What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-01 · 96 added, 180 removed, 161 unchanged (63% 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 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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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 $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.

We generated net income of $1.3 million in the first three months of fiscal 2023 as compared to $29.9 million in the first three months of fiscal 2022.

The decrease in net income was primarily due to a decline in revenues and the associated decline in gross margins.

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 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.

During the three months ended April 1, 2023, 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 31, 2022, which was filed with the Securities and Exchange Commission on February 24, 2023, except for:

Government Assistance

In January 2023, we received $18.0 million in cash from a California Competes Grant (the “Grant”) awarded from the California Governor’s Office of Business and Economic Development.

The Grant requires FormFactor to create and maintain full-time jobs and make significant infrastructure investments within California over a 5-year term.

If we do not meet the requirements of the Grant, we will be required to repay all or a portion of the Grant.

The Grant is included in our Condensed Consolidated Balance Sheets within Deferred grant and we have elected to recognize when earned as an offset to Cost of revenues and Operating expenses within our Condensed Consolidated Statements of Income.

We have elected to present the proceeds from the Grant as cash provided by operating activities within our Condensed Consolidated Statements of Cash Flows as the grant is to offset operations.

Results of Operations

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

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Revenues 100.0 % 100.0 %

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Revenues by Segment and Market

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

(In thousands)

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Three Months Ended

September 24,

2022 % of Revenues September 25,

2021 % of Revenues $ Change % Change

(Dollars in thousands)

Probe Cards Markets:

Foundry & Logic $ 90,605 50.1 % $ 104,640 55.1 % $ (14,035) (13.4) %

DRAM 34,922 19.3 39,816 20.9 (4,894) (12.3)

Flash 13,838 7.7 10,394 5.5 3,444 33.1

Systems Market:

Systems 41,504 22.9 35,114 18.5 6,390 18.2

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

Nine Months Ended

September 24,

2022 % of Revenues September 25,

2023 % of Revenues March 26,

2022 % of Revenues $ Change % Change

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Total revenues $ 167,448 100.0 % $ 197,174 100.0 % $ (29,726) (15.1) %

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.

Foundry & Logic — The decrease in Foundry & Logic product revenue for the three months ended April 1, 2023, compared to the three months ended March 26, 2022, was driven by the weakening demand in the semiconductor industry that began in the third quarter of fiscal 2022 and continued into the three months ended April 1, 2023 and resulted in decreased unit sales across all major customers.

DRAM — The decrease in DRAM product revenue for the three months ended April 1, 2023, compared to the three months ended March 26, 2022, was driven by lower customer demand, a result of the semiconductor industry's overall demand weakening and DRAM market weakness.

Flash — The decrease in Flash product revenue for the three months ended April 1, 2023, compared to the three months ended March 26, 2022, was driven by decreased customer demand from large multi-national customers, a result of the semiconductor industry's overall demand weakening and Flash market weakness.

Systems — The increase in Systems market revenue for the three months ended April 1, 2023, compared to the three months ended March 26, 2022, was driven by increased sales of our 200 millimeter probe stations and cryogenic systems, partially offset by decreased sales of our metrology systems.

Revenues by Geographic Region

Three Months Ended Nine Months Ended

September 24,

Revenue September 25,

Revenue September 24,

Revenue September 25,

Three Months Ended

2023 % of Revenues March 26,

2022 % of Revenues

(Dollars in thousands)

Taiwan $ 40,329 24.1 % $ 53,069 26.9 %

China 36,728 20.3 51,047 26.8 124,862 21.5 125,499 22.2

United States 37,731 22.5 25,647 13.0

China 27,099 16.2 38,399 19.5

South Korea 20,775 12.4 27,501 13.9

Malaysia 11,270 6.7 22,199 11.3

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 10,977 6.6 9,382 4.8

Europe 9,426 5.6 8,395 4.3

Singapore 5,340 3.2 10,896 5.5

Rest of the world 4,501 2.7 1,686 0.8

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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 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.

Changes in revenue by geographic region for the three months ended April 1, 2023, compared to the three months ended March 26, 2022, 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.

The decrease in China mentioned previously is also impacted by lowered demand from a large Chinese DRAM integrated device manufacturer and the impact from expanded export license requirements imposed by the United States government in the fourth quarter of fiscal 2022 for exporting advanced U.S.

semiconductor technology sold in China.

Cost of Revenues and Gross Margins

Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead and amortization of certain intangible assets.

Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead (including equipment costs, related occupancy, and computer services), warranty adjustments, inventory adjustments (including write-downs for inventory obsolescence), and amortization of certain intangible assets.

Our manufacturing operations rely on a limited number of suppliers to provide key components and materials for our products, some of which are a sole source.

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Three Months Ended

September 24,

2022 September 25,

2021 $ Change % Change

Gross profit $ 62,213 $ 80,219 $ (18,006) (22.4) %

Gross margin 34.4 % 42.2 %

Nine Months Ended

September 24,

2022 September 25,

2023 March 26,

2022 $ Change % Change

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Three Months Ended

September 24, 2022 September 25, 2021

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

Gross profit $ 48,252 $ 22,284 $ (8,323) $ 62,213 $ 69,868 $ 17,553 $ (7,202) $ 80,219

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

Nine Months Ended

September 24, 2022 September 25, 2021

April 1, 2023 March 26, 2022

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

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Gross margin 34.3 % 51.7 % 36.5 % 48.3 % 52.2 % 47.8 %

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 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.

Probe Cards — For the three months ended April 1, 2023, gross margins decreased compared to the three months ended March 26, 2022, primarily due to unfavorable absorption of costs on lower production volumes and greater inventory excess and obsolescence reserves.

Systems — For the three months ended April 1, 2023, gross margins decreased compared to the three months ended March 26, 2022, primarily as a result of less favorable product mix.

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.

Overall — 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 April 1, 2023, compared to the three months ended March 26, 2022, gross profit and gross margins have decreased on lower revenue levels, unfavorable absorption of costs on lower production volumes, and greater inventory excess and obsolescence reserves.

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

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Stock-based compensation $ 1,910 $ 1,078

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Three Months Ended

September 24,

2022 September 25,

2021 $ Change % Change

(Dollars in thousands)

Research and development $ 26,549 $ 26,026 $ 523 2.0 %

% of revenues 14.7 % 13.7 %

Nine Months Ended

September 24,

2022 September 25,

2023 March 26,

2022 $ Change % Change

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% of revenues 16.9 % 13.8 %

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.

Research and development expenses in the three months ended April 1, 2023 increased when compared to the corresponding period in the prior year primarily due to an increase in headcount, which is to support our continued investment in technology leadership.

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

These increases were partially offset by lower performance-based compensation and project material costs.

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

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

Project material costs 249 850

Depreciation 70 (9)

Three Months Ended April 1, 2023 compared to Three Months Ended March 26, 2022

Other general operational costs $ 490

Stock-based compensation 386

Restructuring charges (222) (428)

Depreciation 263

Project material costs (214)

Employee compensation costs 186

$ 523 $ 6,474

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

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Stock-based compensation $ 2,372 $ 1,986

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Three Months Ended

September 24,

2022 September 25,

2021 $ Change % Change

(Dollars in thousands)

Selling, general and administrative $ 31,637 $ 30,940 $ 697 2.3 %

% of revenues 17.5 % 16.3 %

Nine Months Ended

September 24,

2022 September 25,

2023 March 26,

2022 $ Change % Change

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% of revenues 19.5 % 16.7 %

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.

Selling, general and administrative expenses decreased in the three months ended April 1, 2023 when compared to the corresponding period in the prior year, primarily driven by lower performance-based compensation, mostly offset by restructuring charges, higher stock-based compensation, and higher general operating expenses.

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

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

Three Months Ended April 1, 2023 compared to Three Months Ended March 26, 2022

Employee compensation (2,385)

General operating expenses 843

Restructuring charges 826

Stock-based compensation 552

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 Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

Stock-based compensation $ 5,008 $ 4,456

Interest Income and Interest Expense

Interest Income (Expense), Net

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

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 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.

The increase in interest income for the three months ended April 1, 2023 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 loan, interest rate swap derivative contracts, and term loan issuance costs amortization charges.

The interest expense for the three months ended April 1, 2023 compared to the same period of the prior year decreased due to lower outstanding debt.

Other Income, Net

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Provision for Income Taxes

Three Months Ended Nine Months Ended

September 24,

2022 September 25,

2021 September 24,

2022 September 25,

Three Months Ended

2023 March 26,

(In thousands, except percentages)

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federal, state or foreign tax laws, changes in ASC 718 stock-based compensation expense/benefit, future expansion into areas with varying country, state, and local income tax rates, and deductibility of certain costs and expenses by jurisdiction.

We have utilized our previous net operating loss carryforwards, and expect the FDII deduction and corresponding benefit to be available, resulting in a decrease from the U.S.

statutory rate for the year ending December 31, 2022.

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.

and fifteen years in foreign jurisdictions.

We have utilized our previous net operating loss carryforwards allowing us to benefit more from the available FDII deduction, which, combined with higher research and development tax credits, results in a lower worldwide effective tax rate for the three months ended April 1, 2023 when compared to the corresponding period in the prior year.

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (“CHIPS Act”) was signed into law on August 9, 2022.

The CHIPS Act provides for various incentives and tax credits among other items including the Advanced Manufacturing Investment Credit (“AMIC”) which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022.

At least a portion of our future capital expenditures and research and development costs will qualify for this credit, which benefits us by allowing us to net the credit received against our costs.

The AMIC credit is accounted for outside of ASC 740 as a reduction to the depreciable basis of the assets used in operations and will not have an impact on our effective tax rate.

Beginning in 2022, the U.S.

Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the existing option to deduct research and development expenditures and requires taxpayers to amortize such expenditures attributable to domestic and foreign research over five and fifteen years, respectively, pursuant to IRC Section 174.

While the capitalization requirement has a negative impact on our cash flows, there are offsetting benefits from the enactment of this provision that we have included in our estimated annual effective tax rate.

While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed.

If this provision is not deferred, modified, or repealed with retroactive effect to January 1, 2022, we expect our cash taxes to slowly increase over the next few years until we have fully utilized our Federal research and development credits to offset our Federal tax liability to the extent allowed by law.

Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.

Liquidity and Capital Resources

Capital Resources

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.

Our working capital was $352.8 million at April 1, 2023, compared to $324.9 million at December 31, 2022.

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

Marketable securities primarily consist of U.S.

treasuries, corporate bonds, and commercial paper.

treasuries, U.S.

agency securities, corporate bonds, and commercial paper.

We typically invest in highly rated securities with low probabilities of default.

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 $251.6 million at September 24, 2022, compared to $276.1 million at December 25, 2021.

Our cash, cash equivalents and marketable securities totaled approximately $236.3 million at April 1, 2023, compared to $238.1 million at December 31, 2022.

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

Nine Months Ended

September 24,

2022 September 25,

Three Months Ended

2023 March 26,

(In thousands)

1 unchanged sentence

Net cash used in investing activities $ (13,539) $ (21,078)

Net cash used in financing activities $ (84,964) $ (36,869)

Net cash provided by (used) in financing activities $ 4,378 $ (6,016)

Operating Activities

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.

Net cash provided by operating activities for the three months ended April 1, 2023 was attributable to net income of $1.3 million and net non-cash expenses of $26.0 million, which includes depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories, partially offset by an increase in net working capital of $15.1 million.

The increase in net working capital related to an increase in accounts receivable of $15.9 million and decreases in accrued liabilities and deferred revenues of $10.2 million and $6.0 million, respectively, partially offset by an increase in deferred grant of $18.0 million.

Investing Activities

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.

Net cash used in investing activities for the three months ended April 1, 2023 primarily related to $19.7 million in property, plant and equipment purchases, partially offset by $6.2 million net cash received from the maturities and sales of marketable securities.

Financing Activities

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

On October 25, 2019, we entered into a $23.4 million three-year credit facility loan agreement (the “FRT Term Loan”), to fund the acquisition of FRT GmbH, which we acquired on October 9, 2019.

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 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.

Net cash provided by financing activities for the three months ended April 1, 2023 primarily related to $5.0 million received from issuances of common stock under our employee stock purchase plan, partially offset by $0.3 million principal payments made towards the repayment of our term loan and $0.4 million related to tax withholdings associated with the net share settlements of our equity awards.

Building Term Loan

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

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.

The interest rate at April 1, 2023 was 4.66%.

As of April 1, 2023, the balance outstanding pursuant to the Building Term Loan was $15.2 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 September 24, 2022, the notional amount of the loan that is subject to this interest rate swap is $15.8 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 April 1, 2023, the notional amount of the loan that is subject to this interest rate swap is $15.2 million.

Stock Repurchase Programs

On October 26, 2020, our Board of Directors authorized a two-year program to repurchase up to $50 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based compensation programs.

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

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.

During the three months ended March 26, 2022, we repurchased 240,548 shares of common stock for $9.4 million.

We utilized the remaining funds available for repurchase under this program during fiscal 2022.

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.

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

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.

During the three months ended April 1, 2023, we did not repurchase any shares of common stock.

As of April 1, 2023, $18.6 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 September 24, 2022:

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of April 1, 2023:

Payments Due In Fiscal Year

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Total $ 7,710 $ 10,098 $ 9,963 $ 8,546 $ 7,619 $ 15,909 $ 59,845

(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.

(1) Represents our minimum interest payment commitments at 4.66% per annum for the Building Term Loan.

This excludes any amounts related to our interest rate swap.

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

Recent Accounting Pronouncements

See Note 1, Basis of Presentation and New Accounting Pronouncements , of Notes to Condensed Consolidated Financial Statements.

As of April 1, 2023, we were not involved in any such off-balance sheet arrangements.

Recent Accounting Standards

For a description of a recent change in accounting standards, including the expected dates of adoption and estimated effects, if any, in our condensed consolidated financial statements, see Note 1, Basis of Presentation and Significant Accounting Policies, in Part I, Item 1 of this Form 10-Q.

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