KULICKE & SOFFA INDUSTRIES INC 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 45 Consolidated Balance Sheets as of September 28, 2024 and September 30, 2023 47 Consolidated Statements of Operations for fiscal 2024, 2023 and 2022 48 Consolidated Statements of Comprehensive Income for fiscal 2024, 2023 and 2022 49 Consolidated Statements of Changes in Shareholders’ Equity for fiscal 2024, 2023 and 2022 50 Consolidated Statements of Cash Flows for fiscal 2024, 2023 and 2022 51 Notes to Consolidated Financial Statements 52 44 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Kulicke and Soffa Industries, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Kulicke and Soffa Industries, Inc. and its subsidiaries (the “Company”) as of September 28, 2024 and September 30, 2023, and the related consolidated statements of operations, of comprehensive income, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended September 28, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 28, 2024 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of September 28, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 28, 2024 and September 30, 2023 , and the results of its operations and its cash flows for each of the three years in the period ended September 28, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 28, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements 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. 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) provide reasonable 45 Table of Contents 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. Critical Audit Matters 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 (i) relates to accounts or disclosures that are material to the consolidated financial statements; and (ii) 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of inventories - Reserves for excess and obsolete raw materials As described in Notes 1 and 2 to the consolidated financial statements, the Company’s consolidated net inventory balance was $177.7 million. The Company generally provides reserves for obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as forecasted future consumption for inventories, and is based upon internal projections, historical sales volumes, customer order activity and a review of consumable inventory levels at customers’ facilities. The principal considerations for our determination that performing procedures relating to the valuation of inventories, specifically the reserves for excess and obsolete raw materials, is a critical audit matter are our assessment that this is an area of significant judgment by management when developing reserves for excess and obsolete raw materials, including developing the assumptions related to forecasted future consumption for raw materials. This has in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating the reasonableness of management’s significant assumptions related to the forecasted future consumption for raw materials. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s reserves for excess and obsolete raw materials, including controls over management’s assumptions related to forecasted future consumption for raw materials. These procedures also included, among others, testing management’s process for developing the reserves for excess or obsolete raw materials; evaluating the appropriateness of management’s approach; testing the completeness and accuracy of underlying data used in the approach; and evaluating the reasonableness of management’s assumptions related to forecasted future consumption for raw materials. Evaluating management’s assumptions related to forecasted future consumption for raw materials involved evaluating whether the assumptions used by management was reasonable considering (i) current and past sales results, (ii) the consistency of sales with external market and industry data, and (iii) comparing prior year estimates of sales to actual sales results in the current year. /s/ PricewaterhouseCoopers LLP Singapore November 14, 2024 We have served as the Company’s auditor since 2011. 46 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amount) As of September 28, 2024 September 30, 2023 ASSETS Current assets: Cash and cash equivalents $ 227,147 $ 529,402 Short-term investments 350,000 230,000 Accounts and notes receivable, net of allowance for doubtful accounts of $ 49 and $ 49 , respectively 193,909 158,601 Inventories, net 177,736 217,304 Prepaid expenses and other current assets 46,161 53,751 Total current assets 994,953 1,189,058 Property, plant and equipment, net 64,823 110,051 Operating right-of-use assets 35,923 47,148 Goodwill 89,748 88,673 Intangible assets, net 25,239 29,357 Deferred tax assets 17,900 31,551 Equity investments 3,143 716 Other assets 8,433 3,223 TOTAL ASSETS $ 1,240,162 $ 1,499,777 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable 58,847 49,302 Operating lease liabilities 7,718 6,574 Accrued expenses and other current liabilities 90,802 103,005 Income taxes payable 26,427 22,670 Total current liabilities 183,794 181,551 Deferred tax liabilities 34,594 37,264 Income taxes payable 31,352 52,793 Operating lease liabilities 33,245 41,839 Other liabilities 13,168 11,769 TOTAL LIABILITIES $ 296,153 $ 325,216 Commitments and contingent liabilities (Note 16) SHAREHOLDERS’ EQUITY: Preferred stock, without par value: Authorized 5,000 shares; issued - no ne $ — $ — Common stock, no par value: Authorized 200,000 shares; issued 85,364 and 85,364 respectively; outstanding 53,854 and 56,310 shares, respectively 596,703 577,727 Treasury stock, at cost, 31,510 and 29,054 shares, respectively ( 881,830 ) ( 737,214 ) Retained earnings 1,242,558 1,355,810 Accumulated other comprehensive loss ( 13,422 ) ( 21,762 ) TOTAL SHAREHOLDERS’ EQUITY $ 944,009 $ 1,174,561 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,240,162 $ 1,499,777 The accompanying notes are an integral part of these consolidated financial statements. 47 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Fiscal 2024 2023 2022 Net revenue $ 706,232 $ 742,491 $ 1,503,620 Cost of sales 437,478 383,836 755,300 Gross profit 268,754 358,655 748,320 Selling, general and administrative 165,564 152,982 140,050 Research and development 151,214 144,701 136,852 Impairment charges 44,472 21,535 1,346 Operating expenses 361,250 319,218 278,248 (Loss) / Income from operations ( 92,496 ) 39,437 470,072 Interest income 34,230 32,906 7,124 Interest expense ( 89 ) ( 142 ) ( 208 ) (Loss)/Income before income taxes ( 58,355 ) 72,201 476,988 Provision for income taxes 10,651 15,053 43,443 Net (loss)/income $ ( 69,006 ) $ 57,148 $ 433,545 Net (loss)/income per share: Basic $ ( 1.24 ) $ 1.01 $ 7.21 Diluted $ ( 1.24 ) $ 0.99 $ 7.09 Weighted average shares outstanding: Basic 55,613 56,682 60,164 Diluted 55,613 57,548 61,182 The accompanying notes are an integral part of these consolidated financial statements. 48 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Fiscal 2024 2023 2022 Net (loss) / income $ ( 69,006 ) $ 57,148 $ 433,545 Other comprehensive income / (loss): Foreign currency translation adjustment 6,917 9,676 ( 30,536 ) Unrecognized actuarial (loss) / gain on pension plan ( 821 ) ( 49 ) 2,276 Net increase / (decrease) from derivatives designated as hedging instruments 2,244 1,511 ( 1,618 ) Total other comprehensive income / (loss) 8,340 11,138 ( 29,878 ) Comprehensive (loss) / income $ ( 60,666 ) $ 68,286 $ 403,667 The accompanying notes are an integral part of these consolidated financial statements. 49 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands) Common Stock Treasury Stock Retained earnings Accumulated Other Comprehensive (loss) / income Shareholders' Equity Outstanding Shares Amount Balances as of October 2, 2021 61,931 $ 550,117 $ ( 400,412 ) $ 948,554 $ ( 3,022 ) $ 1,095,237 Issuance of stock for services rendered 18 774 175 — — 949 Repurchase of common stock ( 5,576 ) — ( 282,807 ) — — ( 282,807 ) Issuance of shares for equity-based compensation 755 ( 7,244 ) 7,244 — — — Equity-based compensation — 18,037 — — — 18,037 Cash dividend declared ($ 0.17 per share) — — — ( 40,433 ) — ( 40,433 ) Components of comprehensive income: Net income — — — 433,545 — 433,545 Other comprehensive loss — — — — ( 29,878 ) ( 29,878 ) Total comprehensive income / (loss) — — — 433,545 ( 29,878 ) 403,667 Balances as of October 1, 2022 57,128 $ 561,684 $ ( 675,800 ) $ 1,341,666 $ ( 32,900 ) $ 1,194,650 Issuance of stock for services rendered 21 798 202 — — 1,000 Repurchase of common stock ( 1,515 ) — ( 68,115 ) — — ( 68,115 ) Issuance of shares for equity-based compensation 676 ( 6,499 ) 6,499 — — — Equity-based compensation — 21,744 — — — 21,744 Cash dividend declared ($ 0.19 per share) — — — ( 43,004 ) — ( 43,004 ) Components of comprehensive income: Net income — — — 57,148 — 57,148 Other comprehensive income — — — — 11,138 11,138 Total comprehensive income / (loss) — — — 57,148 11,138 68,286 Balances as of September 30, 2023 56,310 $ 577,727 $ ( 737,214 ) $ 1,355,810 $ ( 21,762 ) $ 1,174,561 Issuance of stock for services rendered 25 434 242 — — 676 Repurchase of common stock ( 3,221 ) — ( 150,791 ) — — ( 150,791 ) Issuance of shares for equity-based compensation 740 ( 7,090 ) 7,090 — — — Excise tax — — ( 1,157 ) — — ( 1,157 ) Equity-based compensation — 25,632 — — — 25,632 Cash dividend declared ($ 0.20 per share) — — — ( 44,246 ) — ( 44,246 ) Components of comprehensive income: Net loss — — — ( 69,006 ) — ( 69,006 ) Other comprehensive income — — — — 8,340 8,340 Total comprehensive income / (loss) — — — ( 69,006 ) 8,340 ( 60,666 ) Balances as of September 28, 2024 53,854 $ 596,703 $ ( 881,830 ) $ 1,242,558 $ ( 13,422 ) $ 944,009 The accompanying notes are an integral part of these consolidated financial statements. 50 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Fiscal 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ ( 69,006 ) $ 57,148 $ 433,545 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,735 28,857 21,293 Impairment charges 44,472 21,535 1,346 Equity-based compensation 26,891 22,744 18,986 Adjustment for doubtful accounts — 49 ( 245 ) Adjustment for inventory valuation 69,811 5,214 ( 2,613 ) Deferred taxes 11,374 ( 4,478 ) ( 8,648 ) Loss/(gain) on disposal of property, plant and equipment 72 ( 499 ) ( 253 ) Unrealized fair value changes on equity investment ( 47 ) 323 — Unrealized foreign currency translation 1,944 85 ( 7,278 ) Changes in operating assets and liabilities, net of assets and liabilities assumed in businesses combinations: Accounts and notes receivable ( 34,707 ) 152,667 113,340 Inventory ( 31,511 ) ( 35,755 ) ( 14,924 ) Prepaid expenses and other current assets 9,073 8,619 ( 37,907 ) Accounts payable, accrued expenses and other current liabilities 185 ( 52,333 ) ( 128,734 ) Income taxes payable ( 17,669 ) ( 29,312 ) 4,946 Other, net ( 4,580 ) ( 1,460 ) ( 2,666 ) Net cash provided by operating activities 31,037 173,404 390,188 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of business, net of cash acquired — ( 36,881 ) — Purchases of property, plant and equipment ( 16,148 ) ( 44,406 ) ( 22,985 ) Proceeds from sales of property, plant and equipment 27 591 181 Investment in private equity fund ( 2,380 ) ( 642 ) ( 397 ) Purchase of short term investments ( 690,000 ) ( 595,000 ) ( 469,000 ) Maturity of short term investments 570,000 585,000 626,000 Net cash (used in) / provided by investing activities ( 138,501 ) ( 91,338 ) 133,799 CASH FLOWS FROM FINANCING ACTIVITIES: Payment on short term debt — — ( 54,500 ) Payment for finance leases ( 564 ) ( 629 ) ( 509 ) Repurchase of common stock ( 150,791 ) ( 69,210 ) ( 281,319 ) Tax withholding payments related to vested and released restricted stock units ( 583 ) — — Proceeds from short term debt — — 54,500 Common stock cash dividends paid ( 44,162 ) ( 42,037 ) ( 39,363 ) Net cash used in financing activities ( 196,100 ) ( 111,876 ) ( 321,191 ) Effect of exchange rate changes on cash and cash equivalents 1,309 3,675 ( 10,047 ) Changes in cash and cash equivalents ( 302,255 ) ( 26,135 ) 192,749 Cash and cash equivalents at beginning of period 529,402 555,537 362,788 Cash and cash equivalents at end of period $ 227,147 $ 529,402 $ 555,537 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: Property, plant and equipment included in accounts payable and accrued expenses — 3,000 9,063 CASH PAID FOR: Interest $ 89 $ 142 $ 208 Income taxes $ 22,787 $ 56,254 $ 50,309 The accompanying notes are an integral part of these consolidated financial statements. 51 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION These consolidated financial statements include the accounts of Kulicke and Soffa Industries, Inc. and its subsidiaries (the “Company”), with appropriate elimination of intercompany balances and transactions. Fiscal Year Each of the Company’s first three fiscal quarters ends on the Saturday that is 13 weeks after the end of the immediately preceding fiscal quarter. The fourth quarter of each fiscal year ends on the Saturday closest to September 30. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. The 2024, 2023 and 2022 fiscal years ended on September 28, 2024, September 30, 2023 and October 1, 2022, respectively. Nature of Business The Company designs, develops, manufactures and sells capital equipment and tools as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. The Company’s operating results depend upon the capital and operating expenditures of integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), foundry service providers, and other electronics manufacturers and automotive electronics suppliers worldwide which, in turn, depend on the current and anticipated market demand for semiconductors and products utilizing semiconductors. The semiconductor industry is highly volatile and experiences downturns and slowdowns which can have a severe negative effect on the semiconductor industry’s demand for semiconductor capital equipment, including assembly equipment manufactured and sold by the Company and, to a lesser extent, tools, solutions and services, including those sold or provided by the Company. These downturns and slowdowns have in the past adversely affected the Company’s operating results. The Company believes such volatility will continue to characterize the industry and the Company’s operations in the future. In connection with the cancellation of a project with one of its customers (previously referred to as Project W), on March 11, 2024, the Company committed to a plan to cease operational activities and commence wind down activities concerning various aspects of Project W. As of September 28, 2024, the wind down activities have been substantially completed. For additional information, see Note 17: Restructuring and Cancellation of Project in our Notes to the Consolidated Financial Statements. Use of Estimates The preparation of consolidated financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. On an ongoing basis, management evaluates estimates, including but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory and inventory valuation, carrying value and lives of fixed assets, goodwill and intangible assets, accrual for customer credit programs, the valuation estimates and assessment of impairment and observable price adjustments, income taxes, equity-based compensation expense, accrual for employee termination benefits and warranties. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable. As a result, management makes judgments regarding the carrying values of the Company’s assets and liabilities that are not readily apparent from other sources. Authoritative pronouncements, historical experience and assumptions are used as the basis for making estimates, and on an ongoing basis, management evaluates these estimates. Actual results may differ from these estimates. In light of the macroeconomic headwinds, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of September 28, 2024. While there was no material impact to our consolidated financial statements as of and for the year ended September 28, 2024, these estimates may change, as new events occur and additional information is obtained, as well as other factors related to the macroeconomic headwinds that could materially impact our consolidated financial statements in future reporting periods. 52 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Vulnerability to Certain Concentrations Financial instruments which may subject the Company to concentrations of credit risk as of September 28, 2024 and September 30, 2023 consisted primarily of trade receivables. The Company manages credit risk associated with investments by investing its excess cash in highly rated debt instruments of the U.S. government and its agencies, financial institutions, and corporations. The Company has established investment guidelines relative to diversification and maturities designed to maintain safety and liquidity. These guidelines are periodically reviewed and modified as appropriate. The Company’s trade receivables result primarily from the sale of semiconductor equipment, related accessories and replacement parts, and tools to a relatively small number of large manufacturers in a highly concentrated industry. Write-offs of uncollectible accounts have historically not been material. The Company actively monitors its customers’ financial strength to reduce the risk of loss, especially in light of the current macroeconomic headwinds. The Company’s products are complex and require raw materials, components and subassemblies having a high degree of reliability, accuracy and performance. The Company relies on subcontractors to manufacture many of these components and subassemblies and it relies on sole source suppliers for some important components and raw material inventory. Foreign Currency Translation and Remeasurement The majority of the Company’s business is transacted in U.S. dollars; however, the functional currencies of some of the Company’s subsidiaries are their local currencies. In accordance with ASC No. 830, Foreign Currency Matters (“ASC 830”), for a subsidiary of the Company that has a functional currency other than the U.S. dollar, gains and losses resulting from the translation of the functional currency into U.S. dollars for financial statement presentation are not included in determining net income, but are accumulated in the cumulative translation adjustment account as a separate component of shareholders’ equity (accumulated other comprehensive income / (loss)). The tax effect of currency translation adjustments related to unremitted foreign earnings no longer deemed to be indefinitely reinvested outside the U.S. is reflected in the determination of the Company's net income or other comprehensive income (“OCI”). Gains and losses resulting from foreign currency transactions are included in the determination of net income and to date has not been material. The Company’s operations are exposed to changes in foreign currency exchange rates due to transactions denominated in currencies other than the location’s functional currency. The Company is also exposed to foreign currency fluctuations that impact the remeasurement of net monetary assets of those operations whose functional currency, the U.S. dollar, differs from their respective local currencies, most notably in Israel and Singapore. In addition to net monetary remeasurement, the Company has exposures related to the translation of subsidiary financial statements from their functional currency, the local currency, into its reporting currency, the U.S. dollar, most notably in the Netherlands, China, Taiwan, Japan and Germany. The Company’s U.S. operations also have foreign currency exposure due to net monetary assets denominated in currencies other than the U.S. dollar. Derivative Financial Instruments The Company’s primary objective for holding derivative financial instruments is to manage the fluctuation in foreign exchange rates and accordingly is not speculative in nature. The Company’s international operations are exposed to changes in foreign exchange rates as described above. The Company has established a program to monitor the forecasted transaction currency risk to protect against foreign exchange rate volatility. Generally, the Company uses foreign exchange forward contracts in these hedging programs. These instruments, which have maturities of up to twelve months, are recorded at fair value and are included in prepaid expenses and other current assets, or accrued expenses and other current liabilities. Our accounting policy for derivative financial instruments is based on whether they meet the criteria for designation as a cash flow hedge. A designated hedge with exposure to variability in the functional currency equivalent of the future foreign currency cash flows of a forecasted transaction is referred to as a cash flow hedge. The criteria for designating a derivative as a cash flow hedge include the assessment of the instrument’s effectiveness in risk reduction, matching of the derivative instrument to its underlying transaction, and the assessment of the probability that the underlying transaction will occur. For derivatives with cash flow hedge accounting designation, we report the after-tax gain / (loss) from the effective portion of the hedge as a component of accumulated other comprehensive income / (loss) and reclassify it into earnings in the same period in which the hedged transaction affects earnings and in the same line item on the Consolidated Statements of Operations as the impact of the hedged transaction. 53 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Derivatives that we designate as cash flow hedges are classified in the consolidated statement of cash flows in the same section as the underlying item, primarily within cash flows from operating activities. The hedge effectiveness of these derivative instruments is evaluated by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the fair value of the forecasted cash flows of the hedged item. If it is probable that the forecasted transaction will no longer occur, the cumulative unrealized gain or loss on the related derivative is reclassified from accumulated other comprehensive income / (loss) into earnings. Subsequent gain / (loss) on the related derivative instrument is recognized into earnings in each period until the instrument matures, is terminated, is re-designated as a qualified cash flow hedge, or is sold. Ineffective portions of cash flow hedges, as well as amounts excluded from the assessment of effectiveness, are recognized in earnings. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash equivalents are measured at fair value based on Level 1 measurement, or quoted market prices, as defined by ASC No. 820, Fair Value Measurements and Disclosures . Equity Investments The Company invests in equity securities in companies to promote business and strategic objectives. Non-marketable equity securities are equity securities without readily determinable fair value that are measured and recorded as follows: • Either using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes, or; • Using the published or estimated Net Asset Value (“NAV”) for investments that qualify as a practical expedient to determine the fair values of equity securities. The fair values of the underlying investments are determined using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices are not available. Changes in the fair value of the investments are recognized as gains and losses in earnings. Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated losses resulting from its customers’ failure to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, including as a result of the existing macroeconomic headwinds, additional allowances may be required. If global or regional economic conditions deteriorate or political conditions were to change in some of the countries where the Company does business, it could have a significant impact on the results of operations, and the Company’s ability to realize the full value of its accounts receivable. Inventories Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. The Company generally provides reserves for obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as 18 months forecasted future consumption for equipment, 24 months forecasted future consumption for spare parts, and 12 months forecasted future consumption for tools. Forecasted consumption is based upon internal projections, historical sales volumes, customer order activity and a review of consumable inventory levels at customers’ facilities. The Company communicates forecasts of its future consumption to its suppliers and adjusts commitments to those suppliers accordingly. If required, the Company reserves the difference between the carrying value of its inventory and the lower of cost or net realizable value, based upon projections about future consumption, and market conditions. If actual market conditions are less favorable than projections, additional inventory reserves may be required. Inventory reserve provision for certain subsidiaries is determined based on management’s estimate of future consumption for equipment, spare parts and tools. This estimate is based on historical sales volumes, internal projections and market developments and trends. 54 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment Property, plant and equipment are carried at cost. The cost of additions and those improvements which increase the capacity or lengthen the useful lives of assets are capitalized while repair and maintenance costs are expensed as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives as follows: buildings 25 years; machinery, equipment, furniture and fittings 3 to 10 years; toolings 1 year; and leasehold improvements are based on the shorter of the life of lease or life of asset. Purchased computer software costs related to business and financial systems are amortized over a five-year period on a straight-line basis. Land is not depreciated. Valuation of Long-Lived Assets In accordance with ASC No. 360, Property, Plant & Equipment (“ASC 360”), the Company’s definite lived intangible assets and property, plant and equipment are tested for impairment based on undiscounted cash flows when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. The carrying amount of an asset or asset group is not recoverable to the extent it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Estimates of future cash flows used to test the recoverability of a long-lived asset or asset group must incorporate the entity’s own assumptions about its use of the asset or asset group and must factor in all available evidence. ASC 360 also provides a single accounting model for long-lived assets to be disposed of by sale and establishes additional criteria that would have to be met to classify an asset as held for sale. ASC 360 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Such events include significant under-performance relative to historical internal forecasts or projected future operating results; significant changes in the manner of use of the assets; significant negative industry or economic trends; or significant changes in market capitalization. During the fiscal years ended September 28, 2024 and September 30, 2023, no “triggering” events occurred. Accounting for Impairment of Goodwill and Other Intangible Assets ASC No. 350, Intangibles - Goodwill and Other requires goodwill and other intangible assets with indefinite lives to be reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment. For goodwill, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, a company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the goodwill impairment test. The Company’s impairment test is performed by comparing the fair value of a reporting unit with its carrying value, and determining if the carrying amount exceeds its fair value. As part of the annual evaluation, the Company performs an impairment test of its goodwill in the fourth quarter of each fiscal year to coincide with the completion of its annual forecasting and refreshing of its business outlook processes. On an ongoing basis, the Company monitors if a “triggering” event has occurred that may have the effect of reducing the fair value of a reporting unit below its respective carrying value. Adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in a non-cash impairment charge in the future. Impairment assessments inherently involve judgment as to the assumptions made about the expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact the assumptions as to prices, costs, growth rates or other factors that may result in changes in the estimates of future cash flows. Although the Company believes the assumptions that it has used in testing for impairment are reasonable, significant changes in any one of the assumptions could produce a significantly different result. Indicators of potential impairment, including significant and unforeseen customer losses, a significant adverse change in legal factors or in the business climate, a significant adverse action or assessment by a regulator, a significant stock price decline or unanticipated competition may lead the Company to perform interim goodwill impairment assessments. For further information on goodwill and other intangible assets, see Note 4 below. 55 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Government Incentives The Company receives government incentives for qualifying research and development, and other activities as defined by the relevant government entities awarding the grants. Government grants, including non-income tax incentives, are recognized when there is reasonable assurance that the grant will be received and the Company will comply with the conditions specified in the grant agreement. The Company records operating grants as a reduction to expense in the same line item on the consolidated statements of income as the expenditure for which the grant is intended to compensate. The Company recognized an immaterial benefit for operating grants in fiscal 2024. Revenue Recognition In accordance with ASC No. 606, Revenue from Contracts with Customers , the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay. The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon the distributors’ resale of the products. Our business is subject to contingencies related to customer orders, including: • Right of Return : A large portion of our revenue comes from the sale of equipment used in the semiconductor assembly process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally maintained at low stock levels at the customers’ facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis. • Warranties : Our equipment is generally shipped with a one-year warranty against manufacturing defects. We establish reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management’s estimate of future expenses, including product parts replacement, freight charges and labor costs expected to be incurred to correct manufacturing defects during the warranty period. • Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in accordance with agreed specifications, customer specifications or subject to satisfactory installation at the customer’s facility. In such cases, if the terms of acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon shipment. If the terms of acceptance are satisfied at our customers’ facilities, the revenue for the equipment will not be recognized until acceptance, which is typically obtained after installation and testing, is received from the customer. Service revenue is generally recognized over time as the services are performed. For fiscal 2024, 2023 and 2022, the service revenue is not material. The Company measures revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Any variable consideration such as sales incentives are recognized as a reduction of net revenue at the time of revenue recognition. The Company’s performance obligations relate to contracts with a duration of less than one year, therefore as allowed under ASC 606, we have opted not to disclose the unsatisfied performance obligations for contracts with original expected durations of less than one year. The length of time between invoicing and payment is not significant under our payment terms. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. Shipping and handling costs billed to customers are recognized in net revenue. Shipping and handling costs paid by the Company are included in cost of sales. 56 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Contract Assets A contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer. ASC 606, Revenue from Contracts with Customers , distinguishes between a contract asset and a receivable based on whether receipt of the consideration is conditional on something other than the passage of time. When the Company transfers control of goods or services to a customer before the customer pays consideration, the Company records either a contract asset or a receivable depending on the nature of the Company’s right to consideration for its performance. The point at which a contract asset becomes an account receivable may be earlier than the point at which an invoice is issued. The Company assesses a contract asset for impairment in accordance with ASC 310, Receivables . Research and Development The Company charges research and development costs associated with the development of new products to expense when incurred. In certain circumstances, pre-production machines that the Company intends to sell are carried as inventory until sold. Income Taxes In accordance with ASC No. 740, Income Taxes , deferred income taxes are determined using the balance sheet method . The Company records a valuation allowance to reduce its deferred tax assets to the amount expected, on a more likely than not basis, to be realized. While the Company has considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, if it were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to deferred tax assets would increase income in the period when such determination is made. Likewise, should the Company determine it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to deferred tax assets would decrease income in the period when such determination is made. The Company determines the amount of unrecognized tax benefit with respect to uncertain tax positions taken or expected to be taken on its income tax returns in accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”). Under ASC 740.10, the Company utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition, requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon examination solely based on its technical merit. Step two, or measurement, is based on the largest amount of benefit which is more likely than not to be realized on settlement with the taxing authority, including resolution of related appeals or litigation processes, if any. Equity-Based Compensation The Company accounts for equity-based compensation under the provisions of ASC No. 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 requires the recognition of the fair value of the equity-based compensation in net income. Compensation expense associated with Relative TSR Performance Share Units is determined using a Monte-Carlo valuation model, and compensation expense associated with time-based and Growth Performance Share Units is determined based on the number of shares granted and the fair value on the date of grant. See Note 11 for a summary of the terms of these performance-based awards. The fair value of equity-based awards is amortized over the vesting period of the award, and the Company elected to use the straight-line method for awards granted after the adoption of ASC 718. Earnings per Share Earnings per share (“EPS”) are calculated in accordance with ASC No. 260, Earnings per Share . Basic EPS include only the weighted average number of common stock outstanding during the period. Diluted EPS include the weighted average number of common stock and the dilutive effect of stock options, performance share units and restricted share units outstanding during the period, when such instruments are dilutive. 57 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accelerated Share Repurchase From time to time, the Company may enter into accelerated share repurchase (“ASR”) agreements with third-party financial institutions to repurchase shares of the Company’s common stock. Under an ASR agreement, in exchange for an up-front payment, the counterparty makes an initial delivery of shares of the Company’s common stock during the purchase period of the relevant ASR. This initial delivery of shares represents the minimum number of shares that the Company may receive under an ASR agreement. Upon settlement of an ASR agreement, the counterparty may deliver additional shares, with the final number of shares delivered determined based on the volume-weighted average price of the Company’s common stock over the term of such ASR agreement, less an agreed-upon discount. The transactions are accounted for as equity transactions and are included in Treasury Stock when the shares are received, at which time there is an immediate reduction in the weighted-average common stock calculation for basic and diluted earnings per share. Accounting for Business Acquisitions The Company accounts for business acquisitions in accordance with ASC No. 805, Business Combinations . The fair value of the net assets acquired and the results of operations of the acquired businesses are included in the consolidated financial statements from the acquisition date forward. The Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property, plant and equipment, intangible assets and related deferred income taxes, useful lives of property, plant and equipment, and amortizable lives of acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities assumed is recognized as goodwill. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change materially between the preliminary allocation and end of the purchase price allocation period. Restructuring Charges Restructuring charges may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs due to exit activities. We recognize voluntary termination benefits when an employee accepts the offered benefit arrangement. We recognize involuntary severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. If the former, we recognize the charges once they are probable and the amounts are estimable. If the latter, we recognize the charges once the benefits have been communicated to employees. Recent Accounting Pronouncements Disclosure Improvements In October 2023, the Financial Accounting Standards Board (the "FASB") issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU aligns the requirements in the FASB Accounting Standards Codification with the SEC’s regulations. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics. They will also allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. This ASU will become effective for each amendment on the date on which the SEC removes the related disclosure from its regulations. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. 58 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Segment Reporting In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in the ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. This ASU will be effective for the Company's fiscal year 2025, and interim periods within the fiscal years beginning in the Company's fiscal year 2026. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. Income Taxes In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvement to Income Tax Disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This ASU will be effective for the Company's fiscal year 2026. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. 59 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 2. BALANCE SHEET COMPONENTS The following tables reflect the components of significant balance sheet accounts as of September 28, 2024 and September 30, 2023: As of (in thousands) September 28, 2024 September 30, 2023 Inventories, net: Raw materials and supplies $ 113,119 $ 114,827 Work in process 43,023 74,555 Finished goods 53,378 49,207 209,520 238,589 Inventory reserves ( 31,784 ) ( 21,285 ) $ 177,736 $ 217,304 Property, plant and equipment, net: Land $ 2,182 $ 2,182 Buildings and building improvements 23,951 23,105 Leasehold improvements 84,738 82,927 Data processing equipment and software 38,238 37,483 Machinery, equipment, furniture and fixtures 106,860 95,692 Construction in progress 10,062 11,099 266,031 252,488 Accumulated depreciation ( 159,517 ) ( 142,437 ) Accumulated impairment $ ( 41,691 ) $ — $ 64,823 $ 110,051 Accrued expenses and other current liabilities: Accrued customer obligations (1) $ 31,014 $ 35,701 Wages and benefits 31,349 33,096 Commissions and professional fees 4,654 4,091 Dividends payable 10,794 10,710 Accrued leasehold renovations 6,476 11,005 Other 6,515 8,402 $ 90,802 $ 103,005 (1) Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations. 60 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 3. BUSINESS COMBINATION Acquisition of Advanced Jet Automation Co., Ltd. On September 8, 2022, the Company through one of its subsidiaries, Kulicke and Soffa Luxembourg S.À R.L, entered into a definitive agreement (the “Definitive Agreement”) for the acquisition of Advanced Jet Automation Co., Ltd. (“AJA”), a technology company headquartered in Taiwan. On February 22, 2023 (the “Closing Date”), pursuant to the Definitive Agreement, the Company completed its acquisition of AJA, including the material business and assets formerly owned by AJA’s affiliate, Samurai Spirit Inc., a leading developer and manufacturer of high-precision micro-dispensing equipment and solutions in Taiwan. AJA became a wholly-owned subsidiary of the Company and on March 30, 2023, AJA was renamed Kulicke and Soffa Hi-Tech Co., Ltd. (“K&S Hi-Tech”). The newly acquired business of K&S Hi-Tech will operate as a business unit (“advanced dispensing solutions”), deemed a separate operating segment which is reported under the “All Others” category. The acquisition broadens the Company’s existing semiconductor, electronic assembly and advanced display portfolio, increasing opportunities across several exciting growth areas including mini and micro-LED, which support both backlighting and direct-emissive approaches. The purchase price consisted of $ 38.1 million in cash paid at closing (the “Purchase Price”) and additional potential earn-out payments based on certain revenue and earnings before interest, tax, depreciation and amortization (“EBITDA”) benchmarks established for the dispensing business unit. As at September 28, 2024, the Company held $ 4.0 million in escrow and will continue to hold such sums for a period of twenty-four ( 24 ) months from the Closing Date, as security pending the completion of Ruo Chuan Inc.’s obligations as the seller under the Definitive Agreement. On February 22, 2024, the Company finalized the valuation of the tangible and identifiable intangible assets and liabilities in connection with the acquisition of AJA and no further adjustment was recorded. The acquisition of AJA was accounted for in accordance with ASC No. 805, Business Combinations , using the acquisition method. The following table summarizes the allocation of the assets acquired and liabilities assumed based on the fair values as of the acquisition date: (in thousands) February 22, 2023 Cash and cash equivalents $ 1,238 Account and other receivables, net 1,156 Inventory 1,581 Property, plant and equipment 1,462 Right-of-use assets 989 Other assets 127 Goodwill 27,975 Intangible assets 7,768 Accounts and other payables ( 965 ) Accrued expenses and other liabilities ( 251 ) Contract liabilities ( 187 ) Lease liability ( 989 ) Deferred tax liabilities ( 1,785 ) Total purchase price $ 38,119 Excluding inventory and property, plant and equipment, all other tangible net assets (liabilities) were valued at their respective carrying amounts, which the Company determined approximate their current fair values at the Closing Date. In connection with the acquisition of AJA, the Company recorded deferred tax liabilities primarily relating to the acquired intangible assets. 61 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and includes the value of expected future cash flows of AJA from expected synergies with our other affiliates and other unidentifiable intangible assets. None of the goodwill recorded as part of the acquisition will be deductible for income tax purposes. The following table summarizes the fair value, useful life and valuation methodology of each identifiable intangible asset. (in thousands) Fair Value Useful Lives Developed technology (1) $ 4,261 8 Customer relationships (2) 2,131 8 In-process research and development (“IPR&D”) (3) 459 N.A. Patents (3) 524 8 Order Backlog (4) 393 1 Total identifiable intangible assets $ 7,768 (1) The fair value of developed technology was determined using the Relief-from-Royalty Method under the income approach. (2) Customer relationships represent the fair value of the existing relationships using the Multi-Period Excess Earnings Method under the income approach. (3) The fair value of IPR&D and Patents were determined using the Replacement Cost Method, a form of the cost approach. (4) Order backlog represents primarily the fair value of purchase arrangements with customers using the Multi-Period Excess Earnings Method under the income approach. IPR&D is recorded as an indefinite-lived intangible asset and not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party. Developed technology, customer relationships, patents and order backlog are amortized using a straight-line method, representing the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets. For fiscal 2023, the acquired dispensing business unit contributed to a net loss of $ 3.0 million. For fiscal 2023, the Company incurred $ 0.5 million of expenses related to the acquisition, which is included within selling, general and administrative expense in the Consolidated Statements of Operations. The acquisition did not result in material contributions to revenue and net income in the consolidated financial statements for fiscal 2023. Additionally, pro forma financial information is not provided for consolidated revenue and net income as such amounts attributable to AJA were insignificant to the Company’s consolidated financial statements taken as a whole. NOTE 4. GOODWILL AND INTANGIBLE ASSETS Goodwill Intangible assets classified as goodwill are not amortized. The goodwill established in connection with our acquisitions represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and recognized individually. The goodwill also includes expected synergies with our other affiliates and other unidentifiable intangible assets. The Company performs an annual impairment test of its goodwill during the fourth quarter of each fiscal year, which coincides with the completion of its annual forecasting and refreshing of business outlook process. 62 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) During the fiscal year ended September 30, 2023, the Company reviewed qualitative factors to ascertain if a "triggering" event may have taken place that may have the effect of reducing the fair value of the reporting unit below its carrying value. The Company concluded that a triggering event had occurred during the third quarter in the fiscal year ended September 30, 2023 in connection with the Lithography reporting unit, which is grouped within the “All Others” category. The triggering event occurred based on the long-term financial and business outlook for the Lithography reporting unit updated as part of the Company’s annual strategic planning process performed during the third quarter. This updated outlook projected that the near-term projected cash flows are expected to be lower than previously forecasted due to a shift in market penetration timeline and increase in cost of materials being purchased. Under ASC 350, the Company is required to test its goodwill and other intangible assets for impairment annually or when a triggering event has occurred that would indicate it is more likely than not that the fair value of the reporting unit is less than the carrying value including goodwill and other intangible assets. Accordingly, the Company has performed the goodwill impairment test for the Lithography reporting unit with reference to the guidance under ASC 350. The Company used a discounted cash flow model to determine the fair value of the Lithography reporting unit. The cash flow projections used within the discounted cash flow model were prepared using the forecasted financial results of the reporting unit, which was based upon underlying estimates of the total market size using independent third party industry reports, and market share data developed using the combination of independent third-party data and our internal data. Significant assumptions used to determine the fair value of the Lithography reporting unit include revenue forecasts, terminal growth rate of 2.5 %, working capital, tax rate and a weighted average cost of capital (discount rate) of 11.7 %. In accordance with the guidance under ASC 350, the Company’s impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. Based on the calculation, the Company determined that the carrying value exceeded the fair value of this reporting unit which resulted in a goodwill impairment charge of $ 9.8 million, representing the entire goodwill assigned to this reporting unit. This goodwill impairment charge was reflected in the Company’s Consolidated Statements of Operations in fiscal 2023. The Company performed its annual impairment test in the fourth quarter of fiscal 2024 and elected to perform the quantitative impairment test as permitted by ASC 350. Based on the quantitative assessment performed on all its reporting units, the Company concluded that no impairment on the Company's recorded goodwill was required. The following table summarizes the changes in the Company’s recorded goodwill based on its reportable segments as of September 28, 2024 and September 30, 2023: (in thousands) Wedge Bonding Equipment APS All Others Total Balance at September 30, 2023 (1) 18,280 26,109 44,284 88,673 Other — 159 916 1,075 Balance at September 28, 2024 18,280 26,268 45,200 89,748 (1) Cumulative goodwill impairment as of September 30, 2023 was approximately $ 45.0 million. 63 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Intangible Assets Intangible assets with determinable lives are amortized over their estimated useful lives. The Company’s intangible assets consist primarily of developed technology, customer relationships, in-process research and development, and trade and brand names. In connection with the evaluation of the goodwill impairment in the Lithography reporting unit performed during the third quarter of fiscal year ended September 30, 2023, the Company assessed tangible and intangible assets for impairment prior to performing the first step of the goodwill impairment test. The Company first compared the carrying value to the undiscounted cash flows of the reporting unit which was lower. Subsequently, the Company proceeded to measure the impairment loss by comparing the carrying value against the discounted cash flow model to determine the fair value of the asset group for the Lithography reporting unit, where significant assumptions include revenue forecasts, terminal growth rate of 2.5 %, working capital, tax rate and a weighted average cost of capital (discount rate) of 11.7 %. As a result of the analysis, the Company recorded an impairment charge of $ 6.9 million on the developed technology reported within the “All Others” category in fiscal 2023. The impairment of intangible assets was reflected in the Company’s Consolidated Statements of Operations in fiscal 2023. No impairment charge was required in the fiscal year ended September 28, 2024 . The following table reflects net intangible assets as of September 28, 2024 and September 30, 2023: As of September 28, 2024 As of September 30, 2023 (dollar amounts in thousands) Average estimated useful lives (in years) Gross Carrying Amount Accumulated Amortization Net Amount Gross Carrying Amount Accumulated Amortization Net Amount Developed technology 6.0 to 15.0 $ 83,401 $ ( 61,575 ) $ 21,826 $ 80,959 ( 55,877 ) $ 25,082 Customer relationships 5.0 to 8.0 37,625 ( 35,916 ) 1,709 36,764 ( 34,789 ) 1,975 Trade and brand name 7.0 to 8.0 7,272 ( 7,272 ) — 7,130 ( 7,130 ) — Other intangible assets 1.0 to 8.0 5,617 ( 4,372 ) 1,245 5,617 ( 3,776 ) 1,841 In-process research and development N.A 459 — 459 459 — 459 $ 134,374 $ ( 109,135 ) $ 25,239 $ 130,929 $ ( 101,572 ) $ 29,357 The following table reflects estimated annual amortization expense related to intangible assets as of September 28, 2024: As of (in thousands) September 28, 2024 Fiscal 2025 $ 5,198 Fiscal 2026 $ 5,198 Fiscal 2027 $ 4,923 Fiscal 2028 $ 4,479 Fiscal 2029 $ 3,420 Fiscal 2030 and thereafter $ 2,021 Total amortization expense $ 25,239 64 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 5. CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. In general, these investments are free of trading restrictions. Cash, cash equivalents and short-term investments consisted of the following as of September 28, 2024: (dollar amounts in thousands) Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 26,800 $ — $ — $ 26,800 Cash equivalents: Mutual Funds (1) 157,590 89 — 157,679 Time deposits (2) 42,668 — — 42,668 Total cash and cash equivalents $ 227,058 $ 89 $ — $ 227,147 Short-term investments: Time deposits (2) $ 350,000 $ — $ — $ 350,000 Total short-term investments $ 350,000 $ — $ — $ 350,000 Total cash, cash equivalents, and short-term investments $ 577,058 $ 89 $ — $ 577,147 (1) Mutual funds held by the Company include Money Market Funds and Ultra-Short Funds. The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy. (2) All short-term investments were classified as available-for-sale and the fair value approximates cost basis. The Company did not recognize any realized gains or losses on the sale of investments during the fiscal year ended 2024. Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of September 30, 2023: (dollar amounts in thousands) Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 37,292 $ — $ — $ 37,292 Cash equivalents: Mutual Funds (1) 202,113 — ( 10 ) 202,103 Time deposits (2) 290,007 — — 290,007 Total cash and cash equivalents $ 529,412 $ — $ ( 10 ) $ 529,402 Short-term investments: Time deposits (2) 230,000 — — 230,000 Total short-term investments $ 230,000 $ — $ — $ 230,000 Total cash, cash equivalents, restricted cash and short-term investments $ 759,412 $ — $ ( 10 ) $ 759,402 (1) Mutual funds held by the Company include Money Market Funds. The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy. (2) All short-term investments were classified as available-for-sale and the fair value approximates cost basis. The Company did not recognize any realized gains or losses on the sale of investments during the fiscal year ended 2023. 65 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 6. EQUITY INVESTMENTS Equity investments consisted of the following as of September 28, 2024 and September 30, 2023: As of (in thousands) September 28, 2024 September 30, 2023 Non-marketable equity securities $ 3,143 $ 716 Net Asset Value (“NAV”) (Private Equity Fund) : Equity investments in affiliated investment funds are valued based on the NAV reported by the investment fund in accordance with ASC Topic 820-10. Investments held by the affiliated investment fund include a diversified portfolio of investments in the global semiconductor industry. The Company receives distributions through the liquidation of the underlying investments by the affiliated investment fund. However, the period of time over which the underlying investments are expected to be liquidated is unknown. Additionally, the Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until March 18, 2032 unless dissolved earlier or extended by the General Partner. In accordance with ASC Topic 820-10, this investment is measured at fair value using the NAV per share (or its equivalent) practical expedient and has not been classified in the fair value hierarchy. As of September 28, 2024, the Company has funded $ 3.4 million into the affiliated investment fund and recognized an unrealized fair value loss of $ 0.3 million on the Consolidated Statements of Operations. The Company has recorded the amount of funded capital that has been called as an equity investment. NOTE 7. FAIR VALUE MEASUREMENTS Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3). Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis We measure certain financial assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during the fiscal year ended September 28, 2024. Fair Value Measurements on a Nonrecurring Basis Our non-financial assets such as intangible assets and property, plant and equipment are carried at cost unless impairment is deemed to have occurred. Fair Value of Financial Instruments Amounts reported as accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value. NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company’s international operations are exposed to changes in foreign exchange rates due to transactions denominated in currencies other than U.S. dollars. Most of the Company’s revenue and cost of materials are transacted in U.S. dollars. However, a significant amount of the Company’s operating expenses is denominated in foreign currencies, primarily in Singapore. The foreign currency exposure of our operating expenses is generally hedged with foreign exchange forward contracts. The Company’s foreign exchange risk management programs include using foreign exchange forward contracts with cash flow hedge accounting designation to hedge exposures to the variability in the U.S. dollar equivalent of forecasted non-U.S. dollar-denominated operating expenses. These instruments generally mature within twelve months . For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the Consolidated Statements of Operations as the impact of the hedged transaction. 66 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of derivative instruments on our Consolidated Balance Sheets as of September 28, 2024 and September 30, 2023 is as follows: As of (in thousands) September 28, 2024 September 30, 2023 Notional Amount Fair Value Asset Derivatives (1) Notional Amount Fair Value Liability Derivatives (2) Derivatives designated as hedging instruments: Foreign exchange forward contracts (3) $ 46,234 $ 1,521 $ 54,590 $ ( 723 ) Total derivatives $ 46,234 $ 1,521 $ 54,590 $ ( 723 ) (1) The fair value of derivative assets is measured using level 2 fair value inputs and is included in prepaid expenses and other current assets on our Consolidated Balance Sheets. (2) The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Balance Sheets. (3) Hedged amounts expected to be recognized into earnings within the next twelve months . The effect of derivative instruments designated as cash flow hedges in our Consolidated Statements of Operations for the fiscal years ended September 28, 2024 and September 30, 2023 was as follows: (in thousands) Fiscal 2024 2023 Foreign exchange forward contract in cash flow hedging relationships: Net gain recognized in OCI, net of tax (1) $ 1,799 $ 2,381 Net (loss)/gain reclassified from accumulated OCI into earnings, net of tax (2) $ ( 445 ) $ 870 (1) Net change in the fair value of the effective portion classified in OCI. (2) Effective portion classified as selling, general and administrative expense. NOTE 9. LEASES We have entered into various non-cancellable operating and finance lease agreements for certain of our offices, manufacturing, technology, sales support and service centers, equipment, and vehicles. We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor. Our lease terms may include one or more options to extend the lease terms, for periods from one year to 20 years, when it is reasonably certain that we will exercise that option. As of September 28, 2024, no option to extend the lease was recognized as right-of-use (“ROU”) assets and lease liabilities. We have lease agreements with lease and non-lease components, and non-lease components are accounted for separately and not included in our ROU assets and corresponding liabilities. We have elected not to present short-term leases on the Consolidated Balance Sheets as these leases have a lease term of 12 months or less at lease inception. Operating leases are included in operating ROU assets, current and non-current operating lease liabilities, and finance leases are included in property, plant and equipment, accrued expenses and other current liabilities, and other liabilities on the Consolidated Balance Sheets. As of September 28, 2024, our finance leases are not material. 67 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table shows the components of lease expense: (in thousands) Fiscal 2024 2023 2022 Operating lease expense (1) $ 10,015 10,746 8,625 (1) Operating lease expense includes short-term lease and variable lease expenses, which is immaterial for the fiscal year ended September 28, 2024. The following table shows the cash flows arising from lease transactions. Cash payments related to short-term leases are not included in the measurement of operating and finance lease liabilities, and, as such, are excluded from the amounts below: (in thousands) Fiscal 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 9,612 $ 9,314 $ 7,908 The following table shows the weighted-average lease terms and discount rates for operating leases: Fiscal 2024 2023 Operating leases: Weighted-average remaining lease term (in years): 7.3 7.7 Weighted-average discount rate: 7.2 % 6.7 % Future lease payments, excluding short-term leases, as of September 28, 2024, are detailed as follows: (in thousands) Operating leases Fiscal 2025 $ 10,371 Fiscal 2026 7,928 Fiscal 2027 5,585 Fiscal 2028 5,027 Fiscal 2029 5,078 Fiscal 2030 and thereafter 18,743 Total minimum lease payments 52,732 Less: Interest 11,769 Present value of lease obligations 40,963 Less: Current portion 7,718 Long-term portion of lease obligations $ 33,245 68 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 10. DEBT AND OTHER OBLIGATIONS Bank Guarantees On November 22, 2013, the Company obtained a $ 5.0 million credit facility with Citibank in connection with the issuance of bank guarantees for operational purposes. As of September 28, 2024 and September 30, 2023, the outstanding amount under the facility was $ 5.0 million and $ 3.1 million respectively. Credit Facilities On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company and one of its subsidiaries with an overdraft facility of up to $ 150 million (the “Overdraft Facility”) for general corporate purposes. Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days’ written demand by the Bank. Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the secured overnight financing rate (“SOFR”) plus a margin of 1.5 % per annum. The Overdraft Facility is an unsecured facility per the terms of the Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation, covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of two of its subsidiaries (the “Subsidiaries”), or encumber its assets with material security interests (including any pledge of monies in the Subsidiaries’ cash deposit account with the Bank). The Facility Agreements also contain customary events of default, including, without limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company and any breach of a representation or warranty under the Facility Agreements. As of September 28, 2024, there were no outstanding amounts under the Overdraft Facility. NOTE 11. SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS Share Repurchase Program On August 15, 2017, the Company's Board of Directors authorized a program (the "Program") to repurchase up to $ 100 million of the Company’s common stock on or before August 1, 2020. In 2018, 2019 and 2020, the Board of Directors increased the share repurchase authorization under the Program to $ 200 million, $ 300 million and $ 400 million, respectively. On March 3, 2022, the Board of Directors increased the share repurchase authorization under the Program by an additional $ 400 million to $ 800 million, and extended its duration through August 1, 2025. On November 17, 2023, the Company modified its written trading plan under Rule 10b5-1 of the Exchange Act, dated as of May 7, 2022, to facilitate repurchases under the Program. The modification provided for the purchase of up to approximately $ 169 million of the Company’s common stock from November 20, 2023 through August 1, 2025. The Program may be suspended or discontinued at any time and is funded using the Company’s available cash, cash equivalents and short-term investments. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations. During the fiscal year ended September 28, 2024, the Company repurchased a total of approximately 3,221.0 thousand shares of common stock at an aggregate cost of approximately $ 151.0 million. The stock repurchases were recorded in the periods they were delivered and accounted for as treasury stock in the Company’s Consolidated Balance Sheets. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital. If the Company reissues treasury stock at an amount below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings. As of September 28, 2024, our remaining stock repurchase authorization under the Program was approximately $ 30.3 million. 69 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Dividends On August 26, 2024, May 16, 2024, March 14, 2024 and November 15, 2023, the Board of Directors declared a quarterly dividend $ 0.20 per share of common stock, resulting in an aggregate dividend of $ 0.80 per share of common stock for the fiscal year ended September 28, 2024. The declaration of any future cash dividend is at the discretion of the Board of Directors, subject to applicable laws, and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company’s stockholders. Accumulated Other Comprehensive Income Changes in accumulated other comprehensive income (loss) by component for the year ended September 28, 2024: (in thousands) Cumulative Foreign Currency Translation Adjustment Pension Plan Adjustments Gain (Losses) on Derivative Instruments Total As of September 30, 2023 $ ( 20,178 ) $ ( 861 ) $ ( 723 ) $ ( 21,762 ) Other comprehensive income (loss) before reclassifications 7,263 ( 968 ) 1,799 8,094 Amount reclassified out of accumulated other comprehensive income (loss) — — 445 445 Tax effects ( 346 ) 147 — ( 199 ) Accumulated other comprehensive income (loss) 6,917 ( 821 ) 2,244 8,340 As of September 28, 2024 $ ( 13,261 ) $ ( 1,682 ) $ 1,521 $ ( 13,422 ) Equity-Based Compensation The Company has a stockholder-approved equity-based compensation plan, the 2021 Omnibus Incentive Plan (the “Plan”) from which employees and directors receive grants. As of September 28, 2024, 1.8 million shares of common stock are available for grant to the Company’s employees and directors under the Plan. • Relative TSR Performance Share Units (“Relative TSR PSUs”) entitle the employee to receive common stock of the Company on the award vesting date, typically the third anniversary of the grant date (or as soon as administratively practicable if later), if market performance objectives which measure relative total shareholder return (“TSR”) are attained. Relative TSR is calculated based upon the 90 -calendar day average price at the end of the performance period of the Company’s stock as compared to specific peer companies that comprise the GICS (45301020) Semiconductor Index. TSR is measured for the Company and each peer company over a performance period, which is generally three years . Vesting percentages range from 0 % to 200 % of awards granted. The provisions of the Relative TSR PSUs are reflected in the grant date fair value of the award; therefore, compensation expense is recognized regardless of whether the market condition is ultimately satisfied. Compensation expense is reversed if the award is forfeited prior to the vesting date. • Revenue Growth Performance Share Units (“Growth PSUs”) entitle the employee to receive common stock of the Company on the award vesting date, typically the third anniversary of the grant date (or as soon as administratively practicable if later), based on organic revenue growth objectives and relative growth performance against named competitors as set by the Management Development and Compensation Committee (“MDCC”) of the Company’s Board of Directors. Organic revenue growth is calculated by averaging revenue growth (net of revenues from acquisitions) over a performance period, which is generally three years . Revenues from acquisitions will be included in the calculation after four fiscal quarters after acquisition. Any portion of the grant that does not meet the revenue growth objectives and relative growth performance is forfeited. Vesting percentages range from 0 % to 200 % of awards granted. 70 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) • In general, Time-based Restricted Share Units (“Time-based RSUs”) awarded to employees vest ratably over a three-year period on the anniversary of the grant date provided the employee remains employed by the Company. Equity-based compensation expense recognized in the Consolidated Statements of Operations for fiscal 2024, 2023 and 2022 was based upon awards ultimately expected to vest, with forfeiture accounted for when they occur. The following table reflects the total equity-based compensation expense, which includes Relative TSR PSUs, Time-based RSUs, Growth PSUs, and common stock, included in the Consolidated Statements of Operations for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Cost of sales $ 1,277 $ 1,192 $ 960 Selling, general and administrative 18,524 16,239 13,911 Research and development 7,090 5,313 4,115 Total equity-based compensation expense $ 26,891 $ 22,744 $ 18,986 The following table reflects the equity-based compensation expense, by type of award, for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Relative TSR PSUs 5,856 4,949 4,255 Time-based RSUs 17,683 14,304 11,655 Growth PSUs 2,093 2,491 2,127 Common stock 1,259 1,000 949 Total equity-based compensation expense $ 26,891 $ 22,744 $ 18,986 Equity-Based Compensation: Relative TSR PSUs The following table reflects the Relative TSR PSUs activity for fiscal 2024: Number of shares (in thousands) Weighted average grant date fair value per share Outstanding as of September 30, 2023 367 $ 41.09 Granted 232 $ 36.88 Forfeited or expired ( 17 ) $ 45.08 Vested ( 246 ) $ 28.08 Outstanding as of September 28, 2024 336 $ 44.91 Fiscal (in thousands, except fair value per share) 2024 2023 2022 Relative TSR PSUs granted 232 187 152 Weighted-average grant-date fair value per share $ 36.88 $ 48.35 $ 52.18 71 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table reflects the assumptions used to calculate compensation expense related to the Company’s Relative TSR PSUs issued during fiscal 2024, 2023 and 2022: Fiscal 2024 2023 2022 Grant price $ 47.44 $ 37.50 $ 49.20 Expected dividend yield 1.60 % 1.81 % 1.14 % Expected stock price volatility 47.27 % 53.79 % 48.50 % Risk-free interest rate 4.53 % 4.42 % 0.68 % Equity-Based Compensation: Time-based RSUs The following table reflects the Time-based RSUs activity for fiscal 2024: Number of shares (in thousands) Weighted average grant date fair value per share Outstanding as of September 30, 2023 832 $ 37.95 Granted 512 $ 47.42 Forfeited or expired ( 49 ) $ 43.88 Vested ( 407 ) $ 35.55 Outstanding as of September 28, 2024 888 $ 44.18 Fiscal (in thousands, except fair value per share) 2024 2023 2022 Time-based RSUs granted 512 513 301 Weighted-average grant-date fair value per share $ 47.42 $ 37.64 $ 49.47 Equity-Based Compensation: Growth PSUs The following table reflects the Growth PSUs activity for fiscal 2024: Number of shares (in thousands) Weighted average grant date fair value per share Outstanding as of September 30, 2023 122 $ 34.85 Granted 49 $ 23.51 Forfeited or expired ( 3 ) $ 42.48 Vested ( 99 ) $ 23.94 Outstanding as of September 28, 2024 69 $ 42.21 Fiscal (in thousands, except fair value per share) 2024 2023 2022 Growth PSUs granted 49 91 79 Weighted-average grant-date fair value per share $ 23.51 $ 37.55 $ 49.26 The total fair value of RSUs and PSUs, as of their respective vesting dates, during the years ended September 28, 2024, September 30, 2023 and October 1, 2022, was $ 36.4 million, $ 28.9 million and $ 41.3 million, respectively. 72 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Equity-Based Compensation: Non-Employee Directors The 2021 Equity Plan provides for the grant of common stock to each non-employee director upon initial election to the board and on the first business day of each calendar quarter while serving on the board. The grant to a non-employee director upon initial election to the board is that number of common stock closest in value to, without exceeding, $ 120,000 . The quarterly grant to a non-employee director upon the first business day of each calendar quarter is that number of common stock closest in value to, without exceeding, $ 39,500 . The following table reflects shares of common stock issued to non-employee directors and the corresponding fair value for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Number of common stock issued 25 21 18 Fair value based upon market price at time of issue $ 1,259 $ 1,000 $ 949 Pension Plan We have pension plans available to employees at various foreign sites. As of September 28, 2024 and September 30, 2023, the defined benefits pension obligations of our plans were $ 5.1 million and $ 4.0 million respectively. Other Plans Some of the Company’s other foreign subsidiaries have retirement plans that are integrated with and supplement the benefits provided by laws of the various countries. These other plans are not required to report nor do they determine the actuarial present value of accumulated benefits or net assets available for plan benefits as they are defined contribution plans. NOTE 12. REVENUE AND CONTRACT BALANCES The Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay. Service revenue is generally recognized over time as the services are performed. For the fiscal years ended September 28, 2024, September 30, 2023 and October 1, 2022, service revenue is not material. Please refer to Note 1: Basis of Presentation — Revenue Recognition , for additional disclosure on the Company’s revenue recognition policy. The Company reports revenue based on our reportable segments and end markets, which provides information about how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Please refer to Note 15: Segment Information, for disclosure of revenue by segments and end markets. Contract Balances As of (in thousands) September 28, 2024 September 30, 2023 October 1, 2022 Contract assets $ — $ 10,181 $ 26,317 Contract liabilities $ 18,646 $ 4,797 $ 3,160 Our contract assets relate to our rights to consideration for revenue with collection dependent on events other than the passage of time, such as the achievement of specified payment milestones. The contract assets will be transferred to net account receivables as our right to consideration for these contract assets become unconditional. Contracts assets are reported in the accompanying Consolidated Balance Sheets within prepaid expenses and other current assets. The change in contract assets during the fiscal year ended September 28, 2024 was mainly due to $ 10.2 million of contract assets reclassified to accounts receivable, net, as our right to consideration for these contract assets became unconditional. 73 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Our contract liabilities are primarily related to payments received in advance of satisfying performance obligations and obligations from customer credit programs, and are reported in the accompanying Consolidated Balance Sheets within accrued expenses and other current liabilities. Revenue recognized during fiscal year 2024 that was included in deferred revenue as of September 30, 2023 was $ 4.5 million. Revenue recognized during fiscal year 2023 that was included in deferred revenue as of October 1, 2022 was $ 2.9 million. NOTE 13. (LOSS) EARNINGS PER SHARE Basic (loss)/income per share is calculated using the weighted average number of shares of common stock outstanding during the period. Restricted stock are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. For fiscal 2024, restricted stock were excluded due to the net loss the Company incurred during the year. The following table reflects a reconciliation of the shares used in the basic and diluted net (loss)/income per share computation for fiscal 2024, 2023 and 2022: Fiscal (in thousands, except per share) 2024 2023 2022 Basic Diluted Basic Diluted Basic Diluted NUMERATOR: Net (loss) / income $ ( 69,006 ) $ ( 69,006 ) $ 57,148 $ 57,148 $ 433,545 $ 433,545 DENOMINATOR: Weighted average shares outstanding - Basic 55,613 55,613 56,682 56,682 60,164 60,164 Dilutive effect of Equity Plans — 866 1,018 Weighted average shares outstanding - Diluted 55,613 57,548 61,182 EPS: Net (loss) / income per share - Basic $ ( 1.24 ) $ ( 1.24 ) $ 1.01 $ 1.01 $ 7.21 $ 7.21 Effect of dilutive shares $ — $ ( 0.02 ) $ ( 0.12 ) Net (loss) / income per share - Diluted $ ( 1.24 ) $ 0.99 $ 7.09 Anti-dilutive shares (1) 467 15 1 (1) Represents the Relative TSR PSUs and Growth PSUs that are excluded from the calculation of diluted earnings per share for fiscal 2024, 2023 and 2022 as the effect would have been anti-dilutive. 74 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 14. INCOME TAXES The following table reflects the U.S. and foreign income (loss) before income taxes for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 United States $ ( 8,522 ) $ ( 5,635 ) $ ( 11,415 ) Foreign ( 49,833 ) 77,836 488,403 Income before income taxes $ ( 58,355 ) $ 72,201 $ 476,988 The following table reflects the current and deferred components of provision for (benefit from) income taxes for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Current: Federal $ ( 1,881 ) $ 10,412 $ 14,975 State 232 ( 128 ) 246 Foreign 2,616 8,830 37,448 Deferred: Federal 101 1,304 ( 5,809 ) State — — — Foreign 9,583 ( 5,365 ) ( 3,417 ) Provision for income taxes $ 10,651 $ 15,053 $ 43,443 The following table reconciles the provision for (benefit from) income taxes with the expected income tax provision computed based on the applicable U.S. federal statutory tax rate for fiscal 2024, 2023 and 2022: Fiscal (dollar amounts in thousands) 2024 2023 2022 Expected income tax provision based on the U.S. federal statutory tax rate $ ( 12,255 ) $ 15,162 $ 100,212 Effect of earnings of foreign subsidiaries subject to different tax rates ( 3,619 ) ( 8,448 ) ( 17,936 ) Benefit from tax incentives 980 ( 11,198 ) ( 50,113 ) Benefit from research and development tax credits ( 4,132 ) ( 4,038 ) ( 2,995 ) Benefit from foreign tax credits ( 1,505 ) ( 7,834 ) ( 26,021 ) Valuation allowance 18,543 3,127 ( 5,830 ) Foreign operations (Deemed income, taxes on undistributed foreign earnings, and withholding taxes) 7,268 24,450 45,421 Non-deductible items (1) 3,622 1,900 267 Goodwill impairment — 2,517 — Other, net (1) 1,749 ( 585 ) 438 Provision for income taxes $ 10,651 $ 15,053 $ 43,443 Effective tax rate ( 18.3 ) % 20.8 % 9.1 % (1) Certain balances in fiscals 2023 and 2022 have been reclassified to conform to the current period presentation. These reclassifications have no impact to the consolidated financial statements in the respective fiscal periods. 75 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company recorded a tax benefit from the U.S. Tax Court opinion in Varian Medical Systems, Inc. v. Commissioner relating to the U.S. TCJA one-time transition tax of $ 6.5 million in fiscal 2024. As of September 28, 2024, a large portion of the Company’s undistributed foreign earnings are not considered to be indefinitely reinvested outside the U.S. and are expected to be available for use in the U.S. without incurring additional U.S. income tax. Determination of the amount of unrecognized deferred tax liabilities related to the indefinitely reinvested undistributed foreign earnings is not practicable. Further, we operate in a number of foreign jurisdictions, including Singapore, where we have a tax incentive that allows for a reduced tax rate on certain classes of income, provided the Company meets certain employment and investment conditions through the expiration date in fiscal 2025. In fiscal 2024, 2023 and 2022, the tax incentive arrangement helped to reduce the Company’s provision for income taxes by $( 1.0 ) million or $( 0.02 ) per share, $ 11.2 million or $ 0.19 per share and $ 50.1 million or $ 0.82 per share, respectively. The following table reflects the deferred tax balances based on the tax effects of cumulative temporary differences for fiscal 2024 and 2023: Fiscal (in thousands) 2024 2023 Accruals and reserves $ 20,149 $ 13,118 Capitalized Research 7,903 12,529 Tax credit carryforwards 5,537 5,026 Net operating loss carryforwards 43,195 26,607 Gross deferred tax assets $ 76,784 $ 57,280 Valuation allowance $ ( 45,462 ) $ ( 21,483 ) Deferred tax assets, net of valuation allowance $ 31,322 $ 35,797 Fixed and intangible assets $ ( 20,055 ) $ ( 16,357 ) Taxes on undistributed foreign earnings ( 27,961 ) ( 25,153 ) Deferred tax liabilities $ ( 48,016 ) $ ( 41,510 ) Net deferred tax liabilities $ ( 16,694 ) $ ( 5,713 ) Reported as Deferred tax assets $ 17,900 $ 31,551 Deferred tax liabilities ( 34,594 ) ( 37,264 ) Net deferred tax liabilities $ ( 16,694 ) $ ( 5,713 ) As of September 28, 2024, the Company has foreign net operating loss carryforwards of $ 153.9 million, state net operating loss carryforwards of $ 40.2 million, and U.S. federal and state tax credit carryforwards of $ 8.6 million that can be used to offset future income tax obligations. These net operating loss and tax credit carryforwards can be utilized prior to their expiration dates in fiscal years 2025 through 2043, except for certain credits and foreign net operating losses that can be carried forward indefinitely. The Company has recorded valuation allowances against certain foreign and state net operating loss carryforwards and state tax credits which are expected to expire unutilized. 76 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table reconciles the beginning and ending balances of the Company’s unrecognized tax benefit, excluding related accrued interest and penalties, for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Unrecognized tax benefit, beginning of year $ 16,619 $ 16,623 $ 14,922 Additions for tax positions, current year 1,931 1,493 2,288 Reductions for tax positions, prior year ( 847 ) ( 1,497 ) ( 587 ) Unrecognized tax benefit, end of year $ 17,703 $ 16,619 $ 16,623 The Company recognizes interest and penalties related to potential income tax liabilities as a component of unrecognized tax benefit and in provision for income taxes. The amount of interest and penalties related to unrecognized tax benefit recorded in fiscal 2024 provision for income taxes is not material. As of September 28, 2024, the Company has recognized $ 3.7 million of accrued interest and penalties related to unrecognized tax benefit within the income tax payable for uncertain tax positions and approximately $ 19.7 million of unrecognized tax benefit, including related interest and penalties, that if recognized, would impact the Company’s effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain uncertain tax positions will increase or decrease during the next 12 months due to the expected lapse of statutes of limitation and/or settlements of tax examinations. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, we cannot practicably estimate the financial outcomes of these examinations. The Company files a U.S. federal income tax return, as well as income tax returns in various state and foreign jurisdictions. For U.S. federal income tax returns purposes, tax years from fiscal 2020 remain subject to examination. For most state tax returns, tax years following fiscal 2005 remain subject to examination as a result of the generation of net operating loss carryforwards. In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 4 to 6 years. The Company’s tax returns are currently under examination by tax authorities in multiple state and foreign jurisdictions. The Company believes that adequate provisions have been made for any adjustments that may result from the examination. NOTE 15. SEGMENT INFORMATION Reportable segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (the “CODM”) in deciding how to allocate resources and assess performance. The Company’s Chief Executive Officer is the CODM. The CODM does not review discrete asset information. The Company operates four reportable segments consisting of: (1) Ball Bonding Equipment, (2) Wedge Bonding Equipment, (3) Advanced Solutions, and (4) Aftermarket Products and Services (“APS”). The four reportable segments are disclosed below: Ball Bonding Equipment : Reflects the results of the Company from the design, development, manufacture and sale of ball bonding equipment and wafer level bonding equipment. Wedge Bonding Equipment : Reflects the results of the Company from the design, development, manufacture and sale of wedge and wedge-related bonding equipment. Advanced Solutions : Reflects the results of the Company from the design, development, manufacture and sale of certain advanced display, die-attach and thermocompression systems and solutions. APS : Reflects the results of the Company from the design, development, manufacture and sale of a variety of tools, spares and services for our equipment. 77 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Any other operating segments that have not been aggregated within the reportable segments described above which do not meet the quantitative threshold to be disclosed as a separate reportable segment have been grouped within an “All Others” category. This group is reflective of the results of the Company from the design, development, manufacture and sale of certain advanced display, advanced dispense, electronics assembly, die-attach and lithography systems and solutions. Results for the “All Others” category and other corporate expenses are included as a reconciling item between the Company’s reportable segments and its consolidated results of operations. The following table reflects the operating information by reportable segment for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Net revenue: Ball Bonding Equipment $ 357,833 $ 287,465 $ 909,428 Wedge Bonding Equipment 105,826 175,550 194,086 Advanced Solutions 52,876 72,256 94,683 APS 160,009 160,718 197,152 All Others 29,688 46,502 108,271 Net revenue 706,232 742,491 1,503,620 Income/(loss) from operations: Ball Bonding Equipment $ 113,000 81,929 385,276 Wedge Bonding Equipment 19,575 63,088 66,649 Advanced Solutions ( 155,350 ) ( 32,530 ) ( 15,389 ) APS 49,744 47,654 82,473 All Others ( 33,527 ) ( 36,797 ) 25,732 Corporate Expenses ( 85,938 ) ( 83,907 ) ( 74,669 ) (Loss)/Income from Operations ( 92,496 ) 39,437 470,072 We have considered: (1) information that is regularly reviewed by our CODM in evaluating financial performance and how to allocate resources; and (2) other financial data, including information that we include in our earnings releases but which is not included in our financial statements, to disaggregate revenues by end markets served. The principal category we use to disaggregate revenues is by the end markets served. The following table reflects the net revenue by end markets served for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 General Semiconductor $ 333,788 $ 333,937 $ 843,763 Automotive & Industrial 117,769 175,249 198,138 LED 21,076 50,166 137,077 Memory 73,590 22,421 127,490 APS 160,009 160,718 197,152 Total revenue $ 706,232 $ 742,491 $ 1,503,620 78 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables reflect the capital expenditures, depreciation and amortization expense by reportable segment for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Capital expenditures: Ball Bonding Equipment $ 1,548 $ 1,087 $ 978 Wedge Bonding Equipment 699 436 1,450 Advanced Solutions 804 30,522 19,036 APS 1,177 5,298 4,964 All Others $ 891 $ 658 $ 1,364 Corporate Expenses 8,617 9,701 4,441 Capital expenditures $ 13,736 $ 47,702 $ 32,233 Fiscal (in thousands) 2024 2023 2022 Depreciation expense: Ball Bonding Equipment $ 1,363 $ 1,538 $ 1,398 Wedge Bonding Equipment 1,003 1,169 981 Advanced Solutions 5,945 7,706 2,034 APS 5,352 6,166 6,632 All Others $ 1,577 1,505 1,047 Corporate Expenses 4,307 4,674 4,284 Depreciation expense $ 19,547 $ 22,758 $ 16,376 Fiscal (in thousands) 2024 2023 2022 Amortization expense: Ball Bonding Equipment $ — $ — $ — Wedge Bonding Equipment — — — Advanced Solutions — — — APS 917 896 994 All Others $ 3,904 4,837 3,557 Corporate Expenses 367 366 366 Amortization expense $ 5,188 $ 6,099 $ 4,917 79 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Geographical information The following tables reflect destination sales to unaffiliated customers by country and long-lived assets by country for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Destination sales to unaffiliated customers: China $ 416,695 $ 335,393 $ 855,345 United States 66,147 65,705 83,906 Taiwan 59,288 66,358 123,995 Malaysia 54,275 64,013 126,520 Japan 12,778 35,849 18,092 Philippines 10,585 31,527 44,510 Korea 11,563 17,977 87,647 Hong Kong 11,743 13,933 27,216 All other (1) 63,158 111,736 136,389 Total destination sales to unaffiliated customers $ 706,232 $ 742,491 $ 1,503,620 Fiscal (in thousands) 2024 2023 Long-lived assets: Singapore $ 47,035 $ 95,489 United States 29,166 24,894 China 15,635 17,717 Israel 7,822 9,264 All others 12,664 13,774 Total long-lived assets $ 112,322 $ 161,138 NOTE 16. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS Warranty Expense The Company’s equipment is generally shipped with a one-year warranty against manufacturing defects. The Company establishes reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management’s estimate of future warranty costs, including product part replacement, freight charges and related labor costs expected to be incurred to correct product failures during the warranty period. The following table reflects the reserve for product warranty activity for fiscal 2024, 2023 and 2022: Fiscal (in thousands) 2024 2023 2022 Reserve for warranty, beginning of period $ 10,457 $ 13,443 $ 16,961 Provision for warranty 12,824 12,850 12,907 Utilization of reserve ( 13,370 ) ( 15,836 ) ( 16,425 ) Reserve for warranty, end of period $ 9,911 $ 10,457 $ 13,443 80 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Other Commitments and Contingencies The following table reflects the obligations not reflected on the Consolidated Balance Sheets as of September 28, 2024: Payments due by fiscal year (in thousands) Total 2025 2026 2027 2028 Thereafter Inventory purchase obligation (1) $ 126,078 $ 126,078 $ — $ — $ — $ — (1) The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancelable and a portion may have varying penalties and charges in the event of cancellation. From time to time, the Company is party to or the target of lawsuits, claims, investigations and proceedings, including for personal injury, intellectual property, commercial, contract, and employment matters, which are handled and defended in the ordinary course of business. The Company accrues a contingent loss liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When a single amount cannot be reasonably estimated but the cost can be estimated within a range, the Company accrues the minimum amount. The Company expenses legal costs, including those expected to be incurred in connection with a loss contingency, as incurred. Unfunded Capital Commitments As of September 28, 2024, the Company also has an obligation to fund uncalled capital commitments of approximately $ 6.6 million, as and when required, in relation to its investment in a private equity fund. Concentrations There were no customers with sales representing more than 10% of our net revenue in fiscal 2024, 2023 and 2022. The following table reflects the significant customer concentrations as a percentage of total accounts receivable as of September 28, 2024 and September 30, 2023: As of September 28, 2024 September 30, 2023 Tianshui Huatian Technology Co., Ltd. 17.2 % * Forehope Semiconductor Group 15.7 % * * Represents less than 10% of total accounts receivables NOTE 17. RESTRUCTURING AND CANCELLATION OF PROJECT Cancellation of Project The Company was engaged by one of its customers (the "Customer") to support the Customer with the development and future mass production of certain technologies relating to advanced display (the "Project"), which project was previously referred to as Project W. In connection with the Customer's strategic review of its business, the Customer informed the Company that it cancelled the Project. In connection with the foregoing, on March 11, 2024, the Company committed to a plan to cease operational activities and commence wind down activities concerning various aspects of Project W. As at September 28, 2024, the wind down activities have been substantially completed. Wind down charges as a result of these activities incurred during fiscal 2024 were accounted in accordance with ASC 330, Inventory. The Company also performed the impairment tests of all associated assets with reference to the guidance under ASC 330, Inventory and ASC 360, Property, Plant and Equipment. The wind down charges and impairments are primarily recorded in the Advanced Solutions reportable segment. Based on current information available, we do not expect any material future charges with respect to the cancellation of Project W that will be classified as exit and disposal costs under the guidance of ASC 420, Exit or Disposal Cost Obligations. We plan to fund the cash costs through existing cash balances. 81 Table of Contents KULICKE AND SOFFA INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) On November 4, 2024, the Company and the Customer entered into a written agreement pursuant to which the Customer has agreed to reimburse the Company for certain costs and expenses that the Company incurred in connection with the Project. The aggregate amount of the reimbursement that the Customer has agreed to pay to the Company pursuant to the agreement is $ 86.2 million. The following table presents a summary of the charges related to the cancellation of Project W incurred for the year ended September 28, 2024. (in thousands) Total Recognized as of Charges Statement of Operations Classification September 28, 2024 Inventory write-down Cost of sales $ 57,333 Purchase Order cancellation charges Cost of sales $ 2,931 Impairment charges relating to long-lived assets Impairment charges $ 44,472 $ 104,736 Inventory write-down In determining the value of our inventory, we consider indicators that net realizable value may be lower than cost based upon projections about future consumption, and market conditions. We recorded a write-down to inventory totaling $ 57.3 million with a corresponding increase to cost of sales in our Consolidated Statements of Operations for fiscal 2024. Purchase Order cancellation charges $ 2.9 million of purchase order cancellation charges were included in the cost of sales in our Consolidated Statements of Operations for fiscal 2024. These costs relate to a net loss on firm purchase commitments for goods for inventory in accordance with ASC 330. Impairment charges relating to long-lived assets In determining the fair value of the long-lived assets, the estimated future cash flows were projected as zero. Accordingly, as of September 28, 2024, we recorded a full impairment of the long-lived assets, resulting in an impairment charge of $ 38.0 million related to property, plant and equipment primarily pertaining to leasehold improvements, $ 3.0 million related to the ROU assets and $ 3.5 million related to Asset Retirement Obligation (ARO). Restructuring In March 2024, the Company implemented a restructuring program to reallocate resources within the Company to enhance its performance, boost productivity and drive efficiency initiatives. As a result, we accounted for the related employee termination costs in accordance with ASC 712, Compensation—Nonretirement Postemployment Benefits. For fiscal 2024, employee termination costs of $ 2.9 million related to other severance and employee costs incurred as a result of the restructuring program, primarily pertaining to ongoing employee benefit arrangements, were recorded within "Selling, general and administrative" in the Consolidated Statements of Operations. In September 2024, the Company also implemented a restructuring program as part of our efforts to centralize global manufacturing and supply chain operations. The accrued costs amounting to $ 2.2 million, which pertain to ongoing employee benefit arrangements arising from the restructuring program as of September 28, 2024 are accounted in accordance with ASC 712 and is expected to be paid by the end of fiscal year 2025. The costs were recorded within " Selling, general and administrative " in the Consolidated Statement of Operations. The Company also expects to record costs amounting to $ 1.8 million in fiscal year 2025, pertaining to one-time benefit arrangements in accordance with ASC 420. 82 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.