What changed in this filing

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Item 9A. Controls and Procedures

2023-02-24 compared with 2022-02-28 · 95 added, 166 removed, 716 unchanged (27% of the section changed)

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Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2021.

Based on this evaluation, our certifying officers concluded that, because of the material weakness in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 30, 2022.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act).

With the participation of our Chief Executive Officer and Chief Financial Officer, our management, under the oversight of our Board of Directors, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2021 using the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013).

We completed our acquisition of IMG Companies, LLC, and its subsidiaries (“IMG”) on November 19, 2021.

We are continuing to integrate IMG into our internal control over financial reporting, and management’s evaluation of the effectiveness of our internal control over financial reporting excluded IMG.

IMG had total assets of approximately $293.0 million as of December 31, 2021, and included in the results of our operations for 2021 are net sales of $7.3 million from IMG.

Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2021 due to the material weaknesses in internal control over financial reporting, described below.

With the participation of our certifying officers, our management, under the oversight of our Board of Directors, evaluated the effectiveness of our internal control over financial reporting as of December 30, 2022, using the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013) .

Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of December 30, 2022 due to the material weakness in internal control over financial reporting, described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The identified material weaknesses related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change management over certain information technology systems (“IT”) systems that support our financial reporting processes.

The control deficiencies were a result of:

inadequate design of IT control processes that were lacking sufficient documentation such that successful operation of the ITGC’s were overly dependent upon knowledge and actions of certain individuals with IT expertise;

insufficient training of IT personnel on the requirements to maintain evidence of ITGC control processes and procedures;

and risk-assessment processes inadequate to identify and assess changes in IT environments that could impact internal control over financial reporting.

The identified material weakness related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change management over an information technology system (“IT System”) that supports our financial reporting process.

We did not have resources within the organization with sufficient levels of information technology knowledge and did not perform risk assessment surrounding the IT System to adequately understand how areas of user access and program change management function within the IT System in order to design and operate ITGCs sufficient to mitigate the identified risks.

Our automated and manual business process controls that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.

The material weaknesses did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results.

Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements included in this Annual Report on Form 10‑K, issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

The material weakness did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results.

KPMG LLP’s report appears on page F-3 of this Annual Report on Form 10‑K.

Management is taking steps to remediate the ITGC deficiencies and will continue to take measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively.

The remediation actions include:

designing and fully documenting ITGC processes and procedures specifically over user access and change management;

developing a training program addressing ITGCs, including educating control owners concerning the principles and requirements of each control, with a focus on maintaining evidence for user access and change-management over IT systems impacting financial reporting;

developing an IT compliance function that’s responsible for the development, training, and testing of the global ITGCs;

developing enhanced risk assessment procedures and controls related to changes in IT environments.

The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that the control objective is achieved and the controls are operating effectively.

We expect that the remediation of these material weaknesses will be completed prior to the end of fiscal year 2022.

Management is taking steps to remediate the ITGC deficiency and will continue to take measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively.

The remediation actions include enhancing the existing IT compliance function with resources that have the experience and skillset to understand relevant risks to the IT system in order to develop processes and controls to respond to these risks.

Remediation Efforts Towards Prior Year Material Weaknesses

As discussed in our Annual Report on Form 10‑K filed for the year ended December 31, 2021, management had identified material weaknesses related to ineffective ITGCs in the areas of user access and program change management over certain IT Systems that support our financial reporting processes.

During 2022, we made progress towards remediation of the material weaknesses identified in the prior year.

Specifically, management designed and documented ITGC processes and procedures over user access and change management controls and maintained evidence over the operation of these controls.

While we have made progress on remediation plans, we require additional time to complete the design and implementation of our remediation plans and to demonstrate the effectiveness of our remediation efforts regarding user access and program change management.

The weakness will not be considered remediated until the applicable controls operate for a sufficient period-of-time and management has concluded, through testing, that the control objective is achieved and are operating effectively.

We expect that the remediation of this material weakness will be completed prior to the end of fiscal 2023 .

Changes in Internal Control Over Financial Reporting

Other than the material weaknesses identified during the quarter, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) or 15d‑15(f) of the Exchange Act) that occurred during the fourth quarter of December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the material weakness identified during the quarter, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) or 15d‑15(f) of the Exchange Act) that occurred during the fourth quarter of December 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

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The information required by this item is incorporated by reference to our Proxy Statement for our 2023 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 30, 2022.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of excess and obsolete inventory

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company reported net inventories of $236.1 million as of December 31, 2021, including an adjustment for excess and obsolete inventory of $14.1 million.

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company reported inventories of $283.7 million as of December 30, 2022, including an adjustment for excess and obsolete inventory of $17.5 million.

The Company states its inventories at the lower of cost or net realizable value.

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The following are the primary procedures we performed to address the critical audit matter.

We evaluated the assumptions used to estimate future consumption by (1) examining historical write-down trends and (2) inspecting publicly available industry information to assess relevant changes to the overall business environment.

Additionally, to evaluate whether recent purchases and historical consumption indicates future consumption we selected a sample of products within inventory and for each sample selection we calculated the rate of consumption for current quantity on hand based on (i) historical consumption and (ii) backlog.

Fair value of certain acquired customer relationship intangible assets

As discussed in Note 2 to the consolidated financial statements, on November 19, 2021, the Company acquired IMG Companies, LLC (IMG) and accounted for the transaction as a business combination.

As a result of the transaction, the Company recorded intangible assets of $62.4 million for customer relationships associated with the generation of future income from IMG’s existing customers.

The estimated fair value of the customer relationship intangible assets was determined using a discounted cash flow model.

We identified the evaluation of the fair value of certain customer relationships acquired in the IMG transaction as a critical audit matter due to the high degree of subjectivity in evaluating discounted future cash flows used to determine the fair value.

Specifically, there was a high degree of auditor judgment required to evaluate the forecasted revenue attributable to customer relationships as changes in this assumption could have a significant impact on the fair value of the customer relationships.

The following are the primary procedures we performed to address the critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process including controls over the development of forecasted revenue attributable to customer relationships.

We evaluated the forecasted revenue assumptions attributable to customer relationships by comparing these assumptions to IMG’s historical results, industry publications, as well as the revenue growth rates of guideline peer companies.

In addition, we involved valuation professionals with specialized skills and knowledge who assisted in evaluating the relevance of the guideline peer companies based on financial and non-financial metrics.

We evaluated whether historical consumption and recent purchases reasonably indicate future consumption by (1) examining historical write-down trends;

(2) inspecting publicly available industry and market information to assess relevant changes to the overall business environment;

and (3) selected a sample of inventory items and for each selection we evaluated whether the historical data accurately supported the Company’s estimate of future consumption.

We have served as the Company’s auditor since 2011.

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and subsidiaries’ (the Company) internal control over financial reporting as of December 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 30, 2022 and December 31, 2021, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 30, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2023 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses relate to ineffective information technology general controls (ITGCs) in the areas of user access and program change-management over certain information technology systems that support the Company’s financial reporting processes which have been identified and included in management’s assessment.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

The Company acquired IMG Companies, LLC during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, IMG Companies, LLC’s internal control over financial reporting associated with total assets of $293 million and total revenues of $7.3 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of IMG Companies, LLC.

A material weakness related to ineffective information technology general controls (ITGCs) in the areas of user access and program change-management over a certain information technology (IT) system that supports the Company’s financial reporting processes has been identified and included in management’s assessment.

The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

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28,861,949 and 28,551,160 shares outstanding, respectively;

32,988,599 and 32,344,516 shares issued, respectively)

33,299,388 32,988,599 shares issued, respectively)

Additional paid in capital

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Interest expense, net

Other expense, net

Other expense (income), net

Income before income taxes

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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

Balance at December 25, 2020

Ordinary shares issued, net of transaction costs

Ordinary shares issued from exercise of stock options

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Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

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Amortization of debt issuance costs

Gain on sale of asset disposal group

(Gain) loss on sale of asset disposal group

Loss on extinguishment of debt

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Cash paid for acquisitions, net of cash acquired

Cash paid for intangible assets

Purchase of marketable securities

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Employees' taxes paid upon vesting of restricted share units

Repurchase of ordinary shares

Debt issuance and modification costs

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Repayments on term loan

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase (decrease) in cash

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

The years ended December 31, 2021, December 25, 2020, and December 27, 2019 were all 53 weeks, 52 weeks, and 52 weeks, respectively.

The years ended December 30, 2022, December 31, 2021, and December 25, 2020 were 52 weeks, 53 weeks, and 52 weeks, respectively.

All references to 2022, 2021, and 2020 are references to the fiscal years then ended.

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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, 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 inventory valuation, uncertain tax positions, fair value assigned to stock options granted, and impairment analyses for both definite‑lived intangible assets and goodwill .

Cash and Cash Equivalents and Marketable Securities

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

Although we had marketable securities outstanding during 2021, we had no marketable securities outstanding as of December 31, 2021 or December 25, 2020.

Available-for-sale investments are subject to a periodic impairment review.

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

We have no t recorded an allowance for credit losses in 2021.

We have no t recorded an allowance for credit losses in 2022 or 2021.

Revenue Recognition

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Financial instruments that subject us to credit risk consist of accounts receivable, accounts payable, and long-term debt.

At December 31, 2021 and December 25, 2020, two customers represented, in the aggregate, approximately 60 % and 73 %, respectively, of the balance of accounts receivable.

At December 30, 2022 and December 31, 2021, three and two customers represented, in the aggregate, approximately 70 % and 60 %, respectively, of the balance of accounts receivable.

We establish an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends, and other information.

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There were no changes to our valuation techniques during 2022.

We estimate the recorded value of our financial assets and liabilities approximates fair value at December 31, 2021 and December 25, 2020.

We estimate the recorded value of our financial assets and liabilities approximates fair value as of December 30, 2022 and December 31, 2021.

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

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

The majority of our inventory values are based upon standard 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.

The majority of our inventories are valued on a standard cost basis, which approximates actual costs on a first-in, first-out basis.

The remainder of our inventories are valued on an average cost basis, which approximates actual costs on a first-in, first-out basis.

Quarterly, we assess the value of our inventory and periodically write it down for excess quantities or obsolescence to its estimated net realizable value.

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

The estimate for future consumption 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 .

Property and Equipment

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Research and development costs are expensed as incurred.

Share-Based Payments

We use the Black-Scholes option-pricing model to value awards on the date of grant.

We use the simplified method to estimate the expected term of share-based awards for all periods as we do not have sufficient history to estimate the weighted average expected term.

The risk-free interest rate is based on the U.S.

Treasury rates in effect on the corresponding date of grant.

Estimated volatility is based on the historical volatility of ours and similar entities’ publicly traded shares.

We recognize deferred income taxes using the asset and liability method of accounting for income taxes.

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

Accounting Pronouncements Recently Adopted

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

Measurement of Credit Losses on Financial Instruments .

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

We adopted the standard on the first day of 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 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 provided by 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.

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 the adoption did not have a significant impact on our financial statements.

Accounting Pronouncements Recently Issued

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IMG provides us increased capacity and capabilities in our precision machining business and expands our served customer base with new component and service offerings.

The following table presents the preliminary purchase price allocation as of November 19, 2021.

As of December 31, 2021, total acquisition consideration remains preliminary, as we are still finalizing the working capital adjustment component of final purchase price under the merger agreement.

November 19, 2021

The following table presents the purchase price allocation.

Cash acquired

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Total acquisition consideration

We preliminarily allocated $ 62.4 million to IMG’s customer relationships and $ 2.6 million to IMG’s order backlog with weighted average amortization periods of 10 years and 6 months, respectively.

Preliminary goodwill recognized from the acquisition was primarily attributed to an assembled workforce and expected synergies.

We incurred transaction costs of approximately $ 4.4 million in connection with the acquisition during 2021.

The fair value adjustment to inventory as part of our preliminary purchase price allocation resulted in a $ 1.4 million charge to cost of sales during 2021.

We allocated $ 62.4 million to IMG’s customer relationships and $ 2.6 million to IMG’s order backlog with weighted average amortization periods of 10 years and 6 months, respectively.

Goodwill recognized from the acquisition was primarily attributed to an assembled workforce and expected synergies.

In connection with the acquisition, we incurred transaction costs of $ 0.2 million and $ 4.4 million in 2022 and 2021, respectively.

The fair value adjustment to inventory as part of our purchase price allocation resulted in charges to cost of sales of $ 2.5 million and $ 1.4 million during 2022 and 2021, respectively.

Total acquisition consideration reflects a $ 0.5 million reduction for a working capital adjustment that was finalized in 2022, prior to the end of the measurement period.

Our consolidated statement of operations for 2021 includes approximately 6 weeks operating activity of IMG, including sales of $ 7.3 million.

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Cloud Computing Implementation Costs

Pursuant to ASU 2018-15, we capitalize implementation costs associated with hosting arrangement that are service contracts.

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

Costs capitalized during the period

Capitalized costs amortized during the period

Capitalized cloud computing implementation costs as of December 31, 2021

The balance of capitalized cloud computing implementation costs, net of accumulated amortization, was $ 8.1 million and $ 11.6 million as of December 30, 2022 and December 31, 2021, respectively, and is included in other assets on our consolidated balance sheets.

The related amortization expense was $ 0.9 million and $ 0.3 million during 2022 and 2021, respectively, and is included in selling, general, and administrative expense on our consolidated statements of operations.

Note 5 – Intangible Assets and Goodwill

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Developed technology

Order backlog

Total intangible assets

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Developed technology

Order backlog

Total intangible assets

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

As of December 31, 2021, we had one operating leases executed for which the rental period had not yet commenced.

As of December 30, 2022, we had no operating leases executed for which the rental period had not yet commenced.

The components of lease expense are as follows:

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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.

Income before tax was as follows:

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Net operating loss carryforwards

Capitalized research expenses

Intercompany interest

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The state and foreign net operating loss carryforwards, if not utilized, will begin to expire in 2032, and 2029, respectively.

At December 31, 2021, we had federal and state research and development credits of $ 2.9 million and zero , respectively.

At December 30, 2022, we had federal research and development credits of $ 0.2 million.

The federal research and development credits, if not utilized, will begin to expire in 2042.

Additionally, we had foreign tax credits of $ 0.6 million, which if not utilized, will begin to expire in 2027.

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.

As of December 31, 2021, we believe it is more-likely-than-not that we will realize our U.S.

deferred tax assets, with the exception of certain state and foreign net operating loss carryforwards we believe are not likely to be realized within the carryforward period.

As of December 30, 2022, we believe it is more-likely-than-not that we will realize our deferred tax assets, with the exception of certain state and foreign net operating loss carryforwards we believe are not likely to be realized within the carryforward period.

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

The 2017 Tax Act included a number of changes including a provision that required capitalization and amortization of research and development costs beginning in 2022.

Prior to 2022 research and development costs could be either expensed or capitalized.

Accordingly, we began capitalizing research and development costs in 2022.

We were granted a tax holiday for our Singapore operations that is effective through 2026.

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

Interest and penalties associated with uncertain tax positions recognized during 2021 and 2020 were insignificant.

At December 30, 2022, other non-current liabilities on our balance sheet included approximately zero and $ 0.7 million of interest and penalties, respectively, associated with uncertain tax positions, which are excluded from the unrecognized tax benefits table below.

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Increase related to prior year tax positions

Decrease in tax positions related to lapse of statute of limitations and settlements

Decrease in tax positions related to lapse of statute of limitations

Balance at December 25, 2020

Increase related to current year tax positions

Increase related to prior year tax positions

Decrease in tax positions related to lapse of statute of limitations

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Maturities of long-term debt consist of the following:

maturities of

long-term debt

The weighted average interest rate across our credit facilities was 3.37 %, 2.74 %, and 3.75 % during 2022, 2021, and 2020, respectively.

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 (“credit facilities”).

We incurred debt issuance costs of approximately $ 1.9 million in connection with the amendment and restatement.

We account for 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.

Under the debt modification literature codified in ASC 470, a portion of the amendment and restatement was treated as an extinguishment.

Accordingly, $ 0.7 million of existing capitalized debt issuance costs were written off as a loss on extinguishment of debt, which is included in other expense (income), net on our statements of operations.

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

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

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We are required to maintain a minimum fixed charge coverage ratio of 1.25 :

1 and a maximum leverage ratio 3.50 :

1 to 4.00 :1.

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.

1 and a maximum leverage ratio of 3.50 :

Interest is charged at either the Base Rate or the Bloomberg Short-Term Bank Yield Index (“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.

The BSBY Rate is equal to BSBY for a particular tenor matching the respective interest period.

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 , which is based on trailing 12‑month EBITDA, as defined in our credit agreement .

We are also charged a commitment fee of 0.175 %- 0.350 %, depending on our leverage ratio, on the unused portion of our revolving credit facility.

Base Rate interest payments and commitment fees are due quarterly .

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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

In February 2018, our Board of Directors authorized a share repurchase program up to $ 50.0 million under which we may repurchase our ordinary shares in the open market or through privately negotiated transactions, depending on market conditions and other factors.

Ordinary shares repurchased are recorded as treasury shares using the cost method on a first-in, first-out basis.

In August 2018, our Board of Directors authorized a $ 50.0 million increase to the share repurchase program.

The following tables details our share repurchases for the periods indicated:

Total Number of Shares Repurchased

Total Cost of Repurchase

Average Price Paid per Share

Amount Available Under Repurchase Program

Amount available at December 28, 2018

Quarter ended March 29, 2019

Quarter ended June 28, 2019

Quarter ended September 27, 2019

Quarter ended December 27, 2019

Year ended December 27, 2019

Note 11 – Share-Based Compensation

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The number of shares reserved for issuance under the 2016 Plan increases annually beginning in fiscal year 2018 by the lesser of (i) 2 % of the ordinary shares outstanding on the last day of the immediately preceding fiscal year or (ii) such amount determined by our Board of Directors.

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 .

Awards may be in the form of share call options (“options”), restricted share units (“RSUs”), and other share‑based awards .

Forfeited or expired awards are returned to the incentive plan pool for future grants.

Options granted under the 2016 Plan generally have a term of 7 years.

Vesting of options and RSUs generally occurs 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.

In March 2012, we adopted the Ichor Holdings Ltd.

2012 Equity Incentive Plan (the “2012 Plan”).

Under the 2012 Plan, we could grant either restricted shares, RSUs, or options to employees, directors, and consultants.

Options granted under the 2012 Plan generally had a term of 7 years.

Vesting of options and RSUs generally occurred 25 % on the first anniversary of the date of grant and quarterly thereafter over the remaining 3 years.

There have been no issuances of equity-based awards under the 2012 Plan since the adoption of the 2016 Plan.

Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 13.9 million, $ 11.5 million, and $ 9.9 million during 2022, 2021, and 2020, 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 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.

Stock Options

Options are valued based on the Black-Scholes-Merton model on the date of grant.

The risk-free interest rate is based on the U.S.

Treasury rates in effect on the date of grant.

Estimated volatility is based on the historical volatility of our ordinary shares.

Options generally vest over 4 years, with 25 % vesting on the first grant-date anniversary and the remaining vesting on a quarterly basis over the remaining 3 years .

Options granted under the 2016 Plan have a contractual term of 7 years.

The table below sets forth the weighted average assumptions used to measure the fair value of options granted:

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Restricted Share Units

RSUs are valued based on the closing market price of our ordinary shares on the date of grant.

RSUs that vest pursuant to a service condition generally vest over 4 years, with 25 % vesting on the first grant-date anniversary and the remaining vesting on a quarterly basis over the remaining 3 years.

RSUs that vest pursuant to a performance condition are generally earned over 3 years, depending on the achievement of certain financial and non-financial targets, and vest on or around the third grant-date anniversary.

RSUs that vest pursuant to a market condition are valued based on a Monte Carlo simulation model and generally earned over 3 years based on a relative total shareholder return model and vest on or around the third grant-date anniversary.

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 ne ver issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows.

The following table summarizes RSU activity:

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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.

Key resources, decisions, and assessment of performance are also analyzed on a company‑wide level.

Foreign operations are conducted primarily through our wholly owned subsidiaries in Singapore and Malaysia.

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 represent sales to unaffiliated customers.

All information on sales by geographic area is based upon the location to which the products were shipped.

The following table sets forth sales by geographic area:

The following table sets forth sales by geographic area, which represents sales to unaffiliated customers based upon the location to which the products were shipped :

United States of America

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Miller (solely in his capacity as the Equityholders’ Representative thereunder) (Incorporated by reference to Exhibit 10.1 to Ichor Holdings, Ltd.’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on November 16, 2021).

Amended and Restated Memorandum and Articles of Association of Ichor Holdings, Ltd., effective as of December 9, 2016 (Incorporated by reference to Exhibit 3.1 to Ichor Holdings, Ltd.’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on December 14, 2016).

Amended and Restated Memorandum and Articles of Association of Ichor Holdings, Ltd., effective as of May 24, 2022.

Description of Securities of Ichor Holdings, Ltd.

Amended and Restated Credit Agreement, dated as of October 29, 2021, by and among Icicle Acquisition Holding B.V., Ichor Holdings, LLC, and Ichor Systems, Inc.

as borrowers, Bank of America, N.A., as administrative agent, and the financial institutions party thereto, as lenders.

as borrowers, Bank of America, N.A., as administrative agent, and the financial institutions party thereto, as lenders (Incorporated by reference to Exhibit 10.1 to Ichor Holdings, Ltd.’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on February 28, 2022).

Ichor Holdings, Ltd.

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Letter Agreement, dated December 23, 2021 between Ichor Systems, Inc.

and Thomas Rohrs.

and Thomas Rohrs (Incorporated by reference to Exhibit 10.11 to Ichor Holdings, Ltd.’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on February 28, 2022).

Offer letter, dated November 15, 2022, between Ichor Systems, Inc.

and Bruce Ragsdale (Incorporated by reference to Exhibit 10.1 to Ichor Holdings, Ltd.’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on November 28, 2022).

List of subsidiaries

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Filed herewith

Furnished herewith

A management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S‑K

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February 24, 2023

/s/ Jorge Titinger

February 24, 2023

Jorge Titinger

/s/ Yuval Wasserman

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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-K

Item 9A. Controls and Procedures