Organization and Summary of Significant Accounting Policies | Note 1 – Organization and Summary of Significant Accounting Policies Organization and Operations of the Company Ichor Holdings, Ltd. and Subsidiaries (the “Company”) designs, develops, manufactures and distributes gas and liquid delivery subsystems and components purchased by capital equipment manufacturers for use in the semiconductor markets. The Company is headquartered in Fremont, California and has operations in the United States, United Kingdom, Singapore, Malaysia, and South Korea. On December 30, 2011, Ichor Systems Holdings, LLC consummated a sales transaction with Icicle Acquisition Holdings, LLC, a Delaware limited liability company. Shortly after consummation of the sale transaction, Icicle Acquisition Holdings, LLC changed its name to Ichor Holdings, LLC. In March 2012, Ichor Holdings, LLC completed a reorganization of its legal structure, forming Ichor Holdings, Ltd., a Cayman Islands entity. Ichor Holdings, Ltd. is now the reporting entity and the ultimate parent company of the operating entities. In January 2016, the Company decided to shut its Kingston, New York facility which was the primary facility for the Precision Flow Technologies, Inc. subsidiary. In May 2016, the Company ceased operations in this facility and ended the relationship with the customer it served in this location. The Company’s consolidated financial statements and accompanying notes for current and prior periods have been retroactively adjusted to present the results of operations of the Precision Flow Technologies, Inc. subsidiary as discontinued operations. In addition, the assets and liabilities to be disposed of have been treated and classified as discontinued operations. For more information on discontinued operations see Note 15 – Discontinued Operations Basis of Presentation These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All financial figures presented in the notes to consolidated financial statements are in thousands, except share, per share, and percentage figures. These consolidated financial statements include the following wholly owned subsidiaries of Ichor Holdings, Ltd.: ▪ FP-Ichor Ltd. (Cayman) ▪ Icicle Acquisition Holding Coöperatief U.A. ▪ Icicle Acquisition Holding B.V. ▪ Ichor Holdings Ltd (Scotland). ▪ Ichor Systems Ltd. (Scotland) ▪ Ichor Holdings, LLC ▪ Ichor Systems, Inc. ▪ Ichor Systems Malaysia Sdn Bhd ▪ Ichor Systems Singapore Pte. Ltd. ▪ Precision Flow Technologies, Inc. ▪ Ajax-United Patterns & Molds, Inc. ▪ Cal-Weld, Inc. ▪ Talon Innovations Corporation ▪ Talon Innovations (FL) Corporation Public Offering and Reverse Stock Split On December 14, 2016, the Company completed an initial public offering (“IPO”) of 5,877,778 ordinary shares at a price to the public of $9.00 per share. The Company received net proceeds from the offering of $47.1 million after offering fees and expenses. The net proceeds were used to repay $40.0 million of the Company’s loans outstanding under the Company’s Credit Facilities. In January 2017, the Company received $7.3 million, net of fees and expenses, from the exercise of the underwriters’ over‑allotment option to sell an additional 881,667 ordinary shares. Immediately prior to the IPO, the Company amended and restated its memorandum of association to reflect the conversion of all outstanding preferred shares to 17,722,808 ordinary shares. As part of the IPO, the Company authorized 200,000,000 ordinary shares at $0.0001 par value per share. The Company also authorized the issuance of 20,000,000 preferred shares at $0.0001 par value per share, with no shares outstanding. In connection with the IPO, the Company amended its memorandum of association to effect an 8.053363 for 1 reverse stock split of its common stock. Concurrent with the reverse stock split, the Company adjusted the number of shares subject to, and the exercise price of, its outstanding stock options and restricted shares under the Company’s 2012 Amended Management Incentive Plan (the “2012 Plan”) so that the holders of the options were in the same economic position both before and after the stock split. As a result of the reverse stock split, all previously reported share and per share amounts, including options in these consolidated financial statements and accompanying notes, have been retrospectively restated to reflect the reverse stock split. Year End We use a 52 or 53 week fiscal year ending on the last Friday in December. The years ended December 29, 2017, December 30, 2016, and December 25, 2015 were 52 weeks, 53 weeks, and 52 weeks, respectively. All references to 2017, 2016, and 2015 are references to fiscal years unless explicitly stated otherwise. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods presented. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from the estimates made by management. Significant estimates include the fair value of assets and liabilities acquired in acquisitions, estimated useful lives for long-lived assets, allowance for doubtful accounts, inventory valuation, uncertain tax positions, fair value assigned to stock options granted, and impairment analysis for both definite-lived intangible assets and goodwill. Correction of Immaterial Error During the second quarter of 2017, we corrected an error related to translating the inventory balances at our Malaysia and Singapore subsidiaries at an incorrect foreign currency rate. The error arose in prior period financial statements beginning in periods prior to 2014 and through 2016. The correction resulted in a $1.8 million increase in cost of sales and a corresponding decrease in gross profit in our consolidated statements of operations and a decrease to inventories in our consolidated balances sheet during the second quarter of 2017. We evaluated the error on both a quantitative and qualitative basis and determined that the error was not material and did not affect the trend of net income or cash flows in previously issued financial statements. Additionally, we determined that correcting the error in the second quarter of 2017 did not have a material impact to our consolidated financial statements for 2017. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 605, Revenue Recognition Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist of accounts receivable, accounts payable and long-term debt. The Company derived approximately 93%, 97%, and 95% of its revenue from continuing operations from two customers during 2017, 2016, and 2015, respectively. At December 29, 2017 and December 30, 2016, those customers represented, in the aggregate, approximately 61% and 83%, respectively, of the accounts receivable balance. Accounts receivable are carried at invoice price less an estimate for doubtful accounts and estimated payment discounts. Payment terms vary by customer, but generally are due within 15‑60 days. The Company reviews a customer’s credit history before extending credit. The Company establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends, and other information. Activity and balances related to the Company’s allowance for doubtful accounts is as follows: Allowance for doubtful accounts Balance at December 26, 2014 $ 385 Charges to costs and expenses (6 ) Write-offs (256 ) Balance at December 25, 2015 123 Charges to costs and expenses 71 Write-offs — Balance at December 30, 2016 194 Charges to costs and expenses 62 Write-offs — Balance at December 29, 2017 $ 256 The Company requires collateral, typically cash, in the normal course of business if customers do not meet its criteria established for offering credit. If the financial condition of the Company’s customers were to deteriorate and result in an impaired ability to make payments, additions to the allowance may be required. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded to income when received. The Company uses qualified manufacturers to supply many components and subassemblies of its products. The Company obtains the majority of its components from a limited group of suppliers. A majority of the purchased components used in the Company’s products are customer specified. An interruption in the supply of a particular component would have a temporary adverse impact on the Company’s operating results. The Company maintains cash balances at both United States-based and foreign-based commercial banks. At various times during the year, cash balances in the United States will exceed amounts that are insured by the Federal Deposit Insurance Corporation (FDIC). The majority of the cash maintained in foreign-based commercial banks is insured by the government where the foreign banking institutions are based. Cash held in foreign-based commercial banks totaled $36.4 million and $14.7 million at December 29, 2017 and December 30, 2016, respectively. No losses have been incurred at December 29, 2017 and December 30, 2016 for the amounts exceeding the insured limits. Fair Value Measurements The Company estimates the fair value of its financial assets and liabilities based upon comparison of such assets and liabilities to the current market values for instruments of a similar nature and degree of risk. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: ▪ Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date ▪ Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability ▪ Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date There were no changes to the Company’s valuation techniques during 2017. The Company estimates that the recorded value of its financial assets and liabilities approximates fair value at December 29, 2017 and December 30, 2016. The Company estimates the value of intangible assets on a nonrecurring basis based on an income approach utilizing discounted cash flows. Under this approach, the Company estimates the future cash flows from its asset groups and discounts the income stream to its present value to arrive at fair value. Future cash flows are based on recently prepared operating forecasts. Operating forecasts and cash flows include, among other things, revenue growth rates that are calculated based on management’s forecasted sales projections. A discount rate is utilized to convert the forecasted cash flows to their present value equivalent. The discount rate applied to the future cash flows includes a subject-company risk premium, an equity market risk premium, a beta, and a risk-free rate. As this approach contains unobservable inputs, the measurement of fair value for intangible assets is classified as Level 3. At December 29, 2017 and December 30, 2016, intangible assets passed the recoverability test resulting in no impairment. At December 25, 2015, certain intangibles assets associated with our Kingston facility did not pass the recoverability test, and the Company recorded an impairment charge of $1.8 million. See Note 15 – Discontinued Operations Inventories Inventories are stated at the lower of cost or market. The majority of inventory values are based upon standard costs that approximate average costs. The Company analyzes its inventory levels and records a write-down for inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected customer demand. Various factors are considered in making this determination, including recent sales history and predicted trends, industry market conditions, and general economic conditions. Property and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives: Estimated useful lives of PP&E Machinery 5-10 years Leasehold improvements Lesser of 10 years or lease term Computer software, hardware, and equipment 3-5 years Office furniture, fixtures, and equipment 5-7 years Vehicles 5 years Maintenance and repairs that neither add materially to the value of the asset nor appreciably prolong its useful life are charged to expense as incurred. Gains or losses on the disposal of property and equipment are included in selling, general and administrative expenses on the consolidated statements of operations. Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset (or asset group) may not be recoverable. In analyzing potential impairments, projections of future cash flows from the asset group are used to estimate fair value. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset group, a loss is recognized for the difference between the estimated fair value and the carrying value of the asset group. The projections are based on assumptions, judgments and estimates of revenue growth rates for the related business, anticipated future economic, regulatory and political conditions, the assignment of discount rates relative to risk, and estimates of terminal values. Other Non-Current Assets In connection with the acquisition of Ajax in 2016, the Company acquired two investments and a note receivable that were recorded at fair value on the date of acquisition: (i) a cost method investment in CHawk Technology International, Inc. (“CHawk”), (ii) an equity method investment in Ajax Foresight Global Manufacturing Sdn. Bhd. (“AFGM”), and (iii) a note receivable from AFGM. The Company accounted for the investments on the cost and equity method, respectively, as the Company did not control either entity. During 2016, the Company recorded equity in earnings of AFGM of $0.2 million, which is included in other expense (income), net. At December 30, 2016, the investment in CHawk and AFGM and the note receivable from AFGM had carrying balances of $1.5 million, $0.7 million, and $0.9 million, respectively. The Company sold its investments in CHawk and AFGM and settled its note from AFGM in January 2017, resulting in a net gain of $0.2 million. Intangible Assets The Company accounts for its intangible assets that have a definite life and are amortized on a basis consistent with their expected cash flows over the following estimated useful lives: Estimated useful lives of intangibles Trademarks 10 years Customer relationships 6-10 years Developed technology 7-10 years Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying a quantitative goodwill impairment test. Under the quantitative test, the fair value of the reporting unit is compared to its carrying value and an impairment loss is recognized for any excess of carrying amount over the reporting unit’s fair value. Fair value of the reporting unit is determined using a discounted cash flow analysis. For purposes of testing goodwill for impairment, the Company has concluded it operates in one reporting unit. The Company performed a qualitative goodwill assessment in the fourth quarter of 2017 and 2016. Our goodwill assessment performed in 2017 and 2016 indicated that it was more likely than not the reporting unit’s fair value exceeded its carrying value. Research and Development Costs Research and development costs are expensed as incurred. Warranty Costs The Company’s product warranties vary by customer, but generally extend for a period of one to two years from the date of sale. Provisions for warranties are determined primarily based on historical warranty cost as a percentage of sales, adjusted for specific problems that may arise. Historical product warranty expense has not been significant. Advertising Costs The Company charges advertising costs to operations as incurred. Advertising costs were not significant and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. Self-Insurance The Company sponsors a self-insured medical plan for employees and their dependents. A third party is engaged to assist in estimating the loss exposure related to the self-retained portion of the risk associated with this insurance. Special Bonus On August 11, 2015, the Board of Directors instituted a special bonus to certain members of management totaling $3.1 million, of which $1.8 million, $0.2 million, and $0.1 million was earned and recorded as a component of selling, general, and administrative, research and development, and cost of sales, respectively, in 2015. The remaining $1.0 million could be earned by certain members of management through the fourth quarter of 2018 based on their continued employment. In December 2016 the Board of Directors approved that all remaining special bonus was earned and to be paid in December 2016. During 2016, the Company expensed $0.6 million related to the special bonus, including the amount earned in the fourth quarter of 2016. The remaining amount of the bonus was forfeited due to employee terminations. Management does not expect to pay bonuses of this nature in future periods. Share-Based Payments The Company uses the Black-Scholes option-pricing model to value the awards on the date of grant. The Company uses the simplified method to estimate the expected term of its share-based awards for all periods, as the Company did not have sufficient history to estimate the weighted average expected term. The risk-free interest rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. Estimated volatility is based on historical volatility of the Company and similar entities whose share prices are publicly traded. Income Taxes The Company recognizes deferred income taxes using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax benefit for the current year differs from the statutory rate primarily as a result of revaluing our deferred taxes from 35% to 21% due to the Tax Cuts and Jobs Act, the impact of foreign operations, discrete tax benefits recorded in connection with the Company’s acquisitions of Talon and Cal‑Weld in 2017 and Ajax in 2016 (see Note 2 – Acquisitions Note 7 – Income Taxes The Company files federal income tax returns, foreign income tax returns, as well as multiple state and local tax returns. The Company is no longer subject to US Federal examination for tax years ending before 2014, to state examinations before 2013, or to foreign examinations before 2012. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the Company’s consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company recognizes interest and penalties as a component of income tax benefit. Foreign Operations The functional currency of the Company’s international subsidiaries located in the United Kingdom, Singapore, and Malaysia, is the U.S. dollar. Transactions denominated in currencies other than the functional currency generate foreign exchange gains and losses that are included in other expense (income), net on the accompanying consolidated statements of operations. Substantially, all of the Company’s sales and agreements with third-party suppliers provide for pricing and payments in U.S. dollars and, therefore, are not subject to material exchange rate fluctuations. Foreign operations consist of revenue of $346.0 million, $241.7 million, and $173.7 million during 2017, 2016, and 2015, respectively. Assets of foreign operations totaled $127.2 million and $90.4 million at December 29, 2017 and December 30, 2016, respectively. Accounting Pronouncements Recently Adopted In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017‑04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Accounting Pronouncements Recently Issued In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers (Topic 606) Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers Revenue from Contracts with Customers (Topic 606) We plan to adopt Topic 606 using the modified retrospective method through a cumulative effect adjustment being recognized in retained earnings at December 30, 2017, the date of adoption. Under this approach, we will not restate the prior period financial statements. We are currently completing the assessment phase of the implementation project and are finalizing our review of the impact of adoption. We are currently in the process of developing, implementing and testing our internal systems, processes and controls necessary to adopt Topic 606, and are in process of making the necessary changes to our accounting policies and disclosures. Based on our current assessment, we do not anticipate that the adoption of Topic 606 will result in a material cumulative effect adjustment to accumulated deficit nor have a material impact on our financial position, results of operations, or cash flows, as it is not expected to materially change the manner or timing of recognizing revenue. We are currently evaluating the impact of the expanded disclosures to our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash In January 2017, the FASB issued ASU No. 2017‑01, Business Combinations (Topic 805): Clarifying the Definition of a Business |