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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 25, 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: 001-39675
_________________
ALLEGRO MICROSYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
_________________
Delaware46-2405937
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
955 Perimeter Road03103
Manchester,New Hampshire(Zip Code)
(Address of principal executive offices)
(603626-2300
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per shareALGMThe Nasdaq Global Select 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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 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, 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.
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 November 16, 2020, the registrant had 189,431,766 shares of common stock, $0.01 par value per share, outstanding.



TABLE OF CONTENTS
Page
2



FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, the impact of the ongoing and global COVID-19 pandemic on our business, prospective products and the plans and objectives of management for future operations, may be forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the offering, liquidity, growth and profitability strategies and factors and trends affecting our business are forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “exploring,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seek,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.
Forward-looking statements are based on our management’s belief and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I., Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A “Risk Factors” in this Quarterly Report. These risks and uncertainties include, but are not limited to:
downturns or volatility in general economic conditions, including as a result of the COVID-19 pandemic, particularly in the automotive market;
our ability to compete effectively with intense competition, expand our market share and increase our profitability;
our ability to compensate for decreases in average selling prices of our products;
the cyclical nature of the analog semiconductor industry;
our ability to manage any sustained yield problems or other delays at our third-party wafer fabrication facilities or in the final assembly and test of our products;
our ability to fully realize the benefits of past and potential future initiatives designed to improve our competitiveness, growth and profitability;
our ability to accurately predict our quarterly net sales and operating results;
our ability to adjust our supply chain volume to account for changing market conditions and customer demand;
our dependence on manufacturing operations in the Philippines;
changes in government trade policies, including the imposition of tariffs and export restrictions; and
our ability to protect our proprietary technology and inventions through patents or trade secrets.
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.
Unless the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Allegro” refer to the operations of Allegro MicroSystems, Inc. and its consolidated subsidiaries.
2


PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
ALLEGRO MICROSYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
September 25, 2020 (Unaudited)
March 27,
2020
Assets
Current assets:
Cash and cash equivalents$201,998 $214,491 
Restricted cash6,354 5,385 
Trade accounts receivable, net of allowances for doubtful accounts of $338 and $288 at September 25, 2020 and March 27, 2020, respectively
57,926 59,457 
Trade and other accounts receivable due from related party16,783 30,851 
Accounts receivable - other2,780 1,796 
Inventories104,796 127,227 
Prepaid expenses and other current assets16,585 9,014 
Total current assets407,222 448,221 
Property, plant and equipment, net217,901 332,330 
Deferred income tax assets6,861 7,217 
Goodwill20,257 1,285 
Intangible assets, net36,274 19,958 
Related party note receivable51,377  
Equity investment in related party25,028  
Other assets, net14,779 8,810 
Total assets$779,699 $817,821 
Liabilities, Non-Controlling Interest and Stockholders' Equity
Current liabilities:
Trade accounts payable$23,856 $20,762 
Amounts due to related party1,157 4,494 
Accrued expenses and other current liabilities64,929 56,855 
Current portion of related party debt 25,000 
Bank lines-of-credit33,000 43,000 
Total current liabilities122,942 150,111 
Related party notes payable, less current portion 17,700 
Other long-term liabilities21,251 15,878 
Total liabilities144,193 183,689 
Commitments and contingencies (Note 16)
Stockholders' Equity:
Common stock:
Class A, $.01 par value; 12,500,000 shares authorized; 10,000,000 shares issued and outstanding at September 25, 2020 and March 27, 2020
100 100 
Class L, $.01 par value; 1,000,000 shares authorized; 638,298 shares issued and outstanding September 25, 2020; 622,470 shares issued and outstanding at March 27, 2020
6 6 
Additional paid-in capital439,732 458,697 
Retained earnings208,759 194,355 
Accumulated other comprehensive loss(14,133)(19,976)
Equity attributable to Allegro MicroSystems, Inc.634,464 633,182 
Non-controlling interests1,042 950 
Total stockholders' equity635,506 634,132 
Total liabilities, non-controlling interest and stockholders' equity$779,699 $817,821 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

ALLEGRO MICROSYSTEMS, INC.

Consolidated Statements of Income
(in thousands, except share and per share amounts)
(Unaudited)
Three-Month Period EndedSix-Month Period Ended
September 25,
2020
September 27,
2019
September 25,
2020
September 27,
2019
Net sales$114,138 $146,615 $205,519 $282,891 
Net sales to related party22,511 16,625 46,131 32,792 
Total net sales136,649 163,240 251,650 315,683 
Cost of goods sold74,879 94,634 134,179 187,690 
Gross profit61,770 68,606 117,471 127,993 
Operating expenses:
Research and development25,130 25,952 49,510 52,080 
Selling, general and administrative24,238 27,593 51,027 53,121 
Total operating expenses49,368 53,545 100,537 105,201 
Operating income12,402 15,061 16,934 22,792 
Other income (expense):
Interest income (expense), net350 (65)663 (70)
Foreign currency transaction (loss) gain(1,318)609 (1,186)3,360 
Income in earnings of equity investment246  458  
Other, net20 (1,189)213 (1,096)
Income before income taxes11,700 14,416 17,082 24,986 
Income tax provision2,082 2,833 2,610 10,168 
Net income9,618 11,583 14,472 14,818 
Net income attributable to non-controlling interests34 18 68 69 
Net income attributable to Allegro MicroSystems, Inc.$9,584 $11,565 $14,404 $14,749 
Net income attributable to Allegro MicroSystems, Inc. per share:
Basic and diluted$0.96 $1.16 $1.44 $1.47 
Weighted average shares outstanding:
Basic and diluted10,000,000 10,000,000 10,000,000 10,000,000 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

ALLEGRO MICROSYSTEMS, INC.

Consolidated Statements of Comprehensive Income
(in thousands)
(Unaudited)
Three-Month Period EndedSix-Month Period Ended
September 25,
2020
September 27,
2019
September 25,
2020
September 27,
2019
Net income$9,618 $11,583 $14,472 $14,818 
Foreign currency translation adjustment1,900 (1,784)6,180 (1,017)
Net actuarial loss amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax  (313) 
Comprehensive income$11,518 $9,799 $20,339 $13,801 
Comprehensive (expense) income attributable to non-controlling interest(31)(33)(24)18 
Comprehensive income attributable to Allegro MicroSystems, Inc.$11,487 $9,766 $20,315 $13,819 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

ALLEGRO MICROSYSTEMS, INC.

Consolidated Statements of Changes in Equity
(in thousands, except share amounts)
(Unaudited)
Common Stock, Class ACommon Stock, Class L
Additional
Paid-In Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Non-controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at June 26, 202010,000,000 $100 638,298 $6 $439,679 $199,175 $(16,002)$977 $623,935 
Net income— — — — — 9,584 — 34 9,618 
Stock-based compensation— — — — 580 — — — 580 
Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries— — — — (527)— — — (527)
Foreign currency translation adjustment— — — — — — 1,869 31 1,900 
Balance at September 25, 202010,000,000 $100 638,298 $6 $439,732 $208,759 $(14,133)$1,042 $635,506 
Common Stock, Class ACommon Stock, Class L
Additional
Paid-In Capital
Retained Earnings
Accumulated
Other
Comprehensive Loss
Non-controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at June 28, 201910,000,000 $100 607,620 $6 $448,136 $160,569 $(15,460)$814 $594,165 
Net income— — — — — 11,565 — 18 11,583 
Stock-based compensation— — — — 374 — — — 374 
Foreign currency translation adjustment— — — — — — (1,817)33 (1,784)
Balance at September 27, 201910,000,000 $100 607,620 $6 $448,510 $172,134 $(17,277)$865 $604,338 
6


Common Stock, Class ACommon Stock, Class L
Additional
Paid-In Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Non-controlling InterestsTotal
Equity
SharesAmountSharesAmount
Balance at March 27, 202010,000,000 $100 622,470 $6 $458,697 $194,355 $(19,976)$950 $634,132 
Net income— — — — — 14,404 — 68 14,472 
Issuance of Class L shares, net of forfeitures— — 15,828 — — — — —  
Capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries— — — — (19,692)— — — (19,692)
Reclassification of certain class L shares— — — — (298)— — — (298)
Stock-based compensation— — — — 1,025 — — — 1,025 
Foreign currency translation adjustment— — — — — — 6,156 24 6,180 
Net actuarial loss and amortization of net transition obligation and prior service costs related to defined benefit plans, net of tax— — — — — — (313)— (313)
Balance at September 25, 202010,000,000 $100 638,298 $6 $439,732 $208,759 $(14,133)$1,042 $635,506 
Common Stock, Class ACommon Stock, Class L
Additional
Paid-In Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Non-controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at March 29, 201910,000,000 $100 607,620 $6 $447,762 $157,385 $(16,278)$814 $589,789 
Net income— — — — — 14,749 — 69 14,818 
Stock-based compensation— — — — 748 — — — 748 
Foreign currency translation adjustment— — — — — — (999)(18)(1,017)
Balance at September 27, 201910,000,000 $100 607,620 $6 $448,510 $172,134 $(17,277)$865 $604,338 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ALLEGRO MICROSYSTEMS, INC.

Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six-Month Period Ended
September 25,
2020
September 27,
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$14,472 $14,818 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization24,026 31,477 
Deferred income taxes1,307 (320)
Stock-based compensation1,025 748 
Loss on disposal of assets293 559 
Provisions for inventory and bad debt209 1,941 
Changes in operating assets and liabilities:
Trade accounts receivable6,196 10,294 
Accounts receivable - other(1,292)1,148 
Inventories(8,772)3,043 
Prepaid expenses and other assets(16,725)(3,863)
Trade accounts payable2,793 (759)
Due to/from related parties10,731 (19,601)
Accrued expenses and other current and long-term liabilities(5,623)(11,769)
Net cash provided by operating activities28,640 27,716 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(18,091)(18,199)
Acquisition of business, net of cash acquired(8,500) 
Proceeds from sales of property, plant and equipment282 3,920 
Contribution of cash balances due to divestiture of subsidiary
(16,335) 
Net cash used in investing activities(42,644)(14,279)
CASH FLOWS FROM FINANCING ACTIVITIES:
Related party note receivable 30,000 
Net cash provided by financing activities 30,000 
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash2,480 (7,157)
Net (decrease) increase in Cash and cash equivalents and Restricted cash(11,524)36,280 
Cash and cash equivalents and Restricted cash at beginning of period219,876 103,257 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:$208,352 $139,537 
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents at beginning of period$214,491 $99,743 
Restricted cash at beginning of period5,385 3,514 
Cash and cash equivalents and Restricted cash at beginning of period$219,876 $103,257 
Cash and cash equivalents at end of period201,998 134,349 
Restricted cash at end of period6,354 5,188 
Cash and cash equivalents and Restricted cash at end of period$208,352 $139,537 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest$107 $763 
Cash paid for income taxes$6,385 $4,582 
Non-cash transactions:
Changes in Trade accounts payable related to Property, plant and equipment, net$(4,000)$(2,659)
Loans to cover purchase of common stock under employee stock plan$171 $ 
Deconsolidation related to Divestiture Transactions (Note 1)$ $ 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)

1. Nature of the Business and Basis of Presentation
Allegro MicroSystems, Inc., together with its consolidated subsidiaries (“AMI” or the “Company”), is a global leader in designing, developing and manufacturing sensing and power solutions for motion control and energy-efficient systems in automotive and industrial markets. The Company was incorporated under the laws of Delaware on March 30, 2013 under the name of Sanken North America, Inc. (“SKNA”) as a wholly owned subsidiary of Sanken Electric Co., Ltd. (“Sanken”). In October 2017, Sanken sold 28.8% of the common stock of SKNA to One Equity Partners (“OEP”). In April 2018, SKNA filed a certificate of amendment in the state of Delaware to change its name to Allegro MicroSystems, Inc. The Company is headquartered in Manchester, New Hampshire and has a global footprint with 16 locations across four continents.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The unaudited condensed consolidated financial statements include the Company's accounts and those of its subsidiaries. All intercompany balances have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included the Company’s final prospectus on Form 424(b) filed with the SEC on October 30, 2020 (the “Prospectus”). In the opinion of the Company's management, the financial information for the interim periods presented reflects all adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
On March 28, 2020, the Company entered into an agreement to divest a majority of its ownership interest in Polar Semiconductor, Inc. (“PSL”) to Sanken, in order to better align with its fabless, asset-lite scalable manufacturing strategy. In order to affect this in-kind, non-cash transaction, Sanken contributed the forgiveness of the fair value of the entire related party notes payable of $42,700 owed to Sanken and the Company contributed the forgiveness of the fair value of $15,000 out of the $66,377 total debt owed by PSL to the Company, which was previously eliminated in consolidation. Following the divestiture, Sanken held a 70% majority share in PSL with the Company retaining a 30% minority shareholder interest. The investment was recorded for the 30%, totaling $25,669 at the divestiture date. Beginning with reporting periods on and after March 28, 2020, the investment is included on the Company’s balance sheet as an equity investment in a related party including a tax impact of $419 for the fair value basis difference compared to book value and $458 of income earned during the six months ended September 25, 2020.
In addition, the difference between the fair value contributed by both parties at the consummation of this transaction and the book value was treated as an adjustment of capitalization changes related to organizational structure of affiliates and direct and indirect interests in subsidiaries within additional paid-in capital of $19,692 at September 25, 2020. This amount includes an estimated tax effect of $527 and $2,497 for the three- and six-month periods ended September 25, 2020, respectively, of which $419 was charged against the investment noted above.
On March 28, 2020, in connection with the divestiture described above, the Company also formally terminated its distribution agreement with Sanken to distribute Sanken’s products and entered into a transitional services agreement with PSL, who contracted with Sanken as their new channel for fulfillment of Sanken product sales in North America and Europe. Sanken will continue to provide distribution support for Allegro’s products in Japan. See Note 20, ”Related party transactions,” for further discussion.

9

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
In accordance with the divestiture transactions noted above, the following non-cash assets and liabilities and related equity impacts attributable to the unaudited statement of cash flows are summarized below:
March 28,
2020
Cash and cash equivalents$(15,332)
Restricted cash(1,013)
Trade accounts receivable, net of allowances37 
Accounts receivable – other(308)
Inventories(32,250)
Prepaid expenses and other current assets(376)
Property, plant and equipment, net(115,341)
Related party note receivable51,377 
Equity investment in related party25,462 
Other assets, net5,609 
Trade accounts payable4,176 
Accrued expenses and other current liabilities7,150 
Current portion of related party debt25,000 
Bank lines-of-credit10,000 
Related party notes payable, less current portion17,700 
Other long-term liabilities(1,247)
Additional paid-in capital19,165 
Impact of the COVID-19 Coronavirus
On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic.
The Company continues to monitor the rapidly evolving conditions and circumstances as well as guidance from international and domestic authorities, including public health authorities, and the Company may need to take additional actions based on their recommendations. There is considerable uncertainty regarding the impact on the Company’s business stemming from current measures and potential future measures that could restrict access to the Company’s facilities, limit manufacturing and support operations and place restrictions on the Company’s workforce and suppliers. The measures implemented by various authorities related to the COVID-19 outbreak have caused the Company to change its business practices including those related to where employees work, the distance between employees in the Company’s facilities, limitations on the in person meetings between employees and with customers, suppliers, service providers, and stakeholders as well as restrictions on business travel to domestic and international locations or to attend trade shows, investor conferences and other events.
The full extent to which the ongoing COVID-19 pandemic adversely affects the Company’s financial performance will depend on future developments, many of which are outside of the Company’s control, are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the effectiveness of actions to contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions can resume. The COVID-19 pandemic could also result in additional governmental restrictions and regulations, which could adversely affect the Company’s business and financial results. In addition, a recession, depression or other sustained adverse market impact resulting from COVID-19 could materially and adversely affect the Company’s business and its access to needed capital and liquidity. Even after the COVID-19 pandemic has lessened or subsided, the Company may continue to experience adverse impacts on its business and financial performance as a result of its global economic impact.
To the extent that the COVID-19 pandemic adversely affects the Company’s business, results of operations, financial condition or liquidity, it also may heighten many of the other risks. Such risks include, if the business impacts of COVID-19
10

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
carry on for an extended period, could cause the Company to recognize impairments for goodwill and certain long-lived assets including amortizable intangible assets.
The Company has taken actions to mitigate its financial risk given the uncertainty in global markets caused by the COVID-19 pandemic. During the fourth quarter of fiscal year 2020, the Company borrowed $43,000 under its revolving credit facilities. The borrowing was made as part of the Company’s ongoing efforts to preserve financial flexibility in light of the current uncertainty in the global markets and related effects on the Company’s business resulting from the COVID-19 pandemic. While the Company does not currently expect to use the proceeds from these borrowings for any near-term liquidity needs, it may use the proceeds for working capital and other general corporate purposes.
On March 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”). The CARES Act contains numerous tax provisions including a correction to the applicable depreciation rates available in the original Tax Cuts and Jobs Act (“TCJA”) for Qualified Improvement Property (“QIP”). The Company currently estimates a $1,680 cash acceleration is available to it as a result of this change and the Company plans to adjust its historical income tax filings accordingly. Additional income tax provisions of the Act are currently being evaluated and not expected to have a material impact. The CARES Act also contains a provision for deferred payment of 2020 employer payroll taxes after the date of enactment to future years. The Company expects to defer a portion of its remaining 2020 employer payroll taxes to subsequent years.
Financial Periods
The Company’s second quarter three-month period is a 13-week period ending on the last Friday in September. The Company’s 2021 fiscal three- and six-month period ended September 25, 2020 and the Company’s 2020 three- and six-month period ended September 27, 2019.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the unaudited consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Such estimates relate to useful lives of fixed and intangible assets, allowances for doubtful accounts and customer returns and sales allowances. Such estimates could also relate to the net realizable value of inventory, accrued liabilities, the valuation of stock-based awards, deferred tax valuation allowances, and other reserves. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements.
Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholder’s equity as a reduction of the additional paid-in capital generated as a result of the offering. As of September 25, 2020 and March 27, 2020, the Company had $1,806 and $0 of deferred offering costs, respectively.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with financial institutions, which management believes to be of a high credit quality. To manage credit risk related to accounts receivables, the Company evaluates its creditworthiness of its customers and maintains allowances, to the extend necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any significant credit losses to date.
As of September 25, 2020 and March 27, 2020, Sanken accounted for 15.5% and 33.8% of the Company’s outstanding trade accounts receivable, net, respectively, including related party trade accounts receivable. No other customers accounted for 10% or more of outstanding trade accounts receivable, net during those periods ended.
11

ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
For the three- and six-month periods ended September 25, 2020, Sanken accounted for 16.5% and 18.3% of total net sales, respectively. No other customers accounted for 10% or more of total net sales for either of the three- and six-month periods ended September 25, 2020. For the three- and six-month periods ended September 27, 2019, Sanken accounted for 10.2% and 10.4% of total net sales, respectively. No other customers accounted for 10% or more of total net sales for either of the three- and six-month periods ended September 27, 2019.
During the three-month period ended September 25, 2020 sales from customers located outside of the United States accounted for in the aggregate 84.7% of the Company’s total net sales, with Greater China accounting for 27.8% and Japan accounting for 16.4%. No other countries accounted for greater than 10% of total net sales for the three-month period ended September 25, 2020. During the six-month period ended September 25, 2020 sales from customers located outside of the United States in the aggregate accounted for 86.5% of the Company’s total net sales, with Greater China accounting for 27.8%, Japan accounting for 18.3% and South Korea accounting for 10.4%. No other countries accounted for greater than 10% of total net sales for the six-month period ended September 25, 2020.
During the three-month period ended September 27, 2019 sales from customers located outside of the United States in the aggregate accounted for 81.2% of the Company’s total net sales, with Japan accounting for 26.0% and Greater China accounting for 22.5%. No other countries accounted for greater than 10% of total net sales for the three-month period ended September 27, 2019. During the six-month period ended September 27, 2019 sales from customers located outside of the United States in the aggregate accounted for 81.2% of the Company’s total net sales, with Japan accounting for 27.2% and Greater China accounting for 18.9%. No other countries accounted for greater than 10% of total net sales for the six-month period ended September 27, 2019.
Impact of Recently Issued Accounting Standards
The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02” or “the new lease standard”) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In addition, a lessee is required to record (i) a right-of-use asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense for operating leases and amortization and interest expense for financing leases. Leases with a term of 12 months or less may be accounted for similar to prior guidance for operating leases.
In July 2018, the FASB issued ASU No. 2018-11, which added an optional transition method under the new lease standard that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented. In November 2019, the FASB issued guidance delaying the effective date for all entities, except for public business entities.
In May 2020, FASB issued ASU No. 2020-05 delaying the effective date of the new lease standard for nonpublic companies to fiscal years beginning after December 15, 2021 and interim periods within those fiscal years beginning after December 15, 2022. The Company expects to adopt this guidance during fiscal year 2022 and it is currently evaluating the expected effect on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which adds an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity by decreasing the number of credit impairment models that entities use to account for debt instruments. ASU 2016-03, along with its subsequent clarifications, was effective for public companies beginning after
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ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
December 15, 2019 and is effective for nonpublic companies for fiscal years beginning after December 15, 2021. The Company is evaluating the new guidance and the expected effect on its consolidated financial statements and related disclosures. In November 2019, the FASB issued guidance delaying the effective date for all entities, except for public business entities. For public entities, this guidance was effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. For nonpublic entities, this guidance is effective for annual periods beginning after December 15, 2020.
In August 2018, the FASB issued ASU No. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018-14 should be applied on a retrospective transition basis, and it is effective for public companies beginning after December 15, 2020 and for nonpublic companies beginning after December 15, 2021. The Company is evaluating the new guidance and the expected effect on its consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, regarding transfers between levels of financial instruments, amounts of unrealized gains and losses included in other comprehensive (loss) income for Level 3 fair value measurements and the information used to determine the fair value of Level 3 fair value measurements. The standard is effective for both public and nonpublic companies, for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the potential impact that the adoption of ASU 2018-13 will have on its consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity method investments and adds guidance on whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This ASU is effective for fiscal years beginning after December 15, 2020 for public companies and for fiscal years beginning after December 15, 2021 for nonpublic companies, with early adoption permitted. The Company is evaluating the new guidance and the expected effect on its consolidated financial statements and related disclosures.
In January 2020, the FASB issued ASU No. 2020-01 Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 for public companies and beginning after December 15, 2021 for nonpublic entities with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2020-01 will have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) to provide temporary optional expedients and exceptions to the contract modifications, hedge relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU, which was effective for all entities upon issuance on March 12, 2020, and may be applied through December 31, 2022, is applicable to all contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or any other reference rate expected to be discontinued. The Company is still assessing the impact that the adoption of ASU 2020-04 will have on its consolidated financial statements.
3. Acquisition
On August 28, 2020 the Company closed on its purchase of Voxtel, Inc. (the “Acquisition”), a privately-held technology company located in Beaverton, Oregon that develops, manufactures and supplies photonic and advanced 3D imaging technologies. The total preliminary purchase price was $35,081, including certain earn-outs that have the potential payout of $15,000. The fair value of these earn-outs at acquisition date was $7,800.
The Acquisition has been accounted for as a business combination and, in accordance with ASC 805, Business Combinations, the Company has recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following table summarizes the preliminary purchase price allocation recorded:
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ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
Estimated fair value of consideration:
Base purchase price$27,281 
Contingent Consideration7,800 
Total estimated fair value of consideration$35,081 
Estimated fair value of assets acquired and liabilities assumed:
Net working capital$3,996 
Property and equipment57 
Finite-life intangible assets13,600 
Indefinite-life intangible assets2,400 
Deferred tax liability(3,843)
Goodwill18,871 
Allocated purchase price$35,081 
The significant intangible assets identified in the preliminary purchase price allocation discussed above include completed technology, in-process research and development, customer relationships and trademarks. Completed technology, customer relationships and trademarks are amortized over their respective useful lives on a straight-line basis. An estimated fair value of $2,400 was assigned to acquired in-process research and development costs with an indefinite life.
Amortization of completed technology is included within cost of revenue, and amortization of customer relationships and trademarks is included within selling, general and administrative expense. To value the completed technology and the in-process research and development assets, the Company utilized the income approach, specifically a discounted cash-flow method known as the multi-period excess earnings method. Customer relationships represent the underlying relationships with certain customers to provide ongoing services for products sold. The Company utilized the income approach, specifically the distribution method, a subset of the excess-earnings method to value the customer relationships and trademarks.
The following table presents the estimated fair values and useful lives of the identifiable finite-life intangible assets acquired:
Useful LifeFair value
Completed technology12 years$13,100 
Customer relationships6 years300 
Trademarks5 years200 
$13,600 
Goodwill was recognized for the excess purchase price over the fair value of the net assets acquired. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce. Goodwill from the Acquisition is included within the Company’s one reporting unit and is included in the Company’s enterprise-level annual review for impairment. Goodwill resulting from the Acquisition is not deductible for tax purposes.
The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the acquisition, which remains preliminary, and using assumptions that the Company’s management believes are reasonable given the information then available. The final allocation of the purchase price may differ materially from the information presented in these condensed consolidated financial statements. Any changes to the preliminary estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.
The revenues and loss before income taxes from the Acquisition were immaterial to the Company’s consolidated results for the three-month period ended September 25, 2020. The Company has not presented pro forma results of operations for the Acquisition because it is not material to the Company's consolidated results of operations, financial position, or cash flows.
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ALLEGRO MICROSYSTEMS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements – (continued)
(Amounts in thousands, except share and per share amounts)
4. Revenue from Contracts with Customers
The Company generates revenue from the sale of magnetic sensor integrated circuits (“ICs”), application-specific analog power semiconductors, wafer foundry products and from the sale of Sanken related products. The following tables summarize net sales disaggregated by core end market and application, by product and by geography for the three- and six- month periods ended September 25, 2020 and September 27, 2019. The categorization of net sales by core end market and application is determined using various characteristics of the product and the application into which the Company’s product will be incorporated. The categorization of net sales by geography is determined based on the location the products are being shipped to.
Net sales by core end market and application:
Three-Month Period EndedSix-Month Period Ended
September 25,
2020
September 27,
2019
September 25,
2020
September 27,
2019
Core end market:
Automotive$89,479 $98,209 $165,857 $190,607 
Industrial21,650 18,092 42,056 34,737 
Other25,520 20,542 43,737 38,329 
Other applications:
Wafer foundry products 16,698  32,988 
Distribution of Sanken products 9,699  19,022 
Total net sales$136,649 $163,240 $251,650 $315,683 
Net sales by product:
Three-Month Period EndedSix-Month Period Ended
September 25,
2020
September 27,
2019
September 25,
2020
September 27,
2019
Power integrated circuits (“PIC”)$50,271 $45,235 $91,870 $80,235 
Magnetic sensors (“MS”)86,097 91,608 159,499 183,438 
Photonics281  281  
Wafer foundry products 16,698  32,988 
Distribution of Sanken products 9,699  19,022 
Total net sales$136,649 $163,240 $251,650 $315,683 
Net sales by geography:
Three-Month Period EndedSix-Month Period Ended
September 25,
2020
September 27,
2019
September 25,
2020
September 27,
2019
Americas:
United States$20,962 $30,659 $33,958 $59,248 
Other Americas3,249 5,200 5,177 11,208 
EMEA:
Europe24,374 24,140 42,220 52,281 
Asia:
Japan22,511 42,472 46,131 85,940 
Greater China37,935 36,696 70,006 59,960 
South Korea12,515 13,950