SEC Filing | FormFactor, Inc.

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form-20210626

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 June 26, 2021

☐ 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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.001 par value

FORM

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 July 27, 2021, 77,674,960 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 JUNE 26, 2021

INDEX


Part I.	Financial Information

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of June 2 6 , 2021 and December 26, 2020	3

	Condensed Consolidated Statements of Income for the three and six months ended June 2 6 , 2021 and June 2 7 , 2020	4

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 2 6 , 2021 and June 2 7 , 2020	5

	Condensed Consolidated Statement of Stockholders' Equity for the three and six months ended June 2 6 , 2021 and June 2 7 , 2020	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 2 6 , 2021 and June 2 7 , 2020	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

Part II.	Other Information	36



Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and use of proceeds	37







Item 6.	Exhibits	38

Signatures		39

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FORMFACTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	June 26, 2021		December 26, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	160,273	$	187,225
Marketable securities	95,962		67,810
Accounts receivable, net of allowance for doubtful accounts of $217 and $248	108,265		107,603
Inventories, net	111,890		99,229
Restricted cash	1,857		1,904
Prepaid expenses and other current assets	19,244		23,303
Total current assets	497,491		487,074
Restricted cash	1,836		1,969
Operating lease, right-of-use-assets	38,485		30,756
Property, plant and equipment, net of accumulated depreciation	125,348		104,103
Goodwill	214,548		212,761
Intangibles, net	41,913		59,147
Deferred tax assets	66,945		66,242
Other assets	1,980		1,165
Total assets	$	988,546	$	963,217

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	62,445	$	62,045
Accrued liabilities	51,487		55,342
Current portion of term loans, net of unamortized issuance costs	9,356		9,516
Deferred revenue	22,655		20,964
Operating lease liabilities	7,908		6,704
Total current liabilities	153,851		154,571
Term loans, less current portion, net of unamortized issuance costs	20,123		24,978
Deferred tax liabilities	4,613		5,346
Long-term operating lease liabilities	34,211		27,996
Other liabilities	6,201		6,242
Total liabilities	218,999		219,133

Stockholders’ equity:


Common stock, $0.001 par value:
250,000,000 shares authorized; 77,454,800 and 77,437,997 shares issued and outstanding	77		78

Additional paid-in capital	894,062		903,838
Accumulated other comprehensive income	3,596		5,886
Accumulated deficit	(128,188)		(165,718)
Total stockholders’ equity	769,547		744,084
Total liabilities and stockholders’ equity	$	988,546	$	963,217

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Revenues	$	188,076	$	157,824	$	374,712	$	318,577
Cost of revenues	111,793		91,657		221,723		185,020
Gross profit	76,283		66,167		152,989		133,557
Operating expenses:
Research and development	25,454		20,919		49,500		42,186
Selling, general and administrative	30,479		22,755		60,494		50,448
Total operating expenses	55,933		43,674		109,994		92,634
Operating income	20,350		22,493		42,995		40,923
Interest income	148		376		342		1,061
Interest expense	(116)		(171)		(296)		(489)
Other expense, net	(194)		(67)		(22)		(158)
Income before income taxes	20,188		22,631		43,019		41,337
Provision for income taxes	2,283		2,162		5,489		4,978
Net income	$	17,905	$	20,469	$	37,530	$	36,359
Net income per share:
Basic	$	0.23	$	0.27	$	0.48	$	0.48
Diluted	$	0.23	$	0.26	$	0.47	$	0.46
Weighted-average number of shares used in per share calculations:
Basic	77,463		76,275		77,530		76,140
Diluted	79,466		78,861		79,621		78,710

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net income	$	17,905	$	20,469	$	37,530	$	36,359
Other comprehensive income (loss), net of tax:
Translation adjustments and other	632		763		(1,747)		364
Unrealized gains (losses) on available-for-sale marketable securities	(97)		524		(228)		497
Unrealized gains (losses) on derivative instruments	(89)		80		(315)		256
Other comprehensive income (loss), net of tax	446		1,367		(2,290)		1,117
Comprehensive income	$	18,351	$	21,836	$	35,240	$	37,476

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

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
	Six Months Ended June 26, 2021
Balances, December 26, 2020	77,437,997	$	78	—	$	—	$	903,838	$	5,886	$	(165,718)	$	744,084
Issuance of common stock under the Employee Stock Purchase Plan	228,784	—		—	—		5,065		—		—		5,065
Issuance of common stock pursuant to exercise of options	100,000	—		—	—		844		—		—		844
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	308,219	—		—	—		(5,261)		—		—		(5,261)
Purchase and retirement of common stock through repurchase program	(620,200)	(1)		—	—		(23,950)		—		—		(23,951)
Stock-based compensation	—	—		—	—		13,526		—		—		13,526
Other comprehensive loss	—	—		—	—		—		(2,290)		—		(2,290)
Net income	—	—		—	—		—		—		37,530		37,530
Balances, June 26, 2021	77,454,800	$	77	—	$	—	$	894,062	$	3,596	$	(128,188)	$	769,547
	Three Months Ended June 26, 2021
Balances, March 27, 2021	77,758,530	$	78	(136,402)	$	(5,738)	$	915,136	$	3,150	$	(146,093)	$	766,533

Issuance of common stock pursuant to exercise of options	50,000	—		—	—		422		—		—		422
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	266,470	—		—	—		(4,120)		—		—		(4,120)
Purchase and retirement of common stock through repurchase program	(620,200)	(1)		136,402	5,738		(23,950)		—		—		(18,213)
Stock-based compensation	—	—		—	—		6,574		—		—		6,574
Other comprehensive income	—	—		—	—		—		446		—		446
Net income	—	—		—	—		—		—		17,905		17,905
Balances, June 26, 2021	77,454,800	$	77	—	$	—	$	894,062	$	3,596	$	(128,188)	$	769,547

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

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
	Six Months Ended June 27, 2020
Balances, December 28, 2019	75,764,990	$	76	—		$	—	$	885,821	$	(659)	$	(244,241)	$	640,997
Issuance of common stock under the Employee Stock Purchase Plan	311,591	—		—		—		4,066		—		—		4,066
Issuance of common stock pursuant to exercise of options	105,769	1		—		—		868		—		—		869
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	319,109	—		—		—		(3,800)		—		—		(3,800)

Stock-based compensation	—	—		—		—		11,114		—		—		11,114
Other comprehensive income	—	—		—		—		—		1,117		—		1,117
Net income	—	—		—		—		—		—		36,359		36,359
Balances, June 27, 2020	76,501,459	$	77	—		$	—	$	898,069	$	458	$	(207,882)	$	690,722
	Three Months Ended June 27, 2020
Balances, March 28, 2020	76,158,251	$	77	$	—	$	—	$	895,600	$	(909)	$	(228,351)	$	666,417

Issuance of common stock pursuant to exercise of options	50,000	—		—		—		422		—		—		422
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax	293,208	—		—		—		(3,415)		—		—		(3,415)

Stock-based compensation	—	—		—		—		5,462		—		—		5,462
Other comprehensive income	—	—		—		—		—		1,367		—		1,367
Net income	—	—		—		—		—		—		20,469		20,469
Balances, June 27, 2020	76,501,459	$	77	—		$	—	$	898,069	$	458	$	(207,882)	$	690,722

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended
	June 26, 2021		June 27, 2020
Cash flows from operating activities:
Net income	$	37,530	$	36,359
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	12,678		9,240
Amortization	13,900		13,717

Reduction in the carrying amount of right-of-use assets	3,652		2,419

Stock-based compensation expense	13,665		11,265


Provision for excess and obsolete inventories	6,898		6,407



Gain on contingent consideration	(95)		(3,700)

Other adjustments to reconcile net income to net cash provided by operating activities	1,211		1,327
Changes in assets and liabilities:
Accounts receivable	(1,194)		11,364
Inventories	(20,388)		(11,089)
Prepaid expenses and other current assets	3,179		(3,271)

Other assets	(344)		248
Accounts payable	(2,028)		5,247
Accrued liabilities	(235)		1,529

Other liabilities	184		292
Deferred revenues	1,522		3,855
Operating lease liabilities	(3,980)		(2,762)

Net cash provided by operating activities	66,155		82,447
Cash flows from investing activities:
Acquisition of property, plant and equipment	(31,322)		(36,743)
Proceeds from sale of a subsidiary	—		82

Purchases of marketable securities	(71,186)		(19,726)
Proceeds from maturities and sales of marketable securities	42,695		35,410

Net cash used in investing activities	(59,813)		(20,977)
Cash flows from financing activities:
Proceeds from issuances of common stock	5,909		4,935
Purchase of common stock through stock repurchase program	(23,951)		—
Tax withholdings related to net share settlements of equity awards	(5,261)		(3,800)
Payment of contingent consideration	(3,873)		—
Proceeds from term loan debt	—		18,000
Principal repayments on term loans	(4,740)		(26,322)
Payment of term loan debt issuance costs	—		(78)
Net cash used in financing activities	(31,916)		(7,265)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,558)		583
Net increase (decrease) in cash, cash equivalents and restricted cash	(27,132)		54,788
Cash, cash equivalents and restricted cash, beginning of period	191,098		147,937
Cash, cash equivalents and restricted cash, end of period	$	163,966	$	202,725

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

FORMFACTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended
	June 26, 2021		June 27, 2020
Non-cash investing and financing activities:



Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases	$	2,906	$	(2,274)
Operating lease, right-of-use assets obtained in exchange for lease obligations	11,629		428

Supplemental disclosure of cash flow information:
Cash paid for income taxes, net	$	4,559	$	4,133
Cash paid for interest	339		473

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	160,273	$	199,926
Restricted cash, current	1,857		1,424
Restricted cash, non-current	1,836		1,375
Total cash, cash equivalents and restricted cash	$	163,966	$	202,725

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

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 2020 Annual Report on Form 10-K filed with the SEC on February 22, 2021. 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 2021 and 2020 each contain 52 weeks and the six months ended June 26, 2021 and June 27, 2020 each contained 26 weeks. Fiscal 2021 will end on December 25, 2021.

Significant Accounting Policies

Our significant accounting policies have not changed during the six months ended June 26, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2020.

New Accounting Pronouncements

ASU 2019-12

In December 2019, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740),” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We adopted ASU 2019-12 on a prospective basis on December 27, 2020, the first day of fiscal 2021. The adoption did not have a material effect on our consolidated financial position, results of operations or cash flows.

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.

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				Six Months Ended
	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Intel Corporation	16.2	%	36.1	%	22.1	%	36.2	%
Samsung Electronics., LTD.	14.7	%	*		*		*
Taiwan Semiconductor Manufacturing Co., LTD.	11.0	%	*		11.2	%	*


	41.9	%	36.1	%	33.3	%	36.2	%

*Represents less than 10% of total revenues.

At June 26, 2021, one customer accounted for 20.6% of gross accounts receivable. At December 26, 2020, two customers accounted for 15.3% and 13.7% 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):


	June 26, 2021		December 26, 2020
Raw materials	$	56,138	$	48,122
Work-in-progress	35,911		30,806
Finished goods	19,841		20,301
	$	111,890	$	99,229

Note 4 — Acquisition

High Precision Devices, Inc. Acquisition

On October 19, 2020, we acquired 100% of the shares of HPD for total consideration of $16.9 million, net of cash acquired of $1.7 million, which included an adjustment for changes in working capital. This acquisition brings highly specialized skills and know-how to address the unique test challenges within the emerging quantum computing, superconducting computing, and ultra-sensitive sensor markets which operate at temperatures as low as 30 millikelvin.

The acquisition was accounted for using the acquisition method of accounting, with FormFactor treated as the acquirer. The acquired assets and liabilities of HPD were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.

Our Condensed Consolidated Statements of Income include the financial results of HPD subsequent to the acquisition date of October 19, 2020. Revenue in fiscal 2020 related to HPD subsequent to the acquisition date that was included in our Condensed Consolidated Statements of Income was not material.

The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values. The fair values assigned to assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date.

We estimated the acquisition price and the allocation of fair value to assets acquired and liabilities assumed as of the acquisition date, October 19, 2020. We subsequently made certain immaterial adjustments within the measurement period to the preliminary acquisition price allocation. See Note 5, Goodwill and Intangible Assets, for changes in identified intangible values

and goodwill. Our purchase accounting remains open at June 26, 2021, subject to finalization of certain deferred tax items. The estimated fair value of assets acquired, including goodwill and intangibles, and liabilities assumed is as follows (in thousands):


	Amount
Cash and cash equivalents	$	1,680
Accounts receivable	1,017
Inventories	3,047
Property, plant and equipment	669
Operating lease, right of use assets	2,554
Prepaid expenses and other current assets	599
Tangible assets acquired	9,566
Deferred revenue	(2,529)
Accounts payable and accrued liabilities	(1,268)
Operating lease liabilities	(2,554)
Deferred tax liabilities	(2,840)
Total tangible assets acquired and liabilities assumed	375
Intangible assets	11,520
Goodwill	6,665
Net Assets Acquired	$	18,560

The intangible assets as of the closing date of the acquisition included (in thousands):


	Amount		Weighted Average Useful Life (in years)
Developed technologies	$	7,500	10.0
Customer relationships	3,600		5.0
Order backlog	200		0.5
Trade names	220		5.0
Total intangible assets	$	11,520	8.2

The fair value of the intangible assets acquired in connection with the acquisition was determined using either the income, market or replacement cost methodologies. The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized.

Identifiable Intangible Assets

Valuation of intangible assets involves multiple assumptions. The key assumptions are described below.

Developed technology acquired primarily consists of existing technology related to cryogenic probe stations, Adiabatic Demagnetization Refrigerator (“ADR”), and continuous ADR cryostats and similar tools, and technology related to other cryogenic applications. We valued the developed technology using the multi-period excess earnings method under the income approach. Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return.

The value of customer relationships represents the fair value of future projected revenues that will be derived from the sale of products to HPD's existing customers. We valued customer relationships using the incremental cash flow method. This method estimates value based on the incremental cash flow afforded by having the customers relationships in place on the acquisition date versus having no relationships in place and needing to replicate or replace those relationships. The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.

Order backlog represents the value of future sales under existing contracts as of the acquisition date. Expected cash flow from order backlog was valued on a discounted direct cash flow basis, net of returns on contributory assets such as working capital, property and equipment, trade name and assembled workforce.

The identified trade names intangibles relate to the estimated fair value of future cash flows related to the HPD brand. We valued trade names by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name.

Goodwill

The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition. We believe the factors that contributed to goodwill include synergies that are specific to our consolidated business, such as cost savings and operational efficiencies, and the acquisition of a talented workforce that expands our expertise in business development and commercializing semiconductor test products, none of which qualify for recognition as a separate intangible asset. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition was recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment.

The goodwill arising from the acquisition was allocated to the HPD reporting unit within the Systems reportable segment.

We have not presented unaudited combined pro forma financial information as the HPD acquisition was not significant to our consolidated results of operations and financial position.

Baldwin Park Acquisition

On July 30, 2020, we acquired the probe card assets of Advantest Corporation for total cash consideration of $35.0 million. This acquisition brings important enabling technologies and capabilities for designing and manufacturing advanced probe cards, and adds a complementary 3D-NAND Flash probe-card product that is qualified and in production at one of the world's leading NAND Flash manufacturers.

The acquisition was accounted for using the acquisition method of accounting, with FormFactor treated as the acquirer. The acquired assets and liabilities of Baldwin Park were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.

Our Condensed Consolidated Statements of Income include the financial results of Baldwin Park subsequent to the acquisition date of July 30, 2020. Revenue related to Baldwin Park since the acquisition date that was included in our Condensed Consolidated Statements of Income for fiscal 2020 was not material.

We estimated the acquisition price and the allocation of fair value to assets acquired and liabilities assumed as of the acquisition date, July 30, 2020. We subsequently made certain immaterial adjustments within the measurement period to the acquisition price allocation as a result of finalization of our valuation of identifiable assets and liabilities. See Note 5, Goodwill and Intangible Assets, for changes in identified intangible values and goodwill. The final allocation of the assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):


	Amount
Accounts receivable	$	4,365
Inventories	2,727
Property, plant and equipment	9,053
Operating lease, right of use assets	519
Prepaid expenses and other current assets	56
Tangible assets acquired	16,720
Accounts payable and accrued liabilities	(743)
Operating lease liabilities	(519)
Total tangible assets acquired and liabilities assumed	15,458
Intangible assets	13,600
Goodwill	5,942
Net assets acquired	$	35,000

The intangible assets as of July 30, 2020 included (in thousands):


	Amount		Weighted Average Useful Life (in years)
Developed technologies	$	8,800	10.0
Customer relationships	4,400		3.0
In-process research and development	400		N/A
Total intangible assets	$	13,600	7.7

Indications of fair value of the intangible assets acquired in connection with the acquisition were determined using either the income, market or replacement cost methodologies. The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized.

Identifiable Intangible Assets

Valuation of intangible assets involves multiple assumptions. The key assumptions are described below.

Developed technology acquired consists of existing technology related to 3D NAND Flash probe cards and the value expected to be derived from interconnect technology. We valued the developed technology related to 3D NAND Flash using the multi-period excess earnings method under the income approach. Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return. We valued the interconnect developed technology asset using the incremental cash flow method. This method estimates value based on the incremental cash flow afforded by having the interconnect capability in place on the acquisition date versus having no capability in place and needing to replicate or replace that capability. The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.

The value of customer relationships represents the fair value of future projected revenues that will be derived from the sale of products to Baldwin Park's existing customers. We valued customer relationships using the incremental cash flow method. This method estimates value based on the incremental cash flow afforded by having the customers relationships in place on the acquisition date versus having no relationships in place and needing to replicate or replace those relationships. The incremental cash flows are then discounted to a present value to arrive at an estimate of fair value for this asset class.

In-process research and development (“IPR&D”) acquired primarily consists of research and development projects that were in process at the time of acquisition related to technologies used in DRAM probe cards. Once these projects are complete they will be amortized over their useful life. We valued the IPR&D using the multi-period excess earnings method under the income approach. Using this approach, the estimated fair values were calculated using expected future cash flows from specific products discounted to their net present values at an appropriate risk-adjusted rate of return.

Goodwill

The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition. We believe the factors that contributed to goodwill include synergies that are specific to our consolidated business, such as cost savings and operational efficiencies, and the acquisition of a talented workforce that expands our expertise in business development, none of which qualify for recognition as a separate intangible asset. We expect this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition was recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment.

The goodwill arising from the acquisition was allocated to the Probe Cards reporting unit within the Probe Cards reportable segment.

We have not presented unaudited combined pro forma financial information as the Baldwin Park acquisition was not significant to our consolidated results of operations and financial position.

Note 5 — Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):


	Probe Cards		Systems		Total
Goodwill, gross, as of December 28, 2019	$	172,482	$	26,714	$	199,196
Addition - FRT GmbH Acquisition	—		975		975
Addition - Baldwin Park Acquisition	5,590		—		5,590
Addition - HPD Acquisition	—		4,654		4,654
Foreign currency translation	—		2,346		2,346
Goodwill, gross, as of December 26, 2020	178,072		34,689		212,761
Addition - Baldwin Park Acquisition	352		—		352
Addition - HPD Acquisition	—		2,011		2,011
Foreign currency translation	—		(576)		(576)
Goodwill, gross, as of July 26, 2021	$	178,424	$	36,124	$	214,548

We have not recorded goodwill impairments for the six months ended June 26, 2021.

Intangible assets were as follows (in thousands):


	June 26, 2021						December 26, 2020
Intangible Assets	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Developed technologies	$	173,627	$	147,968	$	25,659	$	176,265	$	137,754	$	38,511
Customer relationships	51,641		36,437		15,204		52,488		33,378		19,110
Trade names	8,140		7,520		620		8,162		7,363