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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 26, 2020
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 Filer
Non-accelerated FilerSmaller 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 October 30, 2020, 77,387,997 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 26, 2020
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)
 September 26,
2020
December 28,
2019
ASSETS 
Current assets:  
Cash and cash equivalents$185,368 $144,545 
Marketable securities56,100 76,327 
Accounts receivable, net of allowance for doubtful accounts of $222 and $222
96,946 97,868 
Inventories, net94,616 83,258 
Restricted cash1,477 1,981 
Prepaid expenses and other current assets21,687 15,064 
Total current assets456,194 419,043 
Restricted cash1,398 1,411 
Operating lease, right-of-use-assets29,320 31,420 
Property, plant and equipment, net of accumulated depreciation97,528 58,747 
Goodwill220,757 199,196 
Intangibles, net37,937 57,610 
Deferred tax assets71,464 71,252 
Other assets1,009 1,203 
Total assets$915,607 $839,882 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$62,903 $40,914 
Accrued liabilities44,026 36,439 
Current portion of term loans, net of unamortized issuance costs9,120 42,846 
Deferred revenue13,670 9,810 
Operating lease liabilities6,555 6,551 
Total current liabilities136,274 136,560 
Term loans, less current portion, net of unamortized issuance costs26,874 15,639 
Deferred tax liabilities5,682 6,986 
Long-term operating lease liabilities26,794 29,088 
Other liabilities5,841 10,612 
Total liabilities201,465 198,885 
 
Stockholders’ equity: 
Common stock, $0.001 par value:
 
250,000,000 shares authorized; 77,383,494 and 75,764,990 shares issued and outstanding
78 76 
Additional paid-in capital896,576 885,821 
Accumulated other comprehensive income (loss)2,479 (659)
Accumulated deficit(184,991)(244,241)
Total stockholders’ equity714,142 640,997 
Total liabilities and stockholders’ equity$915,607 $839,882 
 
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 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Revenues$177,996 $140,604 $496,573 $410,835 
Cost of revenues101,247 85,286 286,267 247,644 
Gross profit76,749 55,318 210,306 163,191 
Operating expenses:    
Research and development22,878 20,096 65,064 59,893 
Selling, general and administrative31,834 25,887 82,282 77,354 
Total operating expenses54,712 45,983 147,346 137,247 
Operating income22,037 9,335 62,960 25,944 
Interest income249 724 1,310 1,988 
Interest expense(193)(422)(682)(1,539)
Other income, net299 226 141 223 
Income before income taxes22,392 9,863 63,729 26,616 
Provision (benefit) for income taxes(499)1,584 4,479 5,906 
Net income$22,891 $8,279 $59,250 $20,710 
Net income per share: 
Basic $0.30 $0.11 $0.78 $0.28 
Diluted$0.29 $0.11 $0.75 $0.27 
Weighted-average number of shares used in per share calculations:   
Basic 77,029 75,280 76,436 74,749 
Diluted78,809 77,291 78,534 76,763 
 
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 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Net income $22,891 $8,279 $59,250 $20,710 
Other comprehensive income (loss), net of tax:
Translation adjustments and other1,867 (1,814)2,231 (2,042)
Unrealized gains (losses) on available-for-sale marketable securities(148)11 349 304 
Unrealized gains (losses) on derivative instruments302 (536)558 (1,222)
Other comprehensive income (loss), net of tax2,021 (2,339)3,138 (2,960)
Comprehensive income$24,912 $5,940 $62,388 $17,750 

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)
 SharesCommon StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal
Nine Months Ended September 26, 2020
Balances, December 28, 201975,764,990 $76 $885,821 $(659)$(244,241)$640,997 
Issuance of common stock under the Employee Stock Purchase Plan485,566 — 7,875 — — 7,875 
Issuance of common stock pursuant to exercise of options205,769 1 1,712 — — 1,713 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax927,169 1 (15,383)— — (15,382)
Stock-based compensation— — 16,551 — — 16,551 
Other comprehensive income— — — 3,138 — 3,138 
Net income— — — — 59,250 59,250 
Balances, September 26, 202077,383,494 $78 $896,576 $2,479 $(184,991)$714,142 
Three Months Ended September 26, 2020
Balances, June 27, 202076,501,459 $77 $898,069 $458 $(207,882)$690,722 
Issuance of common stock under the Employee Stock Purchase Plan173,975 — 3,809 — — 3,809 
Issuance of common stock pursuant to exercise of options100,000 — 844 — — 844 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax608,060 1 (11,583)— — (11,582)
Stock-based compensation— — 5,437 — — 5,437 
Other comprehensive income— — — 2,021 — 2,021 
Net income— — — — 22,891 22,891 
Balances, September 26, 202077,383,494 $78 $896,576 $2,479 $(184,991)$714,142 


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


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
SharesCommon StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal
Nine Months Ended September 28, 2019
Balances, December 29, 201874,139,712 $74 $862,897 $780 $(283,587)$580,164 
Issuance of common stock under the Employee Stock Purchase Plan544,271 — 6,806 — — 6,806 
Issuance of common stock pursuant to exercise of options112,956 — 754 — — 754 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax899,295 2 (7,898)— — (7,896)
Stock-based compensation— — 16,968 — — 16,968 
Other comprehensive loss— — — (2,960)— (2,960)
Net income— — — — 20,710 20,710 
Balances, September 28, 201975,696,234 $76 $879,527 $(2,180)$(262,877)$614,546 
Three Months Ended September 28, 2019
Balances, June 29, 201974,691,781 $75 $875,024 $159 $(271,156)$604,102 
Issuance of common stock under the Employee Stock Purchase Plan242,774  3,136 — — 3,136 
Issuance of common stock pursuant to exercise of options93,749 — 664 — — 664 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax667,930 1 (5,741)— — (5,740)
Stock-based compensation— — 6,444 — — 6,444 
Other comprehensive loss— — — (2,339)— (2,339)
Net income— — — — 8,279 8,279 
Balances, September 28, 201975,696,234 $76 $879,527 $(2,180)$(262,877)$614,546 

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 26,
2020
September 28,
2019
Cash flows from operating activities:  
Net income $59,250 $20,710 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation14,491 12,644 
Amortization20,249 20,248 
Reduction in the carrying amount of right-of-use assets4,294 3,921 
Stock-based compensation expense16,774 17,088 
Provision for excess and obsolete inventories9,763 8,046 
Gain on contingent consideration(3,771) 
Other adjustments to reconcile net income to net cash provided by operating activities(977)152 
Changes in assets and liabilities:
Accounts receivable5,712 10,580 
Inventories(18,566)(17,246)
Prepaid expenses and other current assets(5,619)(3,727)
Other assets219 (595)
Accounts payable18,054 10,074 
Accrued liabilities4,754 (856)
Other liabilities272 2,374 
Deferred revenues3,806 3,625 
Operating lease liabilities(4,496)(3,660)
Net cash provided by operating activities124,209 83,378 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(41,887)(14,242)
Acquisition of business, net of cash acquired(34,999) 
Proceeds from sale of a subsidiary82 93 
Purchases of marketable securities(29,721)(59,602)
Proceeds from maturities and sales of marketable securities50,330 33,704 
Net cash used in investing activities(56,195)(40,047)
Cash flows from financing activities:  
Proceeds from issuances of common stock9,588 7,672 
Tax withholdings related to net share settlements of equity awards(15,382)(7,898)
Proceeds from term loan debt18,000  
Principal repayments on term loans(41,098)(18,750)
Payment of term loan debt issuance costs(78) 
Net cash used in financing activities(28,970)(18,976)
Effect of exchange rate changes on cash, cash equivalents and restricted cash1,262 (161)
Net increase in cash, cash equivalents and restricted cash40,306 24,194 
Cash, cash equivalents and restricted cash, beginning of period147,937 100,546 
Cash, cash equivalents and restricted cash, end of period$188,243 $124,740 
Non-cash investing and financing activities:  
Change in accounts payable and accrued liabilities related to property, plant and equipment purchases$3,041 $1,062 
Operating lease, right-of-use assets obtained in exchange for lease obligations1,549 36,300 
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net$7,475 $2,875 
Cash paid for interest683 1,128 
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 financial information as of December 28, 2019 is derived from our 2019 Annual Report on Form 10-K. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2019 Annual Report on Form 10-K filed with the SEC on February 21, 2020. 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 2020 and 2019 each contain 52 weeks and the nine months ended September 26, 2020 and September 28, 2019 each contained 39 weeks. Fiscal 2020 will end on December 26, 2020.

Significant Accounting Policies
Our significant accounting policies have not changed during the nine months ended September 26, 2020 from those disclosed in our Annual Report on Form 10-K for the year ended December 28, 2019.

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

New Accounting Pronouncements
ASU 2016-13
In June 2016, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments (Topic 326)." The provisions of this standard require financial assets measured at amortized cost to be presented at the net amount expected to be collected. An allowance account would be established to present the net carrying value at the amount expected to be collected. ASU 2016-13 also provides that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. The guidance was amended through various ASU's subsequent to ASU 2016-13, all of which was effective beginning fiscal 2020. We adopted ASU 2016-13 on a prospective basis on December 29, 2019, the first day of fiscal 2020. The adoption did not have a material effect on our financial position, results of operations or cash flows.

ASU 2018-15
In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new guidance clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019. We adopted ASU 2018-15 on a prospective basis on December 29, 2019, the first day of fiscal 2020. The adoption did not have a material effect on our financial position, results of operations or cash flows.

ASU 2019-12
In December 2019, the FASB issued 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. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. We have not yet determined the impact of this standard on our financial position, results of operations or cash flows.

9


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 amendments in this update apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this update are elective and are effective upon issuance for all entities. We have not yet evaluated the transition approach for our LIBOR indexed contracts and have not determined whether we will be electing such expedients and exceptions.

Release No. 33-10786
In May 2020, the SEC issued Final Rule Release No. 33-10786, which amends the financial statement requirements for acquisitions and dispositions of businesses and related pro forma financial information required under SEC Regulation S-X, Rule 3-05. The final rule modifies the significance test required in SEC Regulation S-X, Rule 1-02(w) by raising the significance threshold for reporting dispositions of a business from 10% to 20% and by modifying the calculation of the investment and income tests. The modifications are effective for fiscal years starting after December 31, 2020 with early adoption permitted. We early adopted these modifications on June 28, 2020, the first day of the third quarter.

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 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Intel Corporation25.6 %23.9 %32.4 %23.8 %
Taiwan Semiconductor Manufacturing Co.,LTD.10.6 %***
Samsung Electronics., LTD.10.6 %**10.0 %
Micron Technology, Inc.10.1 %11.9 %**
SK Hynix Inc.*13.5 %*10.6 %
56.9 %49.3 %32.4 %44.4 %
*Represents less than 10% of total revenues.

At September 26, 2020, two customers accounted for 26.6% and 18.3% of gross accounts receivable, respectively. At December 28, 2019, three customers accounted for 25.7%, 15.1% and 11.5% 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 26,
2020
December 28,
2019
Raw materials$44,586 $38,528 
Work-in-progress32,770 29,720 
Finished goods17,260 15,010 
$94,616 $83,258 

Note 4 Acquisition

FRT Acquisition
On October 9, 2019, we acquired 100% of the shares of FRT GmbH ("FRT"), a German-based company, for total consideration of $26.9 million, net of cash acquired of $1.7 million. The fair value of the purchase consideration was comprised of a $22.2 million cash payment and $6.5 million of contingent consideration as of October 9, 2019.

We estimated the acquisition price and the allocation of fair value to assets acquired and liabilities assumed as of the acquisition date, October 9, 2019. We subsequently made certain immaterial adjustments to the acquisition price allocation related to
10


acquired assets and assumed liabilities, including to intangibles assets. We finalized our allocation of the assets acquired, including goodwill and intangibles, and liabilities assumed for the purchase as follows (in thousands):

Amount
Cash and cash equivalents$1,687 
Accounts receivable3,079 
Inventory2,643 
Property, plant and equipment696 
Operating lease, right of use assets 335 
Prepaid expenses and other current assets838 
Tangible assets acquired9,278 
Customer deposits (1,933)
Accounts payable and accrued liabilities(1,182)
Operating lease liabilities(335)
Deferred tax liabilities(5,757)
Total tangible assets acquired and liabilities assumed 71 
Intangible assets17,429 
Goodwill11,123 
Net Assets Acquired $28,623 

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

AmountWeighted Average Useful Life (in years)
Developed technologies$12,505 8.0
Customer relationships3,071 6.0
Backlog1,645 0.5
Trade names208 2.0
Total intangible assets$17,429 7.0

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.

The contingent consideration is a cash amount equal to 1.5x Earnings Before Interest and Tax ("EBIT") as defined in the purchase agreement, from a minimum of zero up to a maximum of €10.3 million, payable subject to the performance of the acquired business in calendar 2020. For purchase accounting, we estimated the fair value of contingent consideration using a probability weighted approach. Key assumptions in determining the fair value of contingent consideration include estimating the probability of achieving certain EBIT levels and discounting at an appropriate discount rate. See Note 8, Fair Value and Derivative Instruments, for further discussion on the fair value of contingent consideration.

This acquisition strengthens our leadership in test and measurement by expanding our addressable market into 3D hybrid surface metrology and extending the optical applications scope of our existing Systems segment.

Separate from the purchase agreement, on October 25, 2019, we entered into a term loan agreement with a lender for an aggregate amount of $23.4 million to finance the acquisition. See Note 6, Debt, for further discussion of the term loan agreement.

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

11


Developed technologies acquired primarily consists of existing technology related to hybrid 3D surface metrology measurement equipment. We valued the developed technologies 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.

Customer relationships represent the fair value of future projected revenues that will be derived from the sale of products to FRT'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.

Backlog represents business under existing contractual obligations. Expected cash flow from backlog was valued on a direct cash flow basis.

The identified trade names intangible relates to the estimated fair value of future cash flows related to the FRT 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 FRT reporting unit within the Systems reportable segment.

We have not presented unaudited combined pro forma financial information as the FRT 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 ("Baldwin Park") for total cash consideration of $35 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.

As of the reporting date, we have not completed the valuation of assets acquired and liabilities assumed. While the identification of identifiable intangible assets is still in process, we expect certain amounts provisionally recorded as goodwill will be ultimately allocated to such assets as customer relationships, developed technologies, backlog and potentially other technology-related assets as we complete purchase accounting. Consistent with the status of the identification of intangible assets, at this time we do not have an estimate of the allocation of value between amortizing and non-amortizing intangible assets, however we do expect that some amount of intangible assets provisionally recorded as goodwill will ultimately be allocated to an amortizing intangible asset. At the time such amount is estimable, we will record any amortization required between the acquisition date and the date at which the amounts become estimable. While we do not yet have a reasonable basis on which to record any such amortization, the impact to the financial statements as a whole is not expected to be material assuming typical lives of these assets and ranges of potential allocation of value.

The amounts presented below represent provisional amounts of assets acquired and liabilities assumed, which are recorded based on the best information available. As described above, adjustments to fair value for intangible assets have not yet been determined, however preliminary estimates have been determined for trade inventories and property, plant, and equipment step up. These provisional amounts are included in the table below and in the condensed consolidated balance sheets and are subject to revision as the fair value of the associated assets acquired and liabilities assumed is finalized. The total estimated purchase price would be allocated to the underlying assets acquired and liabilities assumed based on the provisional amounts, as follows (in thousands):

12


Amount
Accounts receivable$4,365 
Inventory2,318 
Property, plant and equipment9,053 
Operating lease, right of use assets519 
Prepaid expenses and other current assets317 
Tangible assets acquired16,572 
Accounts payable and accrued liabilities(572)
Operating lease liabilities(519)
Total tangible assets acquired and liabilities assumed15,481 
Goodwill19,519 
Net Assets Acquired$35,000 

The operating results of the acquired business are included in the Company’s results of operations since the date of acquisition. Pro forma financial information has not been provided for the acquisition of Baldwin Park as it is not significant to the Company’s operations and financial position. Included in Cost of revenues in the Condensed Consolidated Statements of Income in the three and nine months ended September 26, 2020 is $0.5 million of amortization of the estimated step-up to fair value for finished goods and work-in-process inventories acquired and then sold to customers within the quarter.

Note 5 Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):
Probe CardsSystemsTotal
Goodwill, gross, as of December 29, 2018$172,482 $16,732 $189,214 
Addition - FRT GmbH Acquisition 10,148 10,148 
Foreign currency translation (166)(166)
Goodwill, gross, as of December 28, 2019172,482 26,714 199,196 
Addition - FRT GmbH Acquisition 975 975 
Addition - Baldwin Park Acquisition19,519  19,519 
Foreign currency translation 1,067 1,067 
Goodwill, gross, as of September 26, 2020$192,001 $28,756 $220,757 

No goodwill impairments have been recorded during the nine months ended September 26, 2020 and the twelve months ended December 28, 2019.

Intangible assets were as follows (in thousands):
September 26, 2020December 28, 2019
Intangible Assets GrossAccumulated AmortizationNetGrossAccumulated AmortizationNet
Developed technologies $156,659 $131,289 $25,370 $154,951 $116,138 $38,813 
Trade names7,870 7,231 639 7,816 6,976 840 
Customer relationships43,460 31,532 11,928 44,229 27,057 17,172 
Backlog1,744 1,744  1,676 891 785 
$209,733 $171,796 $37,937 $208,672 $151,062 $57,610 

Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):
13


 Three Months EndedNine Months Ended
 September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Cost of revenues$4,985 $4,707 $15,661 $14,137 
Selling, general and administrative1,547 1,372 4,588 6,111 
$6,532 $6,079 $20,249 $20,248 

The estimated future amortization of intangible assets is as follows (in thousands):
Fiscal YearAmount
Remainder of 2020$6,105 
202114,945 
20225,708 
20233,954 
20242,200 
Thereafter5,025 
$37,937 
The table above does not include amortization related to the Baldwin Park acquisition as the fair value of intangible assets and their useful lives have not yet been determined.

Note 6 Debt

Our debt consisted of the following (in thousands):
September 26,
2020
December 28,
2019
Term loans$36,070 $58,514 
Less unamortized issuance costs(76)(29)
Term loans less issuance costs $35,994 $58,485 

Future principal and interest payments on our term loans as of September 26, 2020, based on the interest rate in effect at that date were as follows (in thousands):
Payments Due In Fiscal Year
Remainder 20202021202220232024ThereafterTotal
Term loans - principal payments$2,278 $9,133 $9,161 $1,050 $1,080 $13,368 $36,070 
Term loans - interest payments (1)
145 503 377 290 271 1,433 3,019 
Total$2,423 $9,636 $