What changed in this filing

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Item 9A. Controls and Procedures

2021-03-05 compared with 2020-03-06 · 119 added, 228 removed, 719 unchanged (33% of the section changed)

CONTROLS AND PROCEDURES

During the third quarter of 2019, we identified a material weakness in our controls related to the prevention and timely detection of funds transfers to unauthorized accounts.

We were the target of criminal fraud by persons impersonating one of our suppliers, which resulted in the transfer of funds to unauthorized bank accounts.

The fraud did not represent a breach of our information systems, as confirmed by an external forensic examination, but rather it was a targeted phishing scam.

Although our internal controls were not properly designed to prevent and timely detect the transfer of funds to unauthorized accounts, a secondary control was properly designed and operated effectively, which aided in a full recovery of all funds that were transferred.

Accordingly, there was no financial loss to record in our financial statements.

Evaluation of Disclosure Controls and Procedures

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Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 25, 2020.

Notwithstanding the identified and remediated material weakness des cribed above and below, we did not identify any misstatements in our reported operating results or financial condition and we have determined that the financial statements and other information included in this report and other periodic filings present fai rly in all material respects our financial condition, results of operations , and cash flows at and for the periods presented in accordance with U.S.

Management’s Report on Internal Control Over Financial Reporting

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Our independent public registered accounting firm will first be required to attest to the effectiveness of our internal control over financial reporting for our Annual Report on Form 10-K for the first year we are no longer an “emerging growth company” as defined by the JOBS Act.

Changes in Internal Control Over Financial Reporting

Limitations on Effectiveness of Controls and Procedures

A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

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If we cannot provide reliable financial information, our business, operating results and share price could be negatively impacted.

Other than the changes associated with the remediation plan described below, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fourth quarter ended December 27, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We determined that certain internal controls required for safeguarding our cash assets were not properly designed due to insufficient specificity regarding our policies and procedures surrounding supplier banking information changes, not identifying appropriate segregation of duties, and insufficient training on exercising professional skepticism.

Remediation of the Material Weakness

We initiated a remediation plan during the third quarter of 2019 and have completed the following actions:

enhanced the approval process for adding or modifying supplier banking information;

increased the level of segregation of duties surrounding those who have the ability to modify supplier information, and;

increased communication of our internal controls and processes and emphasized security awareness and the importance of exercising professional skepticism

We consider the material weakness remediated as of December 27, 2019, as the remedial controls have operated for a sufficient period of time and we have concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fourth quarter ended December 25, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

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Not applicable.

Report of Independent Regis tered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

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As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of December 29, 2018 due to the adoption of Accounting Standards Update (“ASU”) 2016‑02, Leases , and ASU 2018‑11, Leases:

Targeted Improvements (Topic 842) , and its method of accounting for revenue as of December 30, 2017 due to the adoption of ASU 2014‑09, Revenue from Contracts with Customers (Topic 606) .

Targeted Improvements (Topic 842) .

Basis for Opinion

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Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

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Lease liabilities, less current portion

Deferred tax liabilities

Deferred tax liabilities, net

Other non-current liabilities

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Additional paid in capital

Treasury shares at cost (4,437,439 and 4,339,529 shares, respectively)

Treasury shares at cost ( 4,437,439 shares)

Retained earnings

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Income tax benefit

Net income from continuing operations

Discontinued operations:

Loss from discontinued operations before taxes

Income tax benefit from discontinued operations

Net loss from discontinued operations

Net income per share from continuing operations:

Net income per share:

Shares used to compute net income from continuing operations and net income per share:

Shares used to compute net income per share:

ICHOR HOLDINGS, LTD.

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Balance at December 29, 2017

Ordinary shares issued from initial public offering, net of transaction costs

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

Repurchase of ordinary shares

Share-based compensation expense

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Balance at December 27, 2019

Ordinary shares issued, net of transaction costs

Ordinary shares issued from exercise of stock options

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Ordinary shares issued from employee share purchase plan

Repurchase of ordinary shares

Share-based compensation expense

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Depreciation and amortization

Gain on sale of investments and settlement of note receivable

Share-based compensation

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Amortization of debt issuance costs

Loss on sale of asset disposal group

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable, net

Inventories, net

Prepaid expenses and other assets

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Cash paid for intangible assets

Proceeds from sale of investments and settlement note receivable

Proceeds from sale of property and equipment

Net cash used in investing activities

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Repayments on revolving credit facility

Proceeds from term loan

Repayments on term loan

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net increase in cash

Cash at beginning of period

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and Subsidiaries (the “we”, “us”, “our”, “Company”) designs, develops, manufactures, and distributes gas and liquid delivery subsystems and components purchased by capital equipment manufacturers for use in the semiconductor markets.

We are headquartered in Fremont, California and have operations in the United States, United Kingdom, Singapore, Malaysia, and Korea.

We are headquartered in Fremont, California and have operations in the United States, the United Kingdom, Singapore, Malaysia, Korea, and Mexico.

On December 30, 2011, Ichor Systems Holdings, LLC consummated a sales transaction with Icicle Acquisition Holdings, LLC, a Delaware limited liability company.

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is now the reporting entity and the ultimate parent company of the operating entities.

In January 2016, we decided to close our Kingston, New York facility which was the primary facility for the Precision Flow Technologies, Inc.

(“PFT”) subsidiary.

In May 2016, we ceased operations in this facility and ended the relationship with the customer it served in this location.

Our consolidated financial statements and accompanying notes for current and prior periods have been retroactively adjusted to present the results of operations of the Precision Flow Technologies, Inc.

subsidiary as a discontinued operation.

In addition, the assets and liabilities to be disposed of have been treated and classified as a discontinued operation.

For more information on the discontinued operation see Note 14 – Discontinued Operations .

Basis of Presentation

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Ichor Systems Singapore, PTE Ltd.

Talon Innovations Korea

IAN Engineering Co., Ltd.

Public Offering

On December 14, 2016, we completed an initial public offering (“IPO”) of 5,877,778 ordinary shares at a price to the public of $9.00 per share.

We received net proceeds from the offering of $47.1 million after offering fees and expenses.

The net proceeds were used to repay $40.0 million of loans outstanding under our Credit Facilities.

In January 2017, we received $7.3 million, net of fees and expenses, from the exercise of the underwriters’ over‑allotment option to sell an additional 881,667 ordinary shares.

We use a 52‑ or 53‑week fiscal year ending on the last Friday in December.

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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 the fair value of assets and liabilities acquired in acquisitions, estimated useful lives for long‑lived assets, 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

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Charges to costs and expenses

Write-offs and recoveries

Balance at December 27, 2019

Charges to costs and expenses

Write-offs and recoveries

Balance at December 25, 2020

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We estimate the recorded value of our financial assets and liabilities approximates fair value at December 25, 2020 and December 27, 2019.

We estimate the value of intangible assets on a nonrecurring basis based on an income approach utilizing discounted cash flows.

We estimate the value of acquired intangible assets, on a nonrecurring basis, based on an income approach utilizing discounted cash flows.

Under this approach, we estimate the future cash flows from our asset groups and discount the income stream to its present value to arrive at fair value.

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and estimates of terminal values.

At December 27, 2019 and December 28, 2018, intangible assets passed the recoverability test resulting in no impairment.

During 2020 and 2019, we did not identify any triggering events that would indicate impairment.

Intangible Assets

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Foreign Operations

The functional currency of our international subsidiaries located in the United Kingdom, Singapore, and Malaysia, is the U.S.

The functional currency of our international operations located in the United Kingdom, Singapore, Malaysia, and Mexico, is the U.S.

Transactions denominated in currencies other than the functional currency generate foreign exchange gains and losses that are included in other expense (income), net on our consolidated statements of operations.

Substantially, all of our sales and agreements with third-party suppliers provide for pricing and payments in U.S.

dollars and, therefore, are not subject to material exchange rate fluctuations.

Foreign operations consist of revenue of $291.3 million, $379.1 million, and $346.0 million, during 2019, 2018, and 2017, respectively.

Assets of foreign operations totaled $203.8 million and $157.0 million at December 27, 2019 and December 28, 2018, respectively.

Substantially all of our sales contracts, and most of our agreements with third-party suppliers, provide for pricing and payment in U.S.

Accordingly, these transactions are not subject to material exchange rate fluctuations.

Accounting Pronouncements Recently Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) 2014‑09, Revenue from Contracts with Customers (Topic 606) , which supersedes nearly all existing revenue recognition guidance.

Subsequent to the issuance of ASU 2014‑09, the FASB clarified the guidance through several ASUs.

We adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , on December 30, 2017, the first day of fiscal year 2018, using the modified retrospective method.

After assessing our contracts with our customers, we determined that there was not a significant change to the nature, timing, and extent of our revenues under the new standard.

Accordingly, we did not make a cumulative-effect adjustment to retained earnings on December 30, 2017, as there was no adjustment to be made.

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842) , which consists of a comprehensive lease accounting standard.

Under the new standard, assets and liabilities arising from most leases will be recognized on the balance sheet.

Under the standard, assets and liabilities arising from most leases will be recognized on the balance sheet.

Leases will be classified as either operating or financing, and the lease classification will determine whether expense is recognized on a straight-line basis (operating leases) or based on an effective interest method (financing leases).

The standard also contains expanded disclosure requirements regarding the amounts, timing, and uncertainties of cash flows related to leasing activities.

The new standard is effective for interim and annual periods beginning after December 15, 2018.

In July 2018, the FASB issued ASU 2018 ‑11, Leases (Topic 842):

Targeted Improvements , which provides an optional transition method allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

Targeted Improvements , which provides an optional transition method allowing entities to initially apply the lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We adopted and applied the lease standard as of December 29, 2018 , the first day of fiscal year 2019, using this optional transition method.

The new standard provides a number of practical expedients in transition.

The standard provides a number of practical expedients in transition.

We elected the package of practical expedients, which permits us not to reassess our prior conclusions about lease identification, lease classification, and initial direct costs.

We elected to not recognize short-term leases, those with an initial term of 12 months or less, on our consolidated balance sheets.

The new standard had material effects on our consolidated financial statements.

The standard had material effects on our consolidated financial statements.

The most significant effects relate to the recognition of right-of-use (“ROU”) assets and lease liabilities on our balance sheet for our facilities operating leases and the new disclosure requirements about our leasing activities.

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The standard did not have a significant impact on our consolidated statements of operations or cash flows.

In June 2018, the FASB issued ASU 2018‑07, Compensation-Stock Compensation (Topic 718):

Improvements to Non-Employee Share-Based Payment Accounting .

This standard is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees.

ASU 2018‑07 expands the scope of ASC Topic 718, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services.

We adopted ASU 2018‑07 on December 29, 2018, the first day of fiscal year 2019, which did not have a significant impact on our consolidated financial statements.

Accounting Pronouncements Recently Issued

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments–Credit Losses (Topic 326):

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This standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

ASU 2016‑13 is effective for fiscal years beginning after December 15, 2019, using a modified retrospective adoption method.

We will adopt this standard in the first quarter of 2020, and the adoption will not have a material impact on our consolidated financial statements.

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 2020, we incurred capitalizable implementation costs of approximately $ 4.4 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 December 25, 2020.

Additionally, our cash used in operating activities for 2020 includes $ 3.3 million in cash outflows associated with these capitalized implementation costs.

As the ERP system was not yet in-service as of December 25, 2020, there was no amortization expense recognized during 2020.

Accounting Pronouncements Recently Issued

In December 2019, the FASB issued ASU 2019‑12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes , as part of its initiative to reduce complexity in accounting standards.

The amendments in the ASU include removing exceptions to incremental intraperiod tax allocation of losses and gains from different financial statement components, exceptions to the method of recognizing income taxes on interim period losses, and exceptions to deferred tax liability recognition related to foreign subsidiary investments.

In addition, the ASU requires that entities recognize franchise tax based on an incremental method and requires an entity to evaluate the accounting for step-ups in the tax basis of goodwill as inside or outside of a business combination.

The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein.

We have not adopted this ASU as of December 25, 2020.

We are currently evaluating the impact the ASU, although we do not expect the ASU to to have a significant impact on our financial statements.

Note 2 – Acquisitions

On December 1, 2020, we acquired certain operating assets and assumed the operations of a precision machining operation in Nogales, Mexico, which was considered a business combination under ASC 805 – Business Combinations , for an aggregate purchase of $ 5.0 million.

The acquisition adds to our precision machined component manufacturing capacity.

In connection with the acquisition, we recorded $ 2.0 million in tangible operating assets, a $ 1.2 million customer relationship intangible asset, which will be amortized of a period of 6 years, and $ 1.9 million in goodwill.

IAN Engineering Co., Ltd.

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Pro forma financial information has not been provided for the acquisition of IAN as it was not material to our operations and overall financial position.

Talon Innovations Corporation

On December 11, 2017 we completed the acquisition, via stock purchase, of Talon Innovations Corporation (“Talon”), a Minnesota-based leader in the design and manufacturing of high precision machined parts used in leading edge semiconductor tools, for $137.8 million.

Talon expanded our capacity and capabilities in the area of component manufacturing for gas and chemical delivery tools used in semiconductor manufacturing and other industrial applications.

The following table presents the preliminary purchase price allocation as of December 11, 2017 and the final allocation as of December 11 , 2018.

Measurement period adjustments recognized in 2018 primarily relate to the fa ir value of Talon’s opening balance of accounts receivable, inventory, income taxes payable, deferred taxes, developed technology, and other working capital amounts.

December 11, 2017

December 11, 2018

Cash acquired

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Other noncurrent assets

Intangible assets

Accounts payable

Accrued liabilities

Other current liabilities

Deferred tax liabilities

Total acquisition consideration

We allocated $32.4 million to customer relationships and $2.9 million to intellectual property with weighted average amortization periods of 6 years and 10 years, respectively.

Goodwill recognized from the acquisition was primarily attributed to an assembled workforce and expected synergies and is not tax deductible.

We incurred transaction costs of $1.5 million in connection with the acquisition during 2017.

The fair value adjustment to inventory as part of our purchase price allocation resulted in a $4.5 million and $1.6 million charge to cost of sales during 2018 and 2017, respectively.

Our consolidated statement of operations for 2017 includes approximately 3 weeks of Talon operating activity, which was not material to our 2017 results of operations.

Cal‑Weld, Inc.

On July 27, 2017, we completed the acquisition, via stock purchase, of Cal‑Weld, Inc.

(“Cal‑Weld”), a California-based leader in the design and fabrication of precision, high purity industrial components, subsystems, and systems, for $56.2 million.

Cal‑Weld expanded our capacity and capabilities in the area of component manufacturing for gas delivery tools used in semiconductor manufacturing.

The following table presents the preliminary purchase price allocation as of July 27, 2017 and the final allocation on June 29, 2018.

Measurement period adjustments recognized in 2017 and 2018 primarily relate to the fair value of Cal‑Weld’s opening balance of inventory, income taxes payable, and other working capital amounts.

July 27, 2017

June 29, 2018

Cash acquired

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Other noncurrent assets

Intangible assets

Accounts payable

Accrued liabilities

Other non-current liabilities

Deferred tax liabilities

Total acquisition consideration

We allocated $11.5 million to customer relationships and $0.7 million to order backlog with weighted average amortization periods of 6 years and 6 months, respectively.

Goodwill recognized from the acquisition was primarily attributed to an assembled workforce and expected synergies and is not tax deductible.

We incurred transaction costs of $1.9 million in connection with the acquisition during 2017.

The fair value adjustment to inventory as part of our purchase price allocation resulted in a $3.6 million charge to cost of sales during 2017.

Our consolidated statement of operations for 2017 includes approximately 5 months of Cal‑Weld operating activity, including revenue of $53.0 million and net income from continuing operations of $6.7 million.

Note 3 – Inventories

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Excess and obsolete adjustment

Total inventories, net

Total inventories

The following table presents changes to our excess and obsolete adjustment:

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Depreciation expense for 2020, 2019, and 2018 was $ 10.9 million, $ 8.9 million, and $ 7.7 million, 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 December 25, 2020

Note 5 – Intangible Assets and Goodwill

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Total intangible assets

During the second quarter of 2019, we acquired a developed technology asset for $8.1 million, which has a useful life of 10 years.

Future projected annual amortization expense consists of the following:

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Operating lease cost

Supplemental information related to leases is as follows:

Supplemental cash flow information related to leases is as follows:

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

Operating cash flows from operating leases

Supplemental balance sheet information related to leases is as follows:

Weighted-average remaining lease term of operating leases

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Total lease liabilities

Future minimum lease payments under non-cancellable leases as of December 28, 2018, as reported under previous guidance, are as follows:

Total future minimum lease payments

Note 7 – Income Taxes

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act allows net operating losses from the 2018, 2019 and 2020 tax years to be carried back up to five years .

As a result, during 2020 we were able to carry back our 2019 net operating loss to tax years 2017 and 2018, resulting in a $ 1.0 million refund claim.

The CARES Act also provided for an increased interest deduction for tax years 2019 and 2020, as well as the deferral of the employer portion of social security taxes.

In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted.

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corporate income tax rate from 35 % to 21 % for tax years beginning after December 31, 2017.

The 2017 Tax Act also provided for a one‑time transition tax on certain foreign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017, and prospective changes beginning in 2018, including the repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation, and limitations on the deductibility of interest.

We recognized the income tax effects of the 2017 Tax Act in our 2017 financial statements in accordance with Staff Accounting Bulletin (“SAB”) No.

118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes , in the reporting period in which the 2017 Tax Act was signed into law.

As of December 27, 2019, our accounting for the impact of the 2017 Tax Act was substantially complete and is included in our provision for income taxes.

The changes to existing U.S.

tax laws as a result of the 2017 Tax Act, which we believe have the most significant impact on the federal income taxes, are as follows:

Reduction of the U.S.

Corporate Income Tax Rate

We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid.

Accordingly, our deferred tax assets and liabilities were re‑measured in 2017 to reflect the reduction in the U.S.

corporate income tax rate from 35% to 21%, resulting in a $5.9 million increase in income tax benefit for 2017 and a corresponding $5.9 million decrease in net deferred tax liabilities at December 29, 2017.

Transition Tax on Foreign Earnings

In 2017, we recognized a provisional income tax expense of $0.7 million related to the one-time transition tax on certain foreign earnings.

This resulted in a corresponding decrease in deferred tax assets due to the utilization of net operating loss carryforwards.

This amount was adjusted in 2018 to $0.6 million, resulting in a tax benefit of $0.1 million recorded in 2018.

Global Intangible Low-Taxed Income (“GILTI”)

Beginning in 2018, a portion of foreign subsidiaries’ earnings, net of a return on investment in tangible assets, are subject to tax in the United States.

During 2019, we recognized income tax expense of zero, net of foreign tax credits, related to GILTI.

Foreign Derived Intangible Income (“FDII”) Deduction

Beginning in 2018, a deduction is allowed in the United States for a portion of foreign-derived income, net of a return on investment in tangible assets.

During 2019, we recognized income tax benefit of zero related to the FDII deduction.

Foreign Tax Credits

Beginning in 2018, rules surrounding the utilization and carryforward of foreign tax credits in the United States were changed as a result of the 2017 Tax Act.

Due to these changes, we released a valuation allowance on our accrued foreign tax credits which were previously limited under the tax code in effect before the 2017 Tax Act was enacted, resulting in a $4.1 million discrete benefit.

During the fourth quarter of 2019, the IRS issued proposed regulations that may limit our utilization of foreign tax credit carryforwards.

Therefore, if the proposed regulations are finalized without changes, we believe a valuation allowance may be necessary to reduce approximately $1.7 million of our deferred tax assets related to foreign tax credit carryforwards.

Income from continuing operations before tax was as follows:

Due to these changes, we released a valuation allowance in 2018 on our accrued foreign tax credits which were previously limited under the tax code in effect before the 2017 Tax Act was enacted, resulting in a $ 4.1 million discrete benefit.

During the third quarter of 2020, the IRS issued final regulations that clarified the provision in the 2017 Tax Act that may limit our utilization of certain foreign tax credit carryforwards.

For 2020, we have determined that it is more likely than not that the foreign tax credits will be realized within the carryforward period and determined that a valuation allowance is not necessary.

Income before tax was as follows:

United States

Income from continuing operations before tax

Significant components of income tax benefit from continuing operations consist of the following:

Income before tax

Significant components of income tax benefit consist of the following:

Total current tax expense

Total deferred tax benefit

Income tax benefit from continuing operations

Income tax benefit

The reconciliation of income tax computed at the U.S.

federal statutory tax rates to income tax benefit from continuing operations consist of the following:

federal statutory tax rates to income tax benefit consist of the following:

Effective rate reconciliation:

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Withholding tax

Impact of re-characterizing intercompany debt to equity

Impact of Tax Cuts and Jobs Act

Valuation allowance

Income tax benefit from continuing operations

Deferred income tax assets and liabilities from continuing operations consist of the following as of:

Income tax benefit

Deferred income tax assets and liabilities consist of the following.

Certain reclassifications have been made to the prior period to conform to the current period presentation.

Deferred tax assets:

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Interest carryforwards

Transaction costs

Intercompany interest

Operating lease liabilities

Deferred tax assets

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Property, plant and equipment

Operating lease right-of-use assets

Other liabilities

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We have determined the amount of our valuation allowance based on our estimates of taxable income by jurisdiction in which we operate over the periods in which the related deferred tax assets will be recoverable.

During 2017, we completed the acquisitions of Cal‑Weld and Talon, resulting in a release of valuation allowance against our net deferred tax assets.

During the second quarter of 2018, as part of our evaluation of the 2017 Tax Act, we determined we would be able to utilize our foreign tax credit carryforwards, including our currently generated credits and accrued credits related to intercompany payables.

As such, we recognized an addition $4.1 million benefit from releasing the associated valuation allowance.

As of December 25, 2020, we believe it is more-likely-than-not that we will realize our U.S.

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We were granted a tax holiday for our Singapore operations effective 2011 through 2021.

We expect to finalize an extension of the tax holiday through 2026 during the first quarter of 2021.

The net impact of the tax holiday in Singapore as compared to the Singapore statutory rate was a benefit of $ 5.9 million, $ 4.6 million, and $ 7.6 million during 2020, 2019, and 2018, respectively.

Our income tax fluctuates based on the geographic mix of earnings and is calculated quarterly based on actual results pursuant to ASC Topic 740‑270.

As of December 27, 2019, we have recognized $1.9 million of unrecognized tax benefits in long-term liabilities on the accompanying consolidated balance sheet.

As of December 25, 2020, we have recognized $ 2.5 million of unrecognized tax benefits in other non-current liabilities in our consolidated balance sheet.

If recognized, $ 1.1 million of this amount would impact our effective tax rate.

We expect a decrease of $ 0.1 million to the total amount of unrecognized tax benefits within the next twelve months.

Our ongoing practice is to recognize potential accrued interest and penalties related to unrecognized tax benefits within our global operations in income tax benefit.

During 2019, we recognized a net decrease of approximately $0.2 million in potential interest and penalties associated with uncertain tax positions in the consolidated statements of operations.

At December 27, 2019, we had approximately zero and $0.4 million of interest and penalties, respectively, associated with uncertain tax positions, which are excluded from the unrecognized tax benefits table below.

We recognize interest and penalties relating to unrecognized tax benefits as part of its income tax expense.

The following table summarizes the activity related to our unrecognized tax benefit s:

Our ongoing practice is to recognize potential accrued interest and penalties related to unrecognized tax benefits within our statements of operations in income tax benefit.

Interest and penalties associated with uncertain tax positions recognized during 2020 were insignificant.

At December 25, 2020, other non-current liabilities on our balance sheet included approximately zero and $ 0.4 million of interest and penalties, respectively, associated with uncertain tax positions, which are excluded from the unrecognized tax benefits table below.

The following table summarizes the activity related to our unrecognized tax benefits:

Balance at December 29, 2017

Increase in tax positions for current year

Increase in tax positions for prior period

Increase in tax positions due to acquisitions

Impact of Tax Cuts and Jobs Act

Decreases in tax positions for prior period

Balance at December 28, 2018

Increase in tax positions for current year

Decreases in tax positions for prior period

Increase in tax positions for prior period

Decrease in tax positions for prior period

Balance at December 27, 2019

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Balance at December 25, 2020

We assert indefinite reinvestment of our U.S.

and Netherlands unremitted earnings.

With regard to these unremitted earnings, we have not, nor do we anticipate the need to repatriate funds from the U.S.

to the Netherlands or from the Netherlands to the Cayman entity to satisfy liquidity needs.

Determination of the amount of unrecognized withholding tax liability related to the indefinitely reinvested earnings is not practicable.

Our three major filing jurisdictions are the United States, Singapore and Malaysia.

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However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward.

At December 25, 2020, we were not under examination by a tax authority.

Note 8 – Employee Benefit Programs

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The weighted average interest rate across all credit facilities was 3.75 %, 4.78 %, and 4.36 % during 2020, 2019, and 2018, respectively.

On August 11, 2015, we entered into a new credit agreement with a syndicate of lenders and repaid all outstanding indebtedness under our previous credit agreement.

The credit agreement included a $55.0 million term loan facility and $20.0 million revolving credit facility.

We recorded $2.6 million in debt issuance costs associated with the new credit agreement.

In April 2016, we acquired Ajax-United Patterns & Molds, Inc.

To fund the acquisition, we amended our credit agreement, increasing the term loan facility by $15.0 million.

The amendment did not meet the definition of an extinguishment and was accounted for as a modification.

In July 2017, we acquired Cal‑Weld.

To fund the acquisition, we amended our credit agreement, increasing the term loan facility by $20.0 million, increasing the revolving credit facility capacity by $20.0 million, and reducing our interest rate.

The amendment did not meet the definition of an extinguishment and was accounted for as a modification.

In December 2017, we acquired Talon.

To fund the acquisition, we amended our credit agreement, increasing the term loan facility by $120.0 million.

The amendment did not meet the definition of an extinguishment and was accounted for as a modification.

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.

On February 15, 2018, we entered into an amended and restated credit agreement, which includes a $ 175.0 million term loan and a $ 125.0 million revolving credit facility.

We incurred debt issuance costs of $ 2.1 million in connection with the amendment.

We account debt issuance costs as a reduction to the carrying value of our long-term debt, and we amortize the costs to interest expense over the term of the credit agreement.

The amendment did not meet the definition of an extinguishment and was accounted for as a modification.

Term loan payments of $ 2.2 million are due on a quarterly basis.

The credit agreement matures on February 15, 2023 .

Our credit agreement is secured by our tangible and intangible assets and includes customary representations, warranties, and covenants.

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At December 25, 2020, the term loan and revolver bore interest at the Eurodollar rate option of 3.50 % and 2.73 %, respectively.

Term loan payments of $2.2 million are due on a quarterly basis.

The term loan and revolving credit facility mature on February 15, 2023.

Note 10 – Shareholders’ Equity

Public Offering of Shares

On December 14, 2020, we completed an underwritten public offering of 4.6 million ordinary shares with net proceeds of $ 139.4 million, after deducting the underwriting discount of $ 1.35 per share and incremental offering expenses of $ 0.5 million.

Share Repurchase Program

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Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 9.9 million, $ 8.5 million, and $ 7.6 million during 2020, 2019, and 2018, respectively.

On November 12, 2019, in connection with the transition of our former Chief Executive Officer to Executive Chairman, the Compensation Committee of the Board of Directors modified all outstanding equity awards such that the next 18 months of vest ing events would be pulled forward and become immediately vested on January 6, 2020.

Consequently, 98,825 options and 60,721 RSUs will vest on January 6, 2020.

On November 12, 2019, in connection with the transition of our former Chief Executive Officer to Executive Chairman, the Compensation Committee of the Board of Directors modified all outstanding equity awards such that the next 18 months of vesting events would be pulled forward and become immediately vested on January 6, 2020.

Consequently, 98,825 options and 60,721 RSUs vested on January 6, 2020.

This was accounted for as a probable-to-probable modification under ASC Topic 718, resulting in approximately $ 1.4 million in share-based compensation expense pulled forward into 2019.

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Shares are purchased on the last day of the purchase period.

As of December 25, 2020, 2.4 million ordinary shares remained eligible for issuance under the 2017 ESPP.

The table below sets forth the weighted average assumptions used to measure the fair value of 2017 ESPP rights:

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Total net sales

The following table sets forth our two major customers, which comprised 85%, 88%, and 93% of net sales from continuing operations in 2018, 2017, and 2016, respectively:

The following table sets forth our two major customers, which comprised 87 %, 85 %, and 88 % of net sales in 2020, 2019, and 2018, respectively:

Applied Materials

2 unchanged sentences

The following table sets forth the computation of our basic and diluted net income (loss) per share and a reconciliation of the numerator and denominator used in the calculation:

Net income from continuing operations

Net loss from discontinued operations

Basic weighted average ordinary shares outstanding

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Diluted weighted average ordinary shares outstanding

Weighted average number of shares used in basic and diluted per share calculation for net loss from discontinued operations

Earnings per share:

Net income from continuing operations:

Net loss from discontinued operations:

An combined total of 1,587,555, 1,319,511, and 389,058 potentially dilutive options and RSUs were excluded from the calculation of net income per share for 2019, 2018, and 2017, respectively, because including them would have been antidilutive under the treasury stock method.

Note 14 – Discontinued Operations

In January 2016, we made the decision to shut down our Kingston, New York facility, as this location consumed a significant amount of resources while contributing very little income.

We completed the shutdown of the operations of the New York facility in May 2016 through abandonment, as a buyer for the facility and operation was not found.

We recorded lease abandonment and inventory charges of approximately $0.6 million and $2.0 million, respectively, in 2016.

In 2017, we accrued for remaining costs of $0.3 million to occupy the facility through its lease expiration in February 2018.

The discontinued operation was deemed to be fully disposed of at December 29, 2017.

Accordingly, there was no activity associated with the discontinued operation during 2018 and 2019.

The results of the discontinued operation were as follows:

Selling, general, and administrative

Operating loss

Loss from discontinued operations before income taxes

Income tax benefit

Loss from discontinued operations

A combined total of 1,430,000 , 1,588,000 , and 1,320,000 potentially dilutive options and RSUs were excluded from the calculation of net income per share for 2020, 2019, and 2018, respectively, because including them would have been antidilutive under the treasury stock method.

EXHIBIT INDEX

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and Thomas Rohrs.

(Incorporated by reference to Exhibit 10.12 to Ichor Holdings, Ltd.’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 6, 2020).

Offer Letter, dated November 20, 2019, between Ichor Systems, Inc.

and Jeffrey Andreson.

and Jeffrey Andreson (Incorporated by reference to Exhibit 10.12 to Ichor Holdings, Ltd.’s Annual Report on Form 10 K filed with the Securities and Exchange Commission on March 6, 2020).

Letter Agreement, dated January 4, 2021, between Ichor Systems, Inc.

and Thomas Rohrs.

List of subsidiaries

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This certification accompanies this report and shall not, except to the extent required by the Sarbanes‑Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended.

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Filed herewith

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March 5, 2021

/s/ Wendy Arienzo

/s/ Iain MacKenzie

Lead Independent Director

March 5, 2021

Wendy Arienzo

/s/ Laura Black

Iain MacKenzie

/s/ Marc Haugen

March 5, 2021

1 unchanged sentence

March 5, 2021

/s/ Marc Haugen

/s/ Laura Black

March 5, 2021

/s/ Andrew Kowal

/s/ Wendy Arienzo

Wendy Arienzo

March 5, 2021

/s/ Iain MacKenzie

Lead Independent Director

/s/ Sarah O’Dowd

March 5, 2021

Iain MacKenzie

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-K

Item 9A. Controls and Procedures