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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 March 26, 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: 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 FilerAccelerated FilerNon-accelerated Filer
Smaller Reporting CompanyEmerging 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 April 27, 2022, 78,063,870 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 MARCH 26, 2022
INDEX
 
   
 
   
 
   
  
 
  
 
  
  
  
  
  
  
 

2


PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 March 26,
2022
December 25,
2021
ASSETS 
Current assets:  
Cash and cash equivalents$167,182 $151,010 
Marketable securities129,174 125,055 
Accounts receivable, net of allowance for credit losses of $194 and $195
113,505 115,541 
Inventories, net125,590 111,548 
Restricted cash2,026 2,233 
Prepaid expenses and other current assets18,671 18,652 
Total current assets556,148 524,039 
Restricted cash2,053 2,099 
Operating lease, right-of-use-assets35,764 35,210 
Property, plant and equipment, net of accumulated depreciation152,179 146,555 
Goodwill211,553 212,299 
Intangibles, net33,638 36,342 
Deferred tax assets62,746 61,995 
Other assets2,799 1,981 
Total assets$1,056,880 $1,020,520 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$65,378 $57,862 
Accrued liabilities47,438 50,836 
Current portion of term loans, net of unamortized issuance costs6,790 8,931 
Deferred revenue27,002 23,224 
Operating lease liabilities8,049 7,901 
Total current liabilities154,657 148,754 
Term loans, less current portion, net of unamortized issuance costs15,175 15,434 
Deferred tax liabilities3,131 3,623 
Long-term operating lease liabilities31,366 31,009 
Other liabilities5,878 5,920 
Total liabilities210,207 204,740 
 
Stockholders’ equity: 
Common stock, $0.001 par value:
 
250,000,000 shares authorized; 78,166,212 and 78,240,506 shares issued and outstanding
78 78 
Additional paid-in capital902,994 898,945 
Accumulated other comprehensive loss(4,477)(1,449)
Accumulated deficit(51,922)(81,794)
Total stockholders’ equity846,673 815,780 
Total liabilities and stockholders’ equity$1,056,880 $1,020,520 
 
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 Ended
 March 26,
2022
March 27,
2021
Revenues$197,174 $186,636 
Cost of revenues102,950 109,930 
Gross profit94,224 76,706 
Operating expenses:  
Research and development27,134 24,046 
Selling, general and administrative32,906 30,015 
Total operating expenses60,040 54,061 
Operating income34,184 22,645 
Interest income138 194 
Interest expense(192)(180)
Other income, net192 172 
Income before income taxes34,322 22,831 
Provision for income taxes4,450 3,206 
Net income$29,872 $19,625 
Net income per share: 
Basic $0.38 $0.25 
Diluted$0.38 $0.25 
Weighted-average number of shares used in per share calculations:  
Basic 78,246 77,598 
Diluted79,468 79,988 
 
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 Ended
March 26,
2022
March 27,
2021
Net income $29,872 $19,625 
Other comprehensive loss, net of tax:
Translation adjustments and other(2,698)(2,379)
Unrealized losses on available-for-sale marketable securities(1,204)(131)
Unrealized gains (losses) on derivative instruments874 (226)
Other comprehensive loss, net of tax(3,028)(2,736)
Comprehensive income$26,844 $16,889 

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
Shares of
Treasury
Stock
Treasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Three Months Ended March 26, 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 Plan157,642 — — — 5,645 — — 5,645 
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 tax2,612  — — (72)— — (72)
Purchase and retirement of common stock through repurchase program(240,548) — — (9,397)— — (9,397)
Stock-based compensation— — — — 7,831 — — 7,831 
Other comprehensive loss— — — — — (3,028)— (3,028)
Net income— — — — — — 29,872 29,872 
Balances, March 26, 202278,166,212 $78  $ $902,994 $(4,477)$(51,922)$846,673 
Shares of
Common
Stock
Common
Stock
Shares of
Treasury
Stock
Treasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Three Months Ended March 27, 2021
Balances, December 26, 202077,437,997 $78  $ $903,838 $5,886 $(165,718)$744,084 
Issuance of common stock under the Employee Stock Purchase Plan228,784 — — — 5,065 — — 5,065 
Issuance of common stock pursuant to exercise of options50,000  — — 422 — — 422 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax41,749  — — (1,141)— — (1,141)
Purchase of common stock through repurchase program— — (136,402)(5,738)— — — (5,738)
Stock-based compensation— — — — 6,952 — — 6,952 
Other comprehensive income— — — — — (2,736)— (2,736)
Net income— — — — — — 19,625 19,625 
Balances, March 27, 202177,758,530 $78 (136,402)$(5,738)$915,136 $3,150 $(146,093)$766,533 

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)
 Three Months Ended
 March 26,
2022
March 27,
2021
Cash flows from operating activities:  
Net income $29,872 $19,625 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation6,960 6,130 
Amortization2,369 6,805 
Reduction in the carrying amount of right-of-use assets2,492 1,811 
Stock-based compensation expense7,520 7,077 
Provision for excess and obsolete inventories2,501 3,394 
Non-cash restructuring charges150  
Other adjustments to reconcile net income to net cash provided by operating activities32 2,140 
Changes in assets and liabilities:
Accounts receivable966 3,576 
Inventories(17,080)(9,911)
Prepaid expenses and other current assets(144)3,011 
Other assets(73)(50)
Accounts payable10,150 5,722 
Accrued liabilities(3,120)(12,732)
Other liabilities87 114 
Deferred revenues3,908 (2,411)
Operating lease liabilities(2,435)(1,945)
Net cash provided by operating activities44,155 32,356 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(15,606)(13,470)
Purchases of marketable securities(23,462)(41,062)
Proceeds from maturities and sales of marketable securities17,990 14,610 
Net cash used in investing activities(21,078)(39,922)
Cash flows from financing activities:  
Proceeds from issuances of common stock5,687 5,487 
Purchase of common stock through stock repurchase program(9,397)(5,738)
Tax withholdings related to net share settlements of equity awards(72)(1,141)
Principal repayments on term loans(2,234)(2,376)
Net cash used in financing activities(6,016)(3,768)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,142)(1,456)
Net increase (decrease) in cash, cash equivalents and restricted cash15,919 (12,790)
Cash, cash equivalents and restricted cash, beginning of period155,342 191,098 
Cash, cash equivalents and restricted cash, end of period$171,261 $178,308 

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)
Three Months Ended
March 26,
2022
March 27,
2021
Non-cash investing and financing activities:
Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases$(2,524)$1,087 
Operating lease, right-of-use assets obtained in exchange for lease obligations3,359 8,572 
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net$890 $1,034 
Cash paid for interest163 173 
Operating cash outflows from operating leases2,094 2,201 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$167,182 $173,616 
Restricted cash, current2,026 2,798 
Restricted cash, non-current2,053 1,894 
Total cash, cash equivalents and restricted cash$171,261 $178,308 

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 New Accounting Pronouncements
 
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 2021 Annual Report on Form 10-K filed with the SEC on February 18, 2022. 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 2022 and 2021 contain 53 weeks and 52 weeks, respectively, and the three months ended March 26, 2022 and March 27, 2021 each contained 13 weeks. Fiscal 2022 will end on December 31, 2022.

Significant Accounting Policies
Our significant accounting policies have not changed during the three months ended March 26, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2021.

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

New Accounting Pronouncements
ASU 2020-04
In March 2020, the FASB issued ASU 2020-04, “Referenced 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 generally accepted accounting principles 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 January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company has not yet applied the relief afforded by these standard amendments and is currently assessing contracts that will require modification due to reference rate reform to which these standard amendments may be applied.

ASU 2021-08
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers, as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption impact of the new standard will depend on the magnitude of future acquisitions. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.

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 Ended
March 26,
2022
March 27,
2021
Intel Corporation20.8 %28.1 %
Taiwan Semiconductor Manufacturing Co., LTD.10.7 %11.5 %
31.5 %39.6 %

At March 26, 2022, one customer accounted for 22.8% of gross accounts receivable. At December 25, 2021, one customer accounted for 13.8% of gross accounts receivable.

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):
March 26,
2022
December 25,
2021
Raw materials$60,976 $57,673 
Work-in-progress41,875 35,935 
Finished goods22,739 17,940 
$125,590 $111,548 

Note 4 Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):
Probe CardsSystemsTotal
Goodwill, as of December 26, 2020$178,072 $34,689 $212,761 
Addition - Baldwin Park Acquisition352  352 
Addition - HPD Acquisition 1,254 1,254 
Foreign currency translation (2,068)(2,068)
Goodwill, as of December 25, 2021178,424 33,875 212,299 
Foreign currency translation (746)(746)
Goodwill, as of March 26, 2022$178,424 $33,129 $211,553 

We have not recorded goodwill impairments for the three months ended March 26, 2022.

Intangible assets were as follows (in thousands):
March 26, 2022December 25, 2021
Intangible Assets GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Existing developed technologies $171,560 $149,149 $22,411 $172,259 $148,784 $23,475 
Customer relationships51,080 40,638 10,442 51,270 39,254 12,016 
Trade name8,010 7,625 385 8,054 7,603 451 
Backlog   1,896 1,896  
In-process research and development400  400 400  400 
$231,050 $197,412 $33,638 $233,879 $197,537 $36,342 

10


Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):
 Three Months Ended
 March 26,
2022
March 27,
2021
Cost of revenues$808 $5,090 
Selling, general and administrative1,561 1,715 
$2,369 $6,805 

The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):
Fiscal YearAmount
Remainder of 2022$7,056 
20237,062 
20244,472 
20254,219 
20263,195 
Thereafter7,234 
$33,238 

Note 5 Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):
March 26,
2022
December 25,
2021
Accrued compensation and benefits$28,321 $29,706 
Accrued income and other taxes10,276 8,086 
Accrued warranty2,775 2,805 
Employee stock purchase plan contributions withheld2,027 4,693 
Accrued restructuring charges890 2,478 
Other accrued expenses3,149 3,068 
$47,438 $50,836 

Note 6 Restructuring Charges

On September 25, 2021, we adopted 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 includes 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, and expect to incur, personnel related costs to sever, relocate, or retain select employees. Additionally, we are undertaking actions to adjust capacity for certain product offerings. As a result of these adjustments, contract termination costs include charges to satisfy contract obligations. The liability was recognized using our best estimate and it is reasonably possible that the final amount will differ from the amount estimated in the near term. We expect the actions defined under these plans will be largely completed by the end of December 2022, except facilities charges which may extend beyond that time.

These plans are expected to result in FormFactor recording restructuring and other charges in the aggregate amount of approximately $6.0 million to $9.0 million, estimated to be comprised primarily of $1.0 million to $2.0 million of severance and employee-related costs, $2.0 million to 3.0 million in contract and lease termination costs, $1.0 million to $1.5 million in inventory impairments, and $2.0 million to $2.5 million of cost related to impairment of leasehold improvements, facility exits, and other costs. Approximately $3.0 million to $4.5 million and $3.0 million to $4.5 million is expected within the Probe Cards segment and Systems segment, respectively.

The Company has recognized to date restructuring and other charges in the aggregate amount of $4.4 million, comprised of $1.2 million of severance and employee-related costs, $1.5 million in contract and lease termination costs, $1.5 million in inventory impairments, and $0.3 million of cost related to impairment of leasehold improvements, facility exits and other costs.
11


Restructuring charges by reportable segment included in our Condensed Consolidated Statements of Income were as follows (in thousands):

Three Months Ended
March 26, 2022
Probe CardsSystemsTotal
Cost of revenues$39 $100 $139 
Research and development 146 146 
Selling, general and administrative3 25 28 
$42 $271 $313 

Changes to the restructuring accrual in the three months ended March 26, 2022 were as follows (in thousands):
Employee Severance
and Benefits
Inventory
Impairments
Contract
 Termination Costs
Total
December 25, 2021$1,028 $ $1,450 $2,478 
Restructuring charges163 150  313 
Cash payments(301) (1,450)(1,751)
Non-cash settlement (150) (150)
March 26, 2022$890 $ $ $890 

Note 7 — 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 months ended March 26, 2022 or the year ended December 25, 2021.

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

No changes were made to our valuation techniques during the first three months of fiscal 2022.

12


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): 
March 26, 2022Level 1Level 2Total
Assets:
Cash equivalents:
Money market funds$25,172 $ $25,172 
Commercial paper 7,132 7,132 
U.S. treasuries6,000  6,000 
31,172 7,132 38,304 
Marketable securities:
 U.S. treasuries40,039  40,039 
 Certificates of deposit 951 951 
 U.S. agency securities 1,939 1,939 
 Corporate bonds 58,318 58,318 
 Commercial paper 27,927 27,927 
40,039 89,135 129,174 
Interest rate swap derivative contracts 1,537 1,537 
Total assets$71,211 $97,804 $169,015 
Liabilities:
Foreign exchange derivative contracts$ $(577)$(577)

December 25, 2021Level 1Level 2Total
Assets:
Cash equivalents:
Money market funds$9,526 $ $9,526 
U.S. treasuries2,500  2,500 
Commercial paper 1,000 1,000 
U.S. agency securities 5,556 5,556 
12,026 6,556 18,582 
Marketable securities:
U.S. treasuries38,985  38,985 
Certificates of deposit 1,199 1,199 
Corporate bonds 52,709 52,709 
Commercial paper 32,162 32,162 
38,985 86,070 125,055 
Interest rate swap derivative contracts 629 629 
Total assets$51,011 $93,255 $144,266 
Liabilities:
Foreign exchange derivative contracts$ $(489)$(489)
Interest rate swap derivative contracts (55)(55)
Total liabilities$ $(544)$(544)
 
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 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
13


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 income 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 Swaps
The fair value of our interest rate swap contracts 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 contracts qualify for, and are designated as, cash flow hedges. 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 March 26, 2022 will mature by the first quarter of fiscal 2023.

The following table provides information about our foreign currency forward contracts outstanding as of March 26, 2022 (in thousands):
CurrencyContract PositionContract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
Euro DollarBuy(9,967)$(11,617)
Euro DollarSell2,065 2,269 
Japanese YenSell2,334,287 19,127 
Korean WonBuy(1,281,414)(1,052)
Taiwan DollarSell27,806 972 
Total USD notional amount of outstanding foreign exchange contracts$9,699 

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.

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 6, Restructuring Charges, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 26, 2022 or March 27, 2021.

14


Note 8 — 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):
Three Months Ended
March 26,
2022
March 27,
2021
Balance at beginning of period$2,805 $3,918 
Accruals1,214 1,374 
Settlements(1,244)(1,573)
Balance at end of period$2,775 $3,719 

Note 9 — Property, Plant and Equipment, net

Property, plant and equipment, net consisted of the following (in thousands):
March 26,
2022
December 25,
2021
Land$4,751 $4,751 
Building and building improvements44,123 41,722 
Machinery and equipment 258,783 252,632 
Computer equipment and software45,200 44,667 
Furniture and fixtures 7,367 7,293 
Leasehold improvements 83,707 82,266 
Sub-total 443,931 433,331 
Less: Accumulated depreciation and amortization (318,726)(312,700)
Net, property, plant and equipment 125,205 120,631 
Construction-in-process26,974 25,924 
Total$152,179 $146,555 

Note 10 — Stockholders’ Equity and Stock-Based Compensation

Common Stock Repurchase Program
On October 26, 2020, our Board of Directors authorized a program to repurchase up to $50 million of outstanding common stock to offset potential dilution from issuances of common stock under our stock-based compensation plans. The share repurchase program will expire on October 28, 2022. During the three months ended March 26, 2022, we repurchased and retired 240,548 shares of common stock for $9.4 million. During fiscal 2021 we repurchased and retired 622,400 shares of common stock for $24.0 million. As of March 26, 2022, $16.6 million remained available for future repurchases.

Our policy related to repurchases of our common stock is to charge the excess of cost over par value to additional paid-in capital once the shares are retired. All repurchases were made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

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Restricted Stock Units
Restricted stock unit (“RSU”) activity under our equity incentive plan was as follows:
UnitsWeighted Average Grant Date Fair Value
RSUs at December 25, 20212,166,934 $