What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-04 · 157 added, 69 removed, 130 unchanged (63% of the section changed)

18 unchanged sentences

The following summarizes key financial information for the periods indicated.

Amounts are presented in accordance with GAAP unless explicitly identified as being a non-GAAP metric.

For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to Item 2 – Non-GAAP Financial Results within this report.

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Non-GAAP gross margin

Operating expenses

Operating income

GAAP net income

Non-GAAP net income

GAAP diluted EPS

Non-GAAP diluted EPS

Please see “Non‑GAAP Results” within Item 2 of this report for a reconciliation of U.S.

GAAP net income to Non‑GAAP net income.

COVID-19 Pandemic and Market Conditions Update

The COVID‑19 pandemic and related economic repercussions have created, and are expected to continue to create, significant volatility, uncertainty, and turmoil in our industry.

While our facilities are currently not subject to any site-wide government shutdowns, “social distancing” guidelines are resulting, and will continue to result in, reduced factory output.

In addition, an increase in direct costs within our factories associated with employee personal protective equipment (“PPE”), facility cleaning and layout changes, together with increases in logistics costs and employee labor costs, as well as other operating inefficiencies have resulted in, and may continue to result in, lower revenues and operating margins.

While our facilities are currently not subject to any site-wide government shutdowns, in June 2021, the Malaysian government instituted an Enhanced Movement Control Order (“EMCO”), which impacted our weldment facility in Malaysia through both on-site employee restrictions as well as a complete shutdown of all manufacturing in the region during early July.

While we were able to reopen our factory in mid-July, once the government confirmed we were an essential business, we remained under headcount limitations until the third week of August.

With 50% of our weldment capacity located in Malaysia, our overall output in the country was reduced by 40% in the third quarter due to the EMCO restrictions.

In addition to the recent impacts in Malaysia, increases in direct costs within our factories associated with employee personal protective equipment (“PPE”), facility cleaning and layout changes, together with increases in logistics costs and employee labor costs, as well as other operating inefficiencies have resulted in, and may continue to result in, lower revenues and operating margins.

The extent and duration of these impacts cannot be specifically quantified given the dynamic nature and breadth of the pandemic’s impact on our operations and that of our customers and suppliers.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(in thousands)

7 unchanged sentences

Operating income

Interest expense

Interest expense, net

Other expense (income), net

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

Consolidated Statements of Operations Data:

6 unchanged sentences

Operating income

Interest expense

Interest expense, net

Other expense (income), net

1 unchanged sentence

Income tax expense (benefit)

Comparison of the three and six months ended June 25, 2021 and June 26, 2020

Comparison of the three and nine months ended September 24, 2021 and September 25, 2020

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

The increase in net sales from the three and six months ended June 26, 2020 to the three and six months ended June 25, 2021 was primarily due to increased demand from our customers as a result of growth in the global wafer fabrication equipment market, as well as share-gains at our largest customers.

The increase in net sales from the three and nine months ended September 25, 2020 to the three and nine months ended September 24, 2021 was primarily due to strong demand from our customers as a result of continued growth in the global wafer fabrication equipment market, partially offset by production constraints as a result of challenges in our supply chain, primarily due to the EMCO restrictions at our Malaysia factory beginning in June 2021, as noted above in the commentary above under the heading, “ COVID‑19 Pandemic and Market Conditions Update ,” and delivery timelines with certain key suppliers.

Net sales to U.S.

customers increased by $20.1 million and $38.3 million for the three and six months ended June 25, 2021, respectively.

customers increased by $2.1 million and $40.5 million for the three and nine months ended September 24, 2021, respectively.

On a relative basis, net sales to U.S.

customers as a percent of total net sales decreased from 53.1% and 54.0% to 48.8% and 50.6% for the three and six months ended June 25, 2021, respectively.

Net sales to international customers increased by $40.7 million and $66.9 million for the three and six months ended June 25, 2021, respectively.

On a relative basis, net sales to international customers as a percent of total net sales increased increased from 46.9% and 46.0% to 51.2% and 49.4% for the three and six months ended June 25.

2021, respectively.

Cost of Sales and Gross Profit

customers as a percent of total net sales decreased from 55.1% and 54.4% to 48.6% and 50.0% for the three and nine months ended September 24, 2021, respectively.

Net sales to international customers increased by $33.0 million and $100.0 million for the three and nine months ended September 24, 2021, respectively.

On a relative basis, net sales to international customers as a percent of total net sales increased from 44.8% and 45.6% to 51.5% and 50.0% for the three and nine months ended September 24, 2021, respectively.

Cost of Sales , Gross Profit , and Gross Margin

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Cost of sales

The increase in cost of sales and gross profit from the three and six months ended June 26, 2020 to the three and six months ended June 25, 2021 was primarily due to increased sales volume.

The increase in our gross margin from the second quarter of 2020 to the second quarter of 2021 was primarily due to increased factory utilization, as a result of higher overall volume, product mix, and $1.5 million in costs recorded in the second quarter of 2020 in connection with the planned closure of our Union City, California facility that did not repeat in the second quarter of 2021.

The increase in the gross amounts of cost of sales and gross profit for the three and nine months ended September 24, 2021 were primarily due to the factors mentioned in the commentary above under the heading, “ Net Sales ”.

The increase in our gross margin from the three and nine months ended September 25, 2020 to the three and nine months ended September 24, 2021 was primarily due to increased factory utilization, partially offset by increased materials and logistics costs and increased factory inefficiency due to challenges in our supply chain, primarily due to the EMCO restrictions at our Malaysia factory in beginning in June 2021, as noted above in the commentary above under the heading, “ COVID‑19 Pandemic and Market Conditions Update ,” and delivery timelines with certain key suppliers.

The following discrete, non‑recurring items favorably impacted our gross margin for the three and nine months ended September 24, 2021 on a year-over-year basis:

Gross margin increased from the third quarter of 2020 to the third quarter of 2021 due to $0.4 million, or 18 basis points, in costs incurred in connection with the planned closure of our Union City, California facility in the third quarter of 2020 that did not recur in the third quarter of 2021.

The facility ceased operations during the second quarter of 2021.

The increase in our gross margin from the six months ended June 26, 2020 to the six months ended June 25, 2021 was primarily due to due to increased factory utilization, as a result of higher overall volume, product mix, and $1.4 million in costs recorded in the first quarter of 2020 in connection with a mutual contract settlement that did not repeat in 2021, partially offset by a $0.8 million increase in costs recorded in connection with the planned closure of our Union City, California facility.

Gross margin increased from the nine months ended September 25, 2020 to the nine months ended September 24, 2021 due to a $1.4 million, or 21 basis point, contract settlement loss in the first quarter of 2020 that did not recur in the nine months ended September 24, 2021.

This was partially offset by a $0.4 million, or 6 basis point, increase in Union City facility shutdown costs in the nine months ended September 24, 2021 compared to the nine months ended September 25, 2020.

Research and Development

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Research and development

The increase in research and development expenses from the three and six months ended June 26, 2020 to the three and six months ended June 25, 2021 was primarily due to increased employee-related expense, as we expand our engineering team, and materials associated with our new product development programs.

The increase in research and development expenses from the three and nine months ended September 25, 2020 to the three and nine months ended September 24, 2021 was primarily due to increased employee-related expense, as we expand our engineering team to design and engineer next generation, high performance solutions for our customers.

Selling, General, and Administrative

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Selling, general, and administrative

The increase in selling, general, and administrative expense from the second quarter of 2020 to the second quarter of 2021 was primarily due $1.1 million in increased employee-related expenses, including a $0.4 million increase in share-based compensation expense, $0.3 million in increased facility closure costs incurred in connection with the planned closure of our Union City, California facility, and $0.3 million in increased computer hardware and software costs to support the growing organization, partially offset by $0.3 million in reduced professional and related consulting fees.

The decrease in selling, general, and administrative expense from the six months ended June 26, 2020 to the six months ended June 25, 2021 was primarily due to $1.8 million in executive transition costs associated with the transition of our former CEO to Executive Chairman in the first quarter of 2020 that did not repeat in the first quarter of 2021 and $0.8 million in reduced professional and related consulting fees, partially offset by $0.8 million in increased employee-related expenses and $0.8 million in increased computer hardware and software costs.

The increase in selling, general, and administrative expense from the third quarter of 2020 to the third quarter of 2021 was primarily due (i) $1.6 million in increased employee-related expense, which is inclusive of a $0.5 million increase in share-based compensation expense, and (ii) $0.3 million in increased computer hardware and software costs to support the growing organization and our ERP implementation project, partially offset by (iii) $0.3 million in reduced professional and consulting fees.

The increase in selling, general, and administrative expense from the nine months ended September , 2020 to the nine months ended September 24 , 2021 was primarily due to (i) $2.2 million in increas e d employee-related expense, which is inclusive of a $0.2 million increase in share-based compensation expense, (ii) $1.1 million in increase d computer hardware and software costs to support the growing organization and our ERP implementation project, and (iii) $0.3 million in increase costs related to the shutdown of our Union City, California facility, partially offset by (iv) $1.8 million in reduc ed executive transition costs associated with the transition of our former CEO to e xecutive c hairman in the first quarter of 2020 that did not recur in the first quarter of 2021 and (v) $1.2 million in reduc ed professional and consulting fees.

Amortization of Intangible Assets

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Amortization of intangibles assets

The increase in amortization expense from the three and six months ended June 26, 2020 to the three and six months ended June 25, 2021 was primarily due to incremental amortization expense from the acquisition of a customer relationship intangible asset in December 2020 in connection with our acquisition of a precision machining operation in Nogales, Mexico.

Interest Expense

The increase in amortization expense from the three and nine months ended September 25, 2020 to the three and nine months ended September 24, 2021 was primarily due to incremental amortization expense from the acquisition of a customer relationship intangible asset in December 2020 in connection with our acquisition of a precision machining operation in Nogales, Mexico.

Interest Expense, Net

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Interest expense

The decrease in interest expense from the second quarter of 2020 to the second quarter of 2021 was primarily due to a 92 basis point decrease in our weighted average interest rate, from 3.93% to 3.01%, and a $33.5 million decrease in our average amount borrowed during the second quarter of 2021 compared to the second quarter of 2020.

The decrease in interest expense from the six months ended June 26, 2020 to the six months ended June 25, 2021 was primarily due to a 101 basis point decrease in our weighted average interest rate, from 4.17% to 3.16%, and a $13.0 million decrease in our average amount borrowed during the six months ended June 25, 2021 compared to the six months ended June 26, 2020.

Interest expense, net

The decrease in interest expense from the third quarter of 2020 to the third quarter of 2021 was primarily due to a 47‑basis point decrease in our weighted average interest rate, from 3.37% to 2.90%, and a $38.7 million decrease in our average amount borrowed during the quarter.

The decrease in interest expense from the nine months ended September 25, 2020 to the nine months ended September 24, 2021 was primarily due to an 81‑basis point decrease in our weighted average interest rate, from 3.89% to 3.08%, and a $21.6 million decrease in our average amount borrowed during the nine‑month period.

The decrease in our weighted average interest rate during the three and nine months ended September 24, 2021 was primarily driven by continued quarterly reductions in our consolidated leverage ratio, starting with the first quarter of 2020, which lowers the applicable margin component of our all-in interest rate.

Additionally, for the nine months ended September 24, 2021, our weighted average interest rate was favorably impacted by reductions in LIBOR during the first half of 2021 compared to the first half of 2020.

Interest expense for the three and nine months ended September 24, 2021 is net of an insignificant amount of interest income, net of premium amortization, associated with our marketable securities, which were originally purchased in May 2021.

Other Expense (Income), Net

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Other expense, net

The change in other expense, net from the three and six months ended June 26, 2020 to the three and six months ended June 25, 2021 was primarily due to currency exchange rate changes during the quarter as a result of transactions denominated in the local currencies of our foreign operations.

Other expense (income), net

The change in other expense, net from the three and nine months ended September 25, 2020 to the three and nine months ended September 24, 2021 was primarily due to currency exchange rate changes during the quarter as a result of transactions denominated in the local currencies of our foreign operations.

These local currencies consist primarily of the Singapore dollar, Malaysian ringgit, and euro.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands)

Income tax expense (benefit)

The increase in income tax expense from the three and six months ended June 26, 2020 to the three and six months ended June 26, 2021 was primarily due to increased taxable income in the U.S.

in 2021, partially offset by benefits from share-based compensation activity during the periods, as well as a decrease in the release of certain tax reserves related to statute of limitations expirations or settlements.

Non‑GAAP Results

The increase in income tax expense from the third quarter of 2020 to the third quarter of 2021 was primarily due to increased taxable income in the U.S.

in 2021 and a reduction in benefits from share-based compensation activity during the quarter.

The increase in income tax expense from the nine months ended September 25, 2020 to the nine months ended September 24, 2021 was primarily due to increased taxable income in the U.S., partially offset by an increase in benefits from share-based compensation activity during the nine-month period.

Non‑GAAP Financial Results

Management uses non-GAAP metrics to evaluate our operating and financial results.

We believe the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective.

Non-GAAP net income is defined as:

net income excluding (1) amortization of intangible assets, share-based compensation expense, and non-recurring expenses, including contract settlement losses and divestiture and facility shutdown related charges;

Non-GAAP gross margin is defined as non-GAAP gross profit divided by net sales.

Non-GAAP gross profit and non-GAAP net income are defined as:

gross profit or net income excluding, as applicable, (1) amortization of intangible assets, share-based compensation expense, and non-recurring expenses, including contract settlement losses and facility shutdown costs, to the extent they are present in gross profit or net income;

and (2) the tax impacts associated with our non-GAAP adjustments, as well as non-recurring discrete tax items.

Non-GAAP diluted EPS is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period.

The following table presents our unaudited non‑GAAP net income and a reconciliation from net income, the most comparable GAAP measure, for the periods indicated:

Non-GAAP diluted earnings per share (“EPS”) is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period.

Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP.

Other companies may calculate non-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our non-GAAP results as a tool for comparison.

Because of these limitations, you should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP.

In addition, in evaluating non-GAAP results, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving non-GAAP results and you should not infer from our presentation of non-GAAP results that our future results will not be affected by these expenses or any unusual or non-recurring items.

The following table presents our unaudited non‑GAAP gross profit and non-GAAP gross margin and and a reconciliation from gross profit, the most comparable GAAP measure, for the periods indicated:

Three Months Ended

Six Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands, except per share amounts)

Non-GAAP Data:

GAAP gross profit

Non-GAAP adjustments:

Share-based compensation

Other non-recurring expense, net (1)

Contract settlement loss (2)

Facility shutdown costs (3)

Fair value adjustment to inventory from acquisitions (4)

Non-GAAP gross profit

GAAP gross margin

Non-GAAP gross margin

Included in this amount for the nine months ended September 24, 2021 is primarily a non-recurring settlement charge.

During the first quarter of 2020, 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.

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we completed during the second quarter of 2021.

As of the end of the second quarter of 2021, the facility was closed and vacated, and no further charges are expected on a go-forward basis.

Included in this amount for the third quarter of 2020 are (i) severance costs associated with affected employees of $0.2 million, and (ii) accelerated depreciation charges associated with property and equipment expected to be abandoned at the time of facility closure of $0.2 million.

Included in this amount for the nine months ended September 24, 2021 are (i) write-off costs associated with inventories determined during the period to be obsolete of $2.6 million and (ii) severance costs associated with affected employees of $0.2 million, partially offset by (iii) a gain realized upon the sale of equipment and other fixed assets of $0.5 million.

Included in this amount for the nine months September 25, 2020 are (i) write-off costs associated with inventories determined during the period to be obsolete of $1.3 million, (ii) severance costs associated with affected employees of $0.4 million, and (iii) accelerated depreciation charges associated with property and equipment expected to be abandoned at the time of facility closure of $0.2 million.

As part of our purchase price allocation for our acquisition of a precision machining operation in Mexico in December 2020, we recorded acquired-inventory at fair value, resulting in a fair value step-up of $0.2 million.

This was subsequently released to cost of sales in the first quarter of 2021 as acquired-inventory was sold.

The following table presents our unaudited non‑GAAP net income and non-GAAP diluted EPS and a reconciliation from net income, the most comparable GAAP measure, for the periods indicated:

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

(dollars in thousands, except per share amounts)

GAAP net income

11 unchanged sentences

Shares used to compute diluted EPS

Included in this amount for the three and six months ended June 25, 2021 are (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a Sarbanes-Oxley (“SOX”) compliance program and (ii) a non-recurring settlement charge.

Included in this amount for the second quarter of 2020 are primarily (i) acquisition-related expenses associated with a two-year retention agreement between the Company and key management personnel of IAN (the “IAN retention agreement”), which we acquired in April 2018, and (ii) non-capitalizable costs incurred in connection with our implementation of a new ERP system and a SOX compliance program.

Included in this amount for the six months ended June 26, 2020 are (i) a $1.8 million bonus payment to our former CEO in connection with his transition to executive chairman, (ii) acquisition-related expenses associated with the IAN retention agreement, and (iii) non-capitalizable costs incurred in connection with our implementation of a new ERP system and a SOX compliance program.

During the first quarter of 2020, 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.

Included in this amount for the third quarter of 2021 are primarily non-capitalized costs incurred in connection with our implementation of a new ERP system.

Included in this amount for the the third quarter of 2020 are primarily (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a Sarbanes-Oxley (“SOX”) compliance program.

Included in this amount for the nine months ended September 24, 2021 are primarily (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a SOX compliance program.

Included in this amount for the nine months ended September 25, 2020 are primarily (i) a $1.8 million bonus payment to our former CEO in connection with his transition to executive chairman, (ii) acquisition-related expenses associated with a two-year retention agreement between the Company and key management personnel of IAN, (iii) non-capitalizable costs incurred in connection with our implementation of a new ERP system and a SOX compliance program, and (iv) a non-recurring settlement charge.

See footnote 2 to the previous table reconciling gross profit to non-GAAP gross profit.

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we completed during the second quarter of 2021.

Included in this amount for the second quarter of 2021 are $0.4 million in write-off costs associated with inventories determined during the quarter to be obsolete and $0.3 million in other shutdown related charges, partially offset by a $0.5 million gain realized upon the sale of equipment and other fixed assets.

As of the end of the second quarter of 2021, the facility was closed and vacated, and no further charges are expected on a go-forward basis.

Included in this amount for the six months ended June 25, 2021 are $2.6 million in write-off costs associated with inventories determined during the period to be obsolete, $0.3 million in other shutdown related charges, and $0.2 million in severance costs associated with affected employees, partially offset by a $0.5 million gain realized upon the sale of equipment and other fixed assets.

Included in this amount for the three and six months ended June 26, 2020 are write-off costs associated with inventories determined during the period to be obsolete of $1.3 million and severance costs associated with affected employees of $0.2 million

This was subsequently released to cost of sales in the first quarter of 2021 as acquired-inventory was sold.

Included in this amount for the third quarter of 2020 are are (i) severance costs associated with affected employees of $0.2 million, and (ii) accelerated depreciation charges associated with property and equipment expected to be abandoned at the time of facility closure of $0.3 million.

Included in this amount for the nine months ended September 24, 2021 are (i) write-off costs associated with inventories determined during the period to be obsolete of $2.6 million, (ii) other shutdown related charges of $0.3 million, (iii) severance costs associated with affected employees of $0.2 million, partially offset by (iv) a gain realized upon the sale of equipment and other fixed assets of $0.5 million.

See footnote 4 to the previous table reconciling gross profit to non-GAAP gross profit.

GAAP income tax expense (benefit) for impact of our non-GAAP adjustments, as defined, including the impacts of excluding share-based compensation, amortization of intangible assets, and other non-recurring expenses.

This adjustment also excludes the impact of non-recurring discrete tax items.

Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP.

Because of these limitations, you should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP.

Liquidity and Capital Resources

We ended the second quarter of 2021 with cash of $141.7 million, a decrease of $111.2 million from December 25, 2020.

The decrease during the six months ended June 25, 2021 was primarily due to purchases of marketable securities of $105.0 million, payments on long-term debt of $34.4 million, and capital expenditures of $15.4 million, partially offset by cash from operating activities of $38.9 million and net proceeds from the issuance of shares under our share-based compensation plans of $4.2 million.

We ended the third quarter of 2021 with cash of $128.0 million, a decrease of $124.9 million from December 25, 2020.

The decrease during the nine months ended September 24, 2021 was primarily due to purchases of marketable securities of $105.0 million, payments on long-term debt of $36.6 million, and capital expenditures of $18.7 million, partially offset by cash provided by operating activities of $24.4 million, proceeds from maturities and sales of marketable securities of $6.0 million, and net proceeds from the issuance of shares under our share-based compensation plans of $4.5 million.

We believe that our cash, the amounts available under our revolving credit facility, and our cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.

1 unchanged sentence

The following table sets forth a summary of operating, investing, and financing activities for the periods presented:

Six Months Ended

Nine Months Ended

September 24,

September 25,

(in thousands)

4 unchanged sentences

Operating Activities

Our cash provided by operating activities of $38.9 million during the six months ended June 25, 2021 consisted of net income of $37.5 million and net non-cash charges of $17.7 million, partially offset by an increase in our net operating assets and liabilities of $16.3 million.

Our cash provided by operating activities of $24.4 million during the nine months ended September 24, 2021 consisted of net income of $56.0 million and net non-cash charges of $27.3 million, partially offset by an increase in our net operating assets and liabilities of $58.9 million.

Net non-cash charges primarily consisted of depreciation and amortization of $17.7 million, share-based compensation of $8.1 million, and deferred taxes of $1.0 million.

The increase in our net operating assets and liabilities was primarily due to an increase in inventories and accounts receivable of $31.5 million and $18.1 million, respectively, partially offset by an increase in accounts payable of $33.3 million.

The increase in our net operating assets and liabilities was primarily due to (i) an increase in inventories of $59.2 million, driven mostly by higher purchasing activity pursuant to strong customer demand and certain supply chain constraints, primarily due to a government-ordered shutdown of our Malaysia factory in July 2021, constraining production and shipments;

(ii) an increase in accounts receivable of $20.7 million, driven mostly by higher sales in the third quarter of 2021 compared to the fourth quarter of 2020, as well as timing of customer payments;

partially offset by (iii) an increase in accounts payable of $21.2 million, which is primarily due to higher purchases during the third quarter of 2021 compared to the fourth quarter of 2020, partially offset by timing of payments to suppliers.

Investing Activities

Our cash used in investing activities of $119.9 million during the six months ended June 25, 2021 consisted of purchases of marketable securities of $105.0 million, capital expenditures of $15.4 million, partially offset by proceeds from the sale of equipment and other fixed assets associated with our planned closure of our Union City, California facility of $0.5 million.

Our cash used in investing activities of $117.2 million during the nine months ended September 24, 2021 consisted of purchases of marketable securities of $105.0 million, capital expenditures of $18.7 million, partially offset by proceeds from maturities and sales of marketable securities and proceeds from the sale of equipment and other fixed assets associated with our planned closure of our Union City, California facility of $0.5 million.

Our capital expenditures primarily include capacity expansion projects, including machinery and clean rooms, at our factories.

Pursuant to ASU 2018‑15, implementation costs associated with our new ERP implementation of approximately $2.1 million are capitalized as other non-current assets on our consolidated balances sheets and are reflected in cash provided by operating activities.

Financing Activities

Our cash used in financing activities of $30.2 million during the six months ended June 25, 2021 consisted of payments on long-term debt of $34.4 million, of which $30.0 million was a paydown on our revolving credit facility, partially offset by net proceeds from the issuance of shares under our share-based compensation plans of $4.2 million.

Our cash used in financing activities of $32.0 million during the nine months ended September 24, 2021 consisted of payments on long-term debt of $36.6 million, of which $30.0 million was a paydown on our revolving credit facility, partially offset by net proceeds from the issuance of shares under our share-based compensation plans of $4.5 million.

Critical Accounting Policies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis