ICHOR HOLDINGS, LTD. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ICHOR HOLDINGS, LTD. Consolidated Balance Sheets (dollars in thousands, except per share amounts) (unaudited) September 25, 2020 December 27, 2019 Assets Current assets: Cash $ 78,919 $ 60,612 Accounts receivable, net 104,121 84,849 Inventories 137,583 127,037 Prepaid expenses and other current assets 5,577 4,449 Total current assets 326,200 276,947 Property and equipment, net 44,574 44,541 Operating lease right-of-use assets 10,863 14,198 Other noncurrent assets 4,101 1,094 Deferred tax assets, net 4,674 4,738 Intangible assets, net 42,019 52,027 Goodwill 173,010 173,010 Total assets $ 605,441 $ 566,555 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 107,648 $ 131,578 Accrued liabilities 16,785 12,814 Other current liabilities 9,949 5,233 Current portion of long-term debt 8,750 8,750 Current portion of lease liabilities 5,167 5,492 Total current liabilities 148,299 163,867 Long-term debt, less current portion, net 193,467 169,304 Lease liabilities, less current portion 6,040 9,081 Deferred tax liabilities 210 210 Other non-current liabilities 2,758 2,677 Total liabilities 350,774 345,139 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; 23,160,672 and 22,618,708 shares outstanding, respectively; 27,598,111 and 27,056,147 shares issued, respectively) 2 2 Additional paid in capital 254,811 242,318 Treasury shares at cost ( 4,437,439 shares) ( 91,578 ) ( 91,578 ) Retained earnings 91,432 70,674 Total shareholders’ equity 254,667 221,416 Total liabilities and shareholders’ equity $ 605,441 $ 566,555 See accompanying notes. 1 ICHOR HOLDINGS, LTD. Consolidated Statements of Operations (dollars in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 25, 2020 September 27, 2019 September 25, 2020 September 27, 2019 Net sales $ 227,678 $ 154,456 $ 669,270 $ 431,482 Cost of sales 195,172 133,763 578,728 371,033 Gross profit 32,506 20,693 90,542 60,449 Operating expenses: Research and development 3,269 2,987 10,100 8,012 Selling, general, and administrative 13,367 11,048 43,098 33,491 Amortization of intangible assets 3,338 3,336 10,008 9,675 Total operating expenses 19,974 17,371 63,206 51,178 Operating income 12,532 3,322 27,336 9,271 Interest expense 2,052 2,663 6,728 8,193 Other expense (income), net 242 ( 43 ) 213 ( 12 ) Income before income taxes 10,238 702 20,395 1,090 Income tax benefit ( 310 ) ( 221 ) ( 363 ) ( 1,687 ) Net income $ 10,548 $ 923 $ 20,758 $ 2,777 Net income per share: Basic $ 0.46 $ 0.04 $ 0.91 $ 0.12 Diluted $ 0.45 $ 0.04 $ 0.89 $ 0.12 Shares used to compute net income per share: Basic 23,051,994 22,454,408 22,875,186 22,373,181 Diluted 23,347,460 22,718,882 23,199,618 22,629,855 See accompanying notes. 2 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (dollars in thousands) (unaudited) Additional Treasury Total For the three months ending September 25, 2020 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at June 26, 2020 22,868,999 $ 2 $ 248,882 4,437,439 $ ( 91,578 ) $ 80,884 $ 238,190 Ordinary shares issued from exercise of stock options 262,940 — 3,319 — — — 3,319 Ordinary shares issued from vesting of restricted share units 12,065 — ( 184 ) — — — ( 184 ) Ordinary shares issued from employee share purchase plan 16,668 — 377 — — — 377 Share-based compensation expense — — 2,417 — — — 2,417 Net income — — — — — 10,548 10,548 Balance at September 25, 2020 23,160,672 $ 2 $ 254,811 4,437,439 $ ( 91,578 ) $ 91,432 $ 254,667 Additional Treasury Total For the nine months ending September 25, 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 385,276 — 5,913 — — — 5,913 Ordinary shares issued from vesting of restricted share units 123,500 — ( 1,570 ) — — — ( 1,570 ) Ordinary shares issued from employee share purchase plan 33,188 — 727 — — — 727 Share-based compensation expense — — 7,423 — — — 7,423 Net income — — — — — 20,758 20,758 Balance at September 25, 2020 23,160,672 $ 2 254,811 4,437,439 $ ( 91,578 ) $ 91,432 $ 254,667 3 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (continued) (dollars in thousands) (unaudited) Additional Treasury Total For the three months ending September 27, 2019 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at June 28, 2019 22,414,089 $ 2 $ 233,508 4,437,439 $ ( 91,578 ) $ 61,799 $ 203,731 Ordinary shares issued from exercise of stock options 33,421 — 433 — — — 433 Ordinary shares issued from vesting of restricted share units 9,749 — ( 48 ) — — — ( 48 ) Ordinary shares issued from employee share purchase plan 25,144 — 359 — — — 359 Share-based compensation expense — — 1,792 — — — 1,792 Net income — — — — — 923 923 Balance at September 27, 2019 22,482,403 $ 2 $ 236,044 4,437,439 $ ( 91,578 ) $ 62,722 $ 207,190 Additional Treasury Total For the nine months ending September 27, 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 238,121 — 2,640 — — — 2,640 Ordinary shares issued from vesting of restricted share units 60,039 — ( 222 ) — — — ( 222 ) Ordinary shares issued from employee share purchase plan 47,645 — 671 — — — 671 Repurchase of ordinary shares ( 97,910 ) — — 97,910 ( 1,599 ) — ( 1,599 ) Share-based compensation expense — — 4,597 — — — 4,597 Net income — — — — — 2,777 2,777 Balance at September 27, 2019 22,482,403 $ 2 $ 236,044 4,437,439 $ ( 91,578 ) $ 62,722 $ 207,190 See accompanying notes. 4 ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) (unaudited) Nine Months Ended September 25, 2020 September 27, 2019 Cash flows from operating activities: Net income $ 20,758 $ 2,777 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 18,029 15,957 Share-based compensation 7,423 4,597 Deferred income taxes 64 ( 869 ) Amortization of debt issuance costs 726 696 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 19,272 ) ( 36,853 ) Inventories ( 10,546 ) 15,284 Prepaid expenses and other assets ( 472 ) 3,492 Accounts payable ( 23,693 ) 23,413 Accrued liabilities 4,002 661 Other liabilities 1,103 ( 4,152 ) Net cash provided by (used in) operating activities ( 1,878 ) 25,003 Cash flows from investing activities: Capital expenditures ( 8,291 ) ( 8,348 ) Cash paid for intangible assets — ( 8,147 ) Net cash used in investing activities ( 8,291 ) ( 16,495 ) Cash flows from financing activities: Issuance of ordinary shares under share-based compensation plans 6,609 3,217 Employees' taxes paid upon vesting of restricted share units ( 1,570 ) ( 222 ) Repurchase of ordinary shares — ( 1,599 ) Borrowings on revolving credit facility 30,000 5,000 Repayments on revolving credit facility — ( 22,000 ) Repayments on term loan ( 6,563 ) ( 6,563 ) Net cash provided by (used in) financing activities 28,476 ( 22,167 ) Net increase (decrease) in cash 18,307 ( 13,659 ) Cash at beginning of period 60,612 43,834 Cash at end of period $ 78,919 $ 30,175 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 6,426 $ 6,115 Cash paid during the period for taxes, net of refunds $ 179 $ 1,961 Supplemental disclosures of non-cash activities: Capital expenditures included in accounts payable $ 537 $ 712 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 (dollar figures in tables in thousands, except per share amounts) (unaudited) Note 1 – Basis of Presentation and Selected Significant Accounting Policies Basis of Presentation These consolidated unaudited 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. 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. Year End We use a 52- or 53-week fiscal year ending on the last Friday in December. 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. 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 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. 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, 2020 December 27, 2019 Raw materials $ 88,791 $ 85,329 Work in process 37,345 31,825 Finished goods 23,471 17,700 Excess and obsolete adjustment ( 12,024 ) ( 7,817 ) Total inventories $ 137,583 $ 127,037 Note 3 – Property and Equipment and Other Noncurrent Assets Property and equipment consist of the following: September 25, 2020 December 27, 2019 Machinery $ 38,412 $ 33,684 Leasehold improvements 29,153 27,835 Computer software, hardware, and equipment 6,492 5,796 Office furniture, fixtures and equipment 1,040 1,040 Vehicles 22 26 Construction-in-process 4,828 3,760 79,947 72,141 Less accumulated depreciation ( 35,373 ) ( 27,600 ) Total property and equipment, net $ 44,574 $ 44,541 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. 7 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 3,042 Capitalized costs amortized during the period — Capitalized cloud computing implementation costs as of September 25, 2020 $ 3,042 Note 4 – Intangible Assets Definite‑lived intangible assets consist of the following: September 25, 2020 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Trademarks $ 9,690 $ ( 8,478 ) $ — $ 1,212 10.0 years Customer relationships 82,986 ( 51,095 ) — 31,891 7.8 years Developed technology 11,047 ( 2,131 ) — 8,916 10.0 years Total intangible assets $ 103,723 $ ( 61,704 ) $ — $ 42,019 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 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 Nine Months Ended September 25, 2020 September 27, 2019 September 25, 2020 September 27, 2019 Operating lease cost $ 1,363 $ 1,722 $ 4,015 $ 5,015 8 Supplemental cash flow information related to leases is as follows: Nine Months Ended September 25, 2020 September 27, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,096 $ 3,807 Supplemental balance sheet information related to leases is as follows: September 25, 2020 Weighted-average remaining lease term of operating leases 2.5 years Weighted-average discount rate of operating leases 4.5 % Future minimum lease payments under non-cancelable leases as of September 25, 2020 are as follows: 2020, remaining $ 1,409 2021 4,929 2022 4,149 2023 1,179 2024 243 Thereafter 26 Total future minimum lease payments 11,935 Less imputed interest ( 728 ) Total lease liabilities $ 11,207 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 $ 1.0 million from our NOL carryback provision, resulting from the benefit from additional interest and depreciation deductions. Income tax information for the periods reported are as follows: Three Months Ended Nine Months Ended September 25, 2020 September 27, 2019 September 25, 2020 September 27, 2019 Income tax benefit $ ( 310 ) $ ( 221 ) $ ( 363 ) $ ( 1,687 ) Income before income taxes $ 10,238 $ 702 $ 20,395 $ 1,090 Effective income tax rate - 3.0 % - 31.5 % - 1.8 % - 154.8 % 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. 9 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 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 September 25, 2020, we were not under examination by tax authorities. 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 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, 2020 December 27, 2019 Term loan $ 155,312 $ 161,875 Revolving credit facility 49,162 19,162 Total principal amount of long-term debt 204,474 181,037 Less unamortized debt issuance costs ( 2,257 ) ( 2,983 ) Total long-term debt, net 202,217 178,054 Less current portion ( 8,750 ) ( 8,750 ) Total long-term debt, less current portion, net $ 193,467 $ 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 (collectively, “credit facilities”). 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, 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. 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 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 credit facilities mature on February 15, 2023 . 10 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 $ 2.4 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 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 ( 385,276 ) — $ 15.35 Forfeited or expired ( 46,170 ) — $ 22.50 Outstanding, September 25, 2020 1,479,543 65,908 $ 22.24 4.8 years $ 1,707 Exercisable, September 25, 2020 652,976 65,908 $ 20.92 4.1 years $ 1,532 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 354,496 — $ 24.22 Vested ( 178,664 ) — $ 22.80 Forfeited ( 3,699 ) — $ 21.76 Unvested, September 25, 2020 561,303 17,730 $ 23.84 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 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. 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 Nine Months Ended September 25, 2020 September 27, 2019 September 25, 2020 September 27, 2019 United States of America $ 125,538 $ 77,997 $ 364,071 $ 231,529 Singapore 73,196 53,806 220,732 134,083 Europe 18,191 13,225 51,686 38,115 Other 10,753 9,428 32,781 27,755 Total net sales $ 227,678 $ 154,456 $ 669,270 $ 431,482 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 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 Nine Months Ended September 25, 2020 September 27, 2019 September 25, 2020 September 27, 2019 Numerator: Net income $ 10,548 $ 923 $ 20,758 $ 2,777 Denominator: Basic weighted average ordinary shares outstanding 23,051,994 22,454,408 22,875,186 22,373,181 Dilutive effect of options 176,292 222,470 232,026 237,908 Dilutive effect of RSUs 117,623 40,423 91,889 18,239 Dilutive effect of ESPP 1,551 1,581 517 527 Diluted weighted average ordinary shares outstanding 23,347,460 22,718,882 23,199,618 22,629,855 Earnings per share: Net income: Basic $ 0.46 $ 0.04 $ 0.91 $ 0.12 Diluted $ 0.45 $ 0.04 $ 0.89 $ 0.12 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. 12