Restructuring Charges

3 Months Ended

Mar. 26, 2022

Restructuring and Related Activities [Abstract]

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.

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 Cards		Systems		Total
Cost of revenues	$	39	$	100	$	139
Research and development	—		146		146
Selling, general and administrative	3		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 charges	163		150		—		313
Cash payments	(301)		—		(1,450)		(1,751)

Non-cash settlement	—		(150)		—		(150)
March 26, 2022	$	890	$	—	$	—	$	890