10-Q 1 form-20230930.htm 10-Q form-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 30, 2023
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: 000-50307
 
FormFactor, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3711155
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
 
7005 Southfront Road, Livermore, California 94551
(Address of principal executive offices, including zip code)
 
(925) 290-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common stock, $0.001 par valueFORM Nasdaq Global Market
 ______________________________________

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 submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the 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 such files).  Yes ☒  No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer☒Accelerated Filer☐Non-accelerated Filer☐
Smaller Reporting Company☐Emerging Growth Company☐
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 November 1, 2023, 77,842,001 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.



FORMFACTOR, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
INDEX

 
   
 
   
 
   
  
 
  
 
  
  
  
  
  
Item 5.
Other Information
  
 

2

PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 September 30,
2023		December 31,
2022
ASSETS 
Current assets:  
Cash and cash equivalents$108,731 $109,130 
Marketable securities135,693 129,006 
Accounts receivable, net of allowance for credit losses of $500 and $168
88,965 88,143 
Inventories, net111,626 123,157 
Restricted cash1,171 1,221 
Assets held-for-sale33,718 — 
Prepaid expenses and other current assets26,681 23,895 
Total current assets506,585 474,552 
Restricted cash2,146 2,631 
Operating lease, right-of-use-assets29,824 31,362 
Property, plant and equipment, net of accumulated depreciation203,510 189,848 
Goodwill200,485 211,444 
Intangibles, net13,578 26,751 
Deferred tax assets73,572 67,646 
Other assets3,267 3,994 
Total assets$1,032,967 $1,008,228 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$61,589 $69,308 
Accrued liabilities36,487 42,115 
Current portion of term loan, net of unamortized issuance costs1,067 1,045 
Deferred revenue13,855 29,846 
Liabilities held-for-sale8,521 — 
Operating lease liabilities8,007 7,353 
Total current liabilities129,526 149,667 
Term loan, less current portion, net of unamortized issuance costs13,586 14,389 
Deferred tax liabilities317 2,732 
Long-term operating lease liabilities25,096 27,587 
Deferred grant18,000 — 
Other liabilities5,754 5,568 
Total liabilities192,279 199,943 
 
Stockholders’ equity: 
Common stock, $0.001 par value:
 
250,000,000 shares authorized; 77,839,317 and 76,914,590 shares issued and outstanding
78 77 
Additional paid-in capital873,634 844,842 
Accumulated other comprehensive loss(8,509)(5,578)
Accumulated deficit(24,515)(31,056)
Total stockholders’ equity840,688 808,285 
Total liabilities and stockholders’ equity$1,032,967 $1,008,228 
 
The accompanying notes are an integral part of these condensed consolidated financial statements. 
3

FORMFACTOR, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedNine Months Ended
 September 30,
2023		September 24,
2022		September 30,
2023		September 24,
2022
Revenues$171,575 $180,869 $494,939 $581,950 
Cost of revenues102,290 118,656 304,293 331,144 
Gross profit69,285 62,213 190,646 250,806 
Operating expenses:    
Research and development31,014 26,549 87,599 82,000 
Selling, general and administrative35,564 31,637 101,561 97,949 
Total operating expenses66,578 58,186 189,160 179,949 
Operating income2,707 4,027 1,486 70,857 
Interest income, net1,662 557 4,420 684 
Other income, net788 1,041 1,261 1,784 
Income before income taxes5,157 5,625 7,167 73,325 
Provision for income taxes786 1,274 626 8,860 
Net income$4,371 $4,351 $6,541 $64,465 
Net income per share: 
Basic $0.06 $0.06 $0.08 $0.83 
Diluted$0.06 $0.06 $0.08 $0.82 
Weighted-average number of shares used in per share calculations:   
Basic 77,571 77,245 77,265 77,796 
Diluted78,412 77,688 77,860 78,492 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months EndedNine Months Ended
September 30,
2023		September 24,
2022		September 30,
2023		September 24,
2022
Net income $4,371 $4,351 $6,541 $64,465 
Other comprehensive loss, net of tax:
Translation adjustments(3,351)(7,348)(2,641)(13,902)
Unrealized gains (losses) on available-for-sale marketable securities283 (674)801 (2,425)
Unrealized losses on derivative instruments(996)(881)(1,091)(123)
Other comprehensive loss, net of tax:(4,064)(8,903)(2,931)(16,450)
Comprehensive income (loss)$307 $(4,552)$3,610 $48,015 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
 Shares of
Common
Stock		Common
Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Nine Months Ended September 30, 2023
Balances, December 31, 202276,914,590 $77 $844,842 $(5,578)$(31,056)$808,285 
Issuance of common stock under the Employee Stock Purchase Plan363,190 — 8,822 — — 8,822 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax561,537 1 (9,350)— — (9,349)
Stock-based compensation— — 29,320 — — 29,320 
Other comprehensive loss— — — (2,931)— (2,931)
Net income— — — — 6,541 6,541 
Balances, September 30, 202377,839,317 $78 $873,634 $(8,509)$(24,515)$840,688 
Three Months Ended September 30, 2023
Balances, July 1, 202377,184,012 $77 $867,517 $(4,445)$(28,886)$834,263 
Issuance of common stock under the Employee Stock Purchase Plan153,135 — 3,798 — — 3,798 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax502,170 1 (8,894)— — (8,893)
Stock-based compensation— — 11,213 — — 11,213 
Other comprehensive loss— — — (4,064)— (4,064)
Net income— — — — 4,371 4,371 
Balances, September 30, 202377,839,317 $78 $873,634 $(8,509)$(24,515)$840,688 
Nine Months Ended September 24, 2022
Balances, December 25, 202178,240,506 $78 $898,945 $(1,449)$(81,794)$815,780 
Issuance of common stock under the Employee Stock Purchase Plan316,861 — 10,457 — — 10,457 
Issuance of common stock pursuant to exercise of options6,000 — 42 — — 42 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax713,554 1 (15,564)— — (15,563)
Purchase and retirement of common stock through repurchase program(2,011,822)(2)(73,476)— — (73,478)
Stock-based compensation— — 23,049 — — 23,049 
Other comprehensive loss— — — (16,450)— (16,450)
Net income— — — — 64,465 64,465 
Balances, September 24, 202277,265,099 $77 $843,453 $(17,899)$(17,329)$808,302 
Three Months Ended September 24, 2022
Balances, June 25, 202277,194,733 $77 $860,584 $(8,996)$(21,680)$829,985 
Issuance of common stock under the Employee Stock Purchase Plan159,219 — 4,812 — — 4,812 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax479,478 1 (11,321)— — (11,320)
Purchase and retirement of common stock through repurchase program(568,331)(1)(19,149)— — (19,150)
Stock-based compensation— — 8,527 — — 8,527 
Other comprehensive loss— — — (8,903)— (8,903)
Net income— — — — 4,351 4,351 
Balances, September 24, 202277,265,099 $77 $843,453 $(17,899)$(17,329)$808,302 

The accompanying notes are an integral part of these condensed consolidated financial statements.
6

FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 September 30,
2023		September 24,
2022
Cash flows from operating activities:  
Net income $6,541 $64,465 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation22,880 21,189 
Amortization6,043 7,056 
Reduction in the carrying amount of right-of-use assets5,556 5,900 
Stock-based compensation expense29,333 21,873 
Deferred income tax benefit(6,283)(6,881)
Provision for excess and obsolete inventories12,566 16,078 
Other adjustments to reconcile net income to net cash provided by operating activities1,375 4,066 
Changes in assets and liabilities:
Accounts receivable(7,796)1,654 
Inventories(8,910)(33,023)
Prepaid expenses and other current assets(1,761)(2,016)
Other assets804 (117)
Accounts payable474 17,613 
Accrued liabilities(5,268)(5,035)
Other liabilities467 276 
Deferred revenues(12,915)3,776 
Deferred grant18,000 — 
Operating lease liabilities(5,754)(5,826)
Net cash provided by operating activities55,352 111,048 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(46,094)(39,024)
Acquisition of business— (3,350)
Purchases of marketable securities(96,913)(80,249)
Purchase of promissory note receivable— (1,000)
Proceeds from maturities and sales of marketable securities93,013 71,610 
Net cash used in investing activities(49,994)(52,013)
Cash flows from financing activities:  
Proceeds from issuances of common stock8,822 10,499 
Purchase of common stock through stock repurchase program— (73,478)
Tax withholdings related to net share settlements of equity awards(9,349)(15,564)
Principal repayments on term loans(781)(6,421)
Net cash used in financing activities(1,308)(84,964)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3,324)(5,708)
Net increase (decrease) in cash, cash equivalents and restricted cash726 (31,637)
Cash, cash equivalents and restricted cash, beginning of period112,982 155,342 
Cash, cash equivalents and restricted cash, end of period$113,708 $123,705 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2023		September 24,
2022
Non-cash investing and financing activities:
Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases$(6,222)$341 
Operating lease, right-of-use assets obtained in exchange for lease obligations4,728 3,457 
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net$12,064 $9,911 
Cash paid for interest317 455 
Operating cash outflows from operating leases6,836 6,670 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$108,731 $120,602 
Restricted cash, current1,171 1,263 
Restricted cash, non-current2,146 1,840 
Cash and cash equivalents included in Assets held-for-sale1,660 — 
Total cash, cash equivalents and restricted cash$113,708 $123,705 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8

FORMFACTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 — Basis of Presentation and Significant Accounting Policies
 
Basis of Presentation
The accompanying condensed consolidated financial information of FormFactor, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2022 Annual Report on Form 10-K filed with the SEC on February 24, 2023. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
 
Fiscal Year 
We operate on a 52/53 week fiscal year, whereby the fiscal year ends on the last Saturday of December. Fiscal 2023 and 2022 contain 52 weeks and 53 weeks, respectively, and the nine months ended September 30, 2023 and September 24, 2022 each contained 39 weeks. Fiscal 2023 will end on December 30, 2023.

Significant Accounting Policies
Our significant accounting policies have not changed during the nine months ended September 30, 2023 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, except for:

Government Assistance
In January 2023, we received $18.0 million in cash from a California Competes Grant (the “Grant”) awarded from the California Governor’s Office of Business and Economic Development. The Grant requires FormFactor to create and maintain full-time jobs and make significant infrastructure investments within California over a 5-year term. If we do not meet the requirements of the Grant, we will be required to repay all or a portion of the Grant.

The Grant is included in our Condensed Consolidated Balance Sheets within Deferred grant and we have elected to recognize the Grant when earned as an offset to Cost of revenues and Operating expenses within our Condensed Consolidated Statements of Income. We have presented the proceeds from the Grant as cash provided by operating activities within our Condensed Consolidated Statements of Cash Flows as the Grant is to offset operations.

New Accounting Pronouncements
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides temporary optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR“) or another reference rate expected to be discontinued. In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” extending the relief offered in Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the optional expedients in Topic 848.

In May 2023, the Company entered into a rate replacement amendment to its credit facility loan agreement to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) and concurrently signed an amendment to modify the floating rate option on its interest rate swap to match that of the debt. The Company applied practical expedients provided in Topic 848 allowing the modified instrument to be accounted for and presented in the same manner as the instrument existing before the modification. These modifications had no significant impact on our financial statements. Refer to Note 7, Debt, for further information regarding the terms of the credit facility loan agreement and interest rate swap agreement.

Reclassifications
Certain immaterial reclassifications were made to the prior year financial statements to conform to the current year presentation.
9

Note 2 — Concentration of Credit and Other Risks

Each of the following customers accounted for 10% or more of our revenues for the periods indicated:
Three Months EndedNine Months Ended
September 30,
2023		September 24,
2022		September 30,
2023		September 24,
2022
Intel Corporation17.1 %17.0 %17.2 %19.7 %
Samsung Electronics., LTD.11.2 %***
SK Hynix Inc.*10.7 %**
28.3 %27.7 %17.2 %19.7 %

At September 30, 2023 and December 31, 2022, one customer accounted for 23.5% and 13.8% of gross accounts receivable, respectively.

Note 3 — Inventories, net

Inventories are stated at the lower of cost (principally standard cost, which approximates actual cost on a first in, first out basis) or net realizable value.
 
Inventories, net, consisted of the following (in thousands):
September 30,
2023		December 31,
2022
Raw materials$50,641 $55,726 
Work-in-progress40,150 46,067 
Finished goods20,835 21,364 
$111,626 $123,157 

Note 4 — Assets Held-For-Sale Divestiture

On September 18, 2023, the Company announced entry into a definitive agreement to sell its FRT Metrology (“FRT”) business to Camtek Ltd. (“Camtek”) for $100 million in cash, subject to customary purchase price adjustments. The Company acquired FRT in fiscal 2019 for total consideration of $24.4 million, net of cash acquired. Headquartered in Bergisch Gladbach, Germany, FRT is a leading supplier of high-precision metrology solutions for the Advanced Packaging and Silicon Carbide markets, and is part of our Systems segment.

The related assets and liabilities have been classified as held-for-sale in the Company’s consolidated balance sheet and measured at the lower of their carrying amount or fair value less cost to sell. We did not record an impairment from this event.

The planned disposition of the FRT business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

10

The components of held-for-sale assets and liabilities at September 30, 2023 were as follows (in thousands):

Assets held-for-sale
Accounts receivable, net of allowance for credit losses$5,491 
Inventories, net7,092 
Other current assets2,131 
Intangibles, net7,069 
Goodwill10,668 
Other assets1,267 
Total assets held-for-sale$33,718 
Liabilities held-for-sale
Current liabilities$6,045 
Other liabilities2,476 
Total liabilities held-for-sale$8,521 

On November 1, 2023, we closed on the sale of FRT to Camtek and received cash proceeds of $103.8 million after preliminary adjustments with respect to cash, indebtedness, and working capital.

Note 5 — Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):
Probe CardsSystemsTotal
Goodwill, as of December 25, 2021$178,424 $33,875 $212,299 
Addition - Woburn Acquisition— 550 550 
Foreign currency translation— (1,405)(1,405)
Goodwill, as of December 31, 2022178,424 33,020 211,444 
Reclassification - Assets held-for-sale— (10,668)(10,668)
Foreign currency translation— (291)(291)
Goodwill, as of September 30, 2023$178,424 $22,061 $200,485 

We have not recorded goodwill impairments for the nine months ended September 30, 2023.

Intangible assets were as follows (in thousands):
September 30, 2023December 31, 2022
Intangible Assets GrossAccumulated
Amortization		NetGrossAccumulated
Amortization		Net
Existing developed technologies $159,115 $147,517 $11,598 $171,441 $151,212 $20,229 
Customer relationships47,877 46,388 1,489 50,912 45,003 5,909 
Trade name7,754 7,663 91 7,972 7,759 213 
In-process research and development400 — 400 400 — 400 
$215,146 $201,568 $13,578 $230,725 $203,974 $26,751 

In the current quarter, $7.1 million of net Intangible assets were reclassified to Assets held-for-sale as described in Note 4, Assets Held-For-Sale Divestiture.

11

Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):
 Three Months EndedNine Months Ended
 September 30,
2023		September 24,
2022		September 30,
2023		September 24,
2022
Cost of revenues$837 $824 $2,506 $2,420 
Selling, general and administrative440 1,530 3,537 4,636 
$1,277 $2,354 $6,043 $7,056 

The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):
Fiscal YearAmount
Remainder of 2023$640 
20242,561 
20252,330 
20261,630 
20271,630 
Thereafter4,387 
$13,178 

Note 6 — Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
September 30,
2023		December 31,
2022
Accrued compensation and benefits$22,684 $15,864 
Accrued warranty4,984 4,199 
Employee stock purchase plan contributions withheld1,576 4,585 
Accrued income and other taxes2,761 12,817 
Accrued restructuring charges29 1,249 
Other accrued expenses4,453 3,401 
$36,487 $42,115 

Note 7 — Debt

On June 22, 2020, we entered into an $18.0 million 15-year credit facility loan agreement (the “Building Term Loan”) with MUFG Union Bank, National Association (“Union Bank”). The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California. On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate LIBOR with SOFR, with no change to the amount or timing of contractual cash flows.

The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 0.1148%, plus 1.75% per annum. Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at September 30, 2023 was 7.19%.

On March 17, 2020, we entered into an interest rate swap agreement with Union Bank to hedge the interest payment on the Building Term Loan for the notional amount of $18.0 million. As future levels of LIBOR over the life of the loan were uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates. By entering into the agreement, we converted a floating-rate interest at one-month LIBOR plus 1.75% into a fixed-rate interest at 2.75%. This agreement was amended on May 19, 2023 to replace the benchmark reference rate LIBOR with SOFR to match the Building Term Loan agreement (as amended). After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate at 2.75%.

12

Note 8 — Restructuring Charges

2022 Restructuring Plan
On October 25, 2022, we adopted a restructuring plan (“2022 restructuring plan”) to align our cost structure with reduced demand levels, by streamlining and improving the efficiency and business effectiveness of our operations. This plan included lowering headcount by approximately 13% of our workforce.

The Company has recognized 2022 restructuring plan charges of approximately $8.1 million for severance and employee-related costs, including $0.3 million for stock-based compensation, with $7.1 million within the Probe Cards segment, $0.5 million within the Systems segment, and $0.5 million within Corporate. We do not expect to incur additional material costs related to the 2022 restructuring plan.

2021 Restructuring Plan
On September 25, 2021, we adopted restructuring plans (“2021 restructuring plans”) to improve our business effectiveness and streamline our operations by consolidating certain manufacturing facilities for both the Probe Cards segment and the Systems segment. This included plans to consolidate or relocate certain leased locations in the United States to other locations in the United States, Germany and Asia. As a result of these changes to certain work locations, we have incurred personnel related costs to sever, relocate, or retain select employees. Additionally, as part of these plans we have undertaken actions to adjust capacity for certain product offerings, which included contract termination costs to satisfy contract obligations.

The Company has recognized 2021 restructuring plans charges of approximately $13.3 million, with $10.1 million within the Probe Cards segment and $3.2 million within the Systems segment, which were comprised of $1.4 million of severance and employee-related costs, $2.0 million in contract and lease termination costs, $9.4 million in inventory impairments and other inventory related costs, and $0.5 million of costs related to impairment of leasehold improvements, facility exits and fixed asset related costs. We do not expect additional material costs related to the 2021 restructuring plan.

Total restructuring charges for both the 2022 and 2021 restructuring plans included in our Condensed Consolidated Statements of Income were as follows (in thousands):
Three Months Ended
September 30, 2023September 24, 2022
Probe CardsSystemsTotalProbe CardsSystemsTotal
Cost of revenues$— $— $— $5,928 $132 $6,060 
Research and development— — — 38 29 67 
Selling, general and administrative— — — — 47 47 
$— $— $— $5,966 $208 $6,174 
Nine Months Ended
September 30, 2023September 24, 2022
Probe CardsSystemsTotalProbe CardsSystemsTotal
Cost of revenues$106 $251 $357 $6,194 $459 $6,653 
Research and development182 109 291 38 228 266 
Selling, general and administrative1,069 118 1,187 3 146 149 
$1,357 $478 $1,835 $6,235 $833 $7,068 
13


Changes to the restructuring accrual in the nine months ended September 30, 2023 were as follows (in thousands):
Employee Severance
and Benefits		Stock-based CompensationInventory
Impairments &
Other Inventory
Related Costs		Contract
Termination &
Other Costs		Total
December 31, 2022$1,249 $— $— $— $1,249 
Restructuring charges917 295 390 233 1,835 
Cash payments(2,137)— (89)(233)(2,459)
Non-cash settlement— (295)(301)— (596)
September 30, 2023$29 $— $— $— $29 

Note 9 — Fair Value and Derivative Instruments

Whenever possible, the fair values of our financial assets and liabilities are determined using quoted market prices of identical securities or quoted market prices of similar securities from active markets. The three levels of inputs that may be used to measure fair value are as follows:
•Level 1 valuations are obtained from real-time quotes for transactions in active exchange markets involving identical securities;
•Level 2 valuations utilize significant observable inputs, such as quoted prices for similar assets or liabilities, quoted prices near the reporting date in markets that are less active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
•Level 3 valuations utilize unobservable inputs to the valuation methodology and include our own data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 during the three and nine months ended September 30, 2023 or the year ended December 31, 2022.

The carrying values of Cash, Accounts receivable, net, Restricted cash, Prepaid expenses and other current assets, Accounts payable, and Accrued liabilities approximate fair value due to their short maturities.

No changes were made to our valuation techniques during the first nine months of fiscal 2023.

14

Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands): 
September 30, 2023Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$26,936 $— $— $26,936 
U.S. treasuries2,290 — — 2,290 
Commercial paper— 1,790 — 1,790 
29,226 1,790 — 31,016 
Marketable securities:
 U.S. treasuries46,403 — — 46,403 
 Certificates of deposit— 238 — 238 
 U.S. agency securities— 12,141 — 12,141 
 Corporate bonds— 61,106 — 61,106 
 Commercial paper— 15,805 — 15,805 
46,403 89,290 — 135,693 
Promissory note receivable— — 922 922 
Interest rate swap derivative contract— 2,536 — 2,536 
Total assets$75,629 $93,616 $922 $170,167 
Liabilities:
Foreign exchange derivative contracts$— $(781)$— $(781)
Total liabilities$— $(781)$— $(781)

December 31, 2022Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$21,279 $— $— $21,279 
Commercial paper— 4,969 — 4,969 
U.S. agency securities— 996 — 996 
21,279 5,965 — 27,244 
Marketable securities:
U.S. treasuries25,019 — — 25,019 
Certificates of deposit— 706 — 706 
U.S. agency securities— 11,045 — 11,045 
Corporate bonds— 67,396 — 67,396 
Commercial paper— 24,840 — 24,840 
25,019 103,987 — 129,006 
Foreign exchange derivative contracts— 664 — 664 
Promissory note receivable— — 943 943 
Interest rate swap derivative contract— 2,374 — 2,374 
Total assets$46,298 $112,990 $943 $160,231 
Liabilities:
Foreign exchange derivative contracts$— $(193)$— $(193)
Total liabilities$— $(193)$— $(193)
 
Cash Equivalents
The fair value of our cash equivalents is determined based on quoted market prices for similar or identical securities.

Marketable Securities
We classify our marketable securities as available-for-sale and value them utilizing a market approach. Our investments are
15

priced by pricing vendors who provide observable inputs for their pricing without applying significant judgment. Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors or when a broker price is more reflective of fair value. Our broker-priced investments are categorized as Level 2 investments because fair value is based on similar assets without applying significant judgments. In addition, all investments have a sufficient trading volume to demonstrate that the fair value is appropriate.

Unrealized gains and losses were immaterial and were recorded as a component of Accumulated other comprehensive loss in our Condensed Consolidated Balance Sheets. We did not have any other-than-temporary unrealized gains or losses at either period end included in these financial statements.

Interest Rate Swap
The fair value of our interest rate swap contract is determined at the end of each reporting period based on valuation models that use interest rate yield curves as inputs. For accounting purposes, our interest rate swap contract qualifies for, and is designated as a cash flow hedge. The hedged risk is the interest rate exposure to changes in interest payments attributable to changes in our variable-rate interest over the interest rate swap term. The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable-rate debt. Cash settlements, in the form of cash payments or cash receipts, of the interest rate swap, in the form of cash payments or cash receipts, are recognized as a component of interest expense. The cash flows associated with the interest rate swaps are reported in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows and the fair value of the interest rate swap contracts are recorded within Prepaid expenses and other current assets and Other assets in our Condensed Consolidated Balance Sheets.

Foreign Exchange Derivative Contracts
We operate and sell our products in various global markets. As a result, we are exposed to changes in foreign currency exchange rates. We utilize foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities and forecasted foreign currency revenue and expense transactions. Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with foreign currency transaction gains or losses.

We do not use derivative financial instruments for speculative or trading purposes. For accounting purposes, certain of our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded within Other income, net in our Condensed Consolidated Statement of Income for both realized and unrealized gains and losses. Certain of our foreign currency forward contracts are designated as cash flow hedges, and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded as a component of Accumulated other comprehensive loss and reclassified into earnings in the same period in which the hedged transaction affects earnings, and in the same line item on the Condensed Consolidated Statements of Income as the impact of the hedge transaction.

The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points. All of our foreign exchange derivative contracts outstanding at September 30, 2023 will mature by the third quarter of fiscal 2024.

The following table provides information about our foreign currency forward contracts outstanding as of September 30, 2023 (in thousands):
CurrencyContract PositionContract Amount
(Local Currency)		Contract Amount
(U.S. Dollars)
Euro DollarBuy20,312 $22,427 
Euro DollarSell3,576 3,786 
Japanese YenSell2,759,293 18,535 
Korean WonBuy1,520,865 1,133 
Taiwan DollarSell59,367 1,839 

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that utilize observable market inputs.

16

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
We measure and report our non-financial assets such as Property, plant and equipment, Goodwill and Intangible assets at fair value on a non-recurring basis if we determine these assets to be impaired or in the period when we make a business acquisition. Other than as discussed in Note 8, Restructuring Charges, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and nine months ended September 30, 2023 or September 24, 2022.

Note 10 — Warranty
We offer warranties on certain products and record a liability for the estimated future costs associated with warranty claims at the time revenue is recognized. The warranty liability is based upon historical experience and our estimate of the level of future costs. While we engage in product quality programs and processes, our warranty obligation is affected by product failure rates, material usage and service delivery costs. We regularly monitor product returns for warranty and maintain a reserve for the related expenses based upon our historical experience and any specifically identified failures. As we sell new products to our customers, we must exercise considerable judgment in estimating the expected failure rates. This estimating process is based on historical experience of similar products, as well as various other assumptions that we believe to be reasonable under the circumstances. We provide for the estimated cost of product warranties at the time revenue is recognized as a component of Cost of revenues in our Condensed Consolidated Statement of Income.

Changes in our warranty liability were as follows (in thousands):
Nine Months Ended
September 30,
2023		September 24,
2022
Balance at beginning of period$4,199 $2,805 
Accruals6,426 5,653 
Settlements(5,535)(4,652)
Reclassification - Liabilities held-for-sale(106)— 
Balance at end of period$4,984 $3,806 

Note 11 — Property, Plant and Equipment, net

Property, plant and equipment, net consisted of the following (in thousands):
September 30,
2023		December 31,
2022
Land$17,136 $17,136 
Building and building improvements44,452 44,932 
Machinery and equipment 286,033 276,180 
Computer equipment and software46,968 45,813 
Furniture and fixtures 7,471 7,540 
Leasehold improvements 90,813 86,500 
Sub-total 492,873 478,101 
Less: Accumulated depreciation and amortization (353,796)(335,711)
Net, property, plant and equipment 139,077 142,390 
Construction-in-process64,433 47,458 
Total$203,510 $189,848