporation (Baldwin Park) and 100% of the shares of High Precision Devices, Inc.
+Added: ("HPD") during 2020, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 26, 2020, Baldwin Park’s and HPD’s internal control over financial reporting associated with total assets representing approximately 4% and 3% of consolidated assets as of December 26, 2020, respectively, and total revenues each representing less than 1% of consolidated revenues as of and for the year ended December 26, 2020.
+Added: Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Baldwin Park and HPD.
Change in Accounting Principle
2 unchanged sentences
Codification Improvements .”
−Removed: As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue from contracts with customers as of December 31, 2017 due to the adoption of Accounting Standards Codification 606, “Revenue from Contracts with Customers.”
Basis for Opinions
8 unchanged sentences
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
−Removed: Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
−Removed: on the assessed risk.
+Added: Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances.
13 unchanged sentences
As discussed in notes 2 and 3 to the consolidated financial statements, the Company’s net inventories were $99.2 million as of December 26, 2020, and inventory write-downs totaled $13.1 million for the year ended December 26, 2020.
−Removed: The Company states its inventories at the lower of cost or net realizable value.
+Added: T he Company states its inventories at the lower of cost or net realizable value.
The Company records an adjustment to the cost basis of inventory when evidence exists that the net realizable value of inventory is lower than its cost, which occurs when the Company has excess and/or obsolete inventory.
3 unchanged sentences
Complex auditor judgment was required to evaluate that past consumption, recent purchases, or backlog accurately indicate future consumption and thus meet the accounting objective of recording inventory at the lower of its cost or net realizable value.
−Removed: The primary procedures we performed to address this critical audit matter included the following.
−Removed: We tested certain internal controls over the Company’s process to develop the assumptions used to predict future consumption of inventory.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter.
+Added: This included controls related to the Company’s process to develop the assumptions used to predict future consumption of inventory.
We assessed the Company’s assumptions about how past consumption, recent purchases, or backlog indicate future consumption by:
32 unchanged sentences
Total current liabilities 154,571 136,560
−Removed: Term loan, less current portion, net of unamortized issuance cost of $0 and $29 15,639 34,971
+Added: Term loans, less current portion, net of unamortized issuance cost of $ 70 and $ 0
+Added: 24,978 15,639
Deferred tax liabilities 5,346 6,986
60 unchanged sentences
Balances, December 30, 2017 72,532,176 $ 73 $ 843,116 $ 3,021 $ ( 387,573 ) $ 458,637
+Added: Issuance of common stock under the Employee Stock Purchase Plan 610,297 1 6,661 — — 6,662
Issuance of common stock pursuant to exercise of options for cash 134,609 — 1,158 — — 1,158
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax 862,630 — ( 5,791 ) — — ( 5,791 )
−Removed: Issuance of common stock under the Employee Stock Purchase Plan 655,961 1 5,694 — — 5,695
−Removed: Purchase and retirement of common stock ( 1,367,617 ) ( 1 ) ( 18,969 ) — — ( 18,970 )
Stock-based compensation — — 17,753 — — 17,753
ASU 2017-12 Adoption — — — — ( 50 ) ( 50 )
−Removed: Other comprehensive income — — — 6,761 — 6,761
+Added: Other comprehensive loss — — — ( 2,241 ) — ( 2,241 )
Net income — — — — 104,036 104,036
4 unchanged sentences
Stock-based compensation — — 22,968 — — 22,968
−Removed: ASU 2017-12 Adoption — — — — ( 50 ) ( 50 )
Other comprehensive loss — — — ( 1,439 ) — ( 1,439 )
5 unchanged sentences
Stock-based compensation — — 23,459 — — 23,459
−Removed: Other comprehensive loss — — — ( 1,439 ) — ( 1,439 )
+Added: Other comprehensive income — — — 6,545 — 6,545
Net income — — — — 78,523 78,523
11 unchanged sentences
Amortization 27,991 27,672 29,373
−Removed: Amortization (accretion) of discount on investments ( 365 ) ( 10 ) 38
+Added: Accretion of discount on investments ( 2 ) ( 365 ) ( 10 )
Reduction in the carrying amount of right-of-use assets 5,955 5,269 —
2 unchanged sentences
Deferred income tax provision (benefit) ( 562 ) 4,954 ( 74,908 )
−Removed: Benefit for doubtful accounts receivable — — ( 99 )
Provision for excess and obsolete inventories 13,117 10,421 10,479
1 unchanged sentence
Loss on disposal of long-lived assets 451 486 325
+Added: Gain on contingent consideration ( 2,879 ) — —
Foreign currency transaction losses (gains) ( 968 ) 408 125
−Removed: Loss (gain) on derivative instruments 110 — ( 10 )
+Added: Loss on derivative instruments 372 110 —
Changes in assets and liabilities:
11 unchanged sentences
Acquisition of property, plant and equipment ( 55,865 ) ( 20,847 ) ( 19,869 )
−Removed: Acquisition of FRT GmbH, net of cash acquired ( 20,524 ) — —
+Added: Acquisition of business, net of cash acquired ( 51,880 ) ( 20,524 ) —
Proceeds from sale of subsidiary 82 132 94
5 unchanged sentences
Proceeds from issuances of common stock 10,010 8,093 7,712
−Removed: Purchase and retirement of common stock — — ( 18,970 )
Tax withholdings related to net share settlements of equity awards ( 15,450 ) ( 8,025 ) ( 5,791 )
1 unchanged sentence
Payments on term loan ( 43,417 ) ( 30,000 ) ( 41,250 )
+Added: Payment of term loan issuance costs ( 78 ) — —
Net cash used in financing activities ( 30,935 ) ( 6,578 ) ( 39,329 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 3,762 ( 727 ) ( 256 )
−Removed: Net increase (decrease) in cash, cash equivalents and restricted cash 47,391 7,820 ( 9,870 )
+Added: Net increase in cash, cash equivalents and restricted cash 43,161 47,391 7,820
Cash, cash equivalents and restricted cash, beginning of year 147,937 100,546 92,726
Cash, cash equivalents and restricted cash, end of year $ 191,098 $ 147,937 $ 100,546
+Added: The accompanying notes are an integral part of these consolidated financial statements.
FORMFACTOR, INC.
10 unchanged sentences
Cash paid for interest 867 1,405 3,113
+Added: Reconciliation of cash, cash equivalents and restricted cash:
+Added: Cash and cash equivalents $ 187,225 $ 144,545 $ 98,472
+Added: Restricted cash, current 1,904 1,981 849
+Added: Restricted cash 1,969 1,411 1,225
+Added: Total cash, cash equivalents and restricted cash $ 191,098 $ 147,937 $ 100,546
The accompanying notes are an integral part of these consolidated financial statements.
4 unchanged sentences
was incorporated in Delaware on April 15, 1993 and is headquartered in Livermore, California.
−Removed: We are a leading provider of electrical test and measurement technologies.
−Removed: We provide a broad range of high-performance probe cards, analytical probes, probe stations, metrology systems, and thermal sub-systems to both semiconductor companies and scientific institutions.
−Removed: Our products provide electrical and optical metrology information from a variety of semiconductor and electro-optical devices and integrated circuits from research, to development through production.
+Added: We are a leading provider of test and measurement technologies.
+Added: We provide a broad range of high-performance probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions.
+Added: Our products provide electrical and physical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production.
Customers use our products and services to lower production costs, improve yields, and enable development of complex next generation products.
We believe our technology leadership enables critical roadmap advances for our customers.
−Removed: We also design, develop, manufacture and market advanced wafer probing and thermal solutions for the electrical and optical measurement and testing of high performance semiconductor devices.
−Removed: Design, development and manufacturing operations are located in Beaverton, Oregon, United States and Bergisch Gladbach, Munich and Thiendorf, Germany, and sales, service and support operations are located in the United States, Germany, France, South Korea, Japan, Taiwan, China and Singapore.
+Added: Design, development and manufacturing operations are located in Livermore, San Jose, Carlsbad, and Baldwin Park, California, Beaverton, Oregon and Boulder, Colorado, United States and Bergisch Gladbach, Munich and Thiendorf, Germany, and sales, service and support operations are located in the United States, Germany, France, South Korea, Japan, Taiwan, China and Singapore.
Our fiscal year ends on the last Saturday in December.
The fiscal years ended on December 26, 2020, December 28, 2019 and December 29, 2018, each consisted of 52 weeks, respectively.
−Removed: Reclassifications
−Removed: Certain immaterial reclassifications were made to the prior year financial statements to conform to the current year presentation.
Note 2— Summary of Significant Accounting Policies
2 unchanged sentences
All intercompany balances and transactions have been eliminated.
−Removed: On October 9, 2019, we completed the acquisition of FRT GmbH and, accordingly, our Consolidated Statements of Income include the results of operations of FRT GmbH since that date.
+Added: We completed the acquisitions of FRT GmbH ("FRT") on October 9, 2019, the probe card assets of Advantest Corporation ("Baldwin Park") on July 30, 2020, and High Precision Devises, Inc.
+Added: ("HPD") on October 19, 2020.
+Added: Accordingly, our Consolidated Statements of Income include the results of operations of FRT, Baldwin Park, and HPD since those dates.
+Added: See Note 4, Acquisitions .
The functional currencies of certain of our foreign subsidiaries are the local currencies and, accordingly, all assets and liabilities of these foreign operations are translated to U.S.
26 unchanged sentences
All of our available-for-sale investments are subject to a periodic impairment review.
−Removed: We record a charge to earnings when a decline in fair value is significantly below cost basis and judged to be other-than-temporary, or have other indicators of impairments.
−Removed: If the fair value of an available-for-sale investment is less than its amortized cost basis, an other-than-temporary impairment is triggered in circumstances where (1) we intend to sell the instrument;
−Removed: (2) it is more likely than not that we will be required to sell the instrument before recovery of its amortized cost basis;
−Removed: or (3) a credit loss exists where we do not expect to recover the entire amortized cost basis of the instrument.
−Removed: If we intend to sell, or it is more likely than not that we will be required to sell, the available-for-sale investment before recovery of its amortized cost basis, we recognize an other-than-temporary impairment charge equal to the difference between the investment's amortized cost basis and its fair value.
−Removed: We did not record any other-than-temporary impairments during fiscal 2019, 2018 or 2017.
+Added: If an available-for-sale debt security’s fair value is less than its amortized cost basis, then we evaluate whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses.
+Added: Unrealized gains and losses not attributable to credit losses are included, net of tax, in Accumulated other comprehensive income (loss) in our Consolidated Balance Sheets.
+Added: We did not record an allowance for credit losses during fiscal 2020.
Foreign Exchange Management
11 unchanged sentences
If circumstances change, and the financial condition of our customers is adversely affected and they are unable to meet their financial obligations, we may need to take additional allowances, which would result in an increase in our operating expense.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Activity related to our allowance for doubtful accounts receivable was as follows (in thousands):
4 unchanged sentences
Balance at end of year $ 248 $ 222 $ 185
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We state our inventories at the lower of cost (principally standard cost which approximates actual cost on a first in, first out basis) or net realizable value.
13 unchanged sentences
Restricted Cash
−Removed: Restricted cash is comprised primarily of funds held by our foreign subsidiaries for employee obligations, office leases, customer deposits, and temporary customs import permits.
+Added: Restricted cash is comprised primarily of funds held by our foreign subsidiaries for employee obligations, office leases, customer deposits, temporary customs import permits, and environmental remediation.
Property, Plant, and Equipment
5 unchanged sentences
Upon sale or retirement of assets, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets and the resulting gain or loss is reflected in Operating income in our Consolidated Statements of Income.
+Added: The Company determines if an arrangement is a lease at its inception.
+Added: Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
+Added: We uses our estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date.
+Added: The lease term includes renewal options when it is reasonably certain that the option will be exercised and excludes termination options.
+Added: To the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time.
+Added: Lease expense for these leases is recognized on a straight-line basis over the lease term.
+Added: We have elected not to recognize ROU assets and lease liabilities that arise from short-term leases for any class of underlying asset.
+Added: Operating leases are included in Operating lease, right-of-use-assets, Operating lease liabilities, and Long-term operating lease liabilities in our Consolidated Balance Sheets.
Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed.
3 unchanged sentences
If the fair value of a reporting unit exceeds the carrying amount, goodwill of the reporting unit is not considered impaired.
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We evaluate impairment by first assessing qualitative factors to determine whether it is necessary to perform a quantitative impairment test.
1 unchanged sentence
Otherwise, no further testing is required.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We perform our annual goodwill impairment test in the fourth quarter of each year by assessing qualitative factors, including, but not limited to an assessment of our market capitalization, which was significantly higher than our book value.
3 unchanged sentences
If the results of these analysis are lower than current estimates, a material impairment charge may result at that time.
−Removed: See Note 9 for additional information.
+Added: See Note 9, Goodwill and Intangible Assets , for additional information.
Intangible Assets
7 unchanged sentences
Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets.
−Removed: See Note 9 for additional information.
+Added: See Note 9, Goodwill and Intangible Assets , for additional information.
Impairment of Long-Lived Assets
17 unchanged sentences
We market and sell our products to a relatively narrow base of customers and generally do not require collateral.
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following customers represented 10% or more of our revenues:
4 unchanged sentences
* Less than 10% of revenues.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
−Removed: At December 28, 2019, three customers accounted for 25.7 %, 15.1 % and 11.5 % of gross accounts receivable, respectively.
At December 26, 2020, two customers accounted for 15.3 % and 13.7 % of gross accounts receivable, respectively.
+Added: At December 28, 2019, three customers accounted for 25.7 %, 15.1 %, and 11.5 % of gross accounts receivable, respectively.
No other customers accounted for 10% or more of gross accounts receivable for these fiscal period ends.
−Removed: We operate in the competitive semiconductor industry, including the Dynamic Random Access Memory, or DRAM, Flash memory, and Foundry & Logic and probe stations markets, which have been characterized by price erosion, rapid technological change, short product life cycles and heightened foreign and domestic competition.
−Removed: Significant technological changes in the industry could adversely affect our operating results.
We are exposed to non-performance risk by counterparties on our derivative instruments used in hedging activities.
1 unchanged sentence
These counterparties are large international financial institutions, and, to date, no such counterparty has failed to meet its financial obligations to us.
−Removed: Certain components for our products that meet our requirements are available only from a limited number of suppliers.
−Removed: The rapid rate of technological change and the necessity of developing and manufacturing products with short life cycles may intensify our reliance on such suppliers.
−Removed: The inability to obtain components as required, or to develop alternative sources, if and as required in the future, could result in delays or reductions in product shipments, which in turn could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Revenue Recognition
5 unchanged sentences
global direct sales force and through a combination of manufacturers’ representatives and distributors.
−Removed: We adopted Accounting Standards Codification ("ASC") Topic No.
−Removed: 606 effective on December 31, 2017, the first day of fiscal year 2018, using the modified retrospective method.
−Removed: We applied ASC 606 to all contracts not completed as of the date of adoption in order to determine any adjustment to the opening balance of accumulated deficit as of December 31, 2017.
−Removed: We did not restate any prior financial statements presented.
−Removed: No adjustment was recorded to accumulated deficit as of the adoption date and reported revenue would not have been different under legacy GAAP.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
5 unchanged sentences
Judgment may be required in determining if the acceptance clause is substantive.
+Added: In certain instances control of products is transferred to the customer over time based on performance and in those instances we utilize an appropriate input or output measure to determine to what extent control has transferred to the customer.
+Added: Judgment may be required in determining an appropriate measure of performance.
Installation services are routinely provided to customers purchasing our systems.
6 unchanged sentences
Sales incentives and other programs that we may make available to these customers are considered to be a form of variable consideration, which is estimated in determining the contract’s transaction price to be allocated to the performance obligations.
−Removed: We have elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component as our standard payment terms are less than one year.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on its relative stand-alone selling price.
2 unchanged sentences
Transaction price allocated to the remaining performance obligations:
−Removed: On December 28, 2019, we had $ 4.1 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts not yet delivered.
+Added: On December 26, 2020, we had $ 7.9 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts and
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: contracts with overtime revenue recognition that are not yet delivered.
We expect to recognize approximately 84.1 % of our remaining performance obligations as revenue in fiscal 2021, approximately 9.5 % in fiscal 2022, and approximately 6.4 % in fiscal 2023 and thereafter.
6 unchanged sentences
Contract assets as of December 26, 2020 and December 28, 2019 were $ 3.7 million and $ 0.9 million, respectively, and are reported on the Consolidated Balance Sheets as a component of Prepaid expenses and other current assets.
−Removed: Contract liabilities include payments received in advance of performance under a contract and are satisfied as the associated revenue is recognized.
+Added: Contract liabilities include payments received and payments due in advance of performance under a contract and are satisfied as the associated revenue is recognized.
Contract liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period as a component of Deferred revenue and Other liabilities.
4 unchanged sentences
Revenue by Category:
−Removed: Refer to Note 15 for further details.
+Added: Refer to Note 15, Segments and Geographic Information , for further details.
Warranty Obligations
17 unchanged sentences
All research and development costs are expensed as incurred.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We utilize the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse and for operating losses and tax credit carryforwards.
2 unchanged sentences
Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year.
−Removed: We are required to evaluate the realizability of our deferred tax assets on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets.
+Added: We are required to evaluate the realizability
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: of our deferred tax assets on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets.
A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized.
13 unchanged sentences
Settlement of any particular position could require the use of cash.
−Removed: See Note 13 for additional information, including the Tax Cuts and Jobs Act enacted in December 2017.
Stock-Based Compensation
−Removed: We recognize compensation expense for all stock-based awards based on the grant-date estimated fair values, net of an estimated forfeiture rate.
+Added: We recognize compensation expense for all stock-based awards based on the grant-date estimated fair values.
The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service periods in our Consolidated Statements of Income.
The fair value of stock options is measured using the Black-Scholes option pricing model, while the fair value for restricted stock units ("RSUs") is measured based on the closing market price of our common stock on the date of grant.
−Removed: The fair value of Performance RSUs ("PRSU") is based on certain market performance criteria is measured using the Monte Carlo simulation pricing model.
−Removed: See Notes 11 and 12 for additional information.
+Added: The fair value of Performance RSUs ("PRSU") is based on certain market performance criteria and is measured using the Monte Carlo simulation pricing model.
+Added: See Notes 11, Stockholders' Equity , and 12, Stock-Based Compensation , for additional information.
Net Income Per Share
21 unchanged sentences
Treasuries $ 40,602 $ 124 $ — $ 40,726
−Removed: Commercial paper 3,914 1 ( 4 ) 3,911
−Removed: Corporate bond 33,867 68 ( 7 ) 33,928
+Added: Corporate bonds 24,156 176 ( 2 ) 24,330
Certificate of deposit 2,160 19 — 2,179
17 unchanged sentences
We anticipate recovering the full cost of the securities either as market conditions improve, or as the securities mature.
−Removed: Accordingly, we believe that the unrealized losses are not other-than-temporary.
−Removed: When evaluating the investments for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below the amortized cost basis, current market liquidity, interest rate risk, the financial condition of the issuer, and credit rating downgrades.
+Added: Accordingly, we believe that the unrealized losses are not as a result of a credit loss.
As of December 26, 2020 and December 28, 2019, gross unrealized losses related to our marketable securities portfolio were not material.
7 unchanged sentences
$ 67,493 $ 67,810 $ 76,231 $ 76,327
−Removed: See also Note 8.
+Added: See also Note 8, Fair Value .
Inventories, net
8 unchanged sentences
December 26, 2020 December 28, 2019
+Added: Land $ 4,751 $ —
Machinery and equipment 226,185 201,861
14 unchanged sentences
Accrued income and other taxes 6,976 6,846
+Added: Accrued contingent consideration 4,012 —
Other accrued expenses 3,086 2,991
$ 55,342 $ 36,439
−Removed: Note 4— Acquisition
−Removed: On October 9, 2019, we acquired 100% of the shares of FRT GmbH ("FRT"), a German-based company, for total consideration of $ 25.9 million, net of cash acquired of $ 1.7 million.
+Added: Note 4— Acquisitions
+Added: High Precision Devises, Inc.
+Added: On October 19, 2020, we acquired 100 % of the shares of HPD for total consideration of $ 16.9 million, net of cash acquired of $ 1.7 million, which included an estimated adjustment for changes in working capital, which are not yet finalized.
+Added: acquisition brings highly specialized skills and know-how to address the unique test challenges within the emerging quantum computing, superconducting computing, and ultra-sensitive sensor markets which operate at temperatures as low as 30 millikelvin.
+Added: The acquisition was accounted for using the acquisition method of accounting, with FormFactor treated as the acquirer.
+Added: The acquired assets and liabilities of HPD were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.
+Added: Our Consolidated Statements of Income include the financial results of HPD subsequent to the acquisition date of October 19, 2020.
+Added: Revenue related to HPD since the acquisition date that was included in our Consolidated Statements of Income for fiscal 2020 was not material.
+Added: The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values.
+Added: The fair values assigned to assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date.
+Added: As of the reporting date, we have not completed the valuation of assets acquired and liabilities assumed.
+Added: While the quantification of identifiable intangible assets is still in process, we expect certain amounts provisionally recorded as goodwill to be allocated to such assets as customer relationships, developed technologies, backlog and potentially other technology-related assets as we complete purchase accounting.
+Added: While we have recorded a provisional allocation of value based on the best estimates available at this time, we do not yet have a final allocation of value between amortizing and non-amortizing intangible assets.
+Added: The items pending include finalizing our evaluation of acquired tangible and financial assets, finalizing the working capital adjustment under the purchase agreement, and finalizing certain key assumptions used to value intangible assets.
+Added: We expect that some amount of intangible assets provisionally recorded as goodwill may ultimately be allocated to an amortizing intangible asset or vice versa, and similarly the relative values of intangible assets may change as the valuation is finalized.
+Added: We have recorded estimated amortization based on these provisional amounts from the acquisition date through December 26, 2020.
+Added: To the extent that upon finalization the required amortization changes, we will record an adjustment to appropriately reflect amortization of the related assets between the acquisition date and the date at which the amounts become estimable.
+Added: We have one year over which to finalize purchase accounting, and while we expect to complete purchasing accounting before that time, the impact of the potential changes to estimated amounts or related amortization to the financial statements as a whole is not expected to be material.
+Added: As described above, adjustments to fair value for intangible assets have not yet been finalized, however provisional amounts are included in the table below and in the Consolidated Balance Sheets and are subject to revision as the fair value of the associated assets acquired and liabilities assumed is finalized.
+Added: The total estimated purchase price allocated to the underlying assets acquired and liabilities assumed based on the provisional amounts are as follows (in thousands):`
+Added: Cash and cash equivalents $ 1,680
+Added: Accounts receivable 1,017
+Added: Inventory 3,047
+Added: Property, plant and equipment 669
+Added: Operating lease, right-of-use-assets 2,554
+Added: Prepaid expenses and other assets 599
+Added: Tangible assets acquired 9,566
+Added: Deferred revenue ( 2,393 )
+Added: Accounts payable and accrued liabilities ( 1,268 )
+Added: Operating lease liabilities ( 2,554 )
+Added: Deferred tax liability ( 3,465 )
+Added: Total net tangible assets acquired and liabilities assumed ( 114 )
+Added: Intangible assets 14,020
+Added: Goodwill 4,654
+Added: Net assets acquired $ 18,560
+Added: The preliminary intangible assets as of the closing date of the acquisition included (in thousands):
+Added: Amount Weighted Average Useful Life (in years)
+Added: Developed technologies $ 8,000 10.0
+Added: Customer relationships 5,400 5.0
+Added: Order backlog 400 0.5
+Added: Trade names 220 5.0
+Added: Total intangible assets $ 14,020 7.7
+Added: The fair value of the intangible assets acquired in connection with the acquisition was determined using either the income, market or replacement cost methodologies.
+Added: The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized.
+Added: Identifiable Intangible Assets
+Added: Valuation of intangible assets involves multiple assumptions.
+Added: The key assumptions are described below.
+Added: Developed technology acquired primarily consists of existing technology related to cryogenic probe stations, Adiabatic Demagnetization Refrigerator ("ADR"), and continuous ADR cryostats and similar tools, and technology related to other cryogenic applications.
+Added: We valued the developed technology using the multi-period excess earnings method under the income approach.
+Added: Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return.
+Added: Customer relationships represent the fair value of future projected revenues that will be derived from the sale of products to HPD's existing customers.
+Added: We valued customer relationships using the incremental cash flow method.
+Added: This method estimates value based on the incremental cash flow afforded by having the customers relationships in place on the acquisition date versus having no relationships in place and needing to replicate or replace those relationships.
+Added: The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.
+Added: Order backlog represents business under existing contractual obligations.
+Added: Expected cash flow from order backlog was valued on a discounted direct cash flow basis, net of returns on contributory assets such as working capital, property and equipment, trade name and assembled workforce.
+Added: The identified trade names intangibles relate to the estimated fair value of future cash flows related to the HPD brand.
+Added: We valued trade names by applying the relief-from-royalty method under the income approach.
+Added: This method is based on the application of a royalty rate to forecasted revenue under the trade name.
+Added: The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition.
+Added: We believe the factors that contributed to goodwill include synergies that are specific to our consolidated business, such as cost savings and operational efficiencies, and the acquisition of a talented workforce that expands our expertise in business development and commercializing semiconductor test products, none of which qualify for recognition as a separate intangible asset.
+Added: We do not expect any portion of this goodwill to be deductible for tax purposes.
+Added: The goodwill attributable to the acquisition was recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment.
+Added: The goodwill arising from the acquisition was allocated to the HPD reporting unit within the Systems reportable segment.
+Added: We have not presented unaudited combined pro forma financial information as the HPD acquisition was not significant to our consolidated results of operations and financial position.
+Added: Baldwin Park Acquisition
+Added: On July 30, 2020, we acquired the probe card assets of Advantest Corporation for total cash consideration of $ 35.0 million.
+Added: This acquisition brings important enabling technologies and capabilities for designing and manufacturing advanced probe cards, and adds a complementary 3D-NAND Flash probe-card product that is qualified and in production at one of the world's leading NAND Flash manufacturers.
+Added: The acquisition was accounted for using the acquisition method of accounting, with FormFactor treated as the acquirer.
+Added: The acquired assets and liabilities of Baldwin Park were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.
+Added: Our Consolidated Statements of Income include the financial results of Baldwin Park subsequent to the acquisition date of July 30, 2020.
+Added: Revenue related to Baldwin Park since the acquisition date that was included in our Consolidated Statements of Income for fiscal 2020 was not material.
+Added: The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values.
+Added: The fair values assigned to assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date.
+Added: Our purchase accounting remains open as of the reporting date, subject to finalization of the fair value of certain acquired assets and liabilities.
+Added: The item pending includes finalizing certain key assumptions used to value intangible assets.
+Added: The estimated fair value of assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):
+Added: Accounts receivable $ 4,365
+Added: Inventory 2,579
+Added: Property, plant and equipment 9,053
+Added: Operating lease, right-of-use-assets 519
+Added: Prepaid expenses and other assets 56
+Added: Tangible assets acquired 16,572
+Added: Accounts payable and accrued liabilities ( 743 )
+Added: Operating lease liabilities ( 519 )
+Added: Total net tangible assets acquired and liabilities assumed 15,310
+Added: Intangible assets 14,100
+Added: Goodwill 5,590
+Added: Net assets acquired $ 35,000
+Added: The preliminary intangible assets as of the closing date of the acquisition included (in thousands):
+Added: Amount Weighted Average Useful Life (in years)
+Added: Developed technologies $ 10,400 10.0
+Added: Customer relationships 3,300 3.0
+Added: In-process research and development 400 N/A
+Added: Total intangible assets $ 14,100 8.3
+Added: Indications of fair value of the intangible assets acquired in connection with the acquisition were determined using either the income, market or replacement cost methodologies.
+Added: The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized.
+Added: Identifiable Intangible Assets
+Added: Valuation of intangible assets involves multiple assumptions.
+Added: The key assumptions are described below.
+Added: Developed technology acquired consists of existing technology related to 3D NAND Flash probe cards and the value of cost savings expected to be derived from Low Temperature Co-fired Ceramic ("LTCC") technology.
+Added: We valued the developed technology related to 3D NAND Flash using the multi-period excess earnings method under the income approach.
+Added: Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return.
+Added: We valued the LTCC developed technology asset using the incremental cash flow method.
+Added: This method estimates value based on the incremental cash flow afforded by having the LTCC capability in place on the acquisition date versus having no capability in place and needing to replicate or replace that capability.
+Added: The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.
+Added: In-process research and development acquired primarily consists of research and development projects that were in process at the time of acquisition related to technologies used in DRAM probe cards.
+Added: Once these projects are complete they will be placed in developed technologies and amortized over its useful life.
+Added: We valued the IPR&D using the multi-period excess earnings method under the income approach.
+Added: Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return.
+Added: Customer relationships represent the fair value of future projected revenues that will be derived from the sale of products to Baldwin Park's existing customers.
+Added: We valued customer relationships using the incremental cash flow method.
+Added: This method estimates value based on the incremental cash flow afforded by having the customers relationships in place on the acquisition date versus having no relationships in place and needing to replicate or replace those relationships.
+Added: The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.
+Added: The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition.
+Added: We believe the factors that contributed to goodwill include synergies that are specific to our consolidated business, such as cost savings and operational efficiencies, and the acquisition of a talented workforce that expands our expertise in business development, none of which qualify for recognition as a separate intangible asset.
+Added: We expect this goodwill to be deductible for tax purposes.
+Added: The goodwill attributable to the acquisition was recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment.
+Added: The goodwill arising from the acquisition was allocated to the Probe Cards reporting unit within the Probe Cards reportable segment.
+Added: We have not presented unaudited combined pro forma financial information as the Baldwin Park acquisition was not significant to our consolidated results of operations and financial position.
+Added: FRT GmbH Acquisition
+Added: On October 9, 2019, we acquired 100 % of the shares of FRT, a German-based company, for total consideration of $ 26.9 million, net of cash acquired of $ 1.7 million.
The fair value of the purchase consideration was comprised of a $ 22.2 million cash payment and $ 6.5 million of contingent consideration.
1 unchanged sentence
We estimated the fair value of contingent consideration using a probability weighted approach.
−Removed: Key assumptions in determining the fair value of contingent
−Removed: consideration include estimating the probability of achieving certain EBIT levels and discounting at an appropriate discount rate.
+Added: Key assumptions in determining the fair value of contingent consideration include estimating the probability of achieving certain EBIT levels and discounting at an appropriate discount rate.
+Added: See Note 8, Fair Value, for additional information .
This acquisition strengthens our leadership in test and measurement by expanding our addressable market into 3D hybrid surface metrology and extending the optical applications scope of our existing Systems segment.
1 unchanged sentence
The acquired assets and liabilities of FRT were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.
−Removed: During fiscal 2019, we incurred approximately $ 0.5 million in transaction costs related to the acquisition, which primarily consisted of legal, accounting and valuation-related expenses.
−Removed: These expenses were recorded in Selling, general and administrative expense in the accompanying Consolidated Statements of Income.
Our Consolidated Statements of Income include the financial results of FRT subsequent to the acquisition date of October 9, 2019.
−Removed: Revenue related to FRT since the acquisition date that was included in our Consolidated Statements of Income for fiscal 2019 was approximately $ 3.9 million.
+Added: Revenue in fiscal 2019 related to FRT subsequent to the acquisition date that was included in our Consolidated Statements of Income was not material.
Separate from the purchase agreement, we entered into a term loan agreement with a lender for an aggregate amount of $ 23.4 million to finance the acquisition.
−Removed: See Note 5 for additional information.
+Added: See Note 5, Debt , for additional information.
The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values.
The fair values assigned to assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date.
−Removed: We have not yet finalized the purchase accounting as certain amounts are preliminary, specifically related to the valuation of intangible assets, and due to ongoing validation of acquired tangible assets and liabilities.
−Removed: The amounts reported below and in the Consolidated Statements of Income and Consolidated Balance Sheets represent our best estimate of the fair value based on information available to us at this time.
−Removed: The table below summarizes the estimated fair value of assets acquired and liabilities assumed following the adjustments mentioned above (in thousands) as of the acquisition date:
+Added: We have finalized our allocation of the assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):
Cash and cash equivalents $ 1,687
3 unchanged sentences
Operating lease, right-of-use-assets 335
−Removed: Prepaid expenses and other current assets 838
+Added: Prepaid expenses and other assets 838
Tangible assets acquired 9,278
3 unchanged sentences
Deferred tax liabilities ( 5,757 )
−Removed: Total tangible assets acquired and liabilities assumed ( 127 )
+Added: Total net tangible assets acquired and liabilities assumed 71
Intangible assets 17,429
38 unchanged sentences
On June 24, 2016, we entered into a Credit Agreement (the “Credit Agreement”) with HSBC Bank USA, National Association ("HSBC"), as administrative agent, co-lead arranger, sole bookrunner and syndication agent, other lenders that may from time-to-time be a party to the Credit Agreement, and certain guarantors.
−Removed: Pursuant to the Credit Agreement, the lenders have provided us with a senior secured term loan facility of $ 150 million (the “CMI Term Loan”).
+Added: Pursuant to the Credit Agreement, the lenders provided us with a senior secured term loan facility of $ 150 million (the “CMI Term Loan”).
The proceeds of the CMI Term Loan were used to finance a portion of the purchase price paid in connection with the Cascade Microtech acquisition in fiscal 2016 and to pay related bank fees and expenses.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
−Removed: The CMI Term Loan bears interest at a rate equal to, at our option, (i) the applicable London Interbank Offered Rate ("LIBOR") rate plus 2.00 % per annum or (ii) Base Rate (as defined in the Credit Agreement) plus 1.00 % per annum.
−Removed: We have initially elected to pay interest at 2.00 % over the one-month LIBOR rate.
−Removed: Interest payments are payable in quarterly installments over a five -year period.
−Removed: The interest rate at December 28, 2019 was 3.71 %.
−Removed: The principal payments on the CMI Term Loan are paid in equal quarterly installments that began June 30, 2016, in an annual amount equal to 5 % for year one, 10 % for year two, 20 % for year three, 30 % for year four and 35 % for year five.
−Removed: In addition to quarterly installments, we made prepayments totaling $ 15.0 million in fiscal 2018 and $ 20.0 million in fiscal 2017.
−Removed: We did not make any prepayments in fiscal 2019.
−Removed: The planned final payment on the CMI Term Loan is scheduled for the third quarter of fiscal 2020.
−Removed: On July 25, 2016, we entered into an interest-rate swap agreement with HSBC and other lenders to hedge the interest payments on the CMI Term Loan.
−Removed: See Note 7 for additional information.
−Removed: The obligations under the CMI Term Loan are fully and unconditionally guaranteed by certain of our existing and subsequently acquired or organized direct and indirect domestic subsidiaries and are secured by a perfected first priority security interest in substantially all of our assets and the assets of those guarantors, subject to certain customary exceptions.
−Removed: The CMI Term Loan contains negative covenants customary for financing of this type, including covenants that place limitations on the incurrence of additional indebtedness, the creation of liens, the payment of dividends;
−Removed: dispositions;
−Removed: fundamental changes, including mergers and acquisitions;
−Removed: loans and investments;
−Removed: sale leasebacks;
−Removed: negative pledges;
−Removed: transactions with affiliates;
−Removed: changes in fiscal year;
−Removed: sanctions and anti-bribery laws and regulations, and modifications to charter documents in a manner materially adverse to the Lenders.
−Removed: The CMI Term Loan also contains affirmative covenants and representations and warranties customary for financing of this type.
−Removed: In addition, the CMI Term Loan contains financial maintenance covenants requiring:
−Removed: • a ratio of total debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") not in excess of 2.50 to 1.00;
−Removed: • a fixed charge coverage ratio of not less than 1.50 to 1.00, stepping down to 1.30 to 1.00 at the end of the fiscal quarter ended June 30, 2018 and to 1.20 to 1.00 at the end of the fiscal quarter ending June 30, 2019.
−Removed: As of December 28, 2019, we were in compliance with all of the financial covenants.
−Removed: The CMI Term Loan contains customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, bankruptcy or insolvency proceedings, change of control, certain material Employee Retirement Security Act ("ERISA") events and cross event of default and cross-acceleration in respect of other material debt.
+Added: The CMI Term Loan bore interest at a rate equal to, at our option, (i) the applicable London Interbank Offered Rate ("LIBOR") rate plus 2.00 % per annum or (ii) Base Rate (as defined in the Credit Agreement) plus 1.00 % per annum.
+Added: We elected to pay interest at 2.00 % over the one-month LIBOR rate.
+Added: Interest payments were payable in quarterly installments over a five-year period.
+Added: The principal payments on the CMI Term Loan were scheduled to be paid in equal quarterly installments that began June 30, 2016, in an annual amount equal to 5 % for year one, 10 % for year two, 20 % for year three, 30 % for year four and 35 % for year five.
+Added: We accelerated payments of these scheduled amounts and made the final payment on the CMI Term Loan on June 30, 2020, approximately one year before the original maturity.
+Added: We are no longer subject to the terms of the Credit Agreement.
FRT Term Loan
−Removed: On October 25, 2019, we entered into a $ 23.4 million three-year credit facility loan agreement (the "FRT Term Loan") with HSBC Trinkaus & Burkhardt AG, Germany, to fund the acquisition of FRT GmbH, which we acquired on October 9, 2019.
−Removed: See Note 4 for further details of the acquisition.
−Removed: The FRT Term Loan bears interest at a rate equal to the Euro Interbank Offered Rate ("EURIBOR") plus 1.75 % per annum and will be repaid in quarterly installments of approximately $ 1.9 million plus interest beginning January 25, 2020.
+Added: On October 25, 2019, we entered into a euro denominated $ 23.4 million three-year credit facility loan agreement (the "FRT Term Loan") with HSBC Trinkaus & Burkhardt AG, Germany, to fund the acquisition of FRT GmbH, which we acquired on October 9, 2019.
+Added: See Note 4, Acquisitions , for further details of the acquisition.
+Added: The FRT Term Loan bears interest at a rate equal to the Euro Interbank Offered Rate ("EURIBOR") plus 1.75 % per annum and will be repaid in quarterly installments of approximately $ 2.0 million plus interest.
+Added: The interest rate at December 26, 2020 was 1.24 %.
The obligations under the FRT Term Loan are fully and unconditionally guaranteed by FormFactor, Inc.
−Removed: The Credit Facility contains negative covenants customary for financing of this type, including covenants that place limitations on the incurrence of additional indebtedness, the creation of liens, the payment of dividends;
+Added: The FRT Term Loan contains negative covenants customary for financing of this type, including covenants that place limitations on the incurrence of additional indebtedness, the creation of liens, the payment of dividends;
dispositions;
7 unchanged sentences
The FRT Term Loan also contains affirmative covenants and representations and warranties customary for financing of this type.
−Removed: Future principal and interest payments on our term loans as of December 28, 2019, based on the interest rate in effect at that date were as follows (in thousands):
+Added: As of December 26, 2020, the balance outstanding pursuant to the FRT term loan was $ 17.1 million.
FORMFACTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: Building Term Loan
+Added: On June 22, 2020, we entered into an $ 18.0 million 15-year credit facility loan agreement (the “Building Term Loan”) with MUFG Union Bank, National Association ("Union Bank").
+Added: The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California.
+Added: The Building Term Loan bears interest at a rate equal to the applicable LIBOR rate plus 1.75 % per annum.
+Added: Interest payments are payable in monthly installments over a fifteen-year period.
+Added: The interest rate at December 26, 2020 was 1.90 %.
+Added: On March 17, 2020, we entered into an interest rate swap agreement with Union Bank to hedge the interest payments on the Building Term Loan for the notional amount of $ 18.0 million.
+Added: As future levels of LIBOR over the life of the loan are uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates.
+Added: By entering into the agreement, we convert a floating rate interest at one-month LIBOR plus 1.75 % into a fixed rate interest at 2.75 %.
+Added: The interest rate swap also includes a 0 % floor that is effective for one year from the date of the swap.
+Added: As of December 26, 2020, the notional amount of the loan that is subject to this interest rate swap is $ 17.5 million.
+Added: See Note 8, Fair Value and Derivative Instruments , for additional information.
+Added: The obligations under the Building Term Loan are guaranteed by a deed of trust covering certain real property and improvements and certain personal property used in connection therewith.
+Added: The deed of trust creates a first priority lien or encumbrance on the property with only such exceptions as may be approved by the Union Bank in writing.
+Added: The Credit Agreement contains covenants customary for financing of this type.
+Added: As of December 26, 2020, the balance outstanding pursuant to the Building Term Loan was $ 17.5 million.
+Added: Future principal and interest payments on our term loans as of December 26, 2020, based on the interest rate in effect at that date were as follows (in thousands):
Payments Due In Fiscal Year
−Removed: 2020 2021 2022 Total
+Added: 2021 2022 2023 2024 2025 2026 and thereafter Total
Term loans - principal payments $ 9,521 $ 9,549 $ 1,050 $ 1,080 $ 1,111 $ 12,258 $ 34,569
1 unchanged sentence
503 377 290 271 248 1,185 2,874
−Removed: Total $ 43,615 $ 7,993 $ 7,885 $ 59,493
−Removed: (1) Represents our minimum interest payment commitments at 1.35 % per annum for the FRT Term Loan and 3.71 % per annum for the CMI Term Loan.
+Added: $ 10,024 $ 9,926 $ 1,340 $ 1,351 $ 1,359 $ 13,443 $ 37,443
+Added: (1) Represents our minimum interest payment commitments at 1.24 % per annum for the FRT Term Loan and 1.90 % per annum for the Building Term Loan.
Note 6— Leases
−Removed: Adoption of New Accounting Standards
−Removed: ASU 2016-02, ASU 2018-10, ASU 2018-11 and ASU 2019-01
−Removed: In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)," which requires the recognition of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet.
−Removed: ASU 2016-02 was amended in July 2018 by both ASU 2018-10, "Codification Improvements to Topic 842, Leases," and ASU 2018-11, "Leases (Topic 842):
−Removed: Targeted Improvements" and in March 2019 by ASU 2019-01, "Leases (Topic 842):
−Removed: Codification Improvements." ASU 2016-02, provides additional guidance on the measurement of the right-of-use assets and lease liabilities and requires enhanced disclosures about our leasing arrangements.
−Removed: Topic 842 replaced the prior existing lease accounting rules under Accounting Standards Codification 840, "Leases (Topic 840)."
−Removed: We adopted Topic 842 and all related amendments on December 30, 2018, the first day of fiscal 2019, using the modified transition approach.
−Removed: The modified transition approach permits a company to use its effective date as the date of initial application to apply the standard to its leases, and, therefore, not restate comparative prior period financial information.
−Removed: Consequently, prior period financial information is not updated, and the disclosures required under the new standard will not be provided for dates and periods before December 30, 2018.
−Removed: The standard provides several optional practical expedients in transition.
−Removed: We elected the "package of practical expedients," which permits us to not reassess, under the new standard, our prior conclusions about lease identification, lease classification and initial direct costs.
−Removed: We did not elect the use-of-hindsight or the practical expedient pertaining to land easements;
−Removed: the latter not being applicable to us.
−Removed: The new standard also provides practical expedients for an entity’s ongoing accounting.
−Removed: We elected the short-term lease recognition exemption.
−Removed: This means, for those leases that qualify, we will not recognize a right-of-use asset or lease liability, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition.
−Removed: We also elected the practical expedient to not separate lease and non-lease components for all our leases.
−Removed: The adoption of the lease standard did not have any effect on our previously reported Consolidated Statements of Income and did not result in a cumulative catch-up adjustment to opening equity.
−Removed: Upon adoption, we recognized operating lease liabilities of approximately $ 40.0 million based on the present value of the remaining minimum rental payments.
−Removed: We also recognized corresponding operating lease, right-of-use-assets of approximately $ 35.7 million, net of deferred rent, which is classified separately in our Consolidated Balance Sheets.
−Removed: These operating lease, right-of-use assets relate to real estate space under non-cancelable operating lease agreements for commercial and industrial space, as well as for our corporate headquarters located in Livermore, California.
+Added: We adopted Accounting Standards Update ("ASU") 2016-02, “ Leases (Topic 842) ,” ASU 2018-10, “ Codification Improvements to Topic 842, Leases ,” ASU 2018-11, “ Leases (Topic 842):
+Added: Targeted Improvements ,” and ASU 2019-01, “ Leases (Topic 842):
+Added: Codification Improvements ," on December 30, 2018, the first day of fiscal 2019, using the modified transition approach.
+Added: The modified transition approach permitted a company to use its effective date as the date of initial application and to apply the standard to its leases, and, therefore, not restate comparative prior period financial information.
+Added: Consequently, prior period financial information is not updated, and the disclosures required under the new standard are not provided for the period before December 30, 2018.
+Added: Our operating lease, right-of-use assets relate to real estate space under non-cancelable operating lease agreements for commercial and industrial space, as well as for our corporate headquarters located in Livermore, California.
Our leases have remaining terms of 1 to 8 years, and some leases include options to extend up to 20 years.
1 unchanged sentence
We did not include any of our renewal options in our lease terms for calculating our lease liability as the renewal options allow us to maintain operational flexibility and we are not reasonably certain we will exercise these options at this time.
−Removed: The weighted-average remaining lease term for our operating leases was 7 years at December 28, 2019 and the weighted-average discount rate was 4.70 % based on our incremental borrowing rate as of the adoption date of Topic 842.
−Removed: The components of lease expense for the year ended December 28, 2019 upon the adoption of ASC 842 were as follows (in thousands):
+Added: The weighted-average remaining lease term for our operating leases was 6.6 years at December 26, 2020 and the weighted-average discount rate was 4.33 %.
FORMFACTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: The components of lease expense were as follows (in thousands):
Lease Expense
+Added: December 26, 2020 December 28, 2019
Operating lease expense $ 7,468 $ 6,985
1 unchanged sentence
Variable lease expense 1,574 1,286
−Removed: Rent expense under prior lease accounting rules (Topic 840) for fiscal 2018 and 2017 was $ 8.4 million and $ 7.9 million, respectively.
−Removed: Future minimum payments under our non-cancelable operating leases under the new lease accounting rules (Topic 842) were as follows as of December 28, 2019 (in thousands):
+Added: $ 9,178 $ 8,413
+Added: Operating lease expense for the year ended December 29, 2018 was $ 8.4 million.
+Added: Future minimum payments under our non-cancelable operating leases were as follows as of December 26, 2020 (in thousands):
Fiscal Year Amount
5 unchanged sentences
Total long-term operating lease liabilities $ 27,996
−Removed: Future minimum payments under our non-cancelable operating leases under prior lease accounting rules (Topic 840) were as follows as of December 29, 2018 (in thousands):
−Removed: Fiscal Year Amount
−Removed: Thereafter 20,382
Note 7— Derivative Financial Instruments
4 unchanged sentences
Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with foreign currency transaction gains or losses.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We do not use derivative financial instruments for speculative or trading purposes.
3 unchanged sentences
The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points.
−Removed: All of our foreign exchange derivative contracts outstanding at December 28, 2019 will mature by the third quarter of fiscal 2020.
+Added: All of our foreign exchange derivative contracts outstanding at December 26, 2020 will mature by the fourth quarter of fiscal 2021.
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides information about our foreign currency forward contracts outstanding as of December 26, 2020 (in thousands):
1 unchanged sentence
Euro Buy ( 11,350 ) $ ( 13,019 )
+Added: Euro Sell 12,304 15,002
Japanese Yen Sell 1,707,934 16,479
−Removed: Korean Won Buy ( 2,669,885 ) ( 2,304 )
+Added: Korean Won Sell 2,309,079 2,093
Total USD notional amount of outstanding foreign exchange contracts $ 20,555
6 unchanged sentences
The location and amount of gains (losses) related to derivative instruments designated as cash flow hedges on our Consolidated Statements of Income was as follows (in thousands):
−Removed: Amount of Loss Recognized in Accumulated OCI on Derivative Location of Loss Reclassified from Accumulated OCI into Income Amount of Loss Reclassified from Accumulated OCI into Income
+Added: Amount of Gain or (Loss) Recognized in Accumulated OCI on Derivative Location of Gain or (Loss) Reclassified from Accumulated OCI into Income Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income
Fiscal 2020 1,142 Cost of revenues $ 89
1 unchanged sentence
Selling, general and administrative 25
−Removed: Fiscal 2018 $ — $ —
+Added: Fiscal 2019 $ 93 Cost of revenues $ ( 526 )
+Added: Research and development ( 75 )
+Added: Selling, general and administrative ( 172 )
Interest Rate Swaps
1 unchanged sentence
As future levels of LIBOR over the life of the loan are uncertain, we entered into these interest-rate swap agreements to hedge the exposure in interest rate risks associated with the movement in LIBOR rates.
−Removed: By entering into the agreements, we convert a floating rate interest at one-month LIBOR plus 2.00 % into a fixed rate interest at 2.94 %.
+Added: By entering into the agreements, we converted a floating rate interest at one-month LIBOR plus 2.00 % into a fixed rate interest at 2.94 %.
+Added: The interest rate swap agreement ended as of March 28, 2020.
+Added: During fiscal 2020 we entered into an interest rate swap agreement with Union Bank to hedge the interest payments on the Building Term Loan for the notional amount of $ 18.0 million.
+Added: As future levels of LIBOR over the life of the loan are uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates.
+Added: By entering into the agreement, we convert a floating rate interest at one-month LIBOR plus 1.75 % into a fixed rate interest at 2.75 %.
+Added: The interest rate swap also includes a 0 % floor that is effective for one year from the date of the swap.
As of December 26, 2020, the notional amount of the loan that is subject to this interest rate swap was $ 17.5 million.
−Removed: See Note 5 for additional information.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: See Note 5, Debt , for additional information.
For accounting purposes, the interest-rate swap contracts qualify for and are designated as cash flow hedges.
1 unchanged sentence
We evaluate hedge effectiveness at hedge inception and on an ongoing basis.
−Removed: Amounts expected to be reclassified from Other comprehensive income (loss) into earnings in the next twelve months were insignificant at December 28, 2019.
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value of our interest rate swap contracts is determined at the end of each reporting period based on valuation models that use interest rate yield curves as inputs.
For accounting purposes, our interest rate swap contracts qualify for, and are designated as, cash flow hedges.
−Removed: The cash flows associated with the interest rate swaps are reported in Net cash provided by operating activities in our Consolidated Statements of Cash Flows.
−Removed: The estimated fair value of the interest rate swaps as of December 28, 2019 and December 29, 2018 was reported as a derivative asset of approximately $ 0.1 million and $ 0.9 million, respectively, within Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheets.
+Added: The cash flows associated with the interest rate swaps are reported in Net cash provided by operating activities in our Consolidated Statements of Cash Flows and the fair value of the interest rate swap contracts are recorded within Accrued Liabilities and Other assets.
The impact of the interest rate swaps on the Consolidated Statements of Income was as follows (in thousands):
−Removed: Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion ) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion )
−Removed: Fiscal 2019 $ ( 86 ) Other income (expense), net $ 548 Other income (expense), net $ —
−Removed: Fiscal 2018 $ 340 Other income (expense), net $ 721 Other income (expense), net $ —
−Removed: Fiscal 2017 $ 287 Other income (expense), net $ 84 Other income (expense), net $ 29
−Removed: See also Note 8.
+Added: Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
+Added: Fiscal 2020 $ ( 119 ) Other income (expense), net $ ( 64 )
+Added: Fiscal 2019 $ ( 86 ) Other income (expense), net $ 548
+Added: Fiscal 2018 $ 340 Other income (expense), net $ 721
+Added: See also Note 8, Fair Value .
Note 8— Fair Value
5 unchanged sentences
We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 during fiscal 2020, 2019 or 2018.
−Removed: The carrying values of Cash, Accounts receivable, net, Restricted cash, Prepaid expenses and other current assets, Accounts payable, Accrued liabilities, and short-term Term loan approximate fair value due to their short maturities.
+Added: The carrying values of Cash, Accounts receivable, net, Restricted cash, Prepaid expenses and other current assets, Accounts payable, Accrued liabilities, and Current portion of term loans, net of unamortized issuance costs approximate fair value due to their short maturities.
No changes were made to our valuation techniques during fiscal 2020.
1 unchanged sentence
The fair value of our cash equivalents is determined based on quoted market prices for similar or identical securities.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Marketable Securities
5 unchanged sentences
Contingent Consideration
−Removed: Contingent consideration, arising from the acquisition of FRT (see Note 4), is a cash amount equal to 1.5x EBIT as defined in the purchase agreement, up to a maximum of €10.3 million, payable subject to the performance of the acquired business in calendar 2020.
−Removed: We estimated the fair value of contingent consideration using a probability weighted approach.
−Removed: Key assumptions in determining the fair value of contingent consideration include estimating the probability of achieving certain EBIT levels and discounting at an appropriate discount rate.
−Removed: There was no change in the value of contingent consideration since the acquisition of FRT and as of December 28, 2019.
+Added: Contingent consideration, arising from the acquisition of FRT (see Note 4, Acquisitions ), is a cash amount equal to 1.5 x EBIT as defined in the purchase agreement, up to a maximum of € 10.3 million, payable subject to the performance of the acquired
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: business in calendar 2020.
+Added: We originally estimated the fair value of contingent consideration at acquisition using a probability weighted approach.
+Added: Key assumptions in determining the fair value of contingent consideration included estimating the probability of achieving certain EBIT levels and discounting at an appropriate discount rate.
+Added: Based on actual results during the earnout period, contingent consideration as of December 26, 2020 was estimated to be $ 4.0 million, a net decrease of $ 1.4 million from $ 5.4 million as of December 28, 2019.
Assets and liabilities Measured at Fair Value on a Recurring Basis
8 unchanged sentences
Corporate bonds — 24,330 — 24,330
−Removed: Commercial paper — 3,911 — 3,911
40,726 27,084 — 67,810
3 unchanged sentences
Foreign exchange derivative contracts $ — $ — $ — $ —
+Added: Interest rate swap derivative contracts — ( 87 ) — ( 87 )
Contingent consideration — — ( 4,012 ) ( 4,012 )
Total liabilities $ — $ ( 87 ) $ ( 4,012 ) $ ( 4,099 )
−Removed: December 29, 2018 Level 1 Level 2 Total
+Added: December 28, 2019 Level 1 Level 2 Level 3 Total
Cash equivalents:
7 unchanged sentences
10,468 65,859 — 76,327
+Added: Foreign exchange derivative contract — 41 — 41
Interest rate swap derivative contracts — 26 — 26
Total assets $ 27,524 $ 65,926 $ — $ 93,450
+Added: Foreign exchange derivative contracts $ — $ ( 240 ) $ — $ ( 240 )
+Added: Contingent consideration — — ( 5,364 ) ( 5,364 )
+Added: Total liabilities $ — $ ( 240 ) $ ( 5,364 ) $ ( 5,604 )
+Added: Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
+Added: We measure and report our non-financial assets such as Property, plant and equipment, Goodwill and Intangible assets at fair value on a non-recurring basis if we determine these assets to be impaired or in the period when we make a business
FORMFACTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
−Removed: We did no t have any liabilities measured at fair value on a recurring basis at December 29, 2018.
−Removed: Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
−Removed: We measure and report goodwill and intangible assets at fair value on a non-recurring basis if we determine these assets to be impaired or in the period when we make a business acquisition.
−Removed: Other than as discussed in Note 4, there were no assets or liabilities measured at fair value on a nonrecurring basis during fiscal 2019, 2018 or 2017.
+Added: Other than as discussed in Note 4, Acquisitions , there were no assets or liabilities measured at fair value on a nonrecurring basis during fiscal 2020, 2019 or 2018.
Note 9— Goodwill and Intangible Assets
4 unchanged sentences
Goodwill, gross, as of December 29, 2018 172,482 16,732 189,214
+Added: Addition - FRT acquisition — 10,148 10,148
Foreign currency translation — ( 166 ) ( 166 )
Goodwill, gross, as of December 28, 2019 172,482 26,714 199,196
−Removed: Additions - FRT GmbH acquisition — 10,148 10,148
+Added: Addition - FRT acquisition — 975 975
+Added: Addition - Baldwin Park acquisition 5,590 — 5,590
+Added: Addition - HPD acquisition — 4,654 4,654
Foreign currency translation — 2,346 2,346
9 unchanged sentences
Backlog 2,227 1,900 327 1,676 891 785
+Added: In-process research and development 400 — 400 — — —
$ 239,542 $ 180,395 $ 59,147 $ 208,672 $ 151,062 $ 57,610
−Removed: During fiscal 2019, we disposed of certain fully amortized trade names.
Amortization expense was included in our Consolidated Statements of Income as follows (in thousands):
7 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
−Removed: The estimated future amortization of intangible assets is as follows (in thousands):
+Added: The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):
Fiscal Year Amount
4 unchanged sentences
Note 10— Commitments and Contingencies
+Added: See Note 6, Leases .
Environmental Matters
32 unchanged sentences
Common Stock Repurchase Program
−Removed: In February 2017, our Board of Directors authorized a program to repurchase up to $ 25 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based incentive plans.
−Removed: The share repurchase program expired on February 1, 2020.
+Added: On October 26, 2020, our Board of Directors authorized a program to repurchase up to $ 50 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based incentive plans.
+Added: The share repurchase program will expire October 28, 2022.
+Added: This repurchase program replaced the previous repurchase program that expired in February 2020 to purchase up to $ 25.0 million of outstanding common stock.
During fiscal 2020, 2019 and 2018, we did not repurchase any shares.
−Removed: During fiscal 2017, we repurchased 1,367,617 shares of common stock for $ 19.0 million.
Equity Incentive Plan
31 unchanged sentences
The PRSUs granted in fiscal 2020, 2019 and 2018 listed below vest based on us achieving certain market performance criteria.
−Removed: The performance criteria are based on a metric called Total Shareholder Return ("TSR") for the performance period of two or three years, relative to the TSR of the companies identified as being part of the S&P Semiconductor Select Industry Index (FormFactor peer companies) as of a specific date.
−Removed: Of the 195,000 PRSUs granted in fiscal 2016, 60,000 shares were forfeited.
−Removed: Therefore, 135,000 shares vested in fiscal 2019.
−Removed: These shares achieved 119.7% TSR performance, which resulted in 161,595 shares released in 2019.
+Added: The performance criteria are based on a metric called Total Shareholder Return ("TSR") for the performance period of three years , relative to the TSR of the companies identified as being part of the S&P Semiconductor Select Industry Index (FormFactor peer companies) as of a specific date.
+Added: Of the 333,000 PRSUs granted in fiscal 2017, 78,333 shares were forfeited, resulting in 255,000 shares vesting in fiscal 2020.
+Added: These shares achieved the maximum 125 % TSR performance, which resulted in an additional 63,750 shares issued in fiscal 2020 related to the fiscal 2017 PRSU grant.
PRSU grant activity was as follows:
1 unchanged sentence
December 26, 2020 December 28, 2019 December 29, 2018
−Removed: Grant Date June 4, 2019 August 16, 2018 July 20, 2017
+Added: Grant Date August 27, 2020 June 4, 2019 August 16, 2018
Performance period July 1, 2020 - June 30, 2023 July 1, 2019 - June 30, 2022 July 1, 2018 - June 30, 2021
Number of shares 258,000 273,000 318,100
−Removed: TSR as-of date June 4, 2019 August 16, 2018 July 1, 2017
+Added: TSR as-of date August 27, 2020 June 4, 2019 August 16, 2018
Stock-based compensation $ 6.9 million $ 4.4 million $ 4.7 million
6 unchanged sentences
As of December 26, 2020, 2,171,656 shares remained available for issuance.
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12— Stock-Based Compensation
1 unchanged sentence
Certain information regarding our stock-based compensation was as follows (in thousands, except per share amounts):
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended
3 unchanged sentences
Fair value of RSUs vested $ 42,597 $ 23,450 $ 17,541
−Removed: Stock-based compensation expense was included in the Consolidated Statements of Income as follows (in thousands):
+Added: Pre-tax stock-based compensation expense by financial statement line and related tax benefit in the Consolidated Statements of Income are as follows (in thousands):
Fiscal Year Ended
5 unchanged sentences
Total stock-based compensation $ 23,830 $ 23,176 $ 17,827
+Added: Stock-based compensation tax benefit $ 4,962 $ 911 $ 453
Unrecognized Stock-Based Compensation Expense
5 unchanged sentences
Total unrecognized stock-based compensation expense $ 41,445 2.2
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Valuation Assumptions
12 unchanged sentences
Expected volatility 30.4 % - 74.4 %
+Added: 36.6 % - 59.5 %
+Added: 44.9 % - 48.9 %
Risk-free interest rate 0.10 % - 1.54 %
+Added: 2.04 % - 2.46 %
+Added: 0.83 % - 2.22 %
Expected life (in years) 0.5 - 1.0
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13— Income Taxes
10 unchanged sentences
December 26, 2020 December 28, 2019 December 29, 2018
−Removed: Current provision (benefit):
+Added: Current provision:
Federal $ 1,799 $ 179 $ 79
8 unchanged sentences
Total provision (benefit) for income taxes $ 6,652 $ 11,717 $ ( 70,109 )
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tax Rate Reconciliation
−Removed: The following is a reconciliation of the difference between income taxes computed by applying the federal statutory rate of 21 % and the provision (benefit) from income taxes for fiscal 2019 and 2018 and applying the federal statutory rate of 35% and the provision for income taxes for 2017 (in thousands):
+Added: The following is a reconciliation of the difference between income taxes computed by applying the federal statutory rate of 21% and the provision (benefit) from income taxes (in thousands):
Fiscal Year Ended
8 unchanged sentences
Global intangible low-taxed income — 1,369 1,828
−Removed: Mandatory deemed repatriation — — 1,655
+Added: Foreign Derived Intangible Income ( 3,668 ) — —
Change in valuation allowance 1,862 2,567 ( 75,803 )
3 unchanged sentences
Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to be reversed.
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant deferred tax assets and liabilities consisted of the following (in thousands):
22 unchanged sentences
pre-tax losses during the previous seven fiscal years, we continued to maintain the 100% valuation allowance through the third quarter of fiscal 2018.
−Removed: As of December 29, 2018, we had reported positive operating performance in the U.S.
−Removed: for two consecutive fiscal years and had also reported a cumulative three-year U.S.
−Removed: pre-tax profit.
−Removed: In addition, during the fourth quarter of fiscal 2018, we completed our financial plan for fiscal 2019 and expected continued positive operating performance in the U.S.
−Removed: We also considered forecasts of future taxable income and evaluated the utilization of net operating losses and tax credit carryforwards prior to their expiration.
−Removed: After considering these factors, we determined that the positive evidence overcame any negative evidence and concluded that it was more likely than not that the U.S.
−Removed: deferred tax assets were realizable.
−Removed: As a result, we released the valuation allowance against a significant portion of the U.S.
+Added: The valuation allowance decreased by $ 75.8 million in fiscal 2018 as we released the valuation allowance against a significant portion of the U.S.
federal deferred tax assets and a portion of the U.S.
−Removed: state deferred tax assets during the fourth quarter of fiscal 2018.
−Removed: The valuation allowance decreased by $ 75.8 million in fiscal 2018, primarily due to the release of the valuation allowance on U.S.
−Removed: deferred tax assets.
−Removed: As of December 28, 2019, we maintained a valuation allowance of $ 36.6 million, primarily related to California deferred tax assets and foreign tax credit carryovers, due to uncertainty about the future realization of these assets.
+Added: state deferred tax assets.
+Added: We determined that the positive
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
+Added: evidence overcame any negative evidence and concluded that it was more likely than not that the U.S.
+Added: deferred tax assets were realizable after considering the reported positive operating performance in the U.S.
+Added: for two consecutive fiscal years, the reported cumulative three-year U.S.
+Added: pre-tax profit, and the expected positive operating performance in the U.S.
+Added: As of December 26, 2020, we maintained a valuation allowance of $ 38.5 million, primarily related to California deferred tax assets arising from research credits and foreign tax credit carryovers, due to uncertainty about the future realization of these assets.
Tax Credits and Carryforwards
2 unchanged sentences
Federal research and development tax credit $ 36,579 2023-2040
−Removed: Federal net operating loss carryforwards 14,589 2031-2035
Foreign tax credit carryforwards 1,059 2021-2027
−Removed: Alternative minimum tax credits 195 Indefinite
California research credits 42,615 Indefinite
−Removed: State net operating loss carryforwards 243,934 2024-2036
+Added: State net operating loss carryforwards 247,990 2022-Indefinite
Singapore net operating loss carryforwards 7,046 Indefinite
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Undistributed Earnings
2 unchanged sentences
To the extent we repatriate the remaining $ 22.4 million of undistributed foreign earnings to the U.S., we established a deferred tax liability of $ 0.1 million for foreign withholding taxes.
+Added: Our estimates are provisional and subject to further analysis.
Unrecognized Tax Benefits
18 unchanged sentences
As of December 26, 2020, changes to our uncertain tax positions in the next 12 months that are reasonably possible are not expected to have a significant impact on our financial position or results of operations.
−Removed: At December 28, 2019, our tax years 2016 through 2019, 2015 through 2019 and 2014 through 2019, remain open for examination in the federal, state and foreign jurisdictions, respectively.
−Removed: However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and make adjustments up to the net operating loss and credit carryforward amounts.
−Removed: Tax Cuts and Jobs Act of 2017
−Removed: The Tax Act was enacted in December 2017.
−Removed: The Tax Act significantly changes U.S.
−Removed: tax law effective January 1, 2018 by, among other things, lowering U.S.
−Removed: corporate income tax rates from 35% to 21 %, repealing corporate alternative minimum tax, implementing a territorial tax system and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries.
−Removed: The Tax Act provided for the repeal of corporate alternative minimum tax and made AMT tax credits fully refundable in future years.
−Removed: As a result, we reassessed the realizability of our deferred tax assets and released the valuation allowance against $ 0.8 million of AMT tax credits at December 30, 2017.
−Removed: Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.
−Removed: As a result of the reduction in the U.S.
−Removed: corporate income tax rate, we revalued our ending U.S.
−Removed: deferred tax assets at December 30, 2017, offset by a corresponding change in the U.S.
−Removed: valuation allowance with no material impact to the fiscal 2017 tax provision.
FORMFACTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
−Removed: The Tax Act provided for a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”).
−Removed: The estimated tax effects of the provisional income inclusion of $ 15.7 million for the deemed repatriation transition tax was fully offset by the benefit of current and carryforward foreign tax credits previously subjected to a full valuation allowance.
−Removed: We paid no U.S.
−Removed: federal cash taxes on the deemed repatriation.
−Removed: The deemed repatriation of undistributed foreign earnings also resulted in a reassessment of the permanent reinvestment of undistributed foreign earnings and profits and we established a deferred tax liability of $ 66 thousand for withholding taxes associated with those earnings which were not permanently reinvested as of December 30, 2017.
−Removed: The SEC staff issued Staff Accounting Bulletin No.
−Removed: 118 (“SAB 118”) to address the application of U.S.
−Removed: GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act and allows the registrant to record provisional amounts during a measurement period not to extend beyond one year of the enactment date.
−Removed: We recognized the provisional impacts related to the one-time transition tax, the revaluation of deferred tax balances and reassessment of the realizability of deferred tax assets and included these estimates in our consolidated financial statements for the year ended December 30, 2017.
−Removed: We completed our analysis within the measurement period in accordance with SAB 118 and did not have a material impact to our consolidated financial statements.
+Added: At December 26, 2020, our tax years 2017 through 2020, 2016 through 2020 and 2015 through 2020, remain open for examination in the federal, state and foreign jurisdictions, respectively.
+Added: However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and make adjustments up to the net operating loss and credit carryforward amounts.
Note 14— Employee Benefit Plans
18 unchanged sentences
Gross margin 43.1 % 49.3 %
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Operating results provide useful information to our management for assessment of our performance and results of operations.
2 unchanged sentences
Acquisition-related costs include transaction costs and any costs directly related to the acquisition and integration of acquired businesses.
+Added: FORMFACTOR, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes revenue, by geographic region, as a percentage of total revenues based upon ship-to location:
1 unchanged sentence
December 26, 2020 December 28, 2019 December 29, 2018
−Removed: United States 26.3 % 25.2 % 34.0 %
−Removed: South Korea 19.8 17.2 14.9
China 25.2 % 18.0 % 14.7 %
Taiwan 21.7 14.7 20.3
−Removed: Japan 8.9 9.4 8.1
+Added: United States 18.4 26.3 25.2
+Added: South Korea 12.5 19.8 17.2
Europe 9.5 7.0 7.5
+Added: Japan 6.3 8.9 9.4
Asia-Pacific (1)
−Removed: Rest of the world 1.6 0.8 0.5
+Added: Rest of World 1.6 1.6 0.8
Total Revenues 100.0 % 100.0 % 100.0 %
16 unchanged sentences
Total $ 581,739 $ 111,877 $ 693,616 $ 491,363 $ 98,101 $ 589,464 $ 434,269 $ 95,406 $ 529,675
−Removed: FORMFACTOR, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long-lived assets, comprised of Operating lease, right-of-use-assets, Property, plant and equipment, net, Goodwill and Intangibles, net, reported based on the location of the asset was as follows (in thousands):
4 unchanged sentences
Total $ 406,767 $ 346,973 $ 310,908
−Removed: Note 16— Selected Quarterly Financial Data (Unaudited)
−Removed: The following selected quarterly financial data should be read in conjunction with our consolidated financial statements and the related notes and Item 7:
−Removed: Management's Discussion and Analysis of Financial Condition and Results of Operations.
−Removed: This information has been derived from our unaudited consolidated financial statements that, in our opinion, reflect all recurring adjustments necessary to fairly present this information when read in conjunction with our consolidated financial statements and the related notes.
−Removed: The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period.
−Removed: Fiscal Quarters Ended
−Removed: 2019 June 29, 2019 March 30, 2019 Dec.
−Removed: 2018 June 30, 2018 March 31, 2018
−Removed: (in thousands, except per share data)
−Removed: Revenues $ 178,629 $ 140,604 $ 138,018 $ 132,213 $ 140,887 $ 134,989 $ 135,509 $ 118,290
−Removed: Cost of revenues 104,324 85,286 82,666 79,692 84,865 82,019 79,291 73,161
−Removed: Gross profit 74,305 55,318 55,352 52,521 56,022 52,970 56,218 45,129
−Removed: Operating Expenses:
−Removed: Research and development 21,606 20,096 20,074 19,723 18,398 18,857 19,675 18,046
−Removed: Selling, general and administrative 28,981 25,887 26,283 25,184 25,828 24,745 25,232 23,449
−Removed: Total operating expenses 50,587 45,983 46,357 44,907 44,226 43,602 44,907 41,495
−Removed: Operating income 23,718 9,335 8,995 7,614 11,796 9,368 11,311 3,634
−Removed: Interest income 726 724 684 580 404 369 326 257
−Removed: Interest expense ( 376 ) ( 422 ) ( 522 ) ( 595 ) ( 660 ) ( 777 ) ( 910 ) ( 967 )
−Removed: Other income (expense), net 379 226 81 ( 84 ) 117 121 50 ( 512 )
−Removed: Income before income taxes 24,447 9,863 9,238 7,515 11,657 9,081 10,777 2,412
−Removed: Provision (benefit) for income taxes 5,811 1,584 2,290 2,032 ( 73,443 ) 1,393 1,654 287
−Removed: Net income $ 18,636 $ 8,279 $ 6,948 $ 5,483 $ 85,100 $ 7,688 $ 9,123 $ 2,125
−Removed: Net income per share:
−Removed: Basic $ 0.25 $ 0.11 $ 0.09 $ 0.07 $ 1.15 $ 0.10 $ 0.12 $ 0.03
−Removed: Diluted $ 0.24 $ 0.11 $ 0.09 $ 0.07 $ 1.13 $ 0.10 $ 0.12 $ 0.03
−Removed: Weighted average number of shares used in per share calculations:
−Removed: Basic 75,731 75,280 74,478 74,362 74,108 73,837 73,157 72,826
−Removed: Diluted 78,055 77,291 76,189 76,009 75,416 74,962 74,533 74,342
−Removed: (1) In the fourth quarter of fiscal 2018, the tax benefit included a $ 75.8 million benefit from a valuation allowance release against certain U.S.
−Removed: deferred tax assets.
−Removed: (2) Quarterly net income per share amounts may not add to the yearly totals due to rounding.
Note 16— New Accounting Pronouncements
−Removed: In August 2018, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
−Removed: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new guidance clarifies the accounting for implementation costs in cloud computing arrangements.
−Removed: ASU 2018-15 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019.
−Removed: Early adoption is permitted.
−Removed: ASU 2018-15 should be applied
+Added: In June 2016, the Financial Accounting Standard Board ("FASB") issued ASU No.
+Added: 2016-13, "Measurement of Credit Losses on Financial Instruments (Topic 326)." The provisions of this standard require financial assets measured at amortized cost to be
FORMFACTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
−Removed: either retrospectively or prospectively to all implementation costs incurred after the date of adoption.
−Removed: We have not yet determined the impact of this standard on our financial statements.
−Removed: In June 2016, the FASB issued ASU No.
−Removed: 2016-13, "Measurement of Credit Losses on Financial Instruments" (Topic 326).
−Removed: The provisions of this standard require financial assets measured at amortized cost to be presented at the net amount expected to be collected.
+Added: presented at the net amount expected to be collected.
An allowance account would be established to present the net carrying value at the amount expected to be collected.
ASU 2016-13 also provides that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses.
−Removed: The guidance was amended through various ASU's subsequent to ASU 2016-13, all of which will be effective for us beginning fiscal 2020.
+Added: The guidance was amended through various ASU's subsequent to ASU 2016-13, all of which was effective beginning fiscal 2020.
+Added: We adopted ASU 2016-13 on a prospective basis on December 29, 2019, the first day of fiscal 2020.
+Added: The adoption did not have a material effect on our financial position, results of operations or cash flows.
+Added: In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
+Added: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new guidance clarifies the accounting for implementation costs in cloud computing arrangements.
+Added: ASU 2018-15 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019.
+Added: We adopted ASU 2018-15 on a prospective basis on December 29, 2019, the first day of fiscal 2020.
+Added: The adoption did not have a material effect on our financial position, results of operations or cash flows.
+Added: In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740),” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.
+Added: The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
+Added: This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.
+Added: Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued.
+Added: Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis.
We do not expect the adoption of ASU 2019-12 to have a material effect on our financial position, results of operations or cash flows.
+Added: In March 2020, the FASB issued ASU 2020-04, "Referenced Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments in this update apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.
+Added: The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.
+Added: The amendments in this update are elective and are effective upon issuance for all entities.
+Added: We have not yet evaluated the transition approach for our LIBOR indexed contracts and have not determined whether we will be electing such expedients and exceptions.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.