What changed in this filing

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Item 1. Financial Statements

2022-05-11 compared with 2021-11-03 · 52 added, 172 removed, 269 unchanged (45% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share amounts)

September 24,

Current assets:

Cash and cash equivalents

Marketable securities

Accounts receivable, net

29 unchanged sentences

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

Accumulated other comprehensive loss

Retained earnings

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

Cost of sales

6 unchanged sentences

Interest expense, net

Other expense (income), net

Other expense, net

Income before income taxes

Income tax expense (benefit)

Income tax expense

Net income per share:

2 unchanged sentences

ICHOR HOLDINGS, LTD.

Consolidated Statements of Comprehensive Income

(in thousands)

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

Other comprehensive loss, net of tax:

Unrealized loss on available-for-sale marketable securities

Comprehensive income

See accompanying notes.

ICHOR HOLDINGS, LTD.

Consolidated Statements of Shareholders’ Equity

(dollars in thousands)

For the three months ending September 24, 2021

Ordinary Shares

Other Comprehensive

Shareholders'

Income (Loss)

Balance at June 25, 2021

Ordinary shares issued from exercise of stock options

Ordinary shares issued from vesting of restricted share units

Ordinary shares issued from employee share purchase plan

Share-based compensation expense

Other comprehensive loss

Balance at September 24, 2021

For the nine months ending September 24, 2021

For the three months ending April 1, 2022

Ordinary Shares

Other Comprehensive

Shareholders'

Income (Loss)

Balance at December 31, 2021

1 unchanged sentence

Ordinary shares issued from vesting of restricted share units

Ordinary shares issued from employee share purchase plan

Share-based compensation expense

Other comprehensive loss

Balance at September 24, 2021

See accompanying notes.

ICHOR HOLDINGS, LTD.

Consolidated Statements of Shareholders’ Equity (continued)

(dollars in thousands)

For the three months ending September 25, 2020

Ordinary Shares

Shareholders'

Balance at June 26, 2020

Ordinary shares issued from exercise of stock options

Ordinary shares issued from vesting of restricted share units

Ordinary shares issued from employee share purchase plan

Share-based compensation expense

Balance at September 25, 2020

For the nine months ending September 25, 2020

Balance at April 1, 2022

For the three months ending March 26, 2021

Ordinary Shares

5 unchanged sentences

Share-based compensation expense

Balance at September 25, 2020

Balance at March 26, 2021

See accompanying notes.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 24,

September 25,

Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Amortization of debt issuance costs

Gain on sale of asset disposal group

Changes in operating assets and liabilities, net of acquisitions:

7 unchanged sentences

Capital expenditures

Purchase of marketable securities

Proceeds from maturities and sales of marketable securities

Proceeds from sale of property and equipment

Net cash used in investing activities

2 unchanged sentences

Employees' taxes paid upon vesting of restricted share units

Borrowings on revolving credit facility

Repayments on revolving credit facility

Repayments on term loan

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net cash used in financing activities

Net decrease in cash

Cash at beginning of period

5 unchanged sentences

Capital expenditures included in accounts payable

Right-of-use assets obtained in exchange for new operating lease liabilities

Right-of-use assets obtained in exchange for new operating lease liabilities, including those acquired through acquisitions

See accompanying notes.

10 unchanged sentences

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

The three months ended September 24, 2021 and September 25, 2020 were both 13 weeks.

References to the third quarter of 2021 and 2020 refer to the three-month periods then ended .

The three months ended April 1, 2022 and March 26, 2021 were both 13 weeks.

References to the first quarter of 2022 and 2021 refer to the three-month periods then ended .

References to fiscal year 2022 and 2021 refer to our fiscal years ending December 30, 2022 and December 31, 2021, respectively.

5 unchanged sentences

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.

Cash and Cash Equivalents and Marketable Securities

Cash and Cash Equivalents

Cash and cash equivalents consist of deposits and financial instruments which are readily convertible into cash and have original maturities of 90 days or less at the time of acquisition.

Marketable securities consist primarily of highly liquid investments with maturities of greater than 90 days when purchased.

We classify our marketable securities as available-for-sale and, accordingly, report them at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss).

Any unrealized losses which are considered to be other-than-temporary are recorded in other income (expense), net.

Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in other income (expense), net.

All of our available-for-sale investments are subject to a periodic impairment review.

If an available-for-sale debt security’s fair value is less than its amortized cost basis, then we evaluate whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses.

Unrealized gains and losses not attributable to credit losses are included, net of tax, in accumulated other comprehensive income (loss).

We have no t record an allowance for credit losses during 2021.

Fair Value of Financial Instruments

The carrying values of our financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and long-term debt, net of unamortized debt issuance costs, approximate fair value.

Revenue Recognition

18 unchanged sentences

We had no significant contract assets or liabilities on our consolidated balance sheets in any of the periods presented .

Inventories are stated at the lower of cost or net realizable value.

The majority of our inventory values are based upon average costs.

On a quarterly basis, we analyze the value of our inventory and periodically record write-downs for estimated excess and obsolete inventory.

This analysis is based on estimated future consumption compared to inventory quantities on-hand.

The estimate is based on how assumptions of historical consumption, recency of purchases, backlog, and other factors indicate future consumption.

Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis.

Reversal of these write-downs are recognized only when the related inventory has been scrapped or sold.

Accounting Pronouncements Recently Adopted

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.

We adopted the standard on the first day of 2021, and it did not have a significant impact on our financial statements.

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2021‑08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) .

This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Adoption of the ASU should be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.

This ASU is currently not expected to have a material impact on our consolidated financial statements .

Note 2 – Inventories

Inventories consist of the following:

September 24,

Raw materials

5 unchanged sentences

Property and equipment consist of the following:

September 24,

Leasehold improvements

4 unchanged sentences

Total property and equipment, net

Depreciation expense was $ 2.8 million and $ 3.0 million for the third quarter of 2021 and 2020, respectively, and $ 7.5 million and $ 8.0 million for the nine months ended September 24, 2021 and September 25, 2020, respectively.

Depreciation expense was $ 4.0 million and $ 2.3 million for the first quarter of 2022 and 2021, respectively.

Cloud Computing Implementation Costs

6 unchanged sentences

Capitalized costs amortized during the period

Capitalized cloud computing implementation costs as of September 24, 2021

Capitalized cloud computing implementation costs as of April 1, 2022

Note 4 – Intangible Assets

Definite‑lived intangible assets consist of the following:

September 24, 2021

April 1, 2022

Customer relationships

Developed technology

Order backlog

Total intangible assets

2 unchanged sentences

Developed technology

Order backlog

Total intangible assets

8 unchanged sentences

As these amounts are variable, they are not included in lease liabilities.

As of September 24, 2021, we had zero operating lease executed for which the rental period had not yet commenced.

As of April 1, 2022, we had one operating lease 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 24,

September 25,

September 24,

September 25,

Operating lease cost

Supplemental cash flow information related to leases is as follows:

Nine Months Ended

September 24,

September 25,

Three Months Ended

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

1 unchanged sentence

Supplemental balance sheet information related to leases is as follows:

September 24,

September 25,

Weighted-average remaining lease term of operating leases

Weighted-average discount rate of operating leases

Future minimum lease payments under non-cancelable leases as of September 24, 2021 are as follows:

Future minimum lease payments under non-cancelable leases as of April 1, 2022 are as follows:

2022, remaining

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

Income tax expense (benefit)

Income tax expense

Income before income taxes

Effective income tax rate

Our effective tax rate for the three and nine months ended September 24, 2021 differs from the statutory rate primarily due to taxes on foreign income that differ from the U.S.

Our effective tax rates for the first quarter of 2022 and 2021 differ from the statutory rate primarily due to taxes on foreign income that differ from the U.S.

tax rate, including a tax holiday in Singapore, and the impact of share-based compensation activity during the quarter.

Our effective tax rate for the three and nine months ended September 25, 2020 differs from the statutory rate primarily 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.

The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $ 3.2 million at September 24, 2021.

The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $ 3.6 million at April 1, 2022.

The related interest and penalties were insignificant.

The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant.

As of September 24, 2021, we were not under examination by tax authorities.

As of April 1, 2022, we were not under examination by tax authorities.

Note 7 – Employee Benefit Programs

2 unchanged sentences

Eligible employees receive a discretionary matching contribution equal to 50 % of a participant’s deferral, up to an annual matching maximum of 4 % of a participant’s annual compensation.

Matching contributions were $ 0.5 million and $ 0.5 million for the third quarter of 2021 and 2020, respectively and $ 1.6 million and $ 1.5 million for the nine months ended September 24, 2021 and September 25, 2020, respectively.

Matching contributions were $ 1.0 million and $ 0.6 million for the first quarter of 2022 and 2021, respectively.

Note 8 – Long-Term Debt

Long‑term debt consists of the following:

September 24,

Revolving credit facility

4 unchanged sentences

Total long-term debt, less current portion, net

On February 15, 2018, we entered into an amended and restated credit agreement (the “2018 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.

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

On October 29, 2021, we entered into an amended and restated credit agreement, which includes a group of financial institutions as direct lenders underlying the agreement.

The credit agreement includes a $ 150.0 million term loan facility and a $ 250.0 million revolving credit facility (together, “credit facilities”).

Term loan principal payments of $ 1.9 million are due on a quarterly basis.

The 2018 Credit Agreement matures on February 15, 2023 .

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.

The credit facilities mature on October 29, 2026 .

Interest is charged at either the Base Rate or the Bloomberg Short-Term Bank Yield (“BSBY”) 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 BSBY Rate plus 1.00 %.

The applicable margin on Base Rate and BSBY Rate loans is 0.375 ‑ 1.375 % and 1.375 ‑ 2.375 % per annum, respectively, depending on our leverage ratio.

We are also charged a commitment fee of 0.175 %- 0.350 % 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 24 , 2021 , the term loan and revolving credit facility bore interest at the Eurodollar rate option of 3.00 % and 2.15 %, respectively .

Subsequent Event

On October 29, 2021, we executed an amended and restated credit agreement to refinance all outstanding indebtedness under our 2018 Credit Agreement.

The credit agreement features a $ 150.0 million term loan and a revolving facility allowing for borrowings up to $ 250.0 million.

The credit agreement lowers our overall borrowing rate by (i) decreasing the applicable margin, (ii) decreasing the revolving facility commitment fee, and (iii) removing the 1.00 % Eurodollar Rate floor that was associated with the term loan.

Under the new credit agreement, the Eurodollar Rate, which was equal to LIBOR, is replaced with the Bloomberg Short-Term Bank Yield Index (‘BSBY’).

Additionally, the maturity date is extended to October 2026 , and the maximum permitted leverage ratio is increased to 3.5 x from 3.0 x.

Quarterly term loan payments of $ 1.9 million commence on March 31, 2022.

The impact of the term loan payment schedule under the new credit agreement has been recognized in these consolidated financial statements, which is reflected in the $ 5.6 million balance of current portion of long-term debt.

BSBY Rate interest payments are due on the last day of the applicable interest period, or quarterly for applicable interest periods longer than 3 months .

At April 1, 2022, our credit facilities bore interest under the BSBY rate option of 2.01 %.

Note 9 – Share‑Based Compensation

5 unchanged sentences

Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares were never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows.

Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 3.0 million and $ 2.4 million for the third quarter of 2021 and 2020, respectively, and $ 8.1 million and $ 7.4 million for the nine months ended September 24, 2021 and September 25, 2020, respectively.

Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 2.9 million and $ 2.4 million for the first quarter of 2022 and 2021.

Stock Options

4 unchanged sentences

Aggregate intrinsic value

(in thousands)

Outstanding, December 31, 2021

Forfeited or expired

Outstanding, September 24, 2021

Exercisable, September 24, 2021

Outstanding, April 1, 2022

Exercisable, April 1, 2022

Restricted Share Units

3 unchanged sentences

Unvested, December 31, 2021

Unvested, September 24, 2021

Unvested, April 1, 2022

Employee Share Purchase Plan

2 unchanged sentences

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

During the nine months ended September 24, 2021, 48,643 ordinary shares were purchased by eligible employees under the 2017 ESPP.

As of September 24, 2021, approximately 2.3 million ordinary shares remain available for purchase under the 2017 ESPP.

As of April 1, 2022, approximately 2.3 million ordinary shares remain available for purchase under the 2017 ESPP.

Note 10 – Earnings per Share

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

Basic weighted average ordinary shares outstanding

3 unchanged sentences

Diluted weighted average ordinary shares outstanding

Securities excluded from diluted weighted average ordinary shares outstanding (1)

Securities excluded from the calculation of diluted weighted average ordinary shares outstanding (1)

Earnings per share:

Represents potentially dilutive options and RSUs excluded from the calculation of diluted weighted average ordinary shares outstanding, because including them would have been antidilutive under the treasury stock method.

Note 11 – Fair Value Measurements

We measure certain assets and liabilities, including cash equivalents and marketable securities, at fair value.

Whenever possible, the fair values of our financial assets and liabilities are determined using quoted market prices of identical securities or quoted market prices of similar securities from active markets.

The three levels of inputs that may be used to measure fair value are as follows :

Quoted prices in active markets for identical assets.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets.

Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

As of September 24, 2021, assets measured at fair value on a recurring basis were as follows:

Cash equivalents:

Money market funds

Marketable securities:

Commercial paper

Corporate bonds

The difference between amortized cost and fair value of marketable securities, due to unrealized gains and losses, was immaterial and is recorded as a component of accumulated other comprehensive income (loss).

We did not have any other-than-temporary unrealized gains or losses at either period-end included in these financial statements .

Note 11 – Segment Information

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

United States of America

Total net sales

Foreign long-lived assets, exclusive of deferred tax assets, were $ 40.1 million and $ 31.5 million at September 24, 2021 and December 25, 2020, respectively .

Foreign long-lived assets, exclusive of deferred tax assets, were $ 39.0 million and $ 38.4 million at April 1, 2022 and December 31, 2021, respectively .

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

What changed 10-Q

Item 1. Financial Statements