UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 29, 2017April 1, 2022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __ to __
Commission File Number: 001‑37961001-37961
ICHOR HOLDINGS, LTD.
(Exact Name of Registrant as Specified in its Charter)
Cayman Islands | Not Applicable |
( State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
3185 Laurelview Ct. Fremont, CA | 94538 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (510) 897‑5200897-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Ordinary Shares, par value $0.0001 | ICHR | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer |
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| Accelerated filer |
| ☐ |
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| |||
Non‑accelerated filer |
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| Small reporting company |
| ☐ |
Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
As of NovemberMay 6, 2017,2022, the registrant had 25,588,87228,630,489 ordinary shares, $0.0001 par value per share, outstanding.
TABLE OF CONTENTS
PART I |
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|
ITEM 1. | 1 | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 3. |
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ITEM 4. |
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PART II |
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ITEM 1. |
| |
ITEM 1A. |
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ITEM 2. |
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ITEM 3. |
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ITEM 4. |
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ITEM 5. |
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ITEM 6. |
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
ICHOR HOLDINGS, LTD.
(dollars in thousands, except share and per share data)amounts)
(unaudited)
|
| September 29, 2017 |
|
| December 30, 2016 |
|
| April 1, 2022 |
|
| December 31, 2021 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| $ | 41,987 |
|
| $ | 50,854 |
| ||||||||
Restricted cash |
|
| 861 |
|
|
| 1,794 |
| ||||||||
Cash and cash equivalents |
| $ | 34,516 |
|
| $ | 75,495 |
| ||||||||
Accounts receivable, net |
|
| 59,351 |
|
|
| 26,401 |
|
|
| 153,534 |
|
|
| 142,990 |
|
Inventories, net |
|
| 110,632 |
|
|
| 70,881 |
| ||||||||
Inventories |
|
| 263,851 |
|
|
| 236,133 |
| ||||||||
Prepaid expenses and other current assets |
|
| 3,617 |
|
|
| 7,061 |
|
|
| 7,662 |
|
|
| 8,153 |
|
Current assets from discontinued operations |
|
| 21 |
|
|
| 99 |
| ||||||||
Total current assets |
|
| 216,469 |
|
|
| 157,090 |
|
|
| 459,563 |
|
|
| 462,771 |
|
Property and equipment, net |
|
| 16,748 |
|
|
| 12,018 |
|
|
| 86,003 |
|
|
| 85,204 |
|
Operating lease right-of-use assets |
|
| 34,054 |
|
|
| 29,790 |
| ||||||||
Other noncurrent assets |
|
| 1,677 |
|
|
| 3,574 |
|
|
| 12,110 |
|
|
| 9,166 |
|
Deferred tax assets |
|
| 1,388 |
|
|
| 570 |
| ||||||||
Deferred tax assets, net |
|
| 8,153 |
|
|
| 8,116 |
| ||||||||
Intangible assets, net |
|
| 38,468 |
|
|
| 32,146 |
|
|
| 84,578 |
|
|
| 89,927 |
|
Goodwill |
|
| 95,028 |
|
|
| 77,093 |
|
|
| 335,902 |
|
|
| 335,902 |
|
Total assets |
| $ | 369,778 |
|
| $ | 282,491 |
|
| $ | 1,020,363 |
|
| $ | 1,020,876 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 91,553 |
|
| $ | 88,531 |
|
| $ | 142,866 |
|
| $ | 159,727 |
|
Accrued liabilities |
|
| 7,179 |
|
|
| 6,554 |
|
|
| 21,661 |
|
|
| 19,066 |
|
Other current liabilities |
|
| 5,897 |
|
|
| 5,421 |
|
|
| 14,185 |
|
|
| 14,377 |
|
Current portion of long-term debt |
|
| 1,180 |
|
|
| — |
|
|
| 7,500 |
|
|
| 7,500 |
|
Current liabilities from discontinued operations |
|
| 626 |
|
|
| 564 |
| ||||||||
Current portion of lease liabilities |
|
| 7,854 |
|
|
| 7,633 |
| ||||||||
Total current liabilities |
|
| 106,435 |
|
|
| 101,070 |
|
|
| 194,066 |
|
|
| 208,303 |
|
Long-term debt, less current portion, net |
|
| 66,562 |
|
|
| 37,944 |
|
|
| 283,495 |
|
|
| 285,253 |
|
Deferred tax liabilities |
|
| 440 |
|
|
| 606 |
| ||||||||
Lease liabilities, less current portion |
|
| 26,563 |
|
|
| 22,354 |
| ||||||||
Deferred tax liabilities, net |
|
| 38 |
|
|
| 38 |
| ||||||||
Other non-current liabilities |
|
| 2,516 |
|
|
| 1,173 |
|
|
| 4,372 |
|
|
| 4,213 |
|
Non-current liabilities from discontinued operations |
|
| 31 |
|
|
| 39 |
| ||||||||
Total liabilities |
|
| 175,984 |
|
|
| 140,832 |
|
|
| 508,534 |
|
|
| 520,161 |
|
Shareholders’ equity |
|
|
|
|
|
|
|
| ||||||||
Preferred shares ($0.0001 par value; 20,000,000 shares authorized; no shares issued and outstanding) |
|
| — |
|
|
| — |
| ||||||||
Ordinary shares ($0.0001 par value; 200,000,000 shares authorized; 25,537,585 and 23,857,381 shares issued and outstanding, respectively) |
|
| 3 |
|
|
| 2 |
| ||||||||
Shareholders’ equity: |
|
|
|
|
|
|
|
| ||||||||
Preferred shares ($0.0001 par value; 20,000,000 shares authorized; 0 shares issued and outstanding) |
|
| — |
|
|
| — |
| ||||||||
Ordinary shares ($0.0001 par value; 200,000,000 shares authorized; 28,628,907 and 28,551,160 shares outstanding, respectively; 33,066,346 and 32,988,599 shares issued, respectively) |
|
| 3 |
|
|
| 3 |
| ||||||||
Additional paid in capital |
|
| 211,193 |
|
|
| 196,049 |
|
|
| 420,513 |
|
|
| 417,438 |
|
Accumulated deficit |
|
| (17,402 | ) |
|
| (54,392 | ) | ||||||||
Treasury shares at cost (4,437,439 shares) |
|
| (91,578 | ) |
|
| (91,578 | ) | ||||||||
Retained earnings |
|
| 182,891 |
|
|
| 174,852 |
| ||||||||
Total shareholders’ equity |
|
| 193,794 |
|
|
| 141,659 |
|
|
| 511,829 |
|
|
| 500,715 |
|
Total liabilities and shareholders’ equity |
| $ | 369,778 |
|
| $ | 282,491 |
|
| $ | 1,020,363 |
|
| $ | 1,020,876 |
|
See accompanying notes.
1
Consolidated Statements of Operations
(dollars in thousands, except share and per share data)amounts)
(unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||||||
Net sales |
| $ | 164,519 |
|
| $ | 105,687 |
|
| $ | 472,956 |
|
| $ | 274,339 |
|
| $ | 293,146 |
|
| $ | 264,566 |
|
Cost of sales |
|
| 140,323 |
|
|
| 88,802 |
|
|
| 401,239 |
|
|
| 230,349 |
|
|
| 249,214 |
|
|
| 225,054 |
|
Gross profit |
|
| 24,196 |
|
|
| 16,885 |
|
|
| 71,717 |
|
|
| 43,990 |
|
|
| 43,932 |
|
|
| 39,512 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 1,992 |
|
|
| 1,564 |
|
|
| 5,686 |
|
|
| 4,229 |
|
|
| 4,851 |
|
|
| 3,515 |
|
Selling, general, and administrative |
|
| 11,430 |
|
|
| 6,782 |
|
|
| 26,272 |
|
|
| 20,329 |
|
|
| 23,267 |
|
|
| 14,349 |
|
Amortization of intangible assets |
|
| 2,220 |
|
|
| 1,804 |
|
|
| 5,818 |
|
|
| 5,210 |
|
|
| 5,349 |
|
|
| 3,391 |
|
Total operating expenses |
|
| 15,642 |
|
|
| 10,150 |
|
|
| 37,776 |
|
|
| 29,768 |
|
|
| 33,467 |
|
|
| 21,255 |
|
Operating income |
|
| 8,554 |
|
|
| 6,735 |
|
|
| 33,941 |
|
|
| 14,222 |
|
|
| 10,465 |
|
|
| 18,257 |
|
Interest expense, net |
|
| 739 |
|
|
| 1,183 |
|
|
| 2,104 |
|
|
| 3,245 |
|
|
| 1,532 |
|
|
| 1,919 |
|
Other expense (income), net |
|
| 73 |
|
|
| (241 | ) |
|
| (325) |
|
|
| (384 | ) | ||||||||
Income from continuing operations before income taxes |
|
| 7,742 |
|
|
| 5,793 |
|
|
| 32,162 |
|
|
| 11,361 |
| ||||||||
Income tax benefit from continuing operations |
|
| (6,556 | ) |
|
| (1,888 | ) |
|
| (5,558 | ) |
|
| (1,427 | ) | ||||||||
Net income from continuing operations |
|
| 14,298 |
|
|
| 7,681 |
|
|
| 37,720 |
|
|
| 12,788 |
| ||||||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income (loss) from discontinued operations before taxes |
|
| — |
|
|
| 16 |
|
|
| (721 | ) |
|
| (4,013 | ) | ||||||||
Income tax expense from discontinued operations |
|
| 8 |
|
|
| 23 |
|
|
| 9 |
|
|
| 26 |
| ||||||||
Net loss from discontinued operations |
|
| (8 | ) |
|
| (7 | ) |
|
| (730 | ) |
|
| (4,039 | ) | ||||||||
Other expense, net |
|
| 84 |
|
|
| 185 |
| ||||||||||||||||
Income before income taxes |
|
| 8,849 |
|
|
| 16,153 |
| ||||||||||||||||
Income tax expense |
|
| 810 |
|
|
| 1,515 |
| ||||||||||||||||
Net income |
|
| 14,290 |
|
|
| 7,674 |
|
|
| 36,990 |
|
|
| 8,749 |
|
| $ | 8,039 |
|
| $ | 14,638 |
|
Less: Undistributed earnings attributable to preferred shareholders |
|
| — |
|
|
| (7,628 | ) |
|
| — |
|
|
| (8,707 | ) | ||||||||
Net income attributable to ordinary shareholders |
| $ | 14,290 |
|
| $ | 46 |
|
| $ | 36,990 |
|
| $ | 42 |
| ||||||||
Net income per share from continuing operations attributable to ordinary shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income per share: |
|
|
|
|
|
|
|
| ||||||||||||||||
Basic |
| $ | 0.57 |
|
| $ | 0.43 |
|
| $ | 1.51 |
|
| $ | 0.72 |
|
| $ | 0.28 |
|
| $ | 0.52 |
|
Diluted |
| $ | 0.54 |
|
| $ | 0.08 |
|
| $ | 1.45 |
|
| $ | 0.16 |
|
| $ | 0.28 |
|
| $ | 0.51 |
|
Net income per share attributable to ordinary shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shares used to compute net income per share: |
|
|
|
|
|
|
|
| ||||||||||||||||
Basic |
| $ | 0.57 |
|
| $ | 0.43 |
|
| $ | 1.48 |
|
| $ | 0.49 |
|
|
| 28,592,629 |
|
|
| 28,004,248 |
|
Diluted |
| $ | 0.54 |
|
| $ | 0.08 |
|
| $ | 1.42 |
|
| $ | 0.11 |
|
|
| 29,023,455 |
|
|
| 28,729,112 |
|
Shares used to compute net income from continuing operations per share attributable to ordinary shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
|
| 25,267,113 |
|
|
| 106,082 |
|
|
| 24,923,298 |
|
|
| 85,781 |
| ||||||||
Diluted |
|
| 26,278,147 |
|
|
| 542,949 |
|
|
| 26,008,346 |
|
|
| 380,501 |
| ||||||||
Shares used to compute net income per share attributable to ordinary shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
|
| 25,267,113 |
|
|
| 106,082 |
|
|
| 24,923,298 |
|
|
| 85,781 |
| ||||||||
Diluted |
|
| 26,278,147 |
|
|
| 542,949 |
|
|
| 26,008,346 |
|
|
| 380,501 |
|
See accompanying notes.
2
Consolidated Statements of Shareholders’ Equity
(dollars in thousands, except share data)thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
| Additional |
|
| Treasury |
|
|
|
|
|
| Total |
| |||||||||
For the three months ending April 1, 2022 |
| Ordinary Shares |
|
| Paid-In |
|
| Shares |
|
| Retained |
|
| Shareholders' |
| |||||||||||||||||||||||||||||||||
|
| Ordinary Shares |
|
| Paid-In |
|
| Accumulated |
|
| Shareholders’ |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Earnings |
|
| Equity |
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||||||||||||||||||||||||||||
Balance at December 30, 2016 |
|
| 23,857,381 |
|
| $ | 2 |
|
| $ | 196,049 |
|
| $ | (54,392 | ) |
| $ | 141,659 |
| ||||||||||||||||||||||||||||
Ordinary shares issued from initial public offering, net of transaction costs |
|
| 881,667 |
|
|
| 1 |
|
|
| 7,277 |
|
|
| — |
|
|
| 7,278 |
| ||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
| 28,551,160 |
|
| $ | 3 |
|
| $ | 417,438 |
|
|
| 4,437,439 |
|
| $ | (91,578 | ) |
| $ | 174,852 |
|
| $ | 500,715 |
| ||||||||||||||||||||
Ordinary shares issued from exercise of stock options |
|
| 740,472 |
|
|
| — |
|
|
| 6,331 |
|
|
| — |
|
|
| 6,331 |
|
|
| 42,753 |
|
|
| — |
|
|
| 955 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 955 |
|
Ordinary shares issued from vesting of restricted share units |
|
| 58,065 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,994 |
|
|
| — |
|
|
| (777 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (777 | ) |
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,536 |
|
|
| — |
|
|
| 1,536 |
|
|
| — |
|
|
| — |
|
|
| 2,897 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,897 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 36,990 |
|
|
| 36,990 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,039 |
|
|
| 8,039 |
|
Balance at September 29, 2017 |
|
| 25,537,585 |
|
| $ | 3 |
|
| $ | 211,193 |
|
| $ | (17,402 | ) |
| $ | 193,794 |
| ||||||||||||||||||||||||||||
Balance at April 1, 2022 |
|
| 28,628,907 |
|
| $ | 3 |
|
| $ | 420,513 |
|
|
| 4,437,439 |
|
| $ | (91,578 | ) |
| $ | 182,891 |
|
| $ | 511,829 |
|
|
|
|
|
|
|
|
|
|
| Additional |
|
| Treasury |
|
|
|
|
|
| Total |
| |||||||
For the three months ending March 26, 2021 |
| Ordinary Shares |
|
| Paid-In |
|
| Shares |
|
| Retained |
|
| Shareholders' |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Earnings |
|
| Equity |
| |||||||
Balance at December 25, 2020 |
|
| 27,907,077 |
|
| $ | 3 |
|
| $ | 399,311 |
|
|
| 4,437,439 |
|
| $ | (91,578 | ) |
| $ | 103,953 |
|
| $ | 411,689 |
|
Ordinary shares issued from exercise of stock options |
|
| 105,600 |
|
|
| — |
|
|
| 2,381 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,381 |
|
Ordinary shares issued from vesting of restricted share units |
|
| 30,423 |
|
|
| — |
|
|
| (667 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (667 | ) |
Ordinary shares issued from employee share purchase plan |
|
| 27,151 |
|
|
| — |
|
|
| 606 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 606 |
|
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,415 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,415 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,638 |
|
|
| 14,638 |
|
Balance at March 26, 2021 |
|
| 28,070,251 |
|
| $ | 3 |
|
| $ | 404,046 |
|
|
| 4,437,439 |
|
| $ | (91,578 | ) |
| $ | 118,591 |
|
| $ | 431,062 |
|
See accompanying notes.
3
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 36,990 |
|
| $ | 8,749 |
|
| $ | 8,039 |
|
| $ | 14,638 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 8,351 |
|
|
| 7,049 |
|
|
| 9,315 |
|
|
| 5,657 |
|
Gain on sale of investments and settlement of note receivable |
|
| (241 | ) |
|
| — |
| ||||||||
Share-based compensation |
|
| 1,536 |
|
|
| 1,345 |
|
|
| 2,897 |
|
|
| 2,415 |
|
Deferred income taxes |
|
| (6,207 | ) |
|
| (2,485 | ) |
|
| (37 | ) |
|
| 512 |
|
Amortization of debt issuance costs |
|
| 412 |
|
|
| 395 |
|
|
| 117 |
|
|
| 242 |
|
Changes in operating assets and liabilities, net of assets acquired: |
|
|
|
|
|
|
|
| ||||||||
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
| ||||||||
Accounts receivable, net |
|
| (22,632 | ) |
|
| (13,420 | ) |
|
| (10,544 | ) |
|
| (7,697 | ) |
Inventories |
|
| (18,915 | ) |
|
| (10,236 | ) |
|
| (27,718 | ) |
|
| (9,306 | ) |
Prepaid expenses and other assets |
|
| 4,112 |
|
|
| (2,065 | ) |
|
| (650 | ) |
|
| 512 |
|
Accounts payable |
|
| (2,081 | ) |
|
| 15,657 |
|
|
| (18,209 | ) |
|
| 22,101 |
|
Accrued liabilities |
|
| (1,280 | ) |
|
| 1,397 |
|
|
| 2,182 |
|
|
| (3,467 | ) |
Other liabilities |
|
| 881 |
|
|
| (2,361 | ) |
|
| (1,670 | ) |
|
| 41 |
|
Net cash provided by operating activities |
|
| 926 |
|
|
| 4,025 |
| ||||||||
Net cash provided by (used in) operating activities |
|
| (36,278 | ) |
|
| 25,648 |
| ||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (6,609 | ) |
|
| (2,253 | ) |
|
| (3,417 | ) |
|
| (5,400 | ) |
Cash paid for acquisitions, net of cash acquired |
|
| (49,542 | ) |
|
| (17,406 | ) | ||||||||
Proceeds from sale of intangible assets |
|
| — |
|
|
| 230 |
| ||||||||
Proceeds from sale of property, plant, and equipment |
|
| — |
|
|
| 243 |
| ||||||||
Proceeds from sale of investments and settlement note receivable |
|
| 2,430 |
|
|
| — |
| ||||||||
Net cash used in investing activities |
|
| (53,721 | ) |
|
| (19,186 | ) |
|
| (3,417 | ) |
|
| (5,400 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of ordinary shares, net of fees |
|
| 7,278 |
|
|
| — |
| ||||||||
Proceeds from exercise of stock options |
|
| 6,331 |
|
|
| — |
| ||||||||
Debt issuance and modification costs |
|
| (319 | ) |
|
| — |
| ||||||||
Borrowings under revolving commitment |
|
| 10,000 |
|
|
| 12,000 |
| ||||||||
Repayments on revolving commitment |
|
| — |
|
|
| (7,000 | ) | ||||||||
Borrowing on long-term debt |
|
| 20,000 |
|
|
| 15,000 |
| ||||||||
Repayments on long-term debt |
|
| (295 | ) |
|
| (3,723 | ) | ||||||||
Net cash provided by financing activities |
|
| 42,995 |
|
|
| 16,277 |
| ||||||||
Net increase (decrease) in cash |
|
| (9,800 | ) |
|
| 1,116 |
| ||||||||
Cash and restricted cash at beginning of year |
|
| 52,648 |
|
|
| 24,188 |
| ||||||||
Cash and restricted cash at end of quarter |
| $ | 42,848 |
|
| $ | 25,304 |
| ||||||||
Issuance of ordinary shares under share-based compensation plans |
|
| 1,368 |
|
|
| 2,654 |
| ||||||||
Employees' taxes paid upon vesting of restricted share units |
|
| (777 | ) |
|
| (667 | ) | ||||||||
Repayments on revolving credit facility |
|
| — |
|
|
| (30,000 | ) | ||||||||
Repayments on term loan |
|
| (1,875 | ) |
|
| (2,188 | ) | ||||||||
Net cash used in financing activities |
|
| (1,284 | ) |
|
| (30,201 | ) | ||||||||
Net decrease in cash |
|
| (40,979 | ) |
|
| (9,953 | ) | ||||||||
Cash at beginning of period |
|
| 75,495 |
|
|
| 252,899 |
| ||||||||
Cash at end of period |
| $ | 34,516 |
|
| $ | 242,946 |
| ||||||||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
| $ | 2,518 |
|
| $ | 2,628 |
|
| $ | 1,395 |
|
| $ | 1,842 |
|
Cash paid (refunded) during the period for taxes |
| $ | 150 |
|
| $ | (129 | ) | ||||||||
Cash paid during the period for taxes, net of refunds |
| $ | 106 |
|
| $ | 667 |
| ||||||||
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures included in accounts payable |
| $ | 267 |
|
| $ | 197 |
|
| $ | 2,278 |
|
| $ | 2,273 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities, including those acquired through acquisitions |
| $ | 6,067 |
|
| $ | 364 |
|
See accompanying notes.
ICHOR HOLDINGS, LTD.
Notes to Consolidated Financial Statements (Unaudited)
(dollarsdollar figures in tables in thousands, except share and per share amounts and percentages)amounts)
(unaudited)
Note 1 – Basis of Presentation and Selected Significant Accounting Policies
Basis of Presentation
These consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All financialdollar figures presented in tables in the notes to consolidated financial statements are in thousands, except share, per share amounts. Certain information and percentage figures.footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting. These consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10‑K for the year ended December 31, 2021.
Year End
We use a 5252- or 53 week53-week fiscal year ending on the last Friday in December. The three months ended September 29, 2017April 1, 2022 and September 23, 2016March 26, 2021 were both 13 weeks. The nine months ended September 29, 2017 and September 23, 2016 were both 39 weeks. References to the thirdfirst quarter of 20172022 and 2016 relate2021 refer to the three monthsthree-month periods then ended September 29, 2017. References to fiscal year 2022 and September 23, 2016,2021 refer to our fiscal years ending December 30, 2022 and December 31, 2021, respectively. Fiscal year 2022 and 2021 are 52 and 53 weeks, respectively.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods presented. The Company bases itsWe base our estimates and judgments on historical experience and on various other assumptions that it believeswe believe are reasonable under the circumstances. Actual results could differ from the estimates made by management. Significant estimates include the fair value of assets and liabilities acquired in acquisitions, estimated useful lives for long‑lived assets, allowance for doubtful accounts, inventory valuation, uncertain tax positions, fair value assigned to stock options granted, and impairment analysis for both definite‑lived intangible assets and goodwill.
CorrectionCash and Cash Equivalents
Cash and cash equivalents consist of deposits and financial instruments which are readily convertible into cash and have original maturities of 90 days or less at the time of acquisition.
Fair Value of Financial Instruments
The carrying values of our financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and long-term debt, net of unamortized debt issuance costs, approximate fair value.
Revenue Recognition
We recognize revenue when control of promised goods or services is transferred to our customers, in an Immaterial Error
Duringamount that reflects the second quarter of 2017,consideration we corrected an error relatedexpect to translating the inventory balances at our Malaysia and Singapore subsidiaries at an incorrect foreign currency rate. The error arosebe entitled to in prior period financial statements beginning in periods prior to 2014 and through 2016. The correction resulted in a $1,752 increase in cost ofexchange for those goods or services. This amount is recorded as net sales and a corresponding decrease in gross profit in our consolidated statements of operationsoperations.
Transaction price – In most of our contracts, prices are generally determined by a customer-issued purchase order and generally remain fixed over the duration of the contract. Certain contracts contain variable consideration, including early-payment discounts and rebates. When a decreasecontract includes variable consideration, we evaluate the estimate of the variable consideration to inventoriesdetermine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal will not occur. Variable consideration estimates are updated at each reporting date. Historically, we have not incurred significant costs to obtain a contract. All amounts billed to a customer relating to shipping and handling are classified as net sales, while all costs incurred by us for shipping and handling are classified as cost of sales.
Performance obligations – Substantially all of our performance obligations pertain to promised goods (“products”), which are primarily comprised of fluid delivery subsystems, weldments, and other components. Most of our contracts contain a single performance obligation and are generally completed within twelve months. Product sales are recognized at a point-in-time, generally upon delivery, as such term is defined within the contract, as that is when control of the promised good has transferred. Products are covered by a standard assurance warranty, generally extended for a period of one to two years depending on the customer, which promises that delivered products conform to contract specifications. As such, we account for such warranties under ASC 460, Guarantees, and not as a separate performance obligation.
Contract balances – Accounts receivable represents our unconditional right to receive consideration from our customers. Accounts receivable are carried at invoice price less an estimate for doubtful accounts and estimated payment discounts. Payment terms vary by customer but are generally due within 15‑60 days. Historically, we have not incurred significant payment issues with our customers. We had no significant contract assets or liabilities on our consolidated balances sheet duringbalance sheets in any of the second quarter of 2017. We evaluated the error on both a quantitative and qualitative basis and determined that the error was not material and did not affect the trend of net income or cash flows in previously issued financial statements. Additionally, we determined that correcting the error in the second quarter of 2017 is not expected to have a material impact to our consolidated financial statements for the fiscal year ended December 29, 2017.periods presented.
Accounting Pronouncements Recently IssuedAdopted
In May 2014,October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021‑08, Accounting Standards Update (“ASU”) No. 2014‑09, Revenuefor Contract Assets and Contract Liabilities from Contracts with Customers (Topic 606) (“805). This ASU 2014‑09”), which requires an entityacquirer in a business combination to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014‑09 outlines a single comprehensive model for entities to use in accounting for revenue arisingand measure contract assets and contract liabilities (deferred revenue) from acquired contracts with customers and supersedes most currentusing the revenue recognition guidance. In August 2015,guidance in Topic 606. At the FASB issuedacquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU No. 2015‑14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date (“ASU 2015‑14”), which defers the effective date of ASU 2014‑09 for one year and permits early adoption in accordance with the original effective date of ASU 2014‑09. The standard is effective for the Company beginning in the first quarter of the fiscal year ending December 28, 2018. During the third quarter of 2017 the Company made progress toward completing the evaluation of potential changes from adopting the new standard on its financial statements and disclosures. The Company is still evaluating the impact of the standard on its revenue streams and significant contracts. At this point in time the Company does not anticipate a material impact from the adoption of this standard. However, the final determination is not known at this time, as it is dependent on the number, size, and complexity of contracts not fully evaluated at this time.
In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842) (“ASU 2016‑02”), which establishes a comprehensive lease standard for all industries. The standard requires lessees to recognize a right of use asset and a lease liability for virtually all leases, other than leases that meet the definition of short term leases. The standard is effective for the Company beginning in the first quarter of the fiscal year ending December 27, 2019. The Company is currently evaluating the impact of this accounting standard.
In January 2017, the FASB issued ASU No. 2017‑04, Intangibles—Goodwill and Other (Topic 350) (“ASU 2017‑04”), which eliminates the requirement to perform Step 2 of the goodwill impairment test. Under ASU 2017‑04, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge, if any, for the amount a reporting unit’s carrying amount exceeds its fair value. The standard is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, and2022, including interim periods within those fiscal years. Adoption of the ASU should be applied on a prospective basis. The Company doesprospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. This ASU is currently not expect this standardexpected to have a significantmaterial impact on itsour consolidated financial statements.
Note 2 –Acquisitions
Cal-Weld, Inc.
On July 27, 2017, the Company completed the acquisition of Cal‑Weld, Inc. (“Cal‑Weld”), a California-based leader in the design and fabrication of precision, high purity industrial components, subsystems, and systems, for $56,879. Pursuant to the purchase agreement, the Company placed $6,000 in escrow for indemnification and working capital claims. As of September 29, 2017, the Company has submitted a working capital claim to the seller of $959 which was agreed to and settled subsequent to quarter-end. The Company does not anticipate any further adjustments and expects the remaining amount in escrow to be ultimately transferred to the seller. Accordingly, the remaining amount in escrow is included in the total acquisition consideration. Cal‑Weld will expand the Company’s capacity and capabilities in the area of component manufacturing for Gas Delivery tools used in semiconductor manufacturing.
The following table presents the preliminary purchase price allocation as of July 27, 2017:
|
| Preliminary Allocation July 27, 2017 |
| |
Cash acquired |
| $ | 7,337 |
|
Accounts receivable, net |
|
| 10,318 |
|
Inventories |
|
| 20,836 |
|
Prepaid expenses and other current assets |
|
| 287 |
|
Property and equipment, net |
|
| 1,639 |
|
Other noncurrent assets |
|
| 587 |
|
Intangible assets, net |
|
| 12,140 |
|
Goodwill |
|
| 17,957 |
|
Accounts payable and accrued liabilities |
|
| (8,007 | ) |
Other non-current liabilities |
|
| (908 | ) |
Deferred tax liabilities |
|
| (5,307 | ) |
Total acquisition consideration |
| $ | 56,879 |
|
The Company allocated $11,480 to customer relationships and $660 to order backlog with weighted average amortization periods of 10 years and 6 months, respectively. Goodwill recognized from the acquisition of Cal‑Weld was primarily attributed to an assembled workforce and expected synergies and is not tax deductible. The allocation of acquisition consideration for Cal‑Weld is preliminary as we have not obtained all of the information to finalize the opening balance sheet or the allocation between goodwill and intangible assets. Management has recorded allocations based on information currently available. The Company incurred transaction costs of $1,498 and $1,712 in connection with the acquisition of Cal‑Weld during the three and nine months ended September 29, 2017, respectively.
The Company’s consolidated financial statements for the third quarter of 2017 include approximately two months of Cal‑Weld operating activity. Included in the Company’s statements of operations for the third quarter of 2017 are net sales and net income from continuing operations of $23,389 and $1,391, respectively, attributable to Cal‑Weld.
The following unaudited pro forma consolidated results of operations assume the acquisition was completed on December 26, 2015, the beginning of the earliest period presented. Pro forma adjustments are mainly comprised of amortization expense related to acquired intangible assets, compensation-related costs attributed to non-retained previous ownership, acquisition-related costs, incremental interest expense from increased borrowings to fund the acquisition, acquired inventory fair value charges, and the related income tax effects. The inventory fair value adjustment resulted in a $3,594 charge to cost of sales for the nine months ended September 23, 2016. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved or of results that may occur in the future:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
Net sales |
| $ | 173,091 |
|
| $ | 125,980 |
|
| $ | 542,145 |
|
| $ | 335,217 |
|
Net income from continuing operations |
| $ | 15,914 |
|
| $ | 9,596 |
|
| $ | 45,258 |
|
| $ | 14,940 |
|
Net income per share from continuing operations attributable to ordinary shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.61 |
|
| $ | 0.54 |
|
| $ | 1.79 |
|
| $ | 0.86 |
|
Diluted |
| $ | 0.59 |
|
| $ | 0.10 |
|
| $ | 1.72 |
|
| $ | 0.19 |
|
Ajax‑United Patterns & Molds, Inc.
On April 12, 2016, the Company completed the acquisition of Ajax‑United Patterns & Molds, Inc. (“Ajax”), a California-based manufacturer of complex plastic and metal products used in the medical, biomedical, semiconductor, data communication, and food processing equipment industries, for $17,594.
The following table presents the preliminary purchase price allocation as of December 30, 2016, measurement period adjustments from December 30, 2016 through April 12, 2017, and the final purchase price allocation as of April 12, 2017, the end of the measurement period. Measurement period adjustments are primarily related to finalization of the valuation of deferred tax liabilities and net identifiable assets and liabilities:
|
| Preliminary Allocation December 30, 2016 |
|
| Measurement Period Adjustment |
|
| Final Allocation April 12, 2017 |
| |||
Cash acquired |
| $ | 187 |
|
| $ | — |
|
| $ | 187 |
|
Accounts receivable, net |
|
| 1,250 |
|
|
| — |
|
|
| 1,250 |
|
Inventories |
|
| 3,236 |
|
|
| — |
|
|
| 3,236 |
|
Prepaid expenses and other current assets |
|
| 77 |
|
|
| 8 |
|
|
| 85 |
|
Property and equipment, net |
|
| 1,545 |
|
|
| (78 | ) |
|
| 1,467 |
|
Other noncurrent assets |
|
| 2,948 |
|
|
| — |
|
|
| 2,948 |
|
Intangible assets, net |
|
| 8,030 |
|
|
| — |
|
|
| 8,030 |
|
Goodwill |
|
| 7,078 |
|
|
| (22 | ) |
|
| 7,056 |
|
Accounts payable and accrued liabilities |
|
| (4,486 | ) |
|
| 9 |
|
|
| (4,477 | ) |
Deferred tax liabilities |
|
| (2,271 | ) |
|
| 83 |
|
|
| (2,188 | ) |
Total acquisition consideration |
| $ | 17,594 |
|
| $ | — |
|
| $ | 17,594 |
|
Note 3 – Inventories
Inventories consist of the following:
|
| September 29, 2017 |
|
| December 30, 2016 |
|
| April 1, 2022 |
|
| December 31, 2021 |
| ||||
Raw materials |
| $ | 77,527 |
|
| $ | 46,889 |
|
| $ | 180,541 |
|
| $ | 159,366 |
|
Work in process |
|
| 30,500 |
|
|
| 22,649 |
|
|
| 66,912 |
|
|
| 62,537 |
|
Finished goods |
|
| 11,181 |
|
|
| 9,423 |
|
|
| 31,336 |
|
|
| 28,281 |
|
Excess and obsolete adjustment |
|
| (8,576 | ) |
|
| (8,080 | ) |
|
| (14,938 | ) |
|
| (14,051 | ) |
Total inventories, net |
| $ | 110,632 |
|
| $ | 70,881 |
| ||||||||
Total inventories |
| $ | 263,851 |
|
| $ | 236,133 |
|
Note 43 – Property and Equipment and Other Noncurrent Assets
Property and equipment consist of the following:
|
| September 29, 2017 |
|
| December 30, 2016 |
|
| April 1, 2022 |
|
| December 31, 2021 |
| ||||
Machinery |
| $ | 8,172 |
|
| $ | 5,243 |
|
| $ | 82,742 |
|
| $ | 80,953 |
|
Leasehold improvements |
|
| 14,871 |
|
|
| 11,276 |
|
|
| 37,174 |
|
|
| 36,706 |
|
Computer software, hardware and equipment |
|
| 4,143 |
|
|
| 2,848 |
| ||||||||
Computer software, hardware, and equipment |
|
| 8,031 |
|
|
| 8,031 |
| ||||||||
Office furniture, fixtures and equipment |
|
| 455 |
|
|
| 220 |
|
|
| 1,169 |
|
|
| 1,168 |
|
Vehicles |
|
| 37 |
|
|
| 10 |
|
|
| 284 |
|
|
| 284 |
|
Construction-in-process |
|
| 1,315 |
|
|
| 2,069 |
|
|
| 11,054 |
|
|
| 8,565 |
|
|
|
| 28,993 |
|
|
| 21,666 |
|
|
| 140,454 |
|
|
| 135,707 |
|
Less accumulated depreciation |
|
| (12,245 | ) |
|
| (9,648 | ) |
|
| (54,451 | ) |
|
| (50,503 | ) |
Total property and equipment, net |
| $ | 16,748 |
|
| $ | 12,018 |
|
| $ | 86,003 |
|
| $ | 85,204 |
|
Depreciation expense was $946, $624, $2,533,$4.0 million and $1,839$2.3 million for the thirdfirst quarter of 20172022 and 2016 and the nine months ended September 29, 2017 and September 23, 2016,2021, respectively.
Cloud Computing Implementation Costs
We capitalize implementation costs associated with hosting arrangement that are service contracts. These costs are recorded to prepaid expenses or other noncurrent assets. To-date, these costs are those incurred to implement a new company-wide ERP system.
The following table summarizes capitalized cloud computing implementation costs:
Capitalized cloud computing implementation costs as of December 31, 2021 |
| $ | 8,054 |
|
Costs capitalized during the period |
|
| 3,074 |
|
Capitalized costs amortized during the period |
|
| (152 | ) |
Capitalized cloud computing implementation costs as of April 1, 2022 |
| $ | 10,976 |
|
Note 54 – Intangible Assets and Goodwill
Definite‑lived intangible assets consist of the following:
|
| September 29, 2017 |
|
| April 1, 2022 | |||||||||||||||||||||||||||||
|
| Gross value |
|
| Accumulated amortization |
|
| Accumulated impairment charges |
|
| Carrying amount |
|
| Gross value |
|
| Accumulated amortization |
|
| Accumulated impairment charges |
|
| Carrying amount |
|
| Weighted average useful life | ||||||||
Trademarks |
| $ | 9,690 |
|
| $ | (5,572 | ) |
| $ | — |
|
| $ | 4,118 |
| ||||||||||||||||||
Customer relationships |
|
| 62,037 |
|
|
| (20,186 | ) |
|
| (11,076 | ) |
|
| 30,775 |
|
|
| 120,962 |
|
|
| (44,355 | ) |
|
| — |
|
|
| 76,607 |
|
| 8.5 years |
Developed technology |
|
| 28,100 |
|
|
| (16,810 | ) |
|
| (8,155 | ) |
|
| 3,135 |
|
|
| 11,047 |
|
|
| (3,755 | ) |
|
| — |
|
|
| 7,292 |
|
| 10.0 years |
Backlog |
|
| 660 |
|
|
| (220 | ) |
|
| — |
|
|
| 440 |
| ||||||||||||||||||
Order backlog |
|
| 2,600 |
|
|
| (1,921 | ) |
|
| — |
|
|
| 679 |
|
| 6 months | ||||||||||||||||
Total intangible assets |
| $ | 100,487 |
|
| $ | (42,788 | ) |
| $ | (19,231 | ) |
| $ | 38,468 |
|
| $ | 134,609 |
|
| $ | (50,031 | ) |
| $ | — |
|
| $ | 84,578 |
|
|
|
|
| December 30, 2016 |
| |||||||||||||
|
| Gross value |
|
| Accumulated amortization |
|
| Accumulated impairment charges |
|
| Carrying amount |
| ||||
Trademarks |
| $ | 9,690 |
|
| $ | (4,845 | ) |
| $ | — |
|
| $ | 4,845 |
|
Customer relationships |
|
| 50,557 |
|
|
| (17,150 | ) |
|
| (11,076 | ) |
|
| 22,331 |
|
Developed technology |
|
| 28,100 |
|
|
| (14,975 | ) |
|
| (8,155 | ) |
|
| 4,970 |
|
Backlog |
|
| 30 |
|
|
| (30 | ) |
|
| — |
|
|
| — |
|
Total intangible assets |
| $ | 88,377 |
|
| $ | (37,000 | ) |
| $ | (19,231 | ) |
| $ | 32,146 |
|
Amortization expense was $2,220, $1,804, $5,818, and $5,210 for the third quarter of 2017 and 2016 and the nine months ended September 29, 2017 and September 23, 2016, respectively.
The following table presents changes to goodwill during the nine months ended September 29, 2017:
|
| Goodwill |
| |
Balance at December 30, 2016 |
| $ | 77,093 |
|
Acquisitions |
|
| 17,935 |
|
Impairment |
|
| — |
|
Balance at September 29, 2017 |
| $ | 95,028 |
|
|
| December 31, 2021 | ||||||||||||||||
|
| Gross value |
|
| Accumulated amortization |
|
| Accumulated impairment charges |
|
| Carrying amount |
|
| Weighted average useful life | ||||
Customer relationships |
|
| 146,569 |
|
|
| (65,953 | ) |
|
| — |
|
|
| 80,616 |
|
| 8.7 years |
Developed technology |
|
| 11,047 |
|
|
| (3,483 | ) |
|
| — |
|
|
| 7,564 |
|
| 10.0 years |
Order backlog |
|
| 2,600 |
|
|
| (853 | ) |
|
| — |
|
|
| 1,747 |
|
| 6 months |
Total intangible assets |
| $ | 160,216 |
|
| $ | (70,289 | ) |
| $ | — |
|
| $ | 89,927 |
|
|
|
Note 65 – Commitments and ContingenciesLeases
Operating Leaseslease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
The Company leases officesWe lease facilities under various non-cancellable operating leases expiring through 2024. The Company is2031. In addition to base rental payments, we are generally responsible for utilities and itsour proportionate share of operating expenses, underincluding facility maintenance, insurance, and property taxes. As these amounts are variable, they are not included in lease liabilities. As of April 1, 2022, we had 1 operating lease executed for which the facilities’ leases. rental period had not yet commenced.
The Company recognizes escalatingcomponents of lease expense are as follows:
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
Operating lease cost |
| $ | 2,045 |
|
| $ | 1,381 |
|
Supplemental cash flow information related to leases is as follows:
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 1,823 |
|
| $ | 1,376 |
|
Supplemental balance sheet information related to leases is as follows:
|
| April 1, 2022 |
|
| March 26, 2021 |
|
Weighted-average remaining lease term of operating leases |
| 5.8 years |
|
| 2.2 years |
|
Weighted-average discount rate of operating leases |
| 2.2% |
|
| 4.4% |
|
Future minimum lease payments on a straight‑line basis over the lease term. The total obligation at September 29, 2017 is $10,726.under non-cancelable leases as of April 1, 2022 are as follows:
Litigation
2022, remaining |
| $ | 6,209 |
|
2023 |
|
| 6,451 |
|
2024 |
|
| 5,711 |
|
2025 |
|
| 5,333 |
|
2026 |
|
| 4,857 |
|
Thereafter |
|
| 7,917 |
|
Total future minimum lease payments |
|
| 36,478 |
|
Less imputed interest |
|
| (2,061 | ) |
Total lease liabilities |
| $ | 34,417 |
|
The Company is periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. The ultimate resolution of these actions is not expected to have a material adverse effect on the Company’s financial position or results of operations.
Purchase Commitments
At September 29, 2017, the Company has purchase orders outstanding for raw materials and component parts totaling $78,903.
Note 76 – Income Taxes
Information on the Company’s income taxesIncome tax information for the periods reported isare as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
Income tax benefit from continuing operations |
| $ | (6,556 | ) |
| $ | (1,888 | ) |
| $ | (5,558 | ) |
| $ | (1,427 | ) |
Income from continuing operations before income taxes |
| $ | 7,742 |
|
| $ | 5,793 |
|
| $ | 32,162 |
|
| $ | 11,361 |
|
Effective income tax rate |
|
| -84.7 | % |
|
| -32.6 | % |
|
| -17.3 | % |
|
| -12.6 | % |
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
Income tax expense |
| $ | 810 |
|
| $ | 1,515 |
|
Income before income taxes |
| $ | 8,849 |
|
| $ | 16,153 |
|
Effective income tax rate |
|
| 9.2 | % |
|
| 9.4 | % |
The Company’s
Our effective tax raterates for the thirdfirst quarter of 20172022 and 2016 and for the nine months ended September 29, 2017 and September 23, 2016 differs2021 differ from the statutory rate primarily due to a full valuation allowance provided against its U.S. net deferred tax assets, taxes on foreign income that differ from the U.S. tax rate, tax benefits created in connection with our acquisitions, accrued withholding taxes, and certain other non-recurring tax benefits.
During the third quarter of 2017, we recorded a discrete tax benefit of $5,281 related to the release of a valuation allowance as a result of acquiring deferred tax liabilities in connection with our acquisition of Cal‑Weld. In addition, as a result of re‑characterizing intercompany debt to equity,including a tax benefitholiday in Singapore, and the impact of $1,627 was recordedshare-based compensation activity during the current quarter related to the reversal of previously accrued withholding taxes. Therefore, the tax benefit recorded for the nine months ended September 29, 2017 consists primarily of these benefits offset in part by tax expense or benefit related to our foreign operations in which we conduct business and tax expense related to cash tax liabilities to be paid by U.S. subsidiaries.quarter.
The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $1,644$3.6 million at September 29, 2017.April 1, 2022. The related interest and penalties were $76 and $346, respectively.insignificant. The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant.
As of September 29, 2017, the Company isApril 1, 2022, we were not under examination by tax authorities.
Note 87 – Employee Benefit Programs
401(k) Plan
The Company sponsorsWe sponsor a 401(k) plan available to employees of itsour U.S.‑based subsidiaries. Participants may make salary deferral contributions not to exceed 50% of a participant’s annual compensation in a plan year or the maximum amount otherwise allowed by law. Eligible employees receive a discretionary matching contribution equal to 50% of eacha participant’s deferral, up to an annual matching maximum of two thousand five hundred dollars.4% of a participant’s annual compensation. Matching contributions were $97, $56, $435,$1.0 million and $274 $0.6 million for the thirdfirst quarter of 20172022 and 2016 and the nine months ended September 29, 2017 and September 23, 2016,2021, respectively.
Medical Insurance
The Company sponsors a self‑insured group medical insurance plan for its U.S. employees and their dependents. The self‑insured plan is designed to provide a specified level of coverage, with stop‑loss coverage provided by a commercial insurer, in order to limit the Company’s exposure. Expense incurred related to this plan was $612, $615, $2,028, and $1,824 for the third quarter of 2017 and 2016 and the nine months ended September 29, 2017 and September 23, 2016, respectively.
Note 98 – Credit FacilitiesLong-Term Debt
Long‑term debt consists of the following:
|
| September 29, 2017 |
|
| December 30, 2016 |
|
| April 1, 2022 |
|
| December 31, 2021 |
|
| ||||
Term loan facility |
| $ | 59,535 |
|
| $ | 39,830 |
| |||||||||
Term loan |
| $ | 148,125 |
|
| $ | 150,000 |
|
| ||||||||
Revolving credit facility |
|
| 10,000 |
|
|
| — |
|
|
| 145,000 |
|
|
| 145,000 |
|
|
Total principal amount of long-term debt |
|
| 69,535 |
|
|
| 39,830 |
|
|
| 293,125 |
|
|
| 295,000 |
|
|
Less unamortized debt issuance costs |
|
| (1,793 | ) |
|
| (1,886 | ) |
|
| (2,130 | ) |
|
| (2,247 | ) |
|
Total long-term debt, net |
|
| 67,742 |
|
|
| 37,944 |
|
|
| 290,995 |
|
|
| 292,753 |
|
|
Less current portion |
|
| (1,180 | ) |
|
| — |
|
|
| (7,500 | ) |
|
| (7,500 | ) |
|
Total long-term debt, less current portion, net |
| $ | 66,562 |
|
| $ | 37,944 |
|
| $ | 283,495 |
|
| $ | 285,253 |
|
|
2015 Credit Facility
On August 11, 2015, the Company and its subsidiariesOctober 29, 2021, we entered into an amended and restated credit agreement, which includes a new $55,000group of financial institutions as direct lenders underlying the agreement. The credit agreement includes a $150.0 million term loan facility and $20,000a $250.0 million revolving credit facility (collectively, the “2015 Credit Facility”(together, “credit facilities”) with. Term loan principal payments of $1.9 million are due on a syndicate of lenders and repaid all outstanding indebtedness under the prior $50,000 term loan facility and $25,000 revolvingquarterly basis. The credit facility. In April 2016, the Company amended the 2015 Credit Facility to increase the term loan facility by $15,000. The 2015 Credit Facility also includes a letter of credit subfacility under the revolving credit facility. In July 2017, the Company amended the 2015 Credit Facility to increase the term loan facility by $20,000, add an additional $20,000 of borrowing capacity under its revolving credit facility, and reduce its interest rate (the “July 2017 Amendments”). The July 2017 Amendments did not meet the definition of an extinguishment and were accounted for as debt modifications.facilities mature on October 29, 2026.
Interest is charged at either the Base Rate or the Eurodollar rateBloomberg Short-Term Bank Yield (“BSBY”) Rate (as such terms are defined in the agreement governing the 2015 Credit Facility)credit agreement) at theour option, of the Company, plus an applicable margin.margin. The Base Rate is equal to the higher of i) the Prime Rate, ii) the Federal Funds Effective rateRate plus 0.5%, or iii) the EurodollarBSBY Rate plus 1.00%. The Eurodollar rate is equal to LIBOR. The applicable margin on Base Rate and EurodollarBSBY Rate loans is 1.00-1.50%0.375‑1.375% and 2.00-2.50%1.375‑2.375% per annum, respectively, depending on our leverage ratio. We are also charged a commitment fee of 0.175%-0.350% on the Company’s Leverage Ratio. Interestunused portion of our revolving credit facility. Base Rate interest payments and commitment fees are due quarterly if loans are made under the Base Rate. Interestquarterly. BSBY Rate interest payments are due on the last day of the applicable interest period, under Eurodollar Rate loans. As of September 29, 2017, the term loan facility and revolvingor quarterly for applicable interest periods longer than 3 months. At April 1, 2022, our credit facilityfacilities bore interest atunder the EurodollarBSBY rate option of 3.28%2.01%.
Principal payments are due on a quarterly basis, however, the $25,000 payment made using proceeds from our IPO in December 2016 was treated as a pre-payment, and therefore the Company is only required to make quarterly princpal payments of $295 on the additional $20,000 borrowed in connection with the July 2017 Amendments. The 2015 Credit Facility matures in August 2020.
Note 10 – Related Party Transactions
The Company received advisory services from Francisco Partners Management, L.P. (“Francisco Partners”) an entity affiliated with the Company’s principal shareholders but in which such shareholders hold no interest, through our December 2016 IPO, at which point the agreement was terminated. Under the agreement, the Company was to pay Francisco Partners an annual advisory fee equal to $1,500 per year. Francisco Partners has waived payment of advisory fees for all periods presented.
The Company also received consulting services from Francisco Partners Consulting, LLC (“FPC”), an entity that provides consulting services to the private equity funds management by Francisco Partners and their portfolio companies on a dedicated basis, through our December 2016 IPO, at which point the agreement was terminated. FPC is not an affiliate of the Company or of Francisco Partners, and none of the Company’s principal shareholders hold an in interest in FPC. In the nine months ended September 29, 2017, the Company received from FPC a refund of previously paid consulting fees of $281. In the nine months ended September 23, 2016, the Company paid $512 to FPC for consulting services.
The Company purchases certain parts from Ajax Foresight Global Manufacturing Sdn. Bhd. (“AFGM”), an investment acquired in conjunction with the acquisition of Ajax. Total purchases from AFGM were $387 and $360 in the nine months ended September 29, 2017 and September 23, 2016, respectively. Outstanding accounts payable to AFGM totaled $344 at December 30, 2016. During February 2017, the Company sold its investment in AFGM, and therefore no related party relationship exists on a go‑forward basis.
Note 119 – Share‑Based Compensation
The Company has two share‑based compensation plans, the 2012 Equity Incentive Plan (the “2012 Plan”) and the 2016 Omnibus Incentive Plan (the “2016 Plan”), which provide provides for grants of share‑based awards to employees, directors, and consultants. Awards may be in the form of stock options (“options”), tandem and non‑tandem stock appreciation rights, restricted shares,share awards or restricted stockshare units (“RSUs”), performance awards, and other share‑based awards.Forfeited or expired awards are returned to the incentive plan pool for future grants. Awards generally vest over four years, 25% on the first anniversary of the date of grant and quarterly thereafter.thereafter over the remaining 3 years. Upon vesting of RSUs, employees may elect to have shares withheld to cover statutory minimum withholding taxes. Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares were never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows.
In May 2017,Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $2.9 million and $2.4 million for the Company adopted thefirst quarter of 2022 and 2021.
Stock Options
The following table summarizes option activity:
|
| Number of Stock Options |
|
|
|
|
|
|
|
|
|
|
| |
|
| Service condition |
|
| Weighted average exercise price per share |
|
| Weighted average remaining contractual term |
| Aggregate intrinsic value |
| |||
Outstanding, December 31, 2021 |
|
| 921,469 |
|
| $ | 23.20 |
|
|
|
|
|
|
|
Granted |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
Exercised |
|
| (42,753 | ) |
| $ | 22.33 |
|
|
|
|
|
|
|
Forfeited or expired |
|
| (13,501 | ) |
| $ | 22.55 |
|
|
|
|
|
|
|
Outstanding, April 1, 2022 |
|
| 865,215 |
|
| $ | 23.26 |
|
| 3.6 years |
| $ | 9,322 |
|
Exercisable, April 1, 2022 |
|
| 630,492 |
|
| $ | 23.08 |
|
| 3.3 years |
| $ | 6,901 |
|
Restricted Share Units
The following table summarizes RSU activity:
|
| Number of Restricted Share Units |
|
|
|
|
| |||||||||
|
| Service condition |
|
| Performance condition |
|
| Market condition |
|
| Weighted average grant-date fair value per share |
| ||||
Unvested, December 31, 2021 |
|
| 559,310 |
|
|
| 9,716 |
|
|
| 14,572 |
|
| $ | 37.05 |
|
Granted |
|
| 23,003 |
|
|
| — |
|
|
| — |
|
| $ | 40.00 |
|
Vested |
|
| (52,684 | ) |
|
| — |
|
|
| — |
|
| $ | 27.30 |
|
Forfeited |
|
| (17,624 | ) |
|
| — |
|
|
| — |
|
| $ | 33.45 |
|
Unvested, April 1, 2022 |
|
| 512,005 |
|
|
| 9,716 |
|
|
| 14,572 |
|
| $ | 38.26 |
|
Employee Share Purchase Plan
The 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which provides grants employees the ability to designate a portion of their base compensationbase-pay to purchase ordinary shares at a purchase price equal to 85% of the fair market value of our ordinary shares on the first or last day of each 6 month purchase period. The currentPurchase periods begin on January 1 or July 1 and end on June 30 or December 31, or the next business day if such date is not a business day. Shares are purchased on the last day of the purchase period began on August 7, 2017 and ends on December 30, 2017. Noperiod.
As of April 1, 2022, approximately 2.3 million ordinary shares have been issued to dateremain available for purchase under the 2017 ESPP.
Share‑based compensation expense for stock options, restricted shares, and ordinary shares across all plans was $623, $373, $1,536, and $1,345 for the third quarter of 2017 and 2016 and the nine months ended September 29, 2017 and September 23, 2016, respectively.Note 10 – Earnings per Share
Stock Options
The following table summarizes the Company’s stock option activity during the nine months ended September 29, 2017:
|
| Number of Stock Options |
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Time vesting |
|
| Performance vesting |
|
| Weighted average exercise price per share |
|
| Weighted average remaining contractual term |
| Aggregate intrinsic value (in thousands) |
| ||||
Outstanding, December 30, 2016 |
|
| 1,948,307 |
|
|
| 215,908 |
|
| $ | 8.87 |
|
|
|
|
|
|
|
Granted |
|
| 536,700 |
|
|
| — |
|
| $ | 18.84 |
|
|
|
|
|
|
|
Exercised |
|
| (740,472 | ) |
|
| — |
|
| $ | 8.55 |
|
|
|
|
|
|
|
Forfeited |
|
| — |
|
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
Expired |
|
| — |
|
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
Outstanding, September 29, 2017 |
|
| 1,744,535 |
|
|
| 215,908 |
|
| $ | 11.72 |
|
| 4.1 years |
| $ | 29,573 |
|
Exercisable, September 29, 2017 |
|
| 988,237 |
|
|
| 215,908 |
|
| $ | 9.03 |
|
| 2.8 years |
| $ | 21,393 |
|
The following table summarizes the Company’s restricted share activity during the nine months ended September 29, 2017:
|
| Number of Restricted Ordinary Shares |
|
|
|
|
| |
|
| Time vesting |
|
| Weighted average grant date fair value |
| ||
Unvested, December 30, 2016 |
|
| 103,055 |
|
| $ | 8.39 |
|
Granted |
|
| 95,158 |
|
| $ | 17.83 |
|
Vested |
|
| (58,065 | ) |
| $ | 8.38 |
|
Forfeited |
|
| — |
|
| $ | — |
|
Unvested, September 29, 2017 |
|
| 140,148 |
|
| $ | 14.81 |
|
Note 12 – Segment Information
The Company’s Chief Operating Decision Maker, the Chief Executive Officer, reviews the Company’s results of operations on a consolidated level and executive staff is structured by function rather than by product category. Therefore, the Company operates in one operating segment. Key resources, decisions, and assessment of performance are also analyzed on a company‑wide level.
The Company’s foreign operations are conducted primarily through its wholly owned subsidiaries in Singapore and Malaysia. The Company’s principal markets include North America, Asia and, to a lesser degree, Europe. Sales by geographic area represent sales to unaffiliated customers.
All information on sales by geographic area is based upon the location to which the products were shipped. The following table sets forth sales by geographic area (including sales from discontinued operations):the computation of basic and diluted earnings per share and a reconciliation of the numerator and denominator used in the calculation:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
United States of America |
| $ | 101,975 |
|
| $ | 57,844 |
|
| $ | 268,614 |
|
| $ | 177,977 |
|
Singapore |
|
| 50,275 |
|
|
| 41,844 |
|
|
| 172,799 |
|
|
| 105,337 |
|
Europe |
|
| 6,740 |
|
|
| 3,990 |
|
|
| 19,116 |
|
|
| 11,898 |
|
Other |
|
| 5,529 |
|
|
| 2,147 |
|
|
| 12,427 |
|
|
| 5,697 |
|
Total net sales |
| $ | 164,519 |
|
| $ | 105,825 |
|
| $ | 472,956 |
|
| $ | 300,909 |
|
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
Numerator: |
|
|
|
|
|
|
|
|
Net income |
| $ | 8,039 |
|
| $ | 14,638 |
|
Denominator: |
|
|
|
|
|
|
|
|
Basic weighted average ordinary shares outstanding |
|
| 28,592,629 |
|
|
| 28,004,248 |
|
Dilutive effect of options |
|
| 292,828 |
|
|
| 449,656 |
|
Dilutive effect of RSUs |
|
| 135,860 |
|
|
| 269,002 |
|
Dilutive effect of ESPP |
|
| 2,138 |
|
|
| 6,206 |
|
Diluted weighted average ordinary shares outstanding |
|
| 29,023,455 |
|
|
| 28,729,112 |
|
Securities excluded from the calculation of diluted weighted average ordinary shares outstanding (1) |
|
| 267,000 |
|
|
| 75,000 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Net income: |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.28 |
|
| $ | 0.52 |
|
Diluted |
| $ | 0.28 |
|
| $ | 0.51 |
|
(1) | Represents potentially dilutive options and RSUs excluded from the calculation of diluted weighted average ordinary shares outstanding, because including them would have been antidilutive under the treasury stock method. |
Note 1311 – Earnings per ShareSegment Information
Earnings per share (“EPS”) was presentedOur Chief Operating Decision Maker, the Chief Executive Officer, reviews our results of operations on a consolidated level and executive staff is structured by function rather than by product category. Therefore, we operate in conformity with1 operating segment. Key resources, decisions, and assessment of performance are also analyzed on a company‑wide level.
Foreign operations are conducted primarily through our wholly owned subsidiaries in Singapore and Malaysia. Our principal markets include North America, Asia and, to a lesser degree, Europe. Sales by geographic area represent sales to unaffiliated customers.
All information on sales by geographic area is based upon the two‑class method forlocation to which the third quarter of 2016 and nine months ended September 23, 2016, required for participating securities, as the Company had two classes of stock outstanding until its December 2016 IPO. EPS was not presented in conformity with the two‑class method for the third quarter of 2017 and nine months ended September 29, 2017, as the Company had only one class of stock outstanding for that period.
products were shipped. The following table sets forth the computationsales by geographic area:
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
United States of America |
| $ | 142,470 |
|
| $ | 139,134 |
|
Singapore |
|
| 103,295 |
|
|
| 86,324 |
|
Europe |
|
| 24,392 |
|
|
| 17,330 |
|
Other |
|
| 22,989 |
|
|
| 21,778 |
|
Total net sales |
| $ | 293,146 |
|
| $ | 264,566 |
|
Foreign long-lived assets, exclusive of the Company’s basicdeferred tax assets, were $39.0 million and diluted net income (loss) per share attributable to ordinary shareholders$38.4 million at April 1, 2022 and a reconciliation of the numerator and denominator used in the calculation:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
| $ | 14,298 |
|
| $ | 7,681 |
|
| $ | 37,720 |
|
| $ | 12,788 |
|
Undistributed earnings attributed to preferred shareholders |
|
| — |
|
|
| (7,635 | ) |
|
| — |
|
|
| (12,726 | ) |
Net income from continuing operations, attributable to ordinary shareholders |
| $ | 14,298 |
|
| $ | 46 |
|
| $ | 37,720 |
|
| $ | 62 |
|
Net loss from discontinued operations, attributable to ordinary shareholders |
| $ | (8 | ) |
| $ | (7 | ) |
| $ | (730 | ) |
| $ | (4,039 | ) |
Net income |
| $ | 14,290 |
|
| $ | 7,674 |
|
| $ | 36,990 |
|
| $ | 8,749 |
|
Undistributed earnings attributed to preferred shareholders |
|
| — |
|
|
| (7,628 | ) |
|
| — |
|
|
| (8,707 | ) |
Net income, attributable to ordinary shareholders |
| $ | 14,290 |
|
| $ | 46 |
|
| $ | 36,990 |
|
| $ | 42 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares outstanding |
|
| 25,267,113 |
|
|
| 106,082 |
|
|
| 24,923,298 |
|
|
| 85,781 |
|
Dilutive effect of stock options |
|
| 955,598 |
|
|
| 394,618 |
|
|
| 1,039,920 |
|
|
| 231,932 |
|
Dilutive effect of restricted shares |
|
| 54,088 |
|
|
| 42,249 |
|
|
| 44,679 |
|
|
| 62,788 |
|
Dilutive effect of employee share purchase plan |
|
| 1,348 |
|
|
| — |
|
|
| 449 |
|
|
| — |
|
Weighted average number of shares used in diluted per share calculation for net income from continuing operations |
|
| 26,278,147 |
|
|
| 542,949 |
|
|
| 26,008,346 |
|
|
| 380,501 |
|
Weighted average number of shares used in diluted per share calculation for net loss from discontinued operations |
|
| 25,267,113 |
|
|
| 106,082 |
|
|
| 24,923,298 |
|
|
| 85,781 |
|
Weighted average ordinary shares outstanding |
|
| 25,267,113 |
|
|
| 106,082 |
|
|
| 24,923,298 |
|
|
| 85,781 |
|
Dilutive effect of stock options |
|
| 955,598 |
|
|
| 394,618 |
|
|
| 1,039,920 |
|
|
| 231,932 |
|
Dilutive effect of restricted shares |
|
| 54,088 |
|
|
| 42,249 |
|
|
| 44,679 |
|
|
| 62,788 |
|
Dilutive effect of employee share purchase plan |
|
| 1,348 |
|
|
| — |
|
|
| 449 |
|
|
| — |
|
Weighted average number of shares used in diluted per share calculation for net income |
|
| 26,278,147 |
|
|
| 542,949 |
|
|
| 26,008,346 |
|
|
| 380,501 |
|
Net income (loss) per share attributable to ordinary shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.57 |
|
| $ | 0.43 |
|
| $ | 1.51 |
|
| $ | 0.72 |
|
Diluted |
| $ | 0.54 |
|
| $ | 0.08 |
|
| $ | 1.45 |
|
| $ | 0.16 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | — |
|
| $ | (0.07 | ) |
| $ | (0.03 | ) |
| $ | (47.09 | ) |
Diluted |
| $ | — |
|
| $ | (0.07 | ) |
| $ | (0.03 | ) |
| $ | (47.09 | ) |
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.57 |
|
| $ | 0.43 |
|
| $ | 1.48 |
|
| $ | 0.49 |
|
Diluted |
| $ | 0.54 |
|
| $ | 0.08 |
|
| $ | 1.42 |
|
| $ | 0.11 |
|
An aggregated total of 178,136, 123,763, 226,607, and 185,181 potential ordinary shares have been excluded from the computation of diluted net income (loss) per share attributable to ordinary shareholders for the third quarter of 2017 and 2016 and the nine months ended September 29, 2017 and September 23, 2016,December 31, 2021, respectively because including them would have been antidilutive..
Note 14 – Discontinued Operations
In January 2016, we made the decision to shut down our Kingston, New York facility as this location consumed a significant amount of resources while contributing very little income. We completed the shutdown of the operations of the New York facility in May 2016 through abandonment as a buyer for the facility and operation was not found. The Company continues to incur expenses related to the lease for this facility, which expires February 2018.
In the second quarter of 2017 we accrued for remaining costs to occupy the facility until the lease expires in February 2018. Our initial restructuring accrual recorded in the second quarter of 2016 assumed the ability to sublease the facility, which to‑date we have not been able to do. We do not anticipate any sublease of the facility at this time.
The following table represents the carrying amounts of the major classes of assets and liabilities of the Kingston, New York facility:
|
| September 29, 2017 |
|
| December 30, 2016 |
| ||
Assets |
|
|
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
| $ | 21 |
|
| $ | 99 |
|
Total current assets |
|
| 21 |
|
|
| 99 |
|
Total assets |
| $ | 21 |
|
| $ | 99 |
|
Liabilities |
|
|
|
|
|
|
| |
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 133 |
|
| $ | 152 |
|
Accrued liabilities |
|
| 471 |
|
|
| 360 |
|
Other current liabilities |
|
| 22 |
|
|
| 52 |
|
Total current liabilities |
|
| 626 |
|
|
| 564 |
|
Deferred tax liabilities |
|
| 31 |
|
|
| 30 |
|
Other long-term liabilities |
|
| — |
|
|
| 9 |
|
Total liabilities |
| $ | 657 |
|
| $ | 603 |
|
The following table represents results of our discontinued operation:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
Net sales |
| $ | — |
|
| $ | 138 |
|
| $ | — |
|
| $ | 26,570 |
|
Cost of sales |
|
| — |
|
|
| 118 |
|
|
| — |
|
|
| 28,046 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| — |
|
|
| (5 | ) |
|
| — |
|
|
| 262 |
|
Selling, general, and administrative |
|
| — |
|
|
| 10 |
|
|
| 721 |
|
|
| 2,276 |
|
Amortization of intangible assets |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total operating expenses |
|
| — |
|
|
| 5 |
|
|
| 721 |
|
|
| 2,538 |
|
Operating income (loss) |
|
| — |
|
|
| 15 |
|
|
| (721 | ) |
|
| (4,014 | ) |
Interest income, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other expense, net |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Income (loss) from discontinued operations before income taxes |
|
| — |
|
|
| 16 |
|
|
| (721 | ) |
|
| (4,013 | ) |
Income tax expense |
|
| 8 |
|
|
| 23 |
|
|
| 9 |
|
|
| 26 |
|
Loss from discontinued operations |
| $ | (8 | ) |
| $ | (7 | ) |
| $ | (730 | ) |
| $ | (4,039 | ) |
Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company's consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued. In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through November 13, 2017, the date the consolidated financial statements were issued.
On October 23, 2017 the Company entered into a 5 year commercial building lease agreement for the lease of approximately 64,000 square feet in Tualatin, Oregon near its existing facility. Base rent begins at $30 per month, with the first three months waived. The total rent obligation payable over the 5 year lease period is $1,862.
On November 3, 2017 Ichor Holdings, LLC, a subsidiary of the Company, entered into a Stock Purchase Agreement (the “Agreement”) for the acquisition of Talon Holdings, LLC, the parent company of Talon Innovations Corporation (“Talon”) for $130,000, subject to customary adjustments. The Company anticipates financing the acquisition with approximately $10,000 of cash on‑hand and $120,000 of incremental borrowings. Talon is located in Sauk Rapids, Minnesota, with facilities in Osakis, Minnesota; Tampa, Florida; and Seoul, South Korea. Talon is a leader in the design and manufacturing of high precision machined parts used in leading edge semiconductor tools. In connection with the acquisition of Talon, the Company expects to borrow $120,000 million under its 2015 Credit Facility as an incremental term loan facility (the “Incremental Loan”), payable in quarterly installments of $1,770. The Incremental Loan’s interest rate and maturity date are consistent with other amounts outstanding under the 2015 Credit Facility. The acquisition is subject to satisfaction of customary closing conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in the fourth quarter of 2017.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Concerning Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. You should not place undue reliance on these statements. All statements other than statements of historical fact included in this report are forward-looking statements. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. However, these words are not the exclusive means of identifying such statements. These statements are contained in many sections of this report, including those in Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include our dependence on expenditures by manufacturers in the semiconductor capital equipment industry; our reliance on a very small number of original equipment manufacturer customers for a significant portion of our sales; our customers’ significant negotiating leverage; competition in our industry; risks associated with weakness in the global economy and geopolitical instability, including the war in Ukraine; and other factors set forth in this report, and those set forth in Part I – Item 1A. Risk Factors of our 2021 Annual Report on Form 10‑K and our other filings with the Securities and Exchange Commission (“SEC”). All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in Part I – Item 1A. Risk Factors to our 2021 Annual Report on Form 10-K, as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated unaudited financial statements and related notes included elsewhere in this report. The following discussion contains forward‑looking statements based upon our current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward‑looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors”.
Overview
We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment. Our primaryproduct offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices. Our gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition. Our chemical delivery systems and subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning. We also manufacture certainprovide precision-machined components, for internal use in fluid delivery systemsweldments, e‑beam and for direct sales to our customers.laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products. This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively.
Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing process.processes. Any malfunction or material degradation in fluid delivery reduces yields and increases the likelihood of manufacturing defects in these processes. Historically, semiconductor original equipment manufacturers (“OEMs”) internally designed and manufactured the fluid delivery subsystems used in their process tools. Currently, mostMost OEMs outsource all or a portion of the design, engineering, and manufacturing of their gas delivery subsystems to a few specialized suppliers, including us. Additionally, many OEMs are also increasingly outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems. Outsourcing these subsystems has allowed OEMs to leverage the suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value‑addedvalue-added processes. We believe that this outsourcing trend has enabled OEMs to reduce their fixed costs and development time, as well as provided significantprovide growth opportunities for specialized subsystems suppliers like us.
We have a global footprint with volume production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, Singaporethe United Kingdom, Korea, and Union City, California. We completed our initial public offering (“IPO”) in December 2016. In Mexico.
The following table summarizes key financial information for the third quarter of 2017 and 2016, our two largest customers by sales were Lam Research and Applied Materials. During the third quarter of 2017 and 2016, respectively, we generated sales of $164.5 million and $105.7 million, gross profit of $24.2 million and $16.9 million, net income from continuing operations of $14.3 million and $7.7 million, and adjusted net income from continuing operations of $16.3 million and $8.3 million. Adjusted net income from continuing operations is a financial measure that is not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). See “Non‑GAAP Results” for a discussion of adjusted net income from continuing operations, an accompanying presentation of the most directly comparable financial measure calculatedperiods indicated. Amounts are presented in accordance with GAAP net income from continuingunless explicitly identified as being a non-GAAP metric. For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to Part I –Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this report.
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
|
| (dollars in thousands, except per share amounts) |
| |||||
Net sales |
| $ | 293,146 |
|
| $ | 264,566 |
|
Gross profit |
| $ | 43,932 |
|
| $ | 39,512 |
|
Gross margin |
|
| 15.0 | % |
|
| 14.9 | % |
Non-GAAP gross margin |
|
| 16.0 | % |
|
| 16.1 | % |
Operating expenses |
| $ | 33,467 |
|
| $ | 21,255 |
|
Operating income |
| $ | 10,465 |
|
| $ | 18,257 |
|
Net income |
| $ | 8,039 |
|
| $ | 14,638 |
|
Non-GAAP net income |
| $ | 20,178 |
|
| $ | 21,725 |
|
Diluted EPS |
| $ | 0.28 |
|
| $ | 0.51 |
|
Non-GAAP diluted EPS |
| $ | 0.70 |
|
| $ | 0.76 |
|
COVID-19 Pandemic and Market Conditions Update
The COVID‑19 pandemic and associated macroeconomic impacts, including supply chain disruptions, tightened labor markets, and overall increased inflation have created, and are expected to continue to create significant volatility, uncertainty, and turmoil in our industry. While our facilities are currently not subject to any site-wide government shutdowns, and restrictions have eased around social, business, travel, and governmental activities, we have experienced increases in direct costs and inefficiencies within our factories associated with logistics, employee labor, and certain component shortages. These factors have resulted in, and may continue to result in, lower revenues and operating margins. The extent and duration of these impacts cannot be specifically quantified given the dynamic nature and breadth of the pandemic’s impact on our operations and a reconciliationthat of the differences between adjusted net income from continuing operationsour customers and net income from continuing operations.suppliers.
The following table sets forth our unaudited results of operations for the periods presented. The period‑to‑period comparison of results is not necessarily indicative of results for future periods.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
|
| (in thousands) |
| |||||||||||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
| $ | 164,519 |
|
| $ | 105,687 |
|
| $ | 472,956 |
|
| $ | 274,339 |
|
Cost of sales |
|
| 140,323 |
|
|
| 88,802 |
|
|
| 401,239 |
|
|
| 230,349 |
|
Gross profit |
|
| 24,196 |
|
|
| 16,885 |
|
|
| 71,717 |
|
|
| 43,990 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 1,992 |
|
|
| 1,564 |
|
|
| 5,686 |
|
|
| 4,229 |
|
Selling, general and administrative |
|
| 11,430 |
|
|
| 6,782 |
|
|
| 26,272 |
|
|
| 20,329 |
|
Amortization of intangible assets |
|
| 2,220 |
|
|
| 1,804 |
|
|
| 5,818 |
|
|
| 5,210 |
|
Total operating expenses |
|
| 15,642 |
|
|
| 10,150 |
|
|
| 37,776 |
|
|
| 29,768 |
|
Operating income |
|
| 8,554 |
|
|
| 6,735 |
|
|
| 33,941 |
|
|
| 14,222 |
|
Interest expense |
|
| 739 |
|
|
| 1,183 |
|
|
| 2,104 |
|
|
| 3,245 |
|
Other expense (income), net |
|
| 73 |
|
|
| (241 | ) |
|
| (325 | ) |
|
| (384 | ) |
Income from continuing operations before income taxes |
|
| 7,742 |
|
|
| 5,793 |
|
|
| 32,162 |
|
|
| 11,361 |
|
Income tax benefit from continuing operations |
|
| (6,556 | ) |
|
| (1,888 | ) |
|
| (5,558 | ) |
|
| (1,427 | ) |
Net income from continuing operations |
|
| 14,298 |
|
|
| 7,681 |
|
|
| 37,720 |
|
|
| 12,788 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before taxes |
|
| — |
|
|
| 16 |
|
|
| (721 | ) |
|
| (4,013 | ) |
Income tax expense from discontinued operations |
|
| 8 |
|
|
| 23 |
|
|
| 9 |
|
|
| 26 |
|
Net loss from discontinued operations |
|
| (8 | ) |
|
| (7 | ) |
|
| (730 | ) |
|
| (4,039 | ) |
Net income |
| $ | 14,290 |
|
| $ | 7,674 |
|
| $ | 36,990 |
|
| $ | 8,749 |
|
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
|
| (in thousands) |
| |||||
Net sales |
| $ | 293,146 |
|
| $ | 264,566 |
|
Cost of sales |
|
| 249,214 |
|
|
| 225,054 |
|
Gross profit |
|
| 43,932 |
|
|
| 39,512 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
| 4,851 |
|
|
| 3,515 |
|
Selling, general, and administrative |
|
| 23,267 |
|
|
| 14,349 |
|
Amortization of intangible assets |
|
| 5,349 |
|
|
| 3,391 |
|
Total operating expenses |
|
| 33,467 |
|
|
| 21,255 |
|
Operating income |
|
| 10,465 |
|
|
| 18,257 |
|
Interest expense, net |
|
| 1,532 |
|
|
| 1,919 |
|
Other expense, net |
|
| 84 |
|
|
| 185 |
|
Income before income taxes |
|
| 8,849 |
|
|
| 16,153 |
|
Income tax expense |
|
| 810 |
|
|
| 1,515 |
|
Net income |
| $ | 8,039 |
|
| $ | 14,638 |
|
The following table sets forth our unaudited results of operations as a percentage of our total sales for the periods presented.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
|
| (in thousands) |
| |||||||||||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
Cost of sales |
|
| 85.3 |
|
|
| 84.0 |
|
|
| 84.8 |
|
|
| 84.0 |
|
Gross profit |
|
| 14.7 |
|
|
| 16.0 |
|
|
| 15.2 |
|
|
| 16.0 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 1.2 |
|
|
| 1.5 |
|
|
| 1.2 |
|
|
| 1.5 |
|
Selling, general and administrative |
|
| 6.9 |
|
|
| 6.4 |
|
|
| 5.6 |
|
|
| 7.4 |
|
Amortization of intangible assets |
|
| 1.3 |
|
|
| 1.7 |
|
|
| 1.2 |
|
|
| 1.9 |
|
Total operating expenses |
|
| 9.5 |
|
|
| 9.6 |
|
|
| 8.0 |
|
|
| 10.9 |
|
Operating income |
|
| 5.2 |
|
|
| 6.4 |
|
|
| 7.2 |
|
|
| 5.2 |
|
Interest expense |
|
| 0.4 |
|
|
| 1.1 |
|
|
| 0.4 |
|
|
| 1.2 |
|
Other expense (income), net |
|
| 0.0 |
|
|
| (0.2 | ) |
|
| (0.1 | ) |
|
| (0.1 | ) |
Income from continuing operations before income taxes |
|
| 4.7 |
|
|
| 5.5 |
|
|
| 6.8 |
|
|
| 4.1 |
|
Income tax benefit from continuing operations |
|
| (4.0 | ) |
|
| (1.8 | ) |
|
| (1.2 | ) |
|
| (0.5 | ) |
Net income from continuing operations |
|
| 8.7 |
|
|
| 7.3 |
|
|
| 8.0 |
|
|
| 4.7 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before taxes |
|
| 0.0 |
|
|
| 0.0 |
|
|
| (0.2 | ) |
|
| (1.5 | ) |
Income tax expense from discontinued operations |
|
| 0.0 |
|
|
| 0.0 |
|
|
| 0.0 |
|
|
| 0.0 |
|
Net loss from discontinued operations |
|
| 0.0 |
|
|
| 0.0 |
|
|
| (0.2 | ) |
|
| (1.5 | ) |
Net income |
|
| 8.7 |
|
|
| 7.3 |
|
|
| 7.8 |
|
|
| 3.2 |
|
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
|
|
|
|
|
|
|
|
|
Net sales |
|
| 100.0 |
|
|
| 100.0 |
|
Cost of sales |
|
| 85.0 |
|
|
| 85.1 |
|
Gross profit |
|
| 15.0 |
|
|
| 14.9 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
| 1.7 |
|
|
| 1.3 |
|
Selling, general, and administrative |
|
| 7.9 |
|
|
| 5.4 |
|
Amortization of intangible assets |
|
| 1.8 |
|
|
| 1.3 |
|
Total operating expenses |
|
| 11.4 |
|
|
| 8.0 |
|
Operating income |
|
| 3.6 |
|
|
| 6.9 |
|
Interest expense, net |
|
| 0.5 |
|
|
| 0.7 |
|
Other expense, net |
|
| 0.0 |
|
|
| 0.1 |
|
Income before income taxes |
|
| 3.0 |
|
|
| 6.1 |
|
Income tax expense |
|
| 0.3 |
|
|
| 0.6 |
|
Net income |
|
| 2.7 |
|
|
| 5.5 |
|
Comparison of the Threethree months ended April 1, 2022 and Nine Months Ended September 29, 2017 and September 23, 2016March 26, 2021
Net Sales
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Sales |
| $ | 164,519 |
|
| $ | 105,687 |
|
| $ | 58,832 |
|
|
| 55.7 | % |
| $ | 472,956 |
|
| $ | 274,339 |
|
| $ | 198,617 |
|
|
| 72.4 | % |
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Net sales |
| $ | 293,146 |
|
| $ | 264,566 |
|
| $ | 28,580 |
|
|
| 10.8 | % |
The increase in net sales from the thirdfirst quarter of 20162021 to the thirdfirst quarter of 20172022 was primarily relateddue to an increasestrong demand from our customers as a result of continued growth in volume resultingthe global wafer fabrication equipment market as well as incremental revenues from industry growth, our acquisition of Cal‑Weld, and market share gains. The volume increase was due to an approximate 8.8%, or approximately $26.2 million, increaseIMG Companies, LLC (“IMG”) in November 2021, partially offset by production constraints as a result of challenges in our market share at our two largestsupply chain.
Net sales to U.S. customers which includes the acquisition of Cal‑Weld, and an approximately $32.6 million increase in the volume of purchases primarily by our two largest customers driven by overall industry growth. We refer to the volume of purchases from us by a customer of ours relative to its other suppliers as our market share of that customer. On a geographic basis, sales in the U.S. increased by $44.1$3.3 million in the thirdfirst quarter of 20172022 to $102.0$142.5 million. ForeignOn a relative basis, net sales to U.S. customers as a percent of total net sales decreased from 52.6% in the first quarter of 2021 to 48.6% in the first quarter of 2022.
Net sales to international customers increased by $14.6$25.2 million in the thirdfirst quarter of 20172022 to $62.5$150.7 million.
The increase in On a relative basis, net sales to international customers as a percent of total net sales increased from the nine months ended September 23, 2016 to the nine months ended September 29, 2017 was primarily related to an increase in volume resulting from industry growth, our acquisition of Cal‑Weld and Ajax, and market share gains. The volume increase was due to an approximate 6.7%, or approximately $62.3 million, increase in our market share at our two largest customers, which includes the acquisition of Cal‑Weld and Ajax, and an approximately $136.3 million increase47.4% in the volumefirst quarter of purchases primarily by our two largest customers driven by overall industry growth. On a geographic basis, sales2021 to 51.4% in the U.S. increased by $90.6 million in the nine months ended September 29, 2017 to $268.6 million. Foreign sales increased by $81.4 million in the nine months ended September 29, 2017 to $204.3 million.first quarter of 2022.
Cost of Sales, Gross Profit, and Gross Margin
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||||||||||
|
| (dollars in thousands) |
|
| (dollars in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||
Cost of sales |
| $ | 140,323 |
|
| $ | 88,802 |
|
| $ | 51,521 |
|
|
| 58.0 | % |
| $ | 401,239 |
|
| $ | 230,349 |
|
| $ | 170,890 |
|
|
| 74.2 | % |
| $ | 249,214 |
|
| $ | 225,054 |
|
| $ | 24,160 |
|
|
| 10.7 | % |
Gross profit |
| $ | 24,196 |
|
| $ | 16,885 |
|
| $ | 7,311 |
|
|
| 43.3 | % |
| $ | 71,717 |
|
| $ | 43,990 |
|
| $ | 27,727 |
|
|
| 63.0 | % |
| $ | 43,932 |
|
| $ | 39,512 |
|
| $ | 4,420 |
|
|
| 11.2 | % |
Gross margin |
|
| 14.7 | % |
|
| 16.0 | % |
|
|
|
|
| - 130 bps |
|
|
| 15.2 | % |
|
| 16.0 | % |
|
|
|
|
| - 80 bps |
|
|
| 15.0 | % |
|
| 14.9 | % |
|
|
|
|
| + 10 bps |
|
The increase in the gross amounts of cost of sales and gross profit from the thirdfirst quarter of 20162021 to the thirdfirst quarter of 2017 and2022 were primarily due to the factors mentioned in the commentary above under the heading, “Net Sales.”
The increase in our gross margin from the nine months ended September 23, 2016first quarter of 2021 to the nine months ended September 29, 2017first quarter of 2022 was primarily due to the increase in sales volume. The increase in absolute dollars of gross profit was driven primarily by an increase in sales volume.
As part of our purchase of Cal‑Weld, we recorded opening inventory at fair value which included a fair value adjustment to inventory of $3.6 million. In the third quarter of 2017 we released $3.0 million of the fair value adjustment to cost of sales based on the sale of inventory during the quarter. The impact of this charge accounts for a decrease to reported gross margin of 180 basis points and 60 basis points for the third quarter of 2017 and nine months ended September 29, 2017, respectively.
As discussed in Note 1 – Basis of Presentation to the consolidated financial statements, the Company recorded a charge to cost of sales of $1.75 million in the second quarter of 2017 due to the correction of an error related to translating inventory balances at our Singapore and Malaysia subsidiaries. The impact of this charge accounts for a decrease to reported gross margin of 40 basis points in the nine months ended September 29, 2017.
Additionally, our grossaccretive margins for the third quarter of 2017 and the nine months ended September 29, 2017 were favorably impacted from our recent acquisition of Cal‑Weld, with margins that were accretive to our historical business. This favorability wasIMG in November 2021, partially offset by decreased manufacturing efficienciesincreased materials, logistics, and labor costs, as we invest in our facilities as we kept our labor force intactcapacity to service present levels of strong customer demand in anticipationfuture quarters, and the revenue decline from our historical business comparedimpacts of component and material shortages, due to the previous quarter would be short lived.supply chain challenges, reducing factory utilization.
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Research and development |
| $ | 1,992 |
|
| $ | 1,564 |
|
| $ | 428 |
|
|
| 27.4 | % |
| $ | 5,686 |
|
| $ | 4,229 |
|
| $ | 1,457 |
|
|
| 34.5 | % |
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Research and development |
| $ | 4,851 |
|
| $ | 3,515 |
|
| $ | 1,336 |
|
|
| 38.0 | % |
The increase in research and development expenses from the thirdfirst quarter of 20162021 to the thirdfirst quarter of 2017 and from the nine months ended September 23, 2016 to the nine months ended September 29, 20172022 was primarily due to an increase in headcountincreased employee-related expense, as we expand our engineering team to design and consulting expense to support additional projects.engineer next generation, high performance solutions for our customers.
Selling, General, and Administrative
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Selling, general, and administrative |
| $ | 11,430 |
|
| $ | 6,782 |
|
| $ | 4,648 |
|
|
| 68.5 | % |
| $ | 26,272 |
|
| $ | 20,329 |
|
| $ | 5,943 |
|
|
| 29.2 | % |
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Selling, general, and administrative |
| $ | 23,267 |
|
| $ | 14,349 |
|
| $ | 8,918 |
|
|
| 62.2 | % |
The increase in selling, general, and administrative expense from the third quarter of 2016 to the third quarter of 2017 was primarily due to increased acquisition‑related expenses from our acquisition of Cal‑Weld, incremental Cal‑Weld operating expenses incurred subsequent to the acquisition, increased incentive compensation on improved performance to operating targets, increased public company costs, and increased headcount expense to support increased sales volume.
The increase in selling, general, and administrative expense from the nine months ended September 23, 2016first quarter of 2021 to the nine months ended September 29, 2017first quarter of 2022 was primarily due to increased acquisition-related expensesa non-recurring loss accrual of $3.1 million related to a probable settlement of an employment-related legal matter; $3.0 million in incremental selling, general, and administrative expense from our acquisition of Cal‑Weld, incremental operating expenses fromIMG in November 2021, $1.7 million in increased employee-related costs, inclusive of increased share-based compensation expense; $0.8 million in increased professional, consulting, and audit fees; and $0.3 million in transaction-related fees costs associated with our acquisition Cal‑Weld and Ajax, increased public company costs, increased expenses resulting from the secondary offerings of our ordinary shares by Francisco Partners in the second and third quarters of 2017, and increased headcount expense to support increased sales volume, offset in part by reduced consulting fees paid to Francisco Partners Consulting, LLC (“FPC”).
Selling, general, and administrative expense also increased during the three and nine months ended September 29, 2017 due to a charge of approximately $1.0 million as a result of the final arbitration ruling on our working capital claim with the sellers of Ajax. The ruling was outside of the one year measurement period and not considered to be an adjustment to goodwill, resulting in a charge to selling, general, and administrative expense.IMG.
Amortization of Intangible Assets
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Amortization of intangibles assets |
| $ | 2,220 |
|
| $ | 1,804 |
|
| $ | 416 |
|
|
| 23.1 | % |
| $ | 5,818 |
|
| $ | 5,210 |
|
| $ | 608 |
|
|
| 11.7 | % |
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Amortization of intangibles assets |
| $ | 5,349 |
|
| $ | 3,391 |
|
| $ | 1,958 |
|
|
| 57.7 | % |
AmortizationThe increase in amortization expense increased from the thirdfirst quarter of 20162021 to the thirdfirst quarter of 20172022 was primarily due to incremental amortization expense from intangible assets acquired in connection with our acquisition of Cal‑Weld.
The increaseIMG in amortization expense from the nine months ended September 23, 2016 to the nine months ended September 29, 2017 was due to incremental amortization expense from intangible assets acquired in connection with our acquisition of Ajax in the second quarter of 2016 and our acquisition of Cal‑Weld in the third quarter of 2017.
The fair value assigned to intangible assets acquired in connection with our acquisition of Cal‑Weld is still preliminary. Amortization of intangible assets may change in future periods depending on the final fair value assigned to the assets.
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Interest expense, net |
| $ | 739 |
|
| $ | 1,183 |
|
| $ | (444 | ) |
|
| -37.5 | % |
| $ | 2,104 |
|
| $ | 3,245 |
|
| $ | (1,141 | ) |
|
| -35.2 | % |
The decrease in interest expense, net from the third quarter of 2016 to the third quarter of 2017 was due to a decrease in the average amount borrowed during the third quarter of 2017 as a result of the pay down of debt in December 2016 using proceeds from our IPO and a 150 basis point decrease in our average interest rate during the third quarter of 2017 primarily from an amendment to our 2015 Credit Facility in connection with our acquisition of Cal‑Weld,November 2021, partially offset by reduced amortization expense due to an additional $30.0 millionolder customer relationship asset reaching full amortization in borrowings to fund our acquisitionthe fourth quarter of Cal‑Weld.2021.
Interest Expense, Net
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Interest expense, net |
| $ | 1,532 |
|
| $ | 1,919 |
|
| $ | (387 | ) |
|
| -20.2 | % |
The decrease in interest expense, net from the nine months ended September 23, 2016first quarter of 2021 to the nine months ended September 29, 2017first quarter of 2022 was primarily due to a 147‑basis point decrease in our weighted average interest rate, from 3.30 % to 1.83%, respectively, and a decrease in debt issuance cost amortization expense, partially offset by a $105.0 million increase in average debt outstanding during the first quarter of 2022 compared to the first quarter of 2021 as a result of drawing $130.0 million on our revolving credit facility in November 2021 to partially fund our acquisition of IMG. The decrease in our weighted average interest rate from the first quarter of 2021 to the first quarter of 2022 was primarily due to a decrease in our leverage ratio, which reduces the average amount borrowed during the nine months ended September 29, 2017applicable margin component of our all-in borrowing rate, as a result of the pay down of debt in December 2016 using proceeds fromwell as lower overall applicable margins under our IPOOctober 2021 amended and a 50 basis point decrease in our average interest rate during the nine months ended September 29, 2017 primarily from an amendment to our 2015 Credit Facility in connection with our acquisition of Cal‑Weld, partially offset by an additional $30.0 million in borrowings to fund our acquisition of Cal‑Weld.restated credit agreement.
Total borrowings outstanding at September 29, 2017, net of debt issuance costs, was $67.7 million, compared to $73.5 million at September 23, 2016.
Other Expense, (Income), Net
|
| Three Months Ended |
|
| Change |
| Nine Months Ended |
|
| Change |
| |||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| |||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||
Other expense (income), net |
| $ | 73 |
|
| $ | (241 | ) |
| $ | 314 |
|
| n/m |
| $ | (325 | ) |
| $ | (384 | ) |
| $ | 59 |
|
|
| -15.4 | % |
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Other expense, net |
| $ | 84 |
|
| $ | 185 |
|
| $ | (101 | ) |
|
| -54.6 | % |
The change in other expense, (income), net from the thirdfirst quarter of 20162021 to the thirdfirst quarter of 20172022 was primarily due to currency exchange rate fluctuations onduring the quarter as a result of transactions denominated in the local currencies of our foreign operations, principally the Singapore Dollar, Malaysian Ringgit, and British Pound.operations.
Income Tax Expense
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| Amount |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Income tax expense |
| $ | 810 |
|
| $ | 1,515 |
|
| $ | (705 | ) |
|
| -46.5 | % |
The decrease in other income nettax expense from the nine months ended September 23, 2016first quarter of 2021 to the nine months ended September 29, 2017first quarter of 2022 was primarily due to exchange rate fluctuations on transactions denominateddecreased taxable income in the local currencies of our foreign operations, principally the Singapore Dollar, Malaysian Ringgit, and British Pound, partially offset by a gain on the sale of our cost method investment, CHawk Technology International, Inc. (“CHawk”) of $0.2 million that occurredU.S. in the first quarter of 2017.
Income Tax Benefit2022 and reduced benefits from Continuing Operations
|
| Three Months Ended |
|
| Change |
|
| Nine Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| Amount |
|
| % |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Income tax benefit from continuing operations |
| $ | (6,556 | ) |
| $ | (1,888 | ) |
| $ | (4,668 | ) |
|
| 247.2 | % |
| $ | (5,558 | ) |
| $ | (1,427 | ) |
| $ | (4,131 | ) |
|
| 289.5 | % |
The increase in the income tax benefit from continuing operations from the third quarter of 2016 to the third quarter of 2017 and from the nine months ended September 23, 2016 to the nine months ended September 29, 2017 was primarily due to a discrete tax benefit of $5.3 million recorded relating to the release of a valuation allowance as a result of acquiring deferred tax liabilities in connection with our acquisition of Cal‑Weld and a tax benefit of $1.6 million recorded due to the reversal of previously accrued withholding taxes from re‑characterizing intercompany debt to equity. This compares to the Company only recording a $2.3 million tax benefitshare-based compensation activity during the third quarter of 2016 as a result of the purchase accounting in connection with our acquisition of Ajax that allowed for the release of an equal amount of valuation allowance on a U.S. consolidated basis.quarter.
Management uses non‑GAAP adjusted net income from continuing operationsnon-GAAP metrics to evaluate our operating and financial results. We believe the presentation of non‑GAAPnon-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective. Non‑GAAP adjustedNon-GAAP gross margin is defined as non-GAAP gross profit divided by net sales. Non-GAAP gross profit and non-GAAP net income from continuing operations isare defined as: gross profit or net income from continuing operations; excluding, as applicable, (1) amortization of intangible assets, share-based compensation expense, tax adjustments relatedand non-recurring expenses, including settlement losses, facility shutdown costs, and acquisition-related costs and charges, to those non‑GAAP adjustments;the extent they are present in gross profit or net income; and (2) the tax benefits from acquisitions; and other non‑recurring charges. Non‑GAAP adjustedimpacts associated with our non-GAAP adjustments, as well as non-recurring discrete tax items. Non-GAAP diluted EPSearnings per share (“EPS”) is defined as non‑GAAP adjustednon-GAAP net income from continuing operations divided by adjustedweighted average diluted ordinary shares which assumesoutstanding during the IPO shares sold, the conversion of preferred shares into ordinary shares, and vesting of restricted shares and options in connection with the IPO occurred at the beginning of the measurement period.
The following table presents our unaudited non‑GAAP adjusted net income from continuing operations and a reconciliation from net income from continuing operations, the most comparable GAAP measure, for the periods indicated:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 29, 2017 |
|
| September 23, 2016 |
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||||
|
| (in thousands, except share and per share amounts) |
| |||||||||||||
Non-GAAP Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
| $ | 14,298 |
|
| $ | 7,681 |
|
| $ | 37,720 |
|
| $ | 12,788 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
| 2,220 |
|
|
| 1,804 |
|
|
| 5,818 |
|
|
| 5,210 |
|
Share-based compensation |
|
| 623 |
|
|
| 372 |
|
|
| 1,536 |
|
|
| 1,344 |
|
Other non-recurring expenses, net (1) |
|
| 2,076 |
|
|
| 698 |
|
|
| 2,528 |
|
|
| 2,753 |
|
Tax adjustments related to non-GAAP adjustments |
|
| (20 | ) |
|
| (28 | ) |
|
| (62 | ) |
|
| (67 | ) |
Tax benefit from acquisitions (2) |
|
| (5,281 | ) |
|
| (2,271 | ) |
|
| (5,281 | ) |
|
| (2,271 | ) |
Tax benefit from re-characterizing intercompany debt to equity(3) |
|
| (1,627 | ) |
|
| — |
|
|
| (1,627 | ) |
|
| — |
|
Adjustments to cost of goods sold (4) |
|
| — |
|
|
| — |
|
|
| 1,752 |
|
|
| — |
|
Fair value adjustment for Cal-Weld inventory (5) |
|
| 3,004 |
|
|
| — |
|
|
| 3,004 |
|
|
| — |
|
Loss on Ajax acquisition arbitration settlement (6) |
|
| 1,032 |
|
|
| — |
|
|
| 1,032 |
|
|
| — |
|
Non-GAAP adjusted net income from continuing operations |
| $ | 16,325 |
|
| $ | 8,256 |
|
| $ | 46,420 |
|
| $ | 19,757 |
|
Non-GAAP adjusted diluted EPS |
| $ | 0.62 |
|
| $ | 0.34 |
|
| $ | 1.78 |
|
| $ | 0.82 |
|
Shares used to compute diluted EPS (7) |
|
| 26,278,147 |
|
|
| 24,322,119 |
|
|
| 26,008,346 |
|
|
| 24,142,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non‑GAAP adjusted net income from continuing operations hasNon-GAAP results have limitations as an analytical tool, and you should not consider itthem in isolation or as a substitute for net income or any of our other operating results reported under GAAP. Other companies may calculate adjusted net incomenon-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our adjusted net incomenon-GAAP results as a tool for comparison.
Because of these limitations, you should consider non‑GAAP adjusted net income from continuing operationsnon-GAAP results alongside other financial performance measures including net income from continuing operations and other financial results presented in accordance with GAAP. In addition, in evaluating non‑GAAP adjusted net income,non-GAAP results, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving adjusted net incomenon-GAAP results and you should not infer from our presentation of adjusted net incomenon-GAAP results that our future results will not be affected by these expenses or any unusual or non‑recurringnon-recurring items.
The following table presents our unaudited non‑GAAP gross profit and non-GAAP gross margin and a reconciliation from gross profit, the most comparable GAAP measure, for the periods indicated:
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
U.S. GAAP gross profit |
| $ | 43,932 |
|
| $ | 39,512 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Share-based compensation |
|
| 551 |
|
|
| 306 |
|
Facility shutdown costs (1) |
|
| — |
|
|
| 2,399 |
|
Fair value adjustment to inventory from acquisitions (2) |
|
| 2,492 |
|
|
| 211 |
|
Other non-recurring expense, net (3) |
|
| — |
|
|
| 106 |
|
Non-GAAP gross profit |
| $ | 46,975 |
|
| $ | 42,534 |
|
U.S. GAAP gross margin |
|
| 15.0 | % |
|
| 14.9 | % |
Non-GAAP gross margin |
|
| 16.0 | % |
|
| 16.1 | % |
(1) | During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we completed in 2021. We incurred write-off costs associated with inventories determined to be obsolete and severance costs associated with affected employees in connection with the closure. |
(2) | As part of the purchase price allocations of our acquisitions of IMG in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up of $3.9 million and $0.2 million, respectively. These amounts were subsequently released to cost of sales as acquired-inventories were sold. |
(3) | Included in this amount for the first quarter of 2021 is primarily a non-recurring settlement charge. |
The following table presents our unaudited non‑GAAP net income and non-GAAP diluted EPS and a reconciliation from net income, the most comparable GAAP measure, for the periods indicated:
|
| Three Months Ended |
| |||||
|
| April 1, 2022 |
|
| March 26, 2021 |
| ||
|
| (dollars in thousands, except per share amounts) |
| |||||
U.S. GAAP net income |
| $ | 8,039 |
|
| $ | 14,638 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
| 5,349 |
|
|
| 3,391 |
|
Share-based compensation |
|
| 2,897 |
|
|
| 2,415 |
|
Facility shutdown costs (1) |
|
| — |
|
|
| 2,510 |
|
Settlement loss (2) |
|
| 3,100 |
|
|
| — |
|
Fair value adjustment to inventory from acquisitions (3) |
|
| 2,492 |
|
|
| 211 |
|
Acquisition costs (4) |
|
| 275 |
|
|
| — |
|
Other non-recurring expense, net (5) |
|
| — |
|
|
| 278 |
|
Tax adjustments related to non-GAAP adjustments (6) |
|
| (1,974 | ) |
|
| (1,718 | ) |
Non-GAAP net income |
| $ | 20,178 |
|
| $ | 21,725 |
|
U.S. GAAP diluted EPS |
| $ | 0.28 |
|
| $ | 0.51 |
|
Non-GAAP diluted EPS |
| $ | 0.70 |
|
| $ | 0.76 |
|
Shares used to compute diluted EPS |
|
| 29,023,455 |
|
|
| 28,729,112 |
|
(1) | During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we completed in 2021. We incurred write-off costs associated with inventories determined to be obsolete and severance costs associated with affected employees in connection with the closure. |
(2) | During the first quarter of 2022, we recorded a non-recurring loss accrual of $3.1 million relating to an expected settlement of an employment-related legal matter. We expect the settlement to be finalized and paid within the next 12 months. |
(3) | As part of the purchase price allocations of our acquisitions of IMG in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up of $3.9 million and $0.2 million, respectively. These amounts were subsequently released to cost of sales as acquired-inventories were sold. |
(4) | Included in this amount are incremental transaction-related costs incurred in connection with our acquisition of IMG in November 2021. |
(5) | Included in this amount for the first quarter of 2021 are primarily (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a Sarbanes-Oxley compliance program and (ii) a non-recurring settlement charge. |
(6) | Adjusts U.S. GAAP income tax expense (benefit) for impact of our non-GAAP adjustments, as defined, including the impacts of excluding share-based compensation, amortization of intangible assets, and other non-recurring expenses. This adjustment also excludes the impact of non-recurring discrete tax items. |
Liquidity and Capital Resources
We hadThe following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements. Our cash and restricted cash equivalents are maintained in highly liquid and accessible accounts with no significant restrictions.
Material Cash Requirements
Our primary liquidity requirements arise from: (i) working capital requirements, including procurement of $42.8 million asraw materials inventory for use in our factories and employee-related costs, (ii) business acquisitions, (iii) interest and principal payments under our credit facilities, (iv) research and development investments and capital expenditures, and (v) payment of September 29, 2017.income taxes. We have no significant long-term purchase commitments related to procuring raw materials inventory. Our principal uses of liquidity areability to fund these requirements will depend, in part, on our working capital needsfuture cash flows, which are determined by our future operating performance and purchase new capital equipment. The net decrease in cash was primarily dueare therefore subject to $43.0 millionprevailing global macroeconomic conditions and financial, business, and other factors, some of net cash provided by financing activities, including proceeds from the exercise of the underwriters’ over-allotment option in January 2017 in connection withwhich are beyond our IPO, proceeds from the exercise of stock options by certain employees and board members of the Company, and proceeds from increased borrowings under our term loan facility and revolving credit facility, offset by capital expenditures of $6.6 million and our acquisition of Cal‑Weld of $49.5 million.control.
We believe that our cash (including remaining net proceeds from our IPO),and cash equivalents, the amounts available under our revolving credit facility,facilities, and our operating cash flows from operationsflow will be sufficient to meetfund our anticipated cash needs for working capitalbusiness and capital expendituresour current obligations for at least the next 12 months.months and beyond.
Cash Flow AnalysisSources and Conditions of Liquidity
|
| Nine Months Ended |
| |||||
|
| September 29, 2017 |
|
| September 23, 2016 |
| ||
|
| (in thousands) |
| |||||
Cash provided by operating activities |
| $ | 926 |
|
| $ | 4,025 |
|
Cash used in investing activities |
|
| (53,721 | ) |
|
| (19,186 | ) |
Cash provided by financing activities |
|
| 42,995 |
|
|
| 16,277 |
|
Net increase (decrease) in cash and restricted cash |
| $ | (9,800 | ) |
| $ | 1,116 |
|
Operating Activities
We generated $0.9 millionOur ongoing sources of liquidity to fund our material cash from operating activities duringrequirements are primarily derived from: (i) sales to our customers and the nine months ended September 29, 2017 due to net income of $37.0 million and net non‑cash charges of $3.9 million, partially offset by a net increase of $39.9 millionrelated changes in our net operating assets and liabilities. Non‑liabilities and (ii) proceeds from our credit facilities and equity offerings, when applicable.
Summary of Cash Flows
We ended the first quarter of 2022 with cash and cash equivalents of $34.5 million, a decrease of $41.0 million from December 31, 2021. The decrease was primarily due to cash used in operating activities of $36.3 million and capital expenditures of $3.4 million
The following table sets forth a summary of operating, investing, and financing activities for the periods presented:
|
| Three Months Ended | |||||||
|
| April 1, 2022 |
|
| March 26, 2021 |
|
| ||
|
| (in thousands) | |||||||
Cash provided by (used in) operating activities |
| $ | (36,278 | ) |
| $ | 25,648 |
|
|
Cash used in investing activities |
|
| (3,417 | ) |
|
| (5,400 | ) |
|
Cash used in financing activities |
|
| (1,284 | ) |
|
| (30,201 | ) |
|
Net decrease in cash |
| $ | (40,979 | ) |
| $ | (9,953 | ) |
|
Our cash used in operating activities of $36.3 million during the first quarter of 2022 consisted of net income of $8.0 million, net non-cash charges consist of $8.4$12.3 million, inprimarily consisting of depreciation and amortization $1.5 million in share‑based compensation, and amortization of debt issuance costs of $0.4 million, partially offset by deferred taxes of $6.2$9.3 million and a gain on the saleshare-based compensation expense of our investment$2.9 million, and an increase in CHawk of $0.2 million. The increase inour net operating assets and liabilities of $56.6 million.
The increase in our net operating assets and liabilities, net of acquisitions, was primarily due to an increase in inventories of $27.7 million, a decrease in accounts receivablepayable of $22.6$18.2 million, resulting from increased sales volume and timing of shipments and customer payments during the period, and an increase in accounts receivable of $10.5 million. The increase in our inventories is primarily driven by elevated purchasing activity pursuant to strong customer demand and certain supply chain component constraints. The decrease in accounts payable and increase in accounts receivable were primarily due to fluctuations in payment timing to suppliers and from customers, as well as a higher revenues in the last few weeks of $18.9 million, resulting from increased materials purchasesthe first quarter of 2022 compared to support increased demand.
Investing Activitiesthe last few weeks of the fourth quarter of 2021.
Cash used in investing activities increased during the nine months ended September 29, 2017 to $53.7 million due to our acquisitionfirst quarter of Cal‑Weld2022 consists of $49.5 million and capital expendituresexpenditures.
Cash used in financing activities during the first quarter of $6.62022 consists of payments on long-term debt of $1.9 million, partially offset by $2.4 million in proceeds from the sale of our investments in Ajax Foresight Global Manufacturing Sdn. Bhd. (“AFGM”) and CHawk and the settlement of our note receivable from AFGM.
Cash generated from financing activities increased during the nine months ended September 29, 2017 to $43.0 million due to $7.3 million of net proceeds from the exerciseshare-based compensation activity of the underwriters’ over‑allotment option in January 2017 in connection with our IPO, $6.3$0.6 million of proceeds from the exercise of stock options by certain employees and board members of the Company, and $30.0 million of proceeds from increased borrowing under our term loan facility and revolving credit facility to fund our acquisition of Cal‑Weld, partially offset by a principal payment on our term loan facility of $0.3 million and debt issuance and modification costs of $0.3 million..
Critical Accounting PoliciesEstimates
Our discussion and analysis of ourconsolidated financial condition and results of operations are based upon our financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgmentsassumptions that affect the reported amounts of assets, liabilities, revenuessales, expenses, and expenses. On an ongoing basis, we evaluate our judgments and estimates including those related to revenue recognition, impairment of goodwill and intangible assets, income taxes, advertising expense and share‑based compensation.disclosures. We base our estimates on historical experience and on various other assumptions that we believe are believed to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates under different assumptions or conditions.and our actual results, our future financial statements will be affected.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe to behave the most critical to understandingsignificant impact on our consolidated financial results and condition and that require complex and subjective management judgments and estimatesstatements are identified and described in our annual consolidated financial statements and the notes included in our 2021 Annual Report on Form 10‑K for the year ended December 30, 2016 (our “Annual Report”).K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Currently, substantiallySubstantially all of our sales arrangement with customers, and the significant majority of our arrangements with third‑partythird-party suppliers, provide for pricing and payment in U.S. dollars and, therefore, are not subject to material exchange rate fluctuations. As a result, we do not expect foreign currency exchange rate fluctuations to have a material effect on our results of operations. However, increases in the value of the U.S. dollar relative to other currencies would make our products more expensive relative to competing products priced in such other currencies, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our foreign suppliers raising their prices in order to continue doing business with us.
While not currently significant, weWe do have certain operating expenses that are denominated in currencies of the countries in which our operations are located, and may be subject to fluctuations due to foreign currency exchange rates, particularly the Singapore dollar, Malaysian Ringgit,ringgit, British Pound,pound, euro, Korean won, and Euro.Mexican peso. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.transactions.
Interest Rate Risk
We had total outstanding debtindebtedness of $69.5$293.1 million as of September 29, 2017,April 1, 2022, exclusive of $2.1 million in debt issuance costs, of which $1.2$7.5 million was due within 12 months. The outstanding amount of debt reflected in our consolidated financial statements included elsewhere in this report is net of $1.8 million of debt issuance costs as of September 29, 2017.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. TheAs of April 1, 2022, the interest rate on a significant majority of our outstanding debt is variable, which also reducesbased on BSBY, plus an applicable rate depending on our exposure to theseleverage ratio. A hypothetical 100 basis point change in the interest rate risks. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.outstanding debt would have resulted in a $0.7 million change to interest expense during the first quarter of 2022, or $2.9 million on an annualized basis.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a‑15(b) under the Exchange Act, weWe carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer or CEO, and Chief Financial Officer or CFO,(the certifying officers), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Securities and Exchange Act)Act, as amended (“the Exchange Act”)) as of the end of the period covered by this report.December 31, 2021. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon thaton this evaluation, our CEOChief Executive Officer and CFOChief Financial Officer concluded that our disclosure controls and procedures were not effective becauseas of theApril 1, 2022, due to material weaknessweaknesses in our internal control described below,over financial reporting that was disclosed in Part II – Item 9A of our Annual Report on Form 10‑K for the fiscal year ended December 31, 2021.
Limitations on Effectiveness of Controls and did not provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial ReportingProcedures
A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. If we cannot provide reliable financial information, our business, operating results, and share price could be negatively impacted.
During the second quarter of 2017, we identified a material weaknessChanges in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting related(as defined in Rule 13a-15(f) of the Exchange Act) during the period covered under this report that have materially affected, or are reasonably likely to ineffective periodic risk assessmentmaterially affect, our internal control over control activities that ensure the ending inventory balancesfinancial reporting.
Remediation
As previously described in Part II – Item 9A of our Malaysia and Singapore subsidiaries were recorded atAnnual Report on Form 10‑K for the appropriate U.S. Dollar functional currency rate. During our previous consolidation process,fiscal year ended December 31, 2021, we hadbegan implementing a manual process that translated these inventory balances intoremediation plan to address the U.S. Dollar functional currency at incorrect rates for these subsidiaries due to system limitations, and we didmaterial weaknesses mentioned above. The weaknesses will not implement a control to reconcilebe considered remediated until the ending inventory balance at our Malaysia and Singapore subsidiaries to the final inventory balance reported in our consolidated financial statements. This material weakness resulted in an accumulated overstatement of inventory as of March 31, 2017 of approximately $1.75 million. We corrected this overstatement in the second quarter of 2017 with a charge to cost of sales of $1.75 million. Additionally, we completed the re‑implementation of our Oracle system, which allows for a systems‑based calculation of inventory purchases and ending inventory at the proper U.S. Dollar functional currency rates, and we have implemented a control to reconcile the final Malaysia and Singapore inventory sub‑ledger balances to the final balances recorded in consolidation. While we believe that the new system will correctly record inventory purchases and that our newly implemented reconciliation control will operate at a sufficient level of precision to identify any significant errors, management will continue to monitor the mitigation measures taken as theapplicable controls will need to operate for a reasonablesufficient period of time to determine whether theyand management has concluded, through testing, that these controls are operating effectivelyeffectively. We expect that the remediation of these material weaknesses will be completed prior to remediate the material weakness.end of fiscal year 2022.
PART II—OTHER INFORMATION
ForWe are currently not a discussion of legal proceedings, see “Note 6 – Commitments and Contingencies” in the Notesparty to Financial Statements (Unaudited) included in this report.any material pending or threatened litigation.
This quarterly report should be read in conjunction with the risk factors included in our 2021 Annual Report on Form 10‑K. There have been no material changes in our risk factors from thosethe risk factors disclosed in our 2016 Annual Report, our 2017 Quarterly Report for the quarter ended March 31, 2017, and our 2017 Quarterly Report for the quarter ended June 30, 2017. These risk factors could materially and adversely affect our business, financial condition and results of operations, and the trading price of our ordinary shares could decline.that report. These risk factors do not identify all risks that we face – our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.
ITEM 2. UNREGISTERED SALES OF EQUITYEQUITY SECURITIES AND USE OF PROCEEDS
Use of Proceeds from Initial Public OfferingNone.
On December 8, 2016, in connection with our IPO, we registered under the Securities Act (i) 6,759,445 ordinary shares, including the underwriters’ over-allotment option, pursuant to a registration statement on Form S‑1 (File No. 333-214588) and (ii) 146,945 ordinary shares pursuant to a registration statement on Form S‑1 (File No. 333-214995). We completed our IPO on December 14, 2016 at a price to the public of $9.00 per share, for gross proceeds of approximately $52.9 million.
We received net proceeds of approximately $47.1 million (after underwriters’ discounts and commissions of $3.7 million and additional offering related costs of approximately $2.1 million). The joint lead bookrunners of the offering were Deutsche Bank Securities Inc. and Stifel, Nicolaus & Company, Incorporated. In January 2017, the underwriters exercised their over-allotment option to purchase an additional 881,667 ordinary shares at a price of $9.00 per share, providing us with additional gross proceeds of approximately $7.9 million and net proceeds of approximately $7.3 million, after deducting underwriting discounts, commissions and other offering related costs.
There was no material change in the use of proceeds from our initial public offering as described in our prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act on December 12, 2016.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
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Exhibit Number |
| Description |
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| |
| ||
| Certification of Principal Executive Officer Pursuant to Rules 13a‑14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. | |
| ||
| ||
| ||
101.INS* |
| Inline XBRL Instance Document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
* | Filed herewith. |
** | Furnished herewith and not filed. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| ICHOR HOLDINGS, LTD. | |
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Date: |
| By: | /s/ |
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(Principal Executive Officer) |
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Date: |
| By: | /s/ |
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(Principal Accounting and Financial Officer) |
2722