ICHOR HOLDINGS, LTD. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ICHOR HOLDINGS, LTD. Consolidated Balance Sheets (dollars in thousands, except per share amounts) (unaudited) July 1, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 46,064 $ 75,495 Accounts receivable, net 158,403 142,990 Inventories 290,327 236,133 Prepaid expenses and other current assets 5,699 8,153 Total current assets 500,493 462,771 Property and equipment, net 91,603 85,204 Operating lease right-of-use assets 35,649 29,790 Other noncurrent assets 12,887 9,166 Deferred tax assets, net 9,247 8,116 Intangible assets, net 79,923 89,927 Goodwill 335,902 335,902 Total assets $ 1,065,704 $ 1,020,876 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 147,650 $ 159,727 Accrued liabilities 21,652 19,066 Other current liabilities 14,162 14,377 Current portion of long-term debt 7,500 7,500 Current portion of lease liabilities 7,956 7,633 Total current liabilities 198,920 208,303 Long-term debt, less current portion, net 296,736 285,253 Lease liabilities, less current portion 28,063 22,354 Deferred tax liabilities, net 38 38 Other non-current liabilities 4,623 4,213 Total liabilities 528,380 520,161 Shareholders’ equity: Preferred shares ($ 0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding) — — Ordinary shares ($ 0.0001 par value; 200,000,000 shares authorized; 28,735,728 and 28,551,160 shares outstanding, respectively; 33,173,167 and 32,988,599 shares issued, respectively) 3 3 Additional paid in capital 424,471 417,438 Treasury shares at cost ( 4,437,439 shares) ( 91,578 ) ( 91,578 ) Accumulated other comprehensive loss — — Retained earnings 204,428 174,852 Total shareholders’ equity 537,324 500,715 Total liabilities and shareholders’ equity $ 1,065,704 $ 1,020,876 See accompanying notes. 1 ICHOR HOLDINGS, LTD. Consolidated Statements of Operations (dollars in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended July 1, 2022 June 25, 2021 July 1, 2022 June 25, 2021 Net sales $ 329,560 $ 282,308 $ 622,706 $ 546,874 Cost of sales 274,099 234,955 523,313 460,009 Gross profit 55,461 47,353 99,393 86,865 Operating expenses: Research and development 4,907 4,049 9,758 7,564 Selling, general, and administrative 21,103 14,699 44,370 29,048 Amortization of intangible assets 4,655 3,390 10,004 6,781 Total operating expenses 30,665 22,138 64,132 43,393 Operating income 24,796 25,215 35,261 43,472 Interest expense, net 2,063 1,591 3,595 3,510 Other expense (income), net ( 548 ) 22 ( 464 ) 207 Income before income taxes 23,281 23,602 32,130 39,755 Income tax expense 1,744 737 2,554 2,252 Net income $ 21,537 $ 22,865 $ 29,576 $ 37,503 Net income per share: Basic $ 0.75 $ 0.81 $ 1.03 $ 1.33 Diluted $ 0.74 $ 0.79 $ 1.02 $ 1.30 Shares used to compute net income per share: Basic 28,665,930 28,180,821 28,629,280 28,092,535 Diluted 29,042,519 29,092,521 28,948,055 28,942,902 See accompanying notes. 2 ICHOR HOLDINGS, LTD. Consolidated Statements of Comprehensive Income (in thousands) (unaudited) Three Months Ended Six Months Ended July 1, 2022 June 25, 2021 July 1, 2022 June 25, 2021 Net income $ 21,537 $ 22,865 $ 29,576 $ 37,503 Other comprehensive loss, net of tax: Unrealized loss on available-for-sale marketable securities — ( 24 ) — ( 24 ) Comprehensive income $ 21,537 $ 22,841 $ 29,576 $ 37,479 See accompanying notes. 3 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (dollars in thousands) (unaudited) Additional Treasury Accumulated Total For the three months ending July 1, 2022 Ordinary Shares Paid-In Shares Other Comprehensive Retained Shareholders' Shares Amount Capital Shares Amount Income (Loss) Earnings Equity Balance at April 1, 2022 28,628,907 $ 3 $ 420,513 4,437,439 $ ( 91,578 ) $ — $ 182,891 $ 511,829 Ordinary shares issued from exercise of stock options 5,015 — 83 — — — — 83 Ordinary shares issued from vesting of restricted share units 59,741 — ( 563 ) — — — — ( 563 ) Ordinary shares issued from employee share purchase plan 42,065 — 929 — — — — 929 Share-based compensation expense — — 3,509 — — — — 3,509 Net income — — — — — — 21,537 21,537 Balance at July 1, 2022 28,735,728 $ 3 $ 424,471 4,437,439 $ ( 91,578 ) $ — $ 204,428 $ 537,324 Additional Treasury Accumulated Total For the six months ending July 1, 2022 Ordinary Shares Paid-In Shares Other Comprehensive Retained Shareholders' Shares Amount Capital Shares Amount Income (Loss) Earnings Equity Balance at December 31, 2021 28,551,160 $ 3 $ 417,438 4,437,439 $ ( 91,578 ) $ — $ 174,852 $ 500,715 Ordinary shares issued from exercise of stock options 47,768 — 1,038 — — — — 1,038 Ordinary shares issued from vesting of restricted share units 94,735 — ( 1,340 ) — — — — ( 1,340 ) Ordinary shares issued from employee share purchase plan 42,065 — 929 — — — — 929 Share-based compensation expense — — 6,406 — — — — 6,406 Net income — — — — — — 29,576 29,576 Balance at July 1, 2022 28,735,728 $ 3 424,471 4,437,439 $ ( 91,578 ) $ — $ 204,428 $ 537,324 See accompanying notes. 4 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (continued) (dollars in thousands) (unaudited) Additional Treasury Accumulated Total For the three months ending June 25, 2021 Ordinary Shares Paid-In Shares Other Comprehensive Retained Shareholders' Shares Amount Capital Shares Amount Income (Loss) Earnings Equity Balance at March 26, 2021 28,070,251 $ 3 $ 404,046 4,437,439 $ ( 91,578 ) $ — $ 118,591 $ 431,062 Ordinary shares issued from exercise of stock options 179,131 — 3,150 — — — — 3,150 Ordinary shares issued from vesting of restricted share units 77,177 — ( 1,251 ) — — — — ( 1,251 ) Share-based compensation expense — — 2,681 — — — — 2,681 Other comprehensive loss — — — — — ( 24 ) — ( 24 ) Net income — — — — — — 22,865 22,865 Balance at June 25, 2021 28,326,559 $ 3 $ 408,626 4,437,439 $ ( 91,578 ) $ ( 24 ) $ 141,456 $ 458,483 Additional Treasury Accumulated Total For the six months ending June 25, 2021 Ordinary Shares Paid-In Shares Other Comprehensive Retained Shareholders' Shares Amount Capital Shares Amount Income (Loss) Earnings Equity Balance at December 25, 2020 27,907,077 $ 3 $ 399,311 4,437,439 $ ( 91,578 ) $ — $ 103,953 $ 411,689 Ordinary shares issued from exercise of stock options 284,731 — 5,531 — — — — 5,531 Ordinary shares issued from vesting of restricted share units 107,600 — ( 1,918 ) — — — — ( 1,918 ) Ordinary shares issued from employee share purchase plan 27,151 — 606 — — — — 606 Share-based compensation expense — — 5,096 — — — — 5,096 Other comprehensive loss — — — — — ( 24 ) — ( 24 ) Net income — — — — — — 37,503 37,503 Balance at June 25, 2021 28,326,559 $ 3 $ 408,626 4,437,439 $ ( 91,578 ) $ ( 24 ) $ 141,456 $ 458,483 See accompanying notes. 5 ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended July 1, 2022 June 25, 2021 Cash flows from operating activities: Net income $ 29,576 $ 37,503 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 18,394 11,464 Share-based compensation 6,406 5,096 Deferred income taxes ( 1,131 ) 1,089 Amortization of debt issuance costs 233 483 Gain on sale of asset disposal group — ( 504 ) Other — 59 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 15,413 ) ( 18,131 ) Inventories ( 54,194 ) ( 31,500 ) Prepaid expenses and other assets 2,461 ( 478 ) Accounts payable ( 12,453 ) 33,302 Accrued liabilities 2,586 ( 952 ) Other liabilities ( 3,360 ) 1,458 Net cash provided by (used in) operating activities ( 26,895 ) 38,889 Cash flows from investing activities: Capital expenditures ( 14,413 ) ( 15,369 ) Purchase of marketable securities — ( 105,033 ) Proceeds from sale of property and equipment — 504 Net cash used in investing activities ( 14,413 ) ( 119,898 ) Cash flows from financing activities: Issuance of ordinary shares under share-based compensation plans 1,967 6,117 Employees' taxes paid upon vesting of restricted share units ( 1,340 ) ( 1,918 ) Borrowings on revolving credit facility 25,000 — Repayments on revolving credit facility ( 10,000 ) ( 30,000 ) Repayments on term loan ( 3,750 ) ( 4,375 ) Net cash provided by (used in) financing activities 11,877 ( 30,176 ) Net decrease in cash ( 29,431 ) ( 111,185 ) Cash at beginning of period 75,495 252,899 Cash at end of period $ 46,064 $ 141,714 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 3,295 $ 3,341 Cash paid during the period for taxes, net of refunds $ 1,499 $ 1,272 Supplemental disclosures of non-cash activities: Capital expenditures included in accounts payable $ 1,306 $ 246 Right-of-use assets obtained in exchange for new operating lease liabilities, including those acquired through acquisitions $ 9,587 $ 1,709 See accompanying notes. 6 ICHOR HOLDINGS, LTD. Notes to Consolidated Financial Statements (dollar figures in tables in thousands, except per share amounts) (unaudited) Note 1 – Basis of Presentation and Selected Significant Accounting Policies Basis of Presentation These consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All dollar figures presented in tables in the notes to consolidated financial statements are in thousands, except per share amounts. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting. These consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10‑K for the year ended December 31, 2021. Year End We use a 52- or 53-week fiscal year ending on the last Friday in December. The three months ended July 1, 2022 and June 25, 2021 were both 13 weeks. References to the second 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. Fiscal year 2022 and 2021 are 52 and 53 weeks, respectively. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods presented. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from the estimates made by management. Significant estimates include inventory valuation and impairment analysis for both definite‑lived intangible assets and goodwill. 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. 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 We recognize revenue when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. This amount is recorded as net sales in our consolidated statements of operations. Transaction price – In most of our contracts, prices are generally determined by a customer-issued purchase order and generally remain fixed over the duration of the contract. Certain contracts contain variable consideration, including early-payment discounts and rebates. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal will not occur. Variable consideration estimates are updated at each reporting date. Historically, we have not incurred significant costs to obtain a contract. All amounts billed to a customer relating to shipping and handling are classified as net sales, while all costs incurred by us for shipping and handling are classified as cost of sales. 7 Performance obligations – Substantially all of our performance obligations pertain to promised goods (“products”), which are primarily comprised of fluid delivery subsystems, weldments, and other components. Most of our contracts contain a single performance obligation and are generally completed within twelve months . Product sales are recognized at a point-in-time, generally upon delivery, as such term is defined within the contract, as that is when control of the promised good has transferred. Products are covered by a standard assurance warranty, generally extended for a period of one to two years depending on the customer, which promises that delivered products conform to contract specifications. As such, we account for such warranties under ASC 460, Guarantees , and not as a separate performance obligation . Contract balances – Accounts receivable represents our unconditional right to receive consideration from our customers. Accounts receivable are carried at invoice price less an estimate for doubtful accounts and estimated payment discounts. Payment terms vary by customer but are generally due within 15‑ 60 days. Historically, we have not incurred significant payment issues with our customers. We had no significant contract assets or liabilities on our consolidated balance sheets in any of the periods presented . Accounting Pronouncements Recently Adopted 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: July 1, 2022 December 31, 2021 Raw materials $ 201,966 $ 159,366 Work in process 68,918 62,537 Finished goods 34,793 28,281 Excess and obsolete adjustment ( 15,350 ) ( 14,051 ) Total inventories $ 290,327 $ 236,133 Note 3 – Property and Equipment and Other Noncurrent Assets Property and equipment consist of the following: July 1, 2022 December 31, 2021 Machinery $ 87,403 $ 80,953 Leasehold improvements 40,732 36,706 Computer software, hardware, and equipment 9,370 8,031 Office furniture, fixtures and equipment 1,258 1,168 Vehicles 325 284 Construction-in-process 11,274 8,565 150,362 135,707 Less accumulated depreciation ( 58,759 ) ( 50,503 ) Total property and equipment, net $ 91,603 $ 85,204 Depreciation expense was $ 4.4 million and $ 2.4 million for the second quarter of 2022 and 2021, respectively. Depreciation expense was $ 8.4 million and $ 4.7 million for the six months ended July 1, 2022 and June 25, 2021, respectively. 8 Cloud Computing Implementation Costs 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 31, 2021 $ 8,054 Costs capitalized during the period 4,073 Capitalized costs amortized during the period ( 399 ) Capitalized cloud computing implementation costs as of July 1, 2022 $ 11,728 Note 4 – Intangible Assets Definite‑lived intangible assets consist of the following: July 1, 2022 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Customer relationships 117,022 ( 44,140 ) — 72,882 8.4 years Developed technology 11,047 ( 4,006 ) — 7,041 10.0 years Total intangible assets $ 128,069 $ ( 48,146 ) $ — $ 79,923 December 31, 2021 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Customer relationships 146,569 ( 65,953 ) — 80,616 8.7 years Developed technology 11,047 ( 3,483 ) — 7,564 10.0 years Order backlog 2,600 ( 853 ) — 1,747 6 months Total intangible assets $ 160,216 $ ( 70,289 ) $ — $ 89,927 Note 5 – Leases Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We lease facilities under various non-cancellable operating leases expiring through 2031 . In addition to base rental payments, we are generally responsible for our proportionate share of operating expenses, including facility maintenance, insurance, and property taxes. As these amounts are variable, they are not included in lease liabilities. As of July 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 Six Months Ended July 1, 2022 June 25, 2021 July 1, 2022 June 25, 2021 Operating lease cost $ 2,239 $ 1,391 $ 4,284 $ 2,772 9 Supplemental cash flow information related to leases is as follows: Six Months Ended July 1, 2022 June 25, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,802 $ 2,691 Supplemental balance sheet information related to leases is as follows: July 1, 2022 June 25, 2021 Weighted-average remaining lease term of operating leases 5.7 years 2.4 years Weighted-average discount rate of operating leases 2.3 % 4.2 % Future minimum lease payments under non-cancelable leases as of July 1, 2022 are as follows: 2022, remaining $ 4,217 2023 7,322 2024 6,603 2025 5,991 2026 5,510 Thereafter 8,599 Total future minimum lease payments 38,242 Less imputed interest ( 2,223 ) Total lease liabilities $ 36,019 Note 6 – Income Taxes Income tax information for the periods reported are as follows: Three Months Ended Six Months Ended July 1, 2022 June 25, 2021 July 1, 2022 June 25, 2021 Income tax expense $ 1,744 $ 737 $ 2,554 $ 2,252 Income before income taxes $ 23,281 $ 23,602 $ 32,130 $ 39,755 Effective income tax rate 7.5 % 3.1 % 7.9 % 5.7 % Our effective tax rates for the three and six months ended July 1, 2022 and June 25, 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. The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $ 3.8 million at July 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 July 1, 2022, we were not under examination by tax authorities. Note 7 – Employee Benefit Programs 401(k) Plan We sponsor a 401(k) plan available to employees of our U.S.‑based subsidiaries. Participants may make salary deferral contributions not to exceed 50 % of a participant’s annual compensation or the maximum amount otherwise allowed by law. Eligible employees receive a discretionary matching contribution equal to 50 % of a participant’s deferral, up to an annual matching maximum of 4 % of a participant’s annual compensation. Matching contributions were $ 0.7 million and $ 0.5 million for the second quarter of 2022 and 2021, respectively. Matching contributions were $ 1.6 million and $ 1.1 million for the six months ended July 1, 2022 and June 25, 2021, respectively. 10 Note 8 – Long-Term Debt Long‑term debt consists of the following: July 1, 2022 December 31, 2021 Term loan $ 146,250 $ 150,000 Revolving credit facility 160,000 145,000 Total principal amount of long-term debt 306,250 295,000 Less unamortized debt issuance costs ( 2,014 ) ( 2,247 ) Total long-term debt, net 304,236 292,753 Less current portion ( 7,500 ) ( 7,500 ) Total long-term debt, less current portion, net $ 296,736 $ 285,253 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 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 . 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 July 1, 2022, our credit facilities bore interest under the BSBY rate option of 3.44 %. Note 9 – Share‑Based Compensation The 2016 Omnibus Incentive Plan (the “2016 Plan”) provides for grants of share‑based awards to employees, directors, and consultants. Awards may be in the form of stock options (“options”), tandem and non‑tandem stock appreciation rights, restricted share awards or restricted share units (“RSUs”), performance awards, and other share‑based awards. Forfeited or expired awards are returned to the incentive plan pool for future grants. Awards generally vest over four years , 25 % on the first anniversary of the date of grant and quarterly thereafter over the remaining 3 years. Upon vesting of RSUs, employees may elect to have shares withheld to cover statutory minimum withholding taxes. Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares were never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows. Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 3.5 million and $ 2.7 million for the second quarter of 2022 and 2021, and was $ 6.4 million and $ 5.1 million for the six months ended July 1, 2022 and June 25, 2021, respectively. Stock Options The following table summarizes option activity: Number of Stock Options Service condition Weighted average exercise price per share Weighted average remaining contractual term Aggregate intrinsic value Outstanding, December 31, 2021 921,469 $ 23.20 Granted — $ — Exercised ( 47,768 ) $ 21.73 Forfeited or expired ( 21,775 ) $ 23.24 Outstanding, July 1, 2022 851,926 $ 23.28 3.4 years $ 556 Exercisable, July 1, 2022 663,985 $ 23.16 3.1 years $ 519 11 Restricted Share Units The following table summarizes RSU activity: Number of Restricted Share Units Service condition Performance condition Market condition Weighted average grant-date fair value per share Unvested, December 31, 2021 559,310 9,716 14,572 $ 37.05 Granted 556,600 47,846 71,770 $ 27.49 Vested ( 138,437 ) — — $ 36.03 Forfeited ( 58,923 ) — — $ 33.20 Unvested, July 1, 2022 918,550 57,562 86,342 $ 31.31 Employee Share Purchase Plan The 2017 Employee Stock Purchase Plan (the “2017 ESPP”) grants employees the ability to designate a portion of their base-pay to purchase ordinary shares at a price equal to 85 % of the fair market value of our ordinary shares on the first or last day of each 6 month purchase period. Purchase periods begin on January 1 or July 1 and end on June 30 or December 31, or the next business day if such date is not a business day. Shares are purchased on the last day of the purchase period. As of July 1, 2022, approximately 2.3 million ordinary shares remain available for purchase under the 2017 ESPP. Note 10 – Earnings per Share The following table sets forth the computation of basic and diluted earnings per share and a reconciliation of the numerator and denominator used in the calculation: Three Months Ended Six Months Ended July 1, 2022 June 25, 2021 July 1, 2022 June 25, 2021 Numerator: Net income $ 21,537 $ 22,865 $ 29,576 $ 37,503 Denominator: Basic weighted average ordinary shares outstanding 28,665,930 28,180,821 28,629,280 28,092,535 Dilutive effect of options 148,160 601,871 215,582 550,059 Dilutive effect of RSUs 228,107 298,499 102,871 288,978 Dilutive effect of ESPP 322 11,330 322 11,330 Diluted weighted average ordinary shares outstanding 29,042,519 29,092,521 28,948,055 28,942,902 Securities excluded from the calculation of diluted weighted average ordinary shares outstanding (1) 721,000 185,000 915,000 185,000 Earnings per share: Net income: Basic $ 0.75 $ 0.81 $ 1.03 $ 1.33 Diluted $ 0.74 $ 0.79 $ 1.02 $ 1.30 (1) 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. 12 Note 11 – Segment Information Our Chief Operating Decision Maker, the Chief Executive Officer, reviews our results of operations on a consolidated level and executive staff is structured by function rather than by product category. Additionally, key resources, decisions, and assessment of performance are analyzed at a company‑wide level. Therefore, we operate in one operating segment. Foreign operations are conducted primarily through our wholly owned subsidiaries in Singapore and Malaysia, and to a lesser degree, Scotland, Korea, and Mexico. Our principal markets include North America, Asia, and to a lesser degree, Europe. Sales by geographic area represents sales to unaffiliated customers based upon the location to which the products were shipped. The following table sets forth sales by geographic area: Three Months Ended Six Months Ended July 1, 2022 June 25, 2021 July 1, 2022 June 25, 2021 United States of America $ 158,374 $ 137,747 $ 300,844 $ 276,881 Singapore 114,398 101,214 217,693 187,538 Europe 24,806 22,439 49,198 39,769 Other 31,982 20,908 54,971 42,686 Total net sales $ 329,560 $ 282,308 $ 622,706 $ 546,874 Foreign long-lived assets, exclusive of deferred tax assets, were $ 42.2 million and $ 38.4 million at July 1, 2022 and December 31, 2021, respectively . 13