What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-01 compared with 2022-08-02 · 141 added, 114 removed, 200 unchanged (56% of the section changed)

8 unchanged sentences

We have no obligation to update any of these statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements, including risks related to general market trends, the benefits of acquisitions and investments, our supply chain, uncertainties related to COVID-19 and the impact of our responses to it, the interpretation and impacts of changes in export controls and other trade barriers, military conflicts, political volatility and similar factors, our ability to execute our business strategy and other risks discussed in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 25, 2021 and in this Quarterly Report on Form 10-Q.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements, including risks related to general market trends, the benefits of acquisitions and investments, our supply chain, uncertainties related to COVID-19 and other global, regional or national public health-related crises and the impact of our responses to them, the interpretation and impacts of changes in export controls and other trade barriers, military conflicts, political volatility and similar factors, our ability to execute our business strategy and other risks discussed in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the

year ended December 25, 2021 and in this Quarterly Report on Form 10-Q.

You should carefully consider the numerous risks and uncertainties described under these sections.

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and its subsidiaries.

FormFactor, Inc., headquartered in Livermore, California, is a leading provider of essential test and measurement technologies along the full semiconductor product lifecycle - from characterization, modeling, reliability, and design de-bug, to qualification

and production test.

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.

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Sales of our probe cards and analytical probes are included in the Probe Cards segment, while sales of our probe stations, metrology systems, thermal systems and cryogenic systems are included in the Systems segment.

We generated net income of $60.1 million in the first six months of fiscal 2022 as compared to $37.5 million in the first six months of fiscal 2021.

The increase in net income was primarily due to increased revenue with improved gross margins from a change in product mix and a reduction in the amortization of intangibles from significant intangibles becoming fully amortized, partially offset by higher operating expenses.

Impact of COVID-19

The COVID-19 pandemic continues to cause serious illness and death in many of the regions that we, our customers and our suppliers operate.

The COVID-19 pandemic has resulted in significant governmental actions designed to control the spread of the virus, including the imposition of safety requirements and other orders in locations where we have manufacturing and other activities.

We continue to operate our manufacturing sites at production levels greater than those prior to the pandemic, albeit subject to certain safety and related constraints.

Our other operations are continuing with substantial work-from-home activities.

If the provisions of governmental health orders or other safety requirements applicable to us or our customers or suppliers become more restrictive for an extended period of time, or if we have repeated occurrences of COVID-19 in any of our facilities, we may experience disruptions or delays in manufacturing, product design, product development, customer support, manufacturing and sales, and an overall loss of productivity and efficiency.

While the disruptions in our operations, supply chain and customer demand as a result of the COVID-19 pandemic have been somewhat limited, we continue to see impacts on elements in the supply chain and believe that the COVID-19 pandemic represents a sustained threat that may give rise to a variety of more significant adverse impacts on our business and financial results.

The semiconductor industry is experiencing various supply constraints due to the pandemic.

While we are working with our global supply chain partners to mitigate this risk, the duration and extent of the supply chain disruptions remain uncertain.

For a further description of the uncertainties and business risks associated with the COVID-19 pandemic, see the risk factors discussed in our Annual Report on Form 10-K for the year ended December 25, 2021.

We generated net income of $64.5 million in the first nine months of fiscal 2022 as compared to $58.0 million in the first nine months of fiscal 2021.

The increase in net income was primarily due to increased revenue with improved gross margins from a reduction in the amortization of intangibles due to significant intangibles becoming fully amortized, partially offset by higher operating expenses.

The first half of fiscal 2022 was strong, realizing $60.1 million of the $64.5 million net income in the first nine months of fiscal 2022 with $401.1 million in revenue and 47.0% gross margins.

For the third quarter of fiscal 2022, we generated net income of $4.4 million with $180.9 million in revenue and 34.4% gross margins, which was a significant decline in results after a strong first half.

In October 2022, the United States government imposed new controls, including expanded export license requirements that significantly impact trade with China for advanced U.S.

semiconductor technology sold in China.

The impact of this on our business is still being evaluated and updated guidance is being provided by the U.S.

Government on an ongoing basis and subject to change.

We expect these regulatory conditions, on top of the slowing business environment seen in the third quarter of fiscal 2022, to negatively impact our financial results over the next few quarters.

Given the rapidly evolving situation, the impacts beyond that time frame are uncertain.

Significant Accounting Policies and the Use of Estimates

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Actual results in these areas could differ from management’s estimates.

During the six months ended June 25, 2022, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 25, 2021, which was filed with the Securities and Exchange Commission on February 18, 2022.

During the nine months ended September 24, 2022, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 25, 2021, which was filed with the Securities and Exchange Commission on February 18, 2022.

Results of Operations

The following table sets forth our operating results as a percentage of revenues for the periods indicated:

Three Months Ended Six Months Ended

2022 June 26,

2021 June 25,

2022 June 26,

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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Interest expense (0.1) (0.1) (0.1) (0.1)

Other income (expense), net 0.3 (0.1) 0.2 —

Other income, net 0.6 0.1 0.3 —

Income before income taxes 3.1 12.3 12.6 11.7

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Revenues by Segment and Market

Three Months Ended Six Months Ended

2022 June 26,

2021 June 25,

2022 June 26,

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

(In thousands)

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Three Months Ended

2022 % of Revenues June 26,

September 24,

2022 % of Revenues September 25,

2021 % of Revenues $ Change % Change

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Total revenues $ 180,869 100.0 % $ 189,964 100.0 % $ (9,095) (4.8) %

Six Months Ended

2022 % of Revenues June 26,

Nine Months Ended

September 24,

2022 % of Revenues September 25,

2021 % of Revenues $ Change % Change

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Total revenues $ 581,950 100.0 % $ 564,676 100.0 % $ 17,274 3.1 %

The increase in Foundry & Logic product revenue for the three and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, was driven principally by the increased demand and increased unit sales to other large semiconductor foundries and integrated device manufacturers.

The decrease in DRAM product revenue for the three and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, was driven by decreased design wins and customer demand.

The increase in Flash product revenue for the three and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, was driven by increased customer demand.

The increase in Systems market revenue for the three and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, was driven by both increased sales of metrology systems and our 200 and 300 millimeter probe stations.

Foundry & Logic

The decrease in Foundry & Logic product revenue for the three months ended September 24, 2022, compared to the three months ended September 25, 2021, was driven principally by softening demand for the second half of fiscal 2022 causing decreased unit sales to integrated device manufacturers, offset slightly by increased demand at large semiconductor foundries.

Foundry & Logic product revenue increased slightly for the nine months ended September 24, 2022, compared to the nine months ended September 25, 2021.

Although a slight increase year-over-year, demand has weakened from the slowdown in the semiconductor industry for the second half of fiscal 2022, and as previously described within the Overview.

The decrease in DRAM product revenue for the three and nine months ended September 24, 2022, compared to the three and nine months ended September 25, 2021, was driven by decreased design wins and customer demand.

The increase in Flash product revenue for the three and nine months ended September 24, 2022, compared to the three and nine months ended September 25, 2021, was driven by increased customer demand.

The increase in Systems market revenue for the three months ended September 24, 2022, compared to the three months ended September 25, 2021, was driven by increased sales of our 200 and 300 millimeter probe stations and cryogenic systems.

The increase in Systems market revenue for the nine months ended September 24, 2022, compared to the nine months ended September 25, 2021, was driven by increased sales of our 200 and 300 millimeter probe stations and metrology systems.

Revenues by Geographic Region

Three Months Ended Six Months Ended

Revenue June 26,

Revenue June 25,

Revenue June 26,

Three Months Ended Nine Months Ended

September 24,

Revenue September 25,

Revenue September 24,

Revenue September 25,

(Dollars in thousands)

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Malaysia 6,509 3.6 11,633 6.1 44,952 7.7 34,758 6.2

Japan 9,937 4.9 7,704 4.1 19,319 4.8 17,025 4.5

Europe 8,091 4.0 12,010 6.4 16,486 4.1 22,009 5.9

Singapore 10,357 5.7 7,552 4.0 28,361 4.9 26,072 4.6

Europe 11,798 6.5 10,486 5.5 28,284 4.9 32,495 5.8

Japan 7,692 4.3 10,728 5.6 27,011 4.6 27,753 4.9

Rest of the world 3,921 2.1 2,504 1.4 8,382 1.5 7,223 1.3

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subsidiary and requests the products to be shipped to an address in South Korea, this sale will be reflected in the revenue for South Korea rather than the U.S.

Changes in revenue by geographic region for the three and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, and product sales mix.

More specifically, the increase in revenues for China and Malaysia were driven principally by a single large U.S.-based company with operations in China and Malaysia.

Further increases in China were driven by increased demand from a large Chinese DRAM integrated device manufacturer.

Changes in revenue by geographic region for the three and nine months ended September 24, 2022, compared to the three and nine months ended September 25, 2021, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, and product sales mix.

More specifically, the increase in revenues for the United States, and decreases in revenues for China and Malaysia were driven principally by a single large U.S.-based company with operations in these regions.

The decrease in China mentioned previously was partially offset by increased demand from a large Chinese DRAM integrated device manufacturer.

Cost of Revenues and Gross Margins

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Three Months Ended

2022 June 26,

September 24,

2022 September 25,

2021 $ Change % Change

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Gross margin 34.4 % 42.2 %

Six Months Ended

2022 June 26,

Nine Months Ended

September 24,

2022 September 25,

2021 $ Change % Change

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Three Months Ended

June 25, 2022 June 26, 2021

September 24, 2022 September 25, 2021

Probe Cards Systems Corporate and Other Total Probe Cards Systems Corporate and Other Total

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Gross margin 34.6 % 53.7 % 34.4 % 45.1 % 50.0 % 42.2 %

Six Months Ended

June 25, 2022 June 26, 2021

Nine Months Ended

September 24, 2022 September 25, 2021

Probe Cards Systems Corporate and Other Total Probe Cards Systems Corporate and Other Total

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Gross margin 43.7 % 52.2 % 43.1 % 44.2 % 49.4 % 41.3 %

For the three and six months ended June 25, 2022, gross margins increased compared to the three and six months ended June 26, 2021, primarily due to higher revenues and improved standard margins related to favorable product mix, partially offset by higher net manufacturing spending driven by higher material and labor costs, and — for the three month periods — unfavorable absorption of costs despite higher production volumes.

For the three and six months ended June 25, 2022, gross margins increased compared to the three and six months ended June 26, 2021, primarily as a result of favorable product mix primarily driven by increased sales of metrology tools at favorable margins, and improved leverage on fixed costs at these higher volumes.

For the three months ended September 24, 2022, gross margins decreased compared to the three months ended September 25, 2021, primarily due to greater inventory excess and obsolescence reserves, higher net manufacturing spending driven by higher labor and overhead costs, and lower standard margins related to a less favorable product mix.

For the nine months ended September 24, 2022, gross margins decreased compared to the nine months ended September 25, 2021, primarily due to higher net manufacturing spending driven by higher labor and overhead costs, partially offset by improved standard margins related to a more favorable product mix.

For the three and nine months ended September 24, 2022, gross margins increased compared to the three and nine months ended September 25, 2021, primarily as a result of a more favorable product mix and improved leverage on fixed costs at higher revenues.

Corporate and Other

Corporate and Other includes unallocated expenses relating to share-based compensation and amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, and restructuring which are not used in evaluating the results of, or in allocating resources to, our reportable segments.

The reduction in Corporate and Other for the three and six months ended June 25, 2022 compared to the three and six months ended June 26, 2021 is primarily due to a reduction in the amortization of intangibles resulting from significant intangibles becoming fully amortized, partially offset by increased share-based compensation driven by increases in headcount to support our growth.

Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading and material costs.

For the three and six months ended June 25, 2022, compared to the three and six months ended June 26, 2021, gross profit and gross margins have increased on higher revenue levels, favorable product mix, and less amortization of intangibles.

The increase in Corporate and Other for the three months ended September 24, 2022 compared to the three months ended September 25, 2021 is primarily due to increased restructuring charges arising from a change in estimate of excess and obsolete inventories related to our third quarter of fiscal 2021 plan to adjust capacity for certain product offerings, partially offset by a reduction in the amortization of intangibles resulting from significant intangibles becoming fully amortized.

The decrease in Corporate and Other for the nine months ended September 24, 2022 compared to the nine months ended September 25, 2021 is primarily due to a reduction in the amortization of intangibles resulting from significant intangibles becoming fully amortized, partially offset by increased restructuring charges in the third quarter of fiscal 2022 arising from a change in estimate of excess and obsolete inventories related to our fiscal 2021 plan to adjust capacity for certain product offerings.

Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading, labor costs, and material costs.

For the three months ended September 24, 2022, compared to the three months ended September 25, 2021, gross profit and gross margins have decreased on lower revenue levels, a less favorable Probe Cards segment product mix, increased labor, overhead, and inventory excess and obsolescence reserves, and less amortization of intangibles.

For the nine months ended September 24, 2022, compared to the nine months ended September 25, 2021, gross profit and gross margins have increased on higher revenue levels, improved product mix, and less amortization of intangibles, partially offset by higher labor and overhead costs.

Cost of revenues included stock-based compensation expense as follows (in thousands):

Three Months Ended Six Months Ended

2022 June 26,

2021 June 25,

2022 June 26,

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Stock-based compensation $ 1,022 $ 1,392 $ 2,834 $ 3,806

1 unchanged sentence

Three Months Ended

2022 June 26,

September 24,

2022 September 25,

2021 $ Change % Change

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% of revenues 14.7 % 13.7 %

Six Months Ended

2022 June 26,

Nine Months Ended

September 24,

2022 September 25,

2021 $ Change % Change

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% of revenues 14.1 % 13.4 %

The increase in research and development expenses in the three and six months ended June 25, 2022 when compared to the corresponding period in the prior year was primarily driven by an increase in headcount to support our continued investment in technology leadership.

Research and development expenses in the three months ended September 24, 2022 increased slightly when compared to the corresponding period in the prior year primarily due to an increase in headcount, which increased allocated costs within Other general operations.

This increase was partially offset by a net decrease in employee compensation due to a decrease in performance based compensation, net of an increase in employee compensation due to annual salary adjustments.

For the nine months ended September 24, 2022 when compared to the corresponding period in the prior year there was an increase in research and development expenses primarily driven by an increase in headcount which is to support our continued investment in technology leadership.

Increased general operational costs, annual salary adjustments, project material costs, and stock-based compensation also contributed to the increase.

A detail of the changes is as follows (in thousands):

Three Months Ended June 25, 2022 compared to Three Months Ended June 26, 2021 Six Months Ended June 25, 2022 compared to Six Months Ended June 26, 2021

Employee compensation costs $ 1,006 $ 2,612

Three Months Ended September 24, 2022 compared to Three Months Ended September 25, 2021 Nine Months Ended September 24, 2022 compared to Nine Months Ended September 25, 2021

Other general operations $ 1,700 $ 4,168

Stock-based compensation 32 329

Project material costs 249 850

Depreciation 70 (9)

Stock-based compensation 17 346

Restructuring charges (222) (428)

Employee compensation costs (1,291) 1,547

$ 523 $ 6,474

Research and development included stock-based compensation expense as follows (in thousands):

Three Months Ended Six Months Ended

2022 June 26,

2021 June 25,

2022 June 26,

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Stock-based compensation $ 2,027 $ 2,010 $ 5,708 $ 5,362

1 unchanged sentence

Three Months Ended

2022 June 26,

September 24,

2022 September 25,

2021 $ Change % Change

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% of revenues 17.5 % 16.3 %

Six Months Ended

2022 June 26,

Nine Months Ended

September 24,

2022 September 25,

2021 $ Change % Change

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% of revenues 16.8 % 16.2 %

The increase in selling, general and administrative expenses in the three and six months ended June 25, 2022 when compared to the corresponding period in the prior year was primarily driven by increased headcount, annual salary adjustments, increased travel related costs as restrictions related to COVID-19 relaxed, and higher stock-based compensation.

We expect travel costs to continue to return to previous levels assuming travel restrictions continue to ease.

These increases were partially offset by lower amortization of intangibles.

Selling, general and administrative expenses increased in the three and nine months ended September 24, 2022 when compared to the corresponding period in the prior year, primarily driven by increased headcount, annual salary adjustments, increased travel related costs as restrictions related to COVID-19 relaxed, and higher stock-based compensation.

Furthermore, the increase for the three months ended September 24, 2022 when compared to the corresponding period in the prior year was partially offset by lower performance based compensation.

A detail of the changes is as follows (in thousands):

Three Months Ended June 25, 2022 compared to Three Months Ended June 26, 2021 Six Months Ended June 25, 2022 compared to Six Months Ended June 26, 2021

Employee compensation costs $ 1,249 $ 2,632

General operating expenses 831 1,465

Three Months Ended September 24, 2022 compared to Three Months Ended September 25, 2021 Nine Months Ended September 24, 2022 compared to Nine Months Ended September 25, 2021

Travel related costs $ 583 $ 2,257

General operating expenses 576 2,046

Stock-based compensation 428 914

Restructure 25 66

Consulting fees 19 (319)

Amortization of intangibles (73) (273)

Employee compensation costs (861) 1,824

$ 697 $ 6,515

Selling, general and administrative included stock-based compensation expense as follows (in thousands):

Three Months Ended Six Months Ended

2022 June 26,

2021 June 25,

2022 June 26,

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Stock-based compensation $ 4,946 $ 4,518 $ 13,331 $ 12,417

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Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities.

The increase in interest income for the three and six months ended June 25, 2022 compared with the corresponding period of the prior year was attributable to a slight increase in investment yields due to the higher interest rate environment on higher invested balances.

The increase in interest income for the three and nine months ended September 24, 2022 compared with the corresponding period of the prior year was attributable to an increase in investment yields due to the higher interest rate environment.

Interest expense primarily includes interest on our term loans, interest rate swap derivative contracts, and term loan issuance costs amortization charges.

The interest expense for the three and six months ended June 25, 2022 compared to the same period of the prior year remained consistent despite a lower outstanding debt due to increased average interest rates on the outstanding debt.

Other Income (Expense), Net

Other income (expense), net, primarily includes the effects of foreign currency impact and various other gains and losses.

The interest expense for the three and nine months ended September 24, 2022 compared to the same period of the prior year remained consistent despite a lower outstanding debt due to increased average interest rates on the outstanding debt.

Other Income, Net

Other income, net, primarily includes the effects of foreign currency impact and various other gains and losses.

We partially mitigate our risks from currency movements by hedging certain balance sheet exposures, which minimizes the impacts during periods of foreign exchange volatility.

Provision for Income Taxes

Three Months Ended Six Months Ended

2022 June 26,

2021 June 25,

2022 June 26,

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

(In thousands, except percentages)

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statutory rate for the year ending December 31, 2022.

The decrease in the effective tax rate in the three months ended June 25, 2022 when compared to the corresponding period in the prior year was primarily driven by an increased tax deduction from FDII.

The increase in the effective tax rate in the three months ended September 24, 2022 when compared to the corresponding period in the prior year was primarily driven by a change within the third quarter of fiscal 2022 to the estimated annual taxable income, including by jurisdiction, and lower discrete benefits from stock-based compensation.

As of January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and experimental expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years in the U.S.

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Capital Resources

Our working capital was $377.5 million at June 25, 2022, compared to $375.3 million at December 25, 2021.

Cash and cash equivalents primarily consist of deposits held at banks, money market funds, U.S.

treasuries and commercial paper.

Our working capital was $352.6 million at September 24, 2022, compared to $375.3 million at December 25, 2021.

Cash and cash equivalents primarily consist of deposits held at banks, money market funds, corporate bonds, and commercial paper.

Marketable securities primarily consist of U.S.

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Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment.

Our cash, cash equivalents and marketable securities totaled approximately $266.3 million at June 25, 2022, compared to $276.1 million at December 25, 2021.

Our cash, cash equivalents and marketable securities totaled approximately $251.6 million at September 24, 2022, compared to $276.1 million at December 25, 2021.

Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, and the cash we expect to generate from operations, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from:

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If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.

If we are unsuccessful in maintaining or growing our revenues, maintaining or reducing our cost structure (in response to a potential reduction in demand due to an industry downturn, COVID-19, or other event), or increasing our available cash through debt or equity financings, our cash, cash equivalents and marketable securities may decline.

If we are unsuccessful in maintaining or growing our revenues, maintaining or reducing our cost structure, or increasing our available cash through debt or equity financings, our cash, cash equivalents and marketable securities may decline.

We utilize a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where needed.

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The following table sets forth our net cash flows from operating, investing and financing activities:

Six Months Ended

2022 June 26,

Nine Months Ended

September 24,

2022 September 25,

(In thousands)

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Operating Activities

Net cash provided by operating activities for the six months ended June 25, 2022 was primarily attributable to net income of $60.1 million and net non-cash expenses of $42.0 million, which includes depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories.

These inflows were partially offset by net changes in working capital of $15.3 million, primarily related to cash paid for inventories of $32.3 million, partially offset by cash provided by an increase in accounts payable of $7.5 million, an increase in accrued liabilities for $4.1 million, and a reduction in accounts receivable of $5.5 million.

Net cash provided by operating activities for the nine months ended September 24, 2022 was primarily attributable to net income of $64.5 million and net non-cash expenses of $69.3 million, which includes depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories.

This was partially offset by an increase in net working capital of $22.7 million, primarily related to cash paid for inventories of $33.0 million and a decrease in accrued liabilities for $5.0 million, partially offset by cash provided by an increase in accounts payable of $17.6 million.

Investing Activities

Net cash used in investing activities for the six months ended June 25, 2022 was primarily related to $30.1 million property, plant and equipment purchases, $6.9 million net cash used to purchase marketable securities, and $3.1 million for acquisition of a business.

Net cash used in investing activities for the nine months ended September 24, 2022 was primarily related to $39.0 million property, plant and equipment purchases, $8.6 million of net cash used to purchase marketable securities, and $3.4 million used for acquisition of a business.

Financing Activities

Net cash used in financing activities for the six months ended June 25, 2022 primarily related to $54.3 million used to purchase common stock under our stock repurchase programs, $4.4 million of principal payments made towards the repayment of our term loans, and $4.2 million related to tax withholdings associated with the net share settlements of our equity awards, partially offset by $5.7 million of proceeds received from issuances of common stock under our employee stock purchase plan.

Net cash used in financing activities for the nine months ended September 24, 2022 primarily related to $73.5 million used to purchase common stock under our stock repurchase programs, $6.4 million of principal payments made towards the repayment of our term loans, and $15.6 million related to tax withholdings associated with the net share settlements of our equity awards, partially offset by $10.5 million of proceeds received from issuances of common stock under our employee stock purchase plan.

FRT Term Loan

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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 $1.8 million plus interest.

The interest rate at June 25, 2022 was 1.29%.

As of June 25, 2022, the balance outstanding pursuant to the FRT term loan was $3.7 million.

The FRT Term Loan is expected to be fully paid as of October 25, 2022.

The interest rate at September 24, 2022 was 1.90%.

As of September 24, 2022, the balance outstanding pursuant to the FRT term loan was $1.7 million.

The FRT Term Loan was fully paid as of October 25, 2022.

Building Term Loan

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Interest payments are payable in monthly installments over a fifteen-year period.

The interest rate at June 25, 2022 was 2.81%.

As of June 25, 2022, the balance outstanding pursuant to the Building Term Loan was $16.0 million.

The interest rate at September 24, 2022 was 4.31%.

As of September 24, 2022, the balance outstanding pursuant to the Building Term Loan was $15.8 million.

On March 17, 2020, we entered into a forward starting interest rate swap agreement to hedge the interest payments on the Building Term Loan for the notional amount of $18.0 million, and an amortization period that matches the debt.

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.

By entering into the agreement, we converted a floating interest rate of one-month LIBOR plus 1.75% into a fixed interest rate of 2.75%.

As of June 25, 2022, the notional amount of the loan that is subject to this interest rate swap is $16.0 million.

By entering into the agreement, we converted a floating interest

rate of one-month LIBOR plus 1.75% into a fixed interest rate of 2.75%.

As of September 24, 2022, the notional amount of the loan that is subject to this interest rate swap is $15.8 million.

Stock Repurchase Programs

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During fiscal 2021 we repurchased and retired 622,400 shares of common stock for $24.0 million.

During the six months ended June 25, 2022, we repurchased and retired 676,408 shares of common stock for $26.0 million, utilizing the remaining funds available for repurchase.

On May 20, 2022, our Board of Directors authorized an additional program to repurchase up to $75 million of outstanding common stock, also with the primary purpose to offset potential dilution from issuances of common stock under our stock-based compensation programs.

During the nine months ended September 24, 2022, we repurchased and retired 676,408 shares of common stock for $26.0 million, utilizing the remaining funds available for repurchase.

On May 20, 2022, our Board of Directors authorized an additional program to repurchase up to $75 million of outstanding common stock, also with the primary purpose of offsetting potential dilution from issuances of common stock under our stock-based compensation programs.

The share repurchase program will expire on May 20, 2024.

During the three months ended June 25, 2022, we repurchased and retired 767,083 shares of common stock for $28.4 million under this program.

As of June 25, 2022, $46.6 million remained available for future repurchases.

During the nine months ended September 24, 2022, we repurchased and retired 1,335,414 shares of common stock for $47.5 million under this program.

As of September 24, 2022, $27.5 million remained available for future repurchases.

Contractual Obligations and Commitments

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of June 25, 2022:

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of September 24, 2022:

Payments Due In Fiscal Year

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(1) Represents our minimum interest payment commitments at 4.31% per annum for the Building Term Loan and 1.90% per annum for the FRT Term Loan.

This also excludes any amounts related to our interest rate swap.

This excludes any amounts related to our interest rate swap.

Off-Balance Sheet Arrangements

Historically, we have not participated in transactions that have generated relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of June 25, 2022, we were not involved in any such off-balance sheet arrangements.

As of September 24, 2022, we were not involved in any such off-balance sheet arrangements.

Recent Accounting Pronouncements

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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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis