ICHOR HOLDINGS, LTD. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (the certifying officers), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of December 29, 2023. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on this evaluation, our certifying officers concluded that our disclosure controls and procedures were effective as of December 29, 2023. 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 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 29, 2023, using the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Our internal control over financial reporting is designed to provide reasonable assurance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of the financial statements in accordance with GAAP and that our receipts and expenditures are being made in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 29, 2023. Remediation of Prior Years' Material Weaknesses As disclosed in Item 9A. – Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, we identified a material weakness related to 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. As of December 29, 2023, management has completed the implementation of our remediation efforts of the material weakness described above. During the fiscal year ended December 29, 2023, we implemented our material weakness remediation plan that included: (i) modification of business and IT user roles to restrict system change access for key setup and configurations related to the operation of automated system controls; (ii) implementation of a technology tool to approve, monitor and review changes by business users to certain setup and maintenance activities which can have a material impact on the operation of automated system controls; and (iii) enhanced our internal control function with additional resources and developed and provided training for control owners and operators including the principles and requirements of the control activities. 48 Table of Contents During the fourth quarter of 2023, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective. As a result we have concluded the material weakness has been remediated as of December 29, 2023. Our independent registered public accounting firm, KPMG, LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included in Item 8. - Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting Other than the changes in connection with our implementation of the material weakness remediation plan discussed above, 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 29, 2023 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 A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. If we cannot provide reliable financial information, our business, operating results, and share price could be negatively impacted. ITEM 9B. OTHER INFORMATION During the fourth quarter of 2023, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (each as defined in Item 408 of Regulation S-K). ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference to our Proxy Statement for our 2024 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 29, 2023. Code of Conduct We have adopted a code of business ethics and conduct (the “Code of Conduct”) that applies to all employees, officers, and directors, including the principal executive officer, principal financial officer, and principal accounting officer. The Code of Conduct is available on our investor relations website at ir.ichorsystems.com . We intend to post on our investor relations website all disclosures that are required by law or NASDAQ listing rules regarding any amendment to, or a waiver of, any provision of the Code of Conduct for the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to our Proxy Statement for our 2024 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 29, 2023. 49 Table of Contents ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to our Proxy Statement for our 2024 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 29, 2023. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to our Proxy Statement for our 2024 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 29, 2023. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated by reference to our Proxy Statement for our 2024 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 29, 2023. PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of this report: (1) Financial Statements. The following Consolidated Financial Statements are filed as part of this report under Item 8. – Financial Statements and Supplementary Data . Reports of Independent Registered Public Accounting Firm ( KPMG LLP , Portland, Oregon , PCAOB ID: 185 ) F- 1 Consolidated Balance Sheets F‑ 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Shareholders’ Equity F‑ 6 Consolidated Statements of Cash Flows F‑ 7 Notes to Consolidated Financial Statements F‑ 8 (2) Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto. (3) Exhibits. Exhibits are listed on the Exhibit Index at the end of this report. ITEM 16. FORM 10-K SUMMARY Not applicable. 50 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Ichor Holdings, Ltd.: Opinion on Internal Control over Financial Reporting We have audited Ichor Holdings, Ltd. and subsidiaries' (the Company) internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2023, 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 29, 2023 and December 30, 2022, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 23, 2024 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Portland, Oregon February 23, 2024 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Ichor Holdings, Ltd.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Ichor Holdings, Ltd. and subsidiaries (the Company) as of December 29, 2023 and December 30, 2022, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 29, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. F-2 Table of Contents Evaluation of excess and obsolete inventory As discussed in Notes 1 and 3 to the consolidated financial statements, the Company reported inventories of $245.9 million as of December 29, 2023, including an adjustment for excess and obsolete inventory of $28.4 million. The Company states its inventories at the lower of cost or net realizable value. The Company records an adjustment to the cost basis of inventory when evidence exists that the net realizable value of inventory is lower than its cost, which occurs when the Company has excess and/or obsolete inventory. The Company’s model to estimate excess and/or obsolete inventory is based on an analysis of existing inventory quantities on-hand compared to estimated future consumption. Future consumption is estimated based upon assumptions about how historical consumption, recent purchases, backlog and other factors indicate future consumption. We identified the evaluation of excess and obsolete inventory as a critical audit matter. There was subjective auditor judgement in evaluating whether historical consumption reasonably indicates future consumption used by the Company in their determination that inventory is recorded at the lower of its cost or net realizable value. The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s excess and obsolete inventory process, including the determination of the assumptions used to predict future consumption of inventory. We evaluated whether historical consumption reasonably indicates 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. /s/ KPMG LLP We have served as the Company's auditor since 2011. Portland, Oregon February 23, 2024 F-3 Table of Contents ICHOR HOLDINGS, LTD. Consolidated Balance Sheets (dollars in thousands, except per share data) December 29, 2023 December 30, 2022 Assets Current assets: Cash and cash equivalents $ 79,955 $ 86,470 Accounts receivable, net 66,721 136,321 Inventories 245,885 283,660 Prepaid expenses and other current assets 8,804 7,007 Total current assets 401,365 513,458 Property and equipment, net 92,755 98,055 Operating lease right-of-use assets 36,611 40,557 Other noncurrent assets 11,912 12,926 Deferred tax assets, net 3,148 11,322 Intangible assets, net 57,288 72,022 Goodwill 335,402 335,402 Total assets $ 938,481 $ 1,083,742 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 60,490 $ 110,165 Accrued liabilities 14,871 23,616 Other current liabilities 6,638 15,815 Current portion of long-term debt 7,500 7,500 Current portion of lease liabilities 9,463 9,196 Total current liabilities 98,962 166,292 Long-term debt, less current portion, net 241,183 293,218 Lease liabilities, less current portion 28,187 31,828 Deferred tax liabilities, net 1,169 29 Other non-current liabilities 4,303 4,879 Total liabilities 373,804 496,246 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; 29,435,398 and 28,861,949 shares outstanding, respectively; 33,872,837 and 33,299,388 shares issued, respectively) 3 3 Additional paid in capital 451,581 431,415 Treasury shares at cost ( 4,437,439 shares) ( 91,578 ) ( 91,578 ) Retained earnings 204,671 247,656 Total shareholders’ equity 564,677 587,496 Total liabilities and shareholders’ equity $ 938,481 $ 1,083,742 See accompanying notes to consolidated financial statements. F-4 Table of Contents ICHOR HOLDINGS, LTD. Consolidated Statements of Operations (dollars in thousands, except per share data) Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Net sales $ 811,120 $ 1,280,069 $ 1,096,917 Cost of sales 707,724 1,068,205 919,437 Gross profit 103,396 211,864 177,480 Operating expenses: Research and development 20,223 19,564 15,691 Selling, general, and administrative 79,334 88,572 65,857 Amortization of intangible assets 14,734 17,905 14,918 Total operating expenses 114,291 126,041 96,466 Operating income (loss) ( 10,895 ) 85,823 81,014 Interest expense, net 19,379 11,056 6,451 Other expense (income), net 804 ( 563 ) 807 Income (loss) before income taxes ( 31,078 ) 75,330 73,756 Income tax expense 11,907 2,526 2,857 Net income (loss) $ ( 42,985 ) $ 72,804 $ 70,899 Net income (loss) per share Basic $ ( 1.47 ) $ 2.54 $ 2.51 Diluted $ ( 1.47 ) $ 2.51 $ 2.45 Shares used to compute Net income (loss) per share: Basic 29,200,796 28,714,550 28,259,607 Diluted 29,200,796 28,963,031 28,979,352 See accompanying notes to consolidated financial statements. F-5 Table of Contents ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (dollars in thousands) Ordinary Shares Additional Paid-In Capital Treasury Shares Retained Earnings Total Shareholders' Equity Shares Amount Shares Amount 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 410,558 — 8,288 — — — 8,288 Ordinary shares issued from vesting of restricted share units 164,613 — ( 3,616 ) — — — ( 3,616 ) Ordinary shares issued from employee share purchase plan 68,912 — 1,982 — — — 1,982 Share-based compensation expense — — 11,473 — — — 11,473 Net income — — — — — 70,899 70,899 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 89,045 — 1,937 — — — 1,937 Ordinary shares issued from vesting of restricted share units 179,679 — ( 2,813 ) — — — ( 2,813 ) Ordinary shares issued from employee share purchase plan 42,065 — 929 — — — 929 Share-based compensation expense — — 13,924 — — — 13,924 Net income — — — — — 72,804 72,804 Balance at December 30, 2022 28,861,949 3 431,415 4,437,439 ( 91,578 ) 247,656 587,496 Ordinary shares issued from exercise of stock options 215,884 — 4,467 — — — 4,467 Ordinary shares issued from vesting of restricted share units 259,944 — ( 3,672 ) — — — ( 3,672 ) Ordinary shares issued from employee share purchase plan 97,621 — 2,033 — — — 2,033 Share-based compensation expense — — 17,338 — — — 17,338 Net loss — — — — ( 42,985 ) ( 42,985 ) Balance at December 29, 2023 29,435,398 $ 3 $ 451,581 4,437,439 $ ( 91,578 ) $ 204,671 $ 564,677 See accompanying notes to consolidated financial statements. F-6 Table of Contents ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Cash flows from operating activities: Net income (loss) $ ( 42,985 ) $ 72,804 $ 70,899 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 34,577 35,100 25,992 Share-based compensation 17,338 13,924 11,473 Deferred income taxes 9,314 ( 3,215 ) ( 1,863 ) Amortization of debt issuance costs 465 465 883 Loss on extinguishment of debt — — 737 Gain on sale of asset disposal group — — ( 504 ) Other — — 484 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net 69,600 6,669 ( 33,454 ) Inventories 37,775 ( 47,527 ) ( 89,249 ) Prepaid expenses and other assets 10,204 4,508 786 Accounts payable ( 50,974 ) ( 50,175 ) 38,649 Accrued liabilities ( 9,766 ) 3,648 ( 6,740 ) Other liabilities ( 17,916 ) ( 4,748 ) ( 2,821 ) Net cash provided by operating activities 57,632 31,453 15,272 Cash flows from investing activities: Capital expenditures ( 15,496 ) ( 29,433 ) ( 20,839 ) Cash paid for acquisitions, net of cash acquired — 500 ( 268,766 ) Purchase of marketable securities — — ( 115,197 ) Proceeds from maturities and sales of marketable securities — — 114,713 Proceeds from sale of property and equipment — — 504 Net cash used in investing activities ( 15,496 ) ( 28,933 ) ( 289,585 ) Cash flows from financing activities: Issuance of ordinary shares under share-based compensation plans 7,521 3,768 9,664 Employees' taxes paid upon vesting of restricted share units ( 3,672 ) ( 2,813 ) ( 3,616 ) Debt issuance and modification costs — — ( 1,852 ) Borrowings on revolving credit facility — 25,000 137,591 Repayments on revolving credit facility ( 45,000 ) ( 10,000 ) ( 41,753 ) Proceeds from term loan — — 94,175 Repayments on term loan ( 7,500 ) ( 7,500 ) ( 97,300 ) Net cash provided by (used in) financing activities ( 48,651 ) 8,455 96,909 Net increase (decrease) in cash ( 6,515 ) 10,975 ( 177,404 ) Cash at beginning of period 86,470 75,495 252,899 Cash at end of period $ 79,955 $ 86,470 $ 75,495 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 20,368 $ 10,590 $ 7,123 Cash paid during the period for taxes, net of refunds $ 3,877 $ 3,285 $ 5,642 Supplemental disclosures of non-cash activities: Capital expenditures included in accounts payable $ 625 $ 1,543 $ 930 Right-of-use assets obtained in exchange for new operating lease liabilities, including those acquired through acquisitions $ 4,789 $ 17,889 $ 24,643 See accompanying notes to consolidated financial statements. F-7 Table of Contents ICHOR HOLDINGS, LTD. Notes to Consolidated Financial Statements (dollar figures in tables in thousands, except per share data) Note 1 – Organization and Summary of Significant Accounting Policies Organization and Operations of the Company Ichor Holdings, Ltd. and Subsidiaries (the “we”, “us”, “our”, “Company”) designs, develops, manufactures, and distributes gas and liquid delivery subsystems and components purchased by capital equipment manufacturers for use in the semiconductor markets. We also provide precision-machined components, weldments, electron beam (“e‑beam”) and laser-welded components, precision vacuum and hydrogen brazing, and surface treatment technologies, and other proprietary products. We are headquartered in Fremont, California and have operations in the United States, the United Kingdom, Singapore, Malaysia, Korea, and Mexico. On December 30, 2011, Ichor Systems Holdings, LLC consummated a sales transaction with Icicle Acquisition Holdings, LLC, a Delaware limited liability company. Shortly after consummation of the sale transaction, Icicle Acquisition Holdings, LLC changed its name to Ichor Holdings, LLC. In March 2012, Ichor Holdings, LLC completed a reorganization of its legal structure, forming Ichor Holdings, Ltd., a Cayman Islands entity. Ichor Holdings, Ltd. is now the reporting entity and the ultimate parent company of the operating entities. Basis of Presentation These consolidated 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. Year End We use a 52‑ or 53‑week fiscal year ending on the last Friday in December. The years ended December 29, 2023, December 30, 2022, and December 31, 2021 were 52 weeks, 52 weeks, and 53 weeks, respectively. All references to 2023, 2022, and 2021 are references to the fiscal years then ended. 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, uncertain tax positions, including valuation allowance on deferred tax assets, and impairment analyses for both definite‑lived intangible assets and goodwill. Cash and Cash Equivalents and Marketable Securities 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. F-8 Table of Contents 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 not recorded an allowance for credit losses in 2023, 2022, or 2021. 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. 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 12 months. Product sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, 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 to 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. Commitments and Contingencies We are periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. The ultimate resolution of these actions is not expected to have a material adverse effect on our financial position or results of operations. Concentrations Financial instruments that subject us to concentration risk consist of accounts receivable, accounts payable, and long-term debt. At December 29, 2023 and December 30, 2022, three customers represented, in the aggregate, approximately 63 % and 70 %, 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. We require collateral, typically cash, in the normal course of business if customers do not meet the criteria established for offering credit. If the financial condition of our customers were to deteriorate and result in an impaired ability to make payments, additions to the allowance may be required. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded to income when received. Activity and balances related to our allowance for doubtful accounts was not significant during any period presented. We use qualified manufacturers to supply many components and subassemblies of our products. We obtain the majority of our components from a limited group of suppliers. A majority of the purchased components used in our products are customer specified. An interruption in the supply of a particular component would have a temporary adverse impact on our operating results. F-9 Table of Contents We maintain cash balances at global systematically important banks ("G-SIBs") in both United States and internationally. Cash balances in the United States exceed amounts that are insured by the Federal Deposit Insurance Corporation ("FDIC"). The majority of the cash maintained in foreign-based commercial banks is insured by the government where the foreign banking institutions are based. Cash held in foreign-based commercial banks totaled $ 59.7 million and $ 48.4 million at December 29, 2023 and December 30, 2022, respectively, and at times exceeds insured amounts. No losses have been incurred as of December 29, 2023 or December 30, 2022 for amounts exceeding the insured limits. Fair Value Measurements We estimate the fair value of financial assets and liabilities based upon comparison of such assets and liabilities to the current market values for instruments of a similar nature and degree of risk. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: ▪ Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date ▪ Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability ▪ Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date There were no changes to our valuation techniques during 2023. We estimate the recorded value of our financial assets and liabilities approximates fair value as of December 29, 2023 and December 30, 2022. We estimate the value of acquired intangible assets, on a nonrecurring basis, based on an income approach utilizing discounted cash flows. Under this approach, we estimate the future cash flows from our asset groups and discount the income stream to its present value to arrive at fair value. Future cash flows are based on recently prepared operating forecasts. Operating forecasts and cash flows include, among other things, revenue growth rates that are calculated based on management’s forecasted sales projections. A discount rate is utilized to convert the forecasted cash flows to their present value equivalent. The discount rate applied to the future cash flows includes a subject-company risk premium, an equity market risk premium, a beta, and a risk-free rate. As this approach contains unobservable inputs, the measurement of fair value for intangible assets is classified as Level 3. Inventories Inventories are stated at the lower of cost or net realizable value. 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. F-10 Table of Contents Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives: Estimated useful lives of property & equipment Machinery 5 - 10 years Leasehold improvements 10 years Computer software, hardware, and equipment 3 - 5 years Office furniture, fixtures, and equipment 5 - 7 years Vehicles 5 years Maintenance and repairs that neither add material value to the asset nor appreciably prolong its useful life are charged to expense as incurred. Gains or losses on the disposal of property and equipment are included in selling, general, and administrative expenses on the consolidated statements of operations. Leases We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement. If we determine the arrangement is a lease, or contains a lease, at lease inception, we then determine whether the lease is an operating lease or a finance lease. Operating and finance leases result in recording a right-of-use (“ROU”) asset and lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. 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. This rate is generally consistent with the interest rate we pay on borrowings under our credit facilities, as this rate approximates our collateralized borrowing capabilities over a similar term of lease payments. We utilize the consolidated group incremental borrowing rate for all leases, as we have centralized treasury operations. We have elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. We have elected not to separate lease and non-lease components for any class of underlying asset. Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset (or asset group) may not be recoverable. In analyzing potential impairments, projections of future cash flows from the asset group are used to estimate fair value. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset group, a loss is recognized for the difference between the estimated fair value and the carrying value of the asset group. The projections are based on assumptions, judgments, and estimates of revenue growth rates for the related business; anticipated future economic, regulatory, and political conditions; the assignment of discount rates relative to risk; and estimates of terminal values. During 2023, 2022, and 2021, we did not identify any triggering events that would indicate impairment. F-11 Table of Contents Intangible Assets We account for intangible assets that have a definite life and are amortized on a basis consistent with their expected cash flows over the following estimated useful lives: Estimated useful lives of intangible assets Customer relationships 6 - 10 years Developed technology 10 years Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying a quantitative goodwill impairment test. Under the quantitative test, the fair value of the reporting unit is compared to its carrying value and an impairment loss is recognized for any excess of carrying amount over the reporting unit’s fair value. Fair value of the reporting unit is determined using a discounted cash flow analysis. For purposes of testing goodwill for impairment, we have concluded that we operate as one reporting unit. We performed a qualitative goodwill assessment at December 29, 2023 and December 30, 2022. This assessment indicated that it was more likely than not our reporting unit’s fair value exceeded its carrying value. Research and Development Costs Research and development costs are expensed as incurred. Income Taxes We recognize deferred income taxes using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 % likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in our consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. We recognize interest and penalties as a component of income tax expense. F-12 Table of Contents Foreign Operations The functional currency of our international operations is the U.S. dollar. Transactions denominated in currencies other than the functional currency generate foreign exchange gains and losses that are included in other expense (income), net on our consolidated statements of operations. Substantially all of our sales contracts, and most of our agreements with third-party suppliers, provide for pricing and payment in U.S. dollars. Accordingly, these transactions are not subject to material exchange rate fluctuations. Accounting Pronouncements Recently Issued In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. We are currently evaluating the effect that the adoption of this ASU may have on our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) . The ASU is intended to enhance the transparency, decision usefulness, and effectiveness of income tax disclosures. The ASU requires a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. The ASU also requires a public entity to provide a qualitative description of the states and local income tax category and the net amount of income taxes paid, disaggregated by federal, state, and foreign taxes as well as by individual jurisdictions. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. We are currently evaluating the effect that the adoption of this ASU may have on our consolidated financial statements. Note 2 – Acquisitions IMG Companies, LLC On November 19, 2021 we completed the acquisition, via merger, of IMG Companies, LLC and its subsidiaries (“IMG”), a California-based precision machining, specialty joining, and plating company for an aggregate purchase price of $ 269.5 million. 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 purchase price allocation. Cash acquired $ 1,234 Accounts receivable 8,559 Inventories 12,128 Prepaid expenses and other current assets 579 Property and equipment 33,067 Operating lease right-of-use assets 14,509 Intangible assets 65,000 Goodwill 160,515 Accounts payable ( 3,853 ) Accrued expenses ( 5,620 ) Other current liabilities ( 2,109 ) Lease liabilities ( 14,509 ) Total acquisition consideration $ 269,500 F-13 Table of Contents 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 of operating activity of IMG, including sales of $ 7.3 million. The following table is the unaudited pro forma consolidated results of operations. Pro forma adjustments are primarily comprised of preliminary estimates of amortization expense related to acquired intangible assets, incremental interest expense from increased borrowings to fund the acquisition and the elimination of IMG’s historical interest expense, elimination of IMG’s non-recurring management expenses, elimination of a gain on forgiveness of debt, acquired inventory fair value charges, the related income tax effects, and other insignificant management adjustments. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved or of results that may occur in the future. Year Ended December 31, 2021 Net sales $ 1,156,619 Net income $ 74,531 Net income per share: Basic $ 2.64 Diluted $ 2.57 Note 3 – Inventories Inventories consist of the following: December 29, 2023 December 30, 2022 Raw materials $ 190,027 $ 197,726 Work in process 36,849 56,291 Finished goods 47,449 47,186 Excess and obsolete adjustment ( 28,440 ) ( 17,543 ) Total inventories $ 245,885 $ 283,660 F-14 Table of Contents The following table presents changes to our excess and obsolete adjustment: Excess and obsolete adjustment Balance at December 25, 2020 $ ( 12,742 ) Charge to cost of sales ( 1,942 ) Disposition of inventory 633 Balance at December 31, 2021 ( 14,051 ) Charge to cost of sales ( 4,981 ) Disposition of inventory 1,489 Balance at December 30, 2022 ( 17,543 ) Charge to cost of sales ( 9,784 ) Disposition of inventory ( 1,113 ) Balance at December 29, 2023 $ ( 28,440 ) Note 4 – Property and Equipment Property and equipment consist of the following: December 29, 2023 December 30, 2022 Machinery $ 113,529 $ 90,507 Leasehold improvements 46,129 43,129 Computer software, hardware, and equipment 10,316 9,664 Office furniture, fixtures, and equipment 1,320 1,337 Vehicles 396 401 Construction-in-process 4,216 19,869 175,906 164,907 Less accumulated depreciation ( 83,151 ) ( 66,852 ) Total property and equipment, net $ 92,755 $ 98,055 Depreciation expense for 2023, 2022, and 2021 was $ 18.8 million, $ 17.2 million, and $ 11.1 million, respectively. 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 balance of capitalized cloud computing implementation costs, net of accumulated amortization, was $ 8.1 million and $ 8.1 million as of December 29, 2023 and December 30, 2022, respectively, and is included in other assets on our consolidated balance sheets. The related amortization expense was $ 1.1 million, $ 0.9 million, and $ 0.3 million during 2023, 2022, and 2021, respectively, and is included in selling, general, and administrative expense on our consolidated statements of operations. F-15 Table of Contents Note 5 – Intangible Assets and Goodwill Definite-lived intangible assets consist of the following: December 29, 2023 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Customer relationships $ 105,542 $ ( 53,680 ) $ — $ 51,862 8.7 years Developed technology 11,047 ( 5,621 ) — 5,426 10.0 years Total intangible assets $ 116,589 $ ( 59,301 ) $ — $ 57,288 December 30, 2022 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Customer relationships $ 117,022 $ ( 51,337 ) $ — $ 65,685 8.4 years Developed technology 11,047 ( 4,710 ) — 6,337 10.0 years Total intangible assets $ 128,069 $ ( 56,047 ) $ — $ 72,022 Future projected annual amortization expense consists of the following: Future amortization expense 2024 $ 8,574 2025 8,312 2026 7,729 2027 7,288 2028 7,055 Thereafter 18,330 $ 57,288 The following tables present the changes to goodwill: Goodwill Balance at December 25, 2020 $ 174,887 Acquisitions 161,015 Balance at December 31, 2021 335,902 Acquisitions ( 500 ) Balance at December 30, 2022 335,402 Acquisitions — Balance at December 29, 2023 $ 335,402 Note 6 – Leases 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 December 29, 2023, we had no operating leases executed for which the rental period had not yet commenced. F-16 Table of Contents The components of lease expense are as follows: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Operating lease cost $ 9,656 $ 8,760 $ 5,763 Supplemental cash flow information related to leases is as follows: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 9,494 $ 8,164 $ 5,477 Supplemental balance sheet information related to leases is as follows: December 29, 2023 December 30, 2022 Weighted-average remaining lease term of operating leases 4.6 years 5.3 years Weighted-average discount rate of operating leases 3.4 % 3.0 % Future minimum lease payments under non-cancellable leases as of December 29, 2023 are as follows: 2024 $ 9,463 2025 9,003 2026 8,572 2027 7,595 2028 3,166 Thereafter 2,955 Total future minimum lease payments 40,754 Less imputed interest ( 3,104 ) Total lease liabilities $ 37,650 Note 7 – Income Taxes Income (loss) before tax was as follows: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 United States $ ( 69,040 ) $ ( 353 ) $ 13,435 Foreign 37,962 75,683 60,321 Income (loss) before tax $ ( 31,078 ) $ 75,330 $ 73,756 F-17 Table of Contents Significant components of income tax expense (benefit) consist of the following: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Current: Federal $ ( 56 ) $ 1,605 $ 430 State 16 912 1,524 Foreign 2,633 3,224 2,766 Total current tax expense 2,593 5,741 4,720 Deferred: Federal 8,471 ( 2,604 ) ( 889 ) State 1,529 ( 45 ) ( 771 ) Foreign ( 686 ) ( 566 ) ( 203 ) Total deferred tax expense (benefit) 9,314 ( 3,215 ) ( 1,863 ) Income tax expense $ 11,907 $ 2,526 $ 2,857 The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense (benefit) consist of the following: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Effective rate reconciliation: U.S. federal tax expense $ ( 6,527 ) $ 15,819 $ 15,489 State income taxes, net ( 1,713 ) 752 577 Permanent items 928 248 680 Foreign rate differential ( 1,190 ) ( 2,595 ) ( 1,897 ) Tax holiday ( 4,962 ) ( 11,676 ) ( 9,653 ) Credits ( 1,661 ) ( 1,882 ) ( 1,647 ) Tax contingencies ( 331 ) 462 482 Share-based compensation ( 122 ) 166 ( 2,640 ) Withholding tax 717 1,170 1,044 Other, net ( 763 ) 112 385 Valuation allowance 27,531 ( 50 ) 37 Income tax expense $ 11,907 $ 2,526 $ 2,857 F-18 Table of Contents Deferred income tax assets and liabilities consist of the following: December 29, 2023 December 30, 2022 Deferred tax assets: Inventory $ 7,962 $ 6,648 Share-based compensation 3,563 3,027 Accrued payroll 1,306 1,942 Net operating loss carryforwards 8,092 528 Tax credits 4,987 2,525 Interest carryforwards 4,099 — Capitalized research expenses 7,096 3,746 Intercompany interest 2,758 2,341 Operating lease liabilities 9,379 10,247 Other assets 663 1,531 Deferred tax assets 49,905 32,535 Valuation allowance ( 28,038 ) ( 507 ) Total deferred tax assets 21,867 32,028 Deferred tax liabilities: Intangible assets ( 3,631 ) ( 3,245 ) Property, plant and equipment ( 6,743 ) ( 7,091 ) Operating lease right-of-use assets ( 9,149 ) ( 10,122 ) Other liabilities ( 365 ) ( 277 ) Total deferred tax liabilities ( 19,888 ) ( 20,735 ) Net deferred tax asset $ 1,979 $ 11,293 At December 29, 2023, we had federal and state net operating loss carryforwards of $ 31.1 million, $ 25.1 million, respectively. The federal net operating losses may be carried forward indefinitely to offset up to 80% of taxable income in any given year. The state net operating loss carryforwards, if not utilized, will begin to expire in 2032. At December 29, 2023, we had federal research and development credits of $ 1.7 million, which, if not utilized, will begin to expire in 2028. At December 29, 2023, we had foreign tax credits of $ 1.3 million, which, if not utilized, will begin to expire in 2032. Income tax expense for the current year differs from the statutory rate primarily as a result of the valuation allowance, impact of foreign operations and discrete tax benefits recorded in connection with our historical acquisitions and stock option exercises. We have determined the amount of our valuation allowance of $ 11.1 million 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 29, 2023, we determined it is not more-likely-than-not that our U.S. entities will generate sufficient taxable income to offset reversing deductible timing differences and to fully utilize carryforward tax attributes. Accordingly, we have recorded a valuation allowance against U.S. federal and state deferred tax assets, net of deferred tax liabilities related to indefinite-lived intangible assets for which no future realization can be expected. 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. Beginning with the 2022 tax year, the research and development costs have been capitalized according to these provisions. We were granted a tax holiday for our Singapore operations that is effective through 2026. The net impact of the tax holiday in Singapore as compared to the Singapore statutory rate was a benefit of $ 5.0 million, $ 11.7 million, and $ 9.7 million during 2023, 2022, and 2021, respectively. Our income tax fluctuates based on the geographic mix of earnings and is calculated quarterly based on actual results pursuant to ASC Topic 740‑270. F-19 Table of Contents As of December 29, 2023, we have recognized $ 3.1 million of unrecognized tax benefits in other non-current liabilities in our consolidated balance sheet. If recognized, $ 3.1 million of this amount would impact our effective tax rate. We expect a decrease of $ 0.1 million to the total amount of unrecognized tax benefits within the next 12 months. 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. During 2023, we recognized a net decrease of approximately $ 0.2 million in potential interest and penalties associated with uncertain tax positions in the statements of operations. At December 29, 2023, other non-current liabilities on our balance sheet included approximately zero and $ 0.5 million of interest and penalties, respectively, associated with uncertain tax positions, which are excluded from the unrecognized tax benefits table below. The following table summarizes the activity related to our unrecognized tax benefits: Unrecognized tax benefits Balance at December 25, 2020 $ 2,490 Increase related to current year tax positions 597 Decrease in tax positions related to lapse of statute of limitations ( 92 ) Balance at December 31, 2021 2,995 Increase related to current year tax positions 689 Decrease in tax positions related to lapse of statute of limitations ( 89 ) Balance at December 30, 2022 3,595 Increase related to current year tax positions 488 Decrease in tax positions related to lapse of statute of limitations ( 10 ) Decrease in tax positions related to settlements ( 916 ) Balance at December 29, 2023 $ 3,157 We assert indefinite reinvestment of our U.S. and Netherlands unremitted earnings. With regard to these unremitted earnings, we have not, nor do we anticipate the need to repatriate funds from the U.S. to the Netherlands or from the Netherlands to the Cayman entity to satisfy liquidity needs. Determination of the amount of unrecognized withholding tax liability related to the indefinitely reinvested earnings is not practicable. Our three major filing jurisdictions are the United States, Singapore, and Malaysia. We are no longer subject to U.S. Federal examination for tax years ending before 2017, to state examinations before 2019, or to foreign examinations before 2019. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward. At December 29, 2023, we were not under examination by a tax authority. Note 8 – 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 maximum of 4 % of a participant’s annual compensation. For 2023, 2022, and 2021, matching contributions were $ 2.7 million, $ 3.0 million, and $ 2.2 million, respectively. F-20 Table of Contents Note 9 – Long-Term Debt Long-term debt consists of the following: December 29, 2023 December 30, 2022 Term loan $ 135,000 $ 142,500 Revolving credit facility 115,000 160,000 Total principal amount of long-term debt 250,000 302,500 Less unamortized debt issuance costs ( 1,317 ) ( 1,782 ) Total long-term debt, net 248,683 300,718 Less current portion ( 7,500 ) ( 7,500 ) Total long-term debt, less current portion, net $ 241,183 $ 293,218 Maturities of long-term debt consist of the following: 2024 $ 7,500 2025 7,500 2026 235,000 Total $ 250,000 The weighted average interest rate across our credit facilities was 6.80 %, 3.37 %, and 2.74 % during 2023, 2022, and 2021, 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 (together, “credit facilities”). Term loan payments of $ 1.9 million are due on a quarterly basis. The credit agreement matures on October 29, 2026. Our credit agreement is secured by our tangible and intangible assets and includes customary representations, warranties, and covenants. We are required to maintain a minimum fixed charge coverage ratio of 1.25 : 1 and a maximum leverage ratio of 3.50 : 1. 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 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. 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 December 29, 2023, our credit facilities bore interest under the BSBY rate option of 7.58 %. Note 10 – Share-Based Compensation 2016 Plan In December 30, 2016, we adopted the 2016 Omnibus Incentive Plan (“the 2016 Plan”). The 2016 Plan provides for grants of share‑based awards to employees, directors, and consultants. Under the 2016 Plan, 1,888,000 ordinary shares were reserved for issuance. 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 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. F-21 Table of Contents Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 17.3 million, $ 13.9 million, and $ 11.5 million during 2023 , 2022, and 2021 , respectively. 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 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 30, 2022 805,115 $ 23.35 Exercised ( 215,884 ) $ 20.69 Forfeited or expired ( 7,068 ) $ 21.84 Outstanding, December 29, 2023 582,163 $ 24.36 2.0 years $ 5,399 Exercisable, December 29, 2023 566,312 $ 24.39 2.0 years $ 5,235 Fair value information for options granted and the intrinsic value of options exercised are as follows: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Total intrinsic value of options exercised $ 3,041 $ 1,232 $ 11,859 At December 29, 2023, total unrecognized share-based compensation expense relating to options was $ 0.1 million, with a weighted average remaining service period of 0.4 years. 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 never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows. F-22 Table of Contents 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 30, 2022 860,595 57,562 86,342 $ 30.26 Granted 679,085 47,433 96,301 $ 30.70 Vested ( 383,816 ) — — $ 30.09 Forfeited ( 67,781 ) ( 7,696 ) ( 11,542 ) $ 30.91 Unvested, December 29, 2023 1,088,083 97,299 171,101 $ 30.37 Fair value information for RSUs granted and vested is as follows: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Weighted average grant-date fair value per share of RSUs granted $ 30.70 $ 27.24 $ 49.59 Total grant-date fair value of shares vested $ 11,550 $ 9,644 $ 5,871 At December 29, 2023, total unrecognized share-based compensation expense relating to RSUs was $ 31.7 million, with a weighted average remaining service period of 2.7 years. 2017 ESPP In May 2017, we adopted the 2017 Employee Stock Purchase Plan (the “2017 ESPP”). 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 December 29, 2023 , 2.2 million ordinary shares remained eligible for issuance under the 2017 ESPP. The table below sets forth the weighted average assumptions used to measure the fair value of 2017 ESPP rights: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Weighted average expected term 0.5 years 0.5 years 0.5 years Risk-free interest rate 5.1 % 1.4 % 0.1 % Dividend yield 0.0 % 0.0 % 0.0 % Volatility 63.4 % 63.8 % 63.7 % We recognize share-based compensation expense associated with the 2017 ESPP over the duration of the purchase period. We recognized $ 0.9 million, $ 1.0 million, and $ 0.6 million of share-based compensation expense associated with the 2017 ESPP during 2023, 2022, and 2021, respectively. At December 29, 2023, there was no unrecognized share-based compensation expense. 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. F-23 Table of Contents 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. 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: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 United States of America $ 281,298 $ 572,129 $ 544,109 Singapore 318,790 460,569 383,278 Europe 116,316 109,547 78,745 Other 94,716 137,824 90,785 Total net sales $ 811,120 $ 1,280,069 $ 1,096,917 The following table sets forth our major customers with 10% or more of sales, which comprised 82 %, 79 %, and 85 % of net sales in 2023, 2022, and 2021, respectively: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Applied Materials $ 295,082 $ 396,261 $ 352,077 Lam Research $ 286,836 $ 616,391 $ 579,009 ASML (1) $ 85,589 -- -- (1) ASML did not represent 10% or more of sales in 2022 and 2021 . Foreign long-lived assets, exclusive of deferred tax assets, were $ 48.2 million and $ 52.8 million at December 29, 2023 and December 30, 2022, respectively. F-24 Table of Contents Note 12 – Earnings per Share The following table sets forth the computation of our basic and diluted net income (loss) per share and a reconciliation of the numerator and denominator used in the calculation: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Numerator: Net income (loss) $ ( 42,985 ) $ 72,804 $ 70,899 Denominator: Basic weighted average ordinary shares outstanding 29,200,796 28,714,550 28,259,607 Dilutive effect of options 0 165,855 480,790 Dilutive effect of RSUs 0 74,853 237,357 Dilutive effect of ESPP 0 7,773 1,598 Diluted weighted average ordinary shares outstanding 29,200,796 28,963,031 28,979,352 Securities excluded from the calculation of diluted weighted average ordinary shares outstanding (1) 2,632,000 959,000 273,000 Earnings per share: Net income (loss) per share: Basic $ ( 1.47 ) $ 2.54 $ 2.51 Diluted $ ( 1.47 ) $ 2.51 $ 2.45 (1) Represents potentially dilutive options and RSUs that were excluded from the calculation of net income per share, because including them would have been antidilutive under the treasury stock method. F-25 Table of Contents EXHIBIT INDEX The following exhibits are filed with this Form 10‑K or are incorporated herein by reference: Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated November 11, 2021, by and among Ichor Systems, Inc., Incline Merger Sub, LLC, IMG Companies, LLC, and Brian J. 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). 3.1 Amended and Restated Memorandum and Articles of Association of Ichor Holdings, Ltd., effective as of May 24, 2022 (Incorporated by reference to Exhibit 3.1 to Ichor Holdings, Ltd.'s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2023). 4.1 Description of Securities of Ichor Holdings, Ltd. (Incorporated by reference to Exhibit 4.1 to Ichor Holdings, Ltd.'s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2023). 10.1 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 (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). 10.2+ Ichor Holdings, Ltd. 2016 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.11 to Ichor Holdings, Ltd.’s Amendment No. 2 to Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on November 29, 2016). 10.3+ Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.12 to Ichor Holdings, Ltd.’s Amendment No. 2 to Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on November 29, 2016). 10.4+ Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.13 to Ichor Holdings, Ltd.’s Amendment No. 2 to Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on November 29, 2016). 10.5+ Form of Nonqualified Stock Option Agreement (Incorporated by reference to Exhibit 10.14 to Ichor Holdings, Ltd.’s Amendment No. 2 Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on November 29, 2016). 10.6+ Offer Letter, dated as of January 8, 2013, by and between Ichor Systems, Inc. and Philip Barros (Incorporated by reference to Exhibit 10.16 to Ichor Holdings, Ltd.’s Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on November 14, 2016). 10.7+ Offer Letter, dated as of September 30, 2015, by and between Ichor Systems, Inc. and Philip Barros (Incorporated by reference to Exhibit 10.17 to Ichor Holdings, Ltd.’s Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on November 14, 2016). 10.8+ Select Severance Plan, dated as of March 6, 2019, by and among Ichor Holdings, Ltd. and certain officers and directors party thereto (Incorporated by reference to Exhibit 10.9 to Ichor Holdings, Ltd.’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 8, 2019). 10.9+ Offer Letter, dated August 23, 2019, between Ichor Systems, Inc. and Larry Sparks (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 September 9, 2019). 10.10+ Offer Letter, dated November 20, 2019, between Ichor Systems, Inc. and Jeffrey Andreson (Incorporated by reference to Exhibit 10.12 to Ichor Holdings, Ltd.’s Annual Report on Form 10 K filed with the Securities and Exchange Commission on March 6, 2020). 10.11+ Letter Agreement, dated December 23, 2021 between Ichor Systems, Inc. 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). 10.12+* Offer Letter, dated April 24, 2019, between Ichor Systems, Inc. and Christopher Smith. 10.13+ Offer L etter, 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). 10.14+ Offer Letter, dated July 6, 2023, between Ichor Systems, Inc. and Gregory F. Swyt ( I ncorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on July 10, 2023). 21.1* List of subsidiaries . Table of Contents 23.1* Consent of KPMG LLP . 31.1* Certifications of Chief Executive Officer of the Company under Rule 13a‑14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. 31.2* Certifications of Chief Financial Officer of the Company under Rule 13a‑14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. 32.1** Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. This certification accompanies this report and shall not, except to the extent required by the Sarbanes‑Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended. 32.2** Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. This certification accompanies this report and shall not, except to the extent required by the Sarbanes‑Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended. 97.1* Ichor Holdings, L td . Clawback Policy . 101.INS* Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104* Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101). _____________________________________________ * 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 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 23, 2024 ICHOR HOLDINGS, LTD. By: /s/ Jeffrey S. Andreson Jeffrey S. Andreson Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Name and Title Date /s/ Jeffrey S. Andreson Chief Executive Officer and Director (Principal Executive Officer) February 23, 2024 Jeffrey S. Andreson /s/ Greg Swyt Chief Financial Officer (Principal Accounting and Financial Officer) February 23, 2024 Greg Swyt /s/ Thomas M. Rohrs Executive Chairman and Director February 23, 2024 Thomas M. Rohrs /s/ Iain MacKenzie Lead Independent Director February 23, 2024 Iain MacKenzie /s/ Marc Haugen Director February 23, 2024 Marc Haugen /s/ John Kispert Director February 23, 2024 John Kispert /s/ Laura Black Director February 23, 2024 Laura Black /s/ Wendy Arienzo Director February 23, 2024 Wendy Arienzo /s/ Sarah O’Dowd Director February 23, 2024 Sarah O’Dowd /s/ Jorge Titinger Director February 23, 2024 Jorge Titinger /s/ Yuval Wasserman Director February 23, 2024 Yuval Wasserman