What changed in this filing

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Item 1. Financial Statements

2020-11-03 compared with 2020-08-04 · 99 added, 56 removed, 298 unchanged (34% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share amounts)

September 25,

Current assets:

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

36 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

September 27,

September 25,

September 27,

Cost of sales

8 unchanged sentences

Income before income taxes

Income tax expense (benefit)

Income tax benefit

Net income per share:

4 unchanged sentences

(dollars in thousands)

For the three months ending June 26, 2020

For the three months ending September 25, 2020

Ordinary Shares

Shareholders'

Balance at March 27, 2020

Balance at June 26, 2020

Ordinary shares issued from exercise of stock options

Ordinary shares issued from vesting of restricted share units

Ordinary shares issued from employee share purchase plan

Share-based compensation expense

Balance at June 26, 2020

For the six months ending June 26, 2020

Balance at September 25, 2020

For the nine months ending September 25, 2020

Ordinary Shares

5 unchanged sentences

Share-based compensation expense

Balance at June 26, 2020

Balance at September 25, 2020

ICHOR HOLDINGS, LTD.

1 unchanged sentence

(dollars in thousands)

For the three months ending June 28, 2019

For the three months ending September 27, 2019

Ordinary Shares

Shareholders'

Balance at March 29, 2019

Balance at June 28, 2019

Ordinary shares issued from exercise of stock options

Ordinary shares issued from vesting of restricted share units

Ordinary shares issued from employee share purchase plan

Share-based compensation expense

Balance at June 28, 2019

For the six months ending June 28, 2019

Balance at September 27, 2019

For the nine months ending September 27, 2019

Ordinary Shares

6 unchanged sentences

Share-based compensation expense

Balance at June 28, 2019

Balance at September 27, 2019

See accompanying notes.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 25,

September 27,

Cash flows from operating activities:

6 unchanged sentences

Accounts receivable, net

Inventories, net

Prepaid expenses and other assets

15 unchanged sentences

Net cash provided by (used in) financing activities

Net decrease in cash

Net increase (decrease) in cash

Cash at beginning of period

8 unchanged sentences

ICHOR HOLDINGS, LTD.

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements

(dollar figures in tables in thousands, except per share amounts)

1 unchanged sentence

Basis of Presentation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S.

These consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the U.S.

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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting.

These consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10‑K for the year ended December 27, 2019.

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 .

The three months ended September 25, 2020 and September 27, 2019 were both 13 weeks.

References to the third 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.

3 unchanged sentences

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.

Significant estimates include 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

30 unchanged sentences

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.

We adopted the standard on the first day of the first quarter of 2020.

During the third quarter, we incurred capitalizable implementation costs of approximately $ 3.0 million in connection with our implementation of a new company-wide ERP system that is classified as a hosting arrangement that is a service contract.

Accordingly, these costs are included in Other noncurrent assets on our consolidated balance sheet as of September 25, 2020.

Additionally, our cash used in operating activities for the nine months ended September 25, 2020 include $ 1.8 million in cash outflows associated with these capitalized implementation costs.

As the ERP system was not yet in-service as of September 25, 2020, there was no amortization expense recognized during the nine months then ended.

Note 2 – Inventories

Inventories consist of the following:

September 25,

Raw materials

2 unchanged sentences

Excess and obsolete adjustment

Total inventories, net

Note 3 – Property and Equipment

Total inventories

Note 3 – Property and Equipment and Other Noncurrent Assets

Property and equipment consist of the following:

September 25,

Leasehold improvements

4 unchanged sentences

Total property and equipment, net

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.

Depreciation expense was $ 3.0 million and $ 2.2 million for the third quarter of 2020 and 2019, respectively, and $ 8.0 million and $ 6.3 million for the nine months ended September 25, 2020 and September 27, 2019, respectively.

Cloud Computing Implementation Costs

Pursuant to ASU 2018-15, we capitalize implementation costs associated with hosting arrangement that are service contracts.

These costs are recorded to prepaid expenses or other noncurrent assets.

To-date, these costs are those incurred to implement a new company-wide ERP system.

The following table summarizes capitalized cloud computing implementation costs:

Capitalized cloud computing implementation costs as of December 27, 2019

Costs capitalized during the period

Capitalized costs amortized during the period

Capitalized cloud computing implementation costs as of September 25, 2020

Note 4 – Intangible Assets

Definite‑lived intangible assets consist of the following:

June 26, 2020

September 25, 2020

Customer relationships

14 unchanged sentences

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.

As of September 25, 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

Nine Months Ended

September 25,

September 27,

September 25,

September 27,

Operating lease cost

Supplemental cash flow information related to leases is as follows:

Six Months Ended

Nine Months Ended

September 25,

September 27,

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

Supplemental balance sheet information related to leases is as follows:

September 25,

Weighted-average remaining lease term of operating leases

Weighted-average discount rate of operating leases

Future minimum lease payments under non-cancelable leases as of June 26, 2020 are as follows:

Future minimum lease payments under non-cancelable leases as of September 25, 2020 are as follows:

2020, remaining

12 unchanged sentences

With the enactment of the CARES Act, we expect to generate an additional income tax refund of approximately $ 1.0 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

Income tax expense (benefit)

Nine Months Ended

September 25,

September 27,

September 25,

September 27,

Income tax benefit

Income before income taxes

Effective income tax rate

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.

Our effective tax rate for the three and nine months ended September 25, 2020 differs from the statutory rate due to taxes on foreign income that differ from the U.S.

tax rate, including a tax holiday in Singapore, the impact of stock option exercises, and return-to-provision adjustments related to recently filed tax returns.

Our effective tax rate for the third quarter of 2019 differs from the statutory rate due to taxes on foreign income that differ from the U.S.

tax rate and return-to-provision adjustments related to recently filed tax returns.

Our effective tax rate for the nine months ended September 27, 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 ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $ 2.3 million at September 25, 2020.

The related interest was insignificant and penalties were $ 0.4 million.

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.

As of September 25, 2020, we were not under examination by tax authorities.

Note 7 – Employee Benefit Programs

2 unchanged sentences

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.

Matching contributions were $ 0.5 million and $ 0.4 million for the third quarter of 2020 and 2019, respectively, and $ 1.5 million and $ 1.1 million for the nine months ended September 25, 2020 and September 27, 2019, respectively.

Note 8 – Long-Term Debt

Long‑term debt consists of the following:

September 25,

Revolving credit facility

4 unchanged sentences

Total long-term debt, less current portion, net

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.

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 (collectively, “credit facilities”).

The amendment reduced our borrowing rate, depending on our leverage ratio, and extended the maturity date.

3 unchanged sentences

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 Eurodollar rate is equal to LIBOR, subject to a 1.00 % floor for the term loan.

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.

2 unchanged sentences

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 .

At September 25, 2020, the term loan and revolving credit facility bore interest at the Eurodollar rate option of 3.50 % and 2.78 %, 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 .

The credit facilities mature on February 15, 2023 .

Note 9 – Share‑Based Compensation

5 unchanged sentences

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.

Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 2.4 million and $ 1.8 million for the third quarter of 2020 and 2019, respectively, and $ 7.4 million and $ 4.6 million for the nine months ended September 25, 2020 and September 27, 2019, respectively.

Stock Options

7 unchanged sentences

Forfeited or expired

Outstanding, June 26, 2020

Exercisable, June 26, 2020

Outstanding, September 25, 2020

Exercisable, September 25, 2020

Restricted Share Units

3 unchanged sentences

Unvested, December 27, 2019

Unvested, June 26, 2020

Unvested, September 25, 2020

Employee Share Purchase Plan

2 unchanged sentences

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.

During the nine months ended September 25, 2020, 33,188 ordinary shares were purchased by eligible employees under the 2017 ESPP.

As of September 25, 2020, approximately 2.4 million ordinary shares remain available for purchase under the 2017 ESPP.

Note 10 – Segment Information

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

September 27,

September 25,

September 27,

United States of America

Total net sales

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 .

Foreign long-lived assets, exclusive of deferred tax assets, were $ 28.1 million and $ 30.3 million at September 25, 2020 and December 27, 2019, respectively .

Note 11 – Earnings per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

September 27,

September 25,

September 27,

Basic weighted average ordinary shares outstanding

4 unchanged sentences

Earnings per share:

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.

A combined total of approximately 1,215,000 , 1,481,000 , 1,306,000 , and 1,622,000 potentially dilutive options and RSUs were excluded from the calculation of net income per share for the third quarter of 2020 and 2019 and the nine months ended September 25, 2020 and September 27, 2019, respectively, because including them would have been antidilutive under the treasury stock method.

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 1. Financial Statements