ICHOR HOLDINGS, LTD. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ICHOR HOLDINGS, LTD. Consolidated Balance Sheets (dollars in thousands, except per share amounts) June 26, 2020 December 27, 2019 Assets Current assets: Cash $ 56,969 $ 60,612 Accounts receivable, net 104,859 84,849 Inventories, net 149,190 127,037 Prepaid expenses and other current assets 6,371 4,449 Total current assets 317,389 276,947 Property and equipment, net 45,631 44,541 Operating lease right-of-use assets 12,019 14,198 Other noncurrent assets 1,116 1,094 Deferred tax assets, net 4,354 4,738 Intangible assets, net 45,357 52,027 Goodwill 173,010 173,010 Total assets $ 598,876 $ 566,555 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 118,278 $ 131,578 Accrued liabilities 15,974 12,814 Other current liabilities 6,996 5,233 Current portion of long-term debt 8,750 8,750 Current portion of lease liabilities 5,359 5,492 Total current liabilities 155,357 163,867 Long-term debt, less current portion, net 195,413 169,304 Lease liabilities, less current portion 7,038 9,081 Deferred tax liabilities 210 210 Other non-current liabilities 2,668 2,677 Total liabilities 360,686 345,139 Shareholders’ equity: Preferred shares ($ 0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding) — — Ordinary shares ($ 0.0001 par value; 200,000,000 shares authorized; 22,868,999 and 22,618,708 shares outstanding, respectively; 27,306,438 and 27,056,147 shares issued, respectively) 2 2 Additional paid in capital 248,882 242,318 Treasury shares at cost ( 4,437,439 shares) ( 91,578 ) ( 91,578 ) Retained earnings 80,884 70,674 Total shareholders’ equity 238,190 221,416 Total liabilities and shareholders’ equity $ 598,876 $ 566,555 See accompanying notes. 1 ICHOR HOLDINGS, LTD. Consolidated Statements of Operations (dollars in thousands, except per share amounts) Three Months Ended Six Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Net sales $ 221,564 $ 139,195 $ 441,592 $ 277,026 Cost of sales 192,302 119,662 383,556 237,270 Gross profit 29,262 19,533 58,036 39,756 Operating expenses: Research and development 3,509 2,634 6,831 5,025 Selling, general, and administrative 13,113 10,685 29,731 22,443 Amortization of intangible assets 3,336 3,202 6,670 6,339 Total operating expenses 19,958 16,521 43,232 33,807 Operating income 9,304 3,012 14,804 5,949 Interest expense 2,302 2,762 4,676 5,530 Other expense (income), net 2 7 ( 29 ) 31 Income before income taxes 7,000 243 10,157 388 Income tax expense (benefit) 189 ( 93 ) ( 53 ) ( 1,466 ) Net income $ 6,811 $ 336 $ 10,210 $ 1,854 Net income per share: Basic $ 0.30 $ 0.02 $ 0.45 $ 0.08 Diluted $ 0.30 $ 0.01 $ 0.44 $ 0.08 Shares used to compute net income per share: Basic 22,836,400 22,395,308 22,786,782 22,332,568 Diluted 23,066,976 22,663,053 23,099,946 22,596,412 See accompanying notes. 2 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (dollars in thousands) Additional Treasury Total For the three months ending June 26, 2020 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at March 27, 2020 22,806,679 $ 2 $ 247,023 4,437,439 $ ( 91,578 ) $ 74,073 $ 229,520 Ordinary shares issued from exercise of stock options 8,797 — 111 — — — 111 Ordinary shares issued from vesting of restricted share units 53,523 — ( 393 ) — — — ( 393 ) Share-based compensation expense — — 2,141 — — — 2,141 Net income — — — — — 6,811 6,811 Balance at June 26, 2020 22,868,999 $ 2 $ 248,882 4,437,439 $ ( 91,578 ) $ 80,884 $ 238,190 Additional Treasury Total For the six months ending June 26, 2020 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at December 27, 2019 22,618,708 $ 2 $ 242,318 4,437,439 $ ( 91,578 ) $ 70,674 $ 221,416 Ordinary shares issued from exercise of stock options 122,336 — 2,594 — — — 2,594 Ordinary shares issued from vesting of restricted share units 111,435 — ( 1,386 ) — — — ( 1,386 ) Ordinary shares issued from employee share purchase plan 16,520 — 350 — — — 350 Share-based compensation expense — — 5,006 — — — 5,006 Net income — — — — — 10,210 10,210 Balance at June 26, 2020 22,868,999 $ 2 248,882 4,437,439 $ ( 91,578 ) $ 80,884 $ 238,190 3 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (continued) (dollars in thousands) Additional Treasury Total For the three months ending June 28, 2019 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at March 29, 2019 22,370,129 $ 2 $ 231,793 4,437,439 $ ( 91,578 ) $ 61,463 $ 201,680 Ordinary shares issued from exercise of stock options 17,785 — 303 — — — 303 Ordinary shares issued from vesting of restricted share units 26,175 — ( 63 ) — — — ( 63 ) Share-based compensation expense — — 1,475 — — — 1,475 Net income — — — — — 336 336 Balance at June 28, 2019 22,414,089 $ 2 $ 233,508 4,437,439 $ ( 91,578 ) $ 61,799 $ 203,731 Additional Treasury Total For the six months ending June 28, 2019 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at December 28, 2018 22,234,508 $ 2 $ 228,358 4,339,529 $ ( 89,979 ) $ 59,945 $ 198,326 Ordinary shares issued from exercise of stock options 204,700 — 2,207 — — — 2,207 Ordinary shares issued from vesting of restricted share units 50,290 — ( 174 ) — — — ( 174 ) Ordinary shares issued from employee share purchase plan 22,501 — 312 — — — 312 Repurchase of ordinary shares ( 97,910 ) — — 97,910 ( 1,599 ) — ( 1,599 ) Share-based compensation expense — — 2,805 — — — 2,805 Net income — — — — — 1,854 1,854 Balance at June 28, 2019 22,414,089 $ 2 $ 233,508 4,437,439 $ ( 91,578 ) $ 61,799 $ 203,731 See accompanying notes. 4 ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) Six Months Ended June 26, 2020 June 28, 2019 Cash flows from operating activities: Net income $ 10,210 $ 1,854 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 11,662 10,460 Share-based compensation 5,006 2,805 Deferred income taxes 384 ( 172 ) Amortization of debt issuance costs 484 454 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 20,010 ) ( 1,284 ) Inventories, net ( 22,153 ) 12,633 Prepaid expenses and other assets 563 3,058 Accounts payable ( 13,717 ) ( 4,176 ) Accrued liabilities 3,138 ( 706 ) Other liabilities ( 750 ) ( 4,266 ) Net cash provided by (used in) operating activities ( 25,183 ) 20,660 Cash flows from investing activities: Capital expenditures ( 5,665 ) ( 6,117 ) Cash paid for intangible assets — ( 8,147 ) Net cash used in investing activities ( 5,665 ) ( 14,264 ) Cash flows from financing activities: Issuance of ordinary shares under share-based compensation plans 2,966 2,562 Employees' taxes paid upon vesting of restricted share units ( 1,386 ) ( 174 ) Repurchase of ordinary shares — ( 1,599 ) Borrowings on revolving credit facility 30,000 5,000 Repayments on revolving credit facility — ( 8,000 ) Repayments on term loan ( 4,375 ) ( 6,563 ) Net cash provided by (used in) financing activities 27,205 ( 8,774 ) Net decrease in cash ( 3,643 ) ( 2,378 ) Cash at beginning of period 60,612 43,834 Cash at end of period $ 56,969 $ 41,456 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 4,240 $ 5,755 Cash paid during the period for taxes, net of refunds $ 34 $ 1,624 Supplemental disclosures of non-cash activities: Capital expenditures included in accounts payable $ 1,191 $ 1,170 Right-of-use assets obtained in exchange for new operating lease liabilities $ 328 $ 566 See accompanying notes. 5 ICHOR HOLDINGS, LTD. Notes to Consolidated Financial Statements (Unaudited) (dollar figures in tables in thousands, except per share amounts) Note 1 – Basis of Presentation and Selected Significant Accounting Policies Basis of Presentation These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All dollar figures presented in tables in the notes to consolidated financial statements are in thousands, except per share amounts. Year End We use a 52- or 53-week fiscal year ending on the last Friday in December. The three months ended June 26, 2020 and June 28, 2019 were both 13 weeks. References to the second quarter of 2020 and 2019 refer to the three-month periods then ended . References to fiscal year 2020 refer to our fiscal year ending December 25, 2020. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods presented. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from the estimates made by management. Significant estimates include the fair value of assets and liabilities acquired in acquisitions, estimated useful lives for long‑lived assets, allowance for doubtful accounts, inventory valuation, uncertain tax positions, fair value assigned to stock options granted, and impairment analysis for both definite‑lived intangible assets and goodwill. Revenue Recognition We recognize revenue when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. This amount is recorded as net sales in our consolidated statements of operations. Transaction price – In most of our contracts, prices are generally determined by a customer-issued purchase order and generally remain fixed over the duration of the contract. Certain contracts contain variable consideration, including early-payment discounts and rebates. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal will not occur. Variable consideration estimates are updated at each reporting date. Historically, we have not incurred significant costs to obtain a contract. All amounts billed to a customer relating to shipping and handling are classified as net sales, while all costs incurred by us for shipping and handling are classified as cost of sales. Performance obligations – Substantially all of our performance obligations pertain to promised goods (“products”), which are primarily comprised of fluid delivery subsystems, weldments, and other components. Most of our contracts contain a single performance obligation and are generally completed within twelve months . Product sales are recognized at a point-in-time, generally upon delivery, as such term is defined within the contract, as that is when control of the promised good has transferred. Products are covered by a standard assurance warranty, generally extended for a period of one to two years depending on the customer, which promises that delivered products conform to contract specifications. As such, we account for such warranties under ASC 460, Guarantees , and not as a separate performance obligation . Contract balances – Accounts receivable represents our unconditional right to receive consideration from our customers. Accounts receivable are carried at invoice price less an estimate for doubtful accounts and estimated payment discounts. Payment terms vary by customer but are generally due within 15‑ 60 days. Historically, we have not incurred significant payment issues with our customers. We had no significant contract assets or liabilities on our consolidated balance sheets in any of the periods presented . 6 Commitments and Contingencies We are periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. The ultimate resolution of these actions is not expected to have a material effect on our financial position or results of operations. Subsequent to the end of the first quarter, but before the financial statements were issued, we reached a mutual settlement with the counterparty of a contract dispute and, accordingly, recorded a $ 1.4 million contract settlement loss to cost of sales, as the settlement provided evidence relating to a loss that existed at March 27, 2020. Accounting Pronouncements Recently Adopted In June 2016, the FASB issued ASU 2016‑13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . This standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. We adopted the standard on the first day of the first quarter of 2020, and the adoption did not have a significant impact on our financial statements. In August 2018, the FASB issued ASU 2018‑15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350‑40): 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. We adopted the standard on the first day of the first quarter of 2020, and the adoption did not have a significant impact on our financial statements. Note 2 – Inventories Inventories consist of the following: June 26, 2020 December 27, 2019 Raw materials $ 98,841 $ 85,329 Work in process 39,489 31,825 Finished goods 21,427 17,700 Excess and obsolete adjustment ( 10,567 ) ( 7,817 ) Total inventories, net $ 149,190 $ 127,037 Note 3 – Property and Equipment Property and equipment consist of the following: June 26, 2020 December 27, 2019 Machinery $ 37,133 $ 33,684 Leasehold improvements 28,905 27,835 Computer software, hardware, and equipment 6,250 5,796 Office furniture, fixtures and equipment 1,037 1,040 Vehicles 26 26 Construction-in-process 4,793 3,760 78,144 72,141 Less accumulated depreciation ( 32,513 ) ( 27,600 ) Total property and equipment, net $ 45,631 $ 44,541 Depreciation expense was $ 2.6 million and $ 2.0 million for the second quarter of 2020 and 2019, respectively, and $ 5.0 million and $ 4.1 million for the six months ended June 26, 2020 and June 28, 2019, respectively. 7 Note 4 – Intangible Assets Definite‑lived intangible assets consist of the following: June 26, 2020 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Trademarks $ 9,690 $ ( 8,234 ) $ — $ 1,456 10.0 years Customer relationships 82,986 ( 48,270 ) — 34,716 7.8 years Developed technology 11,047 ( 1,862 ) — 9,185 10.0 years Total intangible assets $ 103,723 $ ( 58,366 ) $ — $ 45,357 December 27, 2019 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Trademarks $ 9,690 $ ( 7,750 ) $ — $ 1,940 10.0 years Customer relationships 82,986 ( 42,621 ) — 40,365 7.8 years Developed technology 11,047 ( 1,325 ) — 9,722 10.0 years Total intangible assets $ 103,723 $ ( 51,696 ) $ — $ 52,027 Note 5 – Leases Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We lease facilities under various non-cancellable operating leases expiring through 2025 . In addition to base rental payments, we are generally responsible for our proportionate share of operating expenses, including facility maintenance, insurance, and property taxes. As these amounts are variable, they are not included in lease liabilities. As of June 26, 2020, we had no operating leases executed for which the rental period had not yet commenced. The components of lease expense are as follows: Three Months Ended Six Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Operating lease cost $ 1,332 $ 1,660 $ 2,652 $ 3,293 Supplemental cash flow information related to leases is as follows: Six Months Ended June 26, 2020 June 28, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,678 $ 2,492 Supplemental balance sheet information related to leases is as follows: June 26, 2020 Weighted-average remaining lease term of operating leases 2.7 years Weighted-average discount rate of operating leases 4.5 % 8 Future minimum lease payments under non-cancelable leases as of June 26, 2020 are as follows: 2020, remaining $ 2,797 2021 4,900 2022 4,123 2023 1,173 2024 241 Thereafter 26 Total future minimum lease payments 13,260 Less imputed interest ( 863 ) Total lease liabilities $ 12,397 Note 6 – Income Taxes Coronavirus Aid, Relief, and Economic Security (“CARES”) Act In response to the COVID‑19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Corporate taxpayers may carryback net operating losses (“NOLs”) originating in 2018 through 2020 for up to five years , which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the existing limitation on taxable income of 80 % by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019, or 2020. Taxpayers may generally deduct interest up to the sum of 50 % of adjusted taxable income, plus business interest income, subject to the existing 30 % limit under the 2017 Tax Act, for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25 % of taxable income and makes qualified improvement property generally eligible for 15 -year cost-recovery and 100 % bonus depreciation. With the enactment of the CARES Act, we expect to generate an additional income tax refund of approximately $ 0.7 million from our NOL carryback provision, resulting from the benefit from additional interest and depreciation deductions. Accordingly, we recognized a benefit of $ 0.2 million related to the CARES Act in our income tax provision for the first quarter of 2020. Income tax information for the periods reported are as follows: Three Months Ended Six Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Income tax expense (benefit) $ 189 $ ( 93 ) $ ( 53 ) $ ( 1,466 ) Income before income taxes $ 7,000 $ 243 $ 10,157 $ 388 Effective income tax rate 2.7 % - 38.3 % - 0.5 % - 377.8 % Our effective tax rate for the three and six months ended June 26, 2020 differs from the statutory rate due to taxes on foreign income that differ from the U.S. tax rate, excess tax benefits from share-based compensation, and the impact of the CARES Act. Our effective tax rate for the second quarter of 2019 differs from the statutory rate due to taxes on foreign income that differ from the U.S. tax rate and excess tax benefits from share-based compensation. Our effective tax rate for the six months ended June 28, 2019 differs from the statutory rate due to taxes on foreign income that differ from the U.S. tax rate, the release of certain tax reserves related to statute of limitation expirations and settlements, and excess tax benefits from share-based compensation. The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $ 2.3 million at June 26, 2020. The related interest and penalties were zero and $ 0.4 million, respectively. The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant. As of June 26, 2020, we were not under examination by tax authorities. 9 Note 7 – Employee Benefit Programs 401(k) Plan We sponsor a 401(k) plan available to employees of our U.S.‑based subsidiaries. Participants may make salary deferral contributions not to exceed 50 % of a participant’s annual compensation or the maximum amount otherwise allowed by law. Eligible employees receive a discretionary matching contribution equal to 50 % of a participant’s deferral, up to an annual maximum of 4 % of a participant’s annual compensation. Matching contributions were $ 0.5 million and $ 0.4 million for the second quarter of 2020 and 2019, respectively, and $ 1.0 million and $ 0.8 million for the six months ended June 26, 2020 and June 28, 2019, respectively. Note 8 – Long-Term Debt Long‑term debt consists of the following: June 26, 2020 December 27, 2019 Term loan $ 157,500 $ 161,875 Revolving credit facility 49,162 19,162 Total principal amount of long-term debt 206,662 181,037 Less unamortized debt issuance costs ( 2,499 ) ( 2,983 ) Total long-term debt, net 204,163 178,054 Less current portion ( 8,750 ) ( 8,750 ) Total long-term debt, less current portion, net $ 195,413 $ 169,304 On February 15, 2018, we amended and restated our credit agreement, which replaced our existing credit facilities with a $ 175.0 million term loan and a $ 125.0 million revolving credit facility. The amendment reduced our borrowing rate, depending on our leverage ratio, and extended the maturity date. We incurred debt issuance costs of $ 2.1 million in connection with the amendment. The amendment did not meet the definition of an extinguishment and was accounted for as a debt modification. Interest is charged at either the Base Rate or the Eurodollar rate (as such terms are defined in the credit agreement) at our option, plus an applicable margin. The Base Rate is equal to the higher of i) the Prime Rate, ii) the Federal Funds Rate plus 0.5 %, or iii) the Eurodollar Rate plus 1.00 %. The Eurodollar rate is equal to LIBOR. The applicable margin on Base Rate and Eurodollar Rate loans is 0.75 ‑ 1.50 % and 1.75 ‑ 2.50 % per annum, respectively, depending on our leverage ratio. We are also charged a commitment fee of 0.20 %- 0.35 % on the unused portion of our revolving credit facility. Base Rate interest payments and commitment fees are due quarterly. Eurodollar interest payments are due on the last day of the applicable interest period. At June 26, 2020, the term loan and revolving credit facility bore interest at the Eurodollar rate option of 3.95 % and 3.68 %, respectively . Term loan principal payments of $ 2.2 million are due on a quarterly basis. The term loan and revolving credit facility mature on February 15, 2023 . Note 9 – Share‑Based Compensation The 2016 Omnibus Incentive Plan (the “2016 Plan”) provides for grants of share‑based awards to employees, directors, and consultants. Awards may be in the form of stock options (“options”), tandem and non‑tandem stock appreciation rights, restricted share awards or restricted share units (“RSUs”), performance awards, and other share‑based awards. Forfeited or expired awards are returned to the incentive plan pool for future grants. Awards generally vest over four years , 25 % on the first anniversary of the date of grant and quarterly thereafter over the remaining 3 years. Upon vesting of RSUs, employees may elect to have shares withheld to cover statutory minimum withholding taxes. Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares were never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows. Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 2.1 million and $ 1.5 million for the second quarter of 2020 and 2019, respectively, and $ 5.0 million and $ 2.8 million for the six months ended June 26, 2020 and June 28, 2019, respectively. 10 Stock Options The following table summarizes option activity: Number of Stock Options Time vesting Performance vesting Weighted average exercise price per share Weighted average remaining contractual term Aggregate intrinsic value (in thousands) Outstanding, December 27, 2019 1,688,938 65,908 $ 20.57 Granted 222,051 — $ 23.49 Exercised ( 122,336 ) — $ 21.20 Forfeited or expired ( 28,375 ) — $ 23.15 Outstanding, June 26, 2020 1,760,278 65,908 $ 20.84 4.5 years $ 9,076 Exercisable, June 26, 2020 904,471 65,908 $ 18.37 3.4 years $ 6,510 Restricted Share Units The following table summarizes RSU activity: Number of Restricted Share Units Time vesting Performance vesting Weighted average grant date fair value per share Unvested, December 27, 2019 389,170 17,730 $ 23.03 Granted 336,610 — $ 24.17 Vested ( 160,153 ) — $ 22.86 Forfeited — — $ — Unvested, June 26, 2020 565,627 17,730 $ 23.74 Employee Share Purchase Plan The 2017 Employee Stock Purchase Plan (the “2017 ESPP”) grants employees the ability to designate a portion of their base-pay to purchase ordinary shares at a price equal to 85 % of the fair market value of our ordinary shares on the first or last day of each 6 month purchase period. Purchase periods begin on January 1 or July 1 and end on June 30 or December 31, or the next business day if such date is not a business day. Shares are purchased on the last day of the purchase period. During the six months ended June 26, 2020, 16,520 ordinary shares were purchased by eligible employees under the 2017 ESPP. As of June 26, 2020, approximately 2.4 million ordinary shares remain available for purchase under the 2017 ESPP. 11 Note 10 – Segment Information Our Chief Operating Decision Maker, the Chief Executive Officer, reviews our results of operations on a consolidated level and executive staff is structured by function rather than by product category. Therefore, we operate in one operating segment. Key resources, decisions, and assessment of performance are also analyzed on a company‑wide level. Foreign operations are conducted primarily through our wholly owned subsidiaries in Singapore and Malaysia. Our principal markets include North America, Asia and, to a lesser degree, Europe. Sales by geographic area represent sales to unaffiliated customers. All information on sales by geographic area is based upon the location to which the products were shipped. The following table sets forth sales by geographic area: Three Months Ended Six Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 United States of America $ 117,692 $ 76,899 $ 238,533 $ 153,532 Singapore 74,327 43,298 147,536 80,277 Europe 18,536 9,797 33,495 24,890 Other 11,009 9,201 22,028 18,327 Total net sales $ 221,564 $ 139,195 $ 441,592 $ 277,026 Foreign long-lived assets, exclusive of deferred tax assets, were $ 29.0 million and $ 30.3 million at June 26, 2020 and December 27, 2019, respectively . Note 11 – Earnings per Share The following table sets forth the computation of basic and diluted earnings per share and a reconciliation of the numerator and denominator used in the calculation: Three Months Ended Six Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Numerator: Net income $ 6,811 $ 336 $ 10,210 $ 1,854 Denominator: Basic weighted average ordinary shares outstanding 22,836,400 22,395,308 22,786,782 22,332,568 Dilutive effect of options 191,526 236,526 255,523 241,077 Dilutive effect of RSUs 36,481 21,359 55,072 12,907 Dilutive effect of ESPP 2,569 9,860 2,569 9,860 Diluted weighted average ordinary shares outstanding 23,066,976 22,663,053 23,099,946 22,596,412 Earnings per share: Net income: Basic $ 0.30 $ 0.02 $ 0.45 $ 0.08 Diluted $ 0.30 $ 0.01 $ 0.44 $ 0.08 A combined total of approximately 1,790,000 , 1,782,000 , 1,555,000 , and 1,890,000 potentially dilutive options and RSUs were excluded from the calculation of net income per share for the second quarter of 2020 and 2019 and the six months ended June 26, 2020 and June 28, 2019, respectively, because including them would have been antidilutive under the treasury stock method. 12