10-Q 1 uctt-20220701.htm 10-Q 10-Q
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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 July 1, 2022

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 000-50646

 

Ultra Clean Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

61-1430858

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

26462 Corporate Avenue, Hayward, California

 

94545

(Address of principal executive offices)

 

(Zip Code)

 

(510) 576-4400

Registrant’s telephone number, including area code

 

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 $0.001 per share

 

UCTT

 

The Nasdaq Stock Market, LLC

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 filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

Number of shares outstanding of the issuer’s common stock as of August 2, 2022: 45,430,976

 

 


ULTRA CLEAN HOLDINGS, INC.

TABLE OF CONTENTS

 

 

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

 

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

3

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

25

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

32

ITEM 4.

 

CONTROLS AND PROCEDURES

 

32

 

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

33

ITEM 1A.

 

RISK FACTORS

 

33

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

33

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

33

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

33

ITEM 5.

 

OTHER INFORMATION

 

33

ITEM 6.

 

EXHIBITS

 

33

SIGNATURES

 

34

 

- 2 -


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

July 1,

 

 

December 31,

 

(In millions, except par value)

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

421.4

 

 

$

466.5

 

Accounts receivable, net of allowance for doubtful accounts of $0.9 and $0.3 at
   July 1, 2022 and December 31, 2021, respectively

 

 

243.8

 

 

 

250.1

 

Inventories

 

 

405.1

 

 

 

379.2

 

Prepaid expenses and other current assets

 

 

41.5

 

 

 

41.3

 

Total current assets

 

 

1,111.8

 

 

 

1,137.1

 

Property, plant and equipment, net

 

 

248.6

 

 

 

242.3

 

Goodwill

 

 

250.7

 

 

 

270.0

 

Intangible assets, net

 

 

207.4

 

 

 

245.7

 

Deferred tax assets, net

 

 

37.2

 

 

 

37.6

 

Operating lease right-of-use assets

 

 

79.2

 

 

 

83.4

 

Other non-current assets

 

 

10.5

 

 

 

9.2

 

Total assets

 

$

1,945.4

 

 

$

2,025.4

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Bank borrowings

 

$

22.3

 

 

$

22.1

 

Accounts payable

 

 

259.4

 

 

 

332.9

 

Accrued compensation and related benefits

 

 

50.7

 

 

 

46.8

 

Operating lease liabilities

 

 

15.4

 

 

 

17.3

 

Other current liabilities

 

 

47.6

 

 

 

50.1

 

Total current liabilities

 

 

395.4

 

 

 

469.1

 

Bank borrowings, net of current portion

 

 

524.0

 

 

 

529.9

 

Deferred tax liabilities

 

 

55.1

 

 

 

54.9

 

Operating lease liabilities

 

 

62.1

 

 

 

65.9

 

Other liabilities

 

 

13.3

 

 

 

12.9

 

Total liabilities

 

 

1,049.9

 

 

 

1,132.7

 

Commitments and contingencies (See Note 10)

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

UCT stockholders’ equity:

 

 

 

 

 

 

Preferred stock — $0.001 par value, 10.0 shares authorized; none 
   outstanding

 

 

 

 

Common stock — $0.001 par value, 90.0 shares authorized; 45.4 shares and
   
44.9 shares issued and outstanding at July 1, 2022 and December 31, 2021,
   respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

521.9

 

 

 

514.9

 

Common shares held in treasury, at cost, 0.6 shares at July 1, 2022 and
   December 31, 2021

 

 

(3.3

)

 

 

(3.3

)

Retained earnings

 

 

340.2

 

 

 

337.4

 

Accumulated other comprehensive gain (loss)

 

 

(13.3

)

 

 

(0.2

)

Total UCT stockholders' equity

 

 

845.6

 

 

 

848.9

 

Noncontrolling interests

 

 

49.9

 

 

 

43.8

 

Total equity

 

 

895.5

 

 

 

892.7

 

Total liabilities and stockholders' equity

 

$

1,945.4

 

 

$

2,025.4

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 3 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 1,

 

 

June 25,

 

 

July 1,

 

 

June 25,

 

(In millions, except per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

532.0

 

 

$

442.5

 

 

$

1,018.9

 

 

$

788.1

 

Services

 

 

76.7

 

 

 

72.7

 

 

 

154.0

 

 

 

144.7

 

Total revenues

 

 

608.7

 

 

 

515.2

 

 

 

1,172.9

 

 

 

932.8

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

441.1

 

 

 

367.9

 

 

 

840.6

 

 

651.5

 

Services

 

 

49.2

 

 

 

47.4

 

 

 

100.1

 

 

94.5

 

Total cost of revenues

 

490.3

 

 

 

415.3

 

 

 

940.7

 

 

 

746.0

 

Gross profit

 

 

118.4

 

 

 

99.9

 

 

 

232.2

 

 

 

186.8

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

7.2

 

 

6.1

 

 

14.1

 

 

10.3

 

Sales and marketing

 

 

13.9

 

 

 

12.7

 

 

 

27.7

 

 

20.3

 

General and administrative

 

 

46.2

 

 

49.2

 

 

 

93.5

 

 

83.9

 

Net loss on divestitures

 

 

56.6

 

 

 

-

 

 

 

56.6

 

 

 

-

 

Total operating expenses

 

 

123.9

 

 

 

68.0

 

 

 

191.9

 

 

 

114.5

 

Income (loss) from operations

 

 

(5.5

)

 

 

31.9

 

 

 

40.3

 

 

72.3

 

Interest income

 

 

0.1

 

 

 

0.1

 

 

 

0.2

 

 

 

0.2

 

Interest expense

 

 

(7.3

)

 

 

(7.1

)

 

 

(13.7

)

 

 

(10.7

)

Other income (expense), net

 

 

(0.3

)

 

 

(0.7

)

 

 

(0.4

)

 

 

(5.0

)

Income (loss) before provision for income taxes

 

 

(13.0

)

 

 

24.2

 

 

 

26.4

 

 

 

56.8

 

Provision for income taxes

 

 

8.7

 

 

 

6.2

 

 

 

17.3

 

 

 

13.2

 

Net income (loss)

 

 

(21.7

)

 

 

18.0

 

 

 

9.1

 

 

 

43.6

 

Less: Net income attributable to noncontrolling interests

 

 

3.4

 

 

 

0.9

 

 

 

6.3

 

 

 

1.5

 

Net income (loss) attributable to UCT

 

$

(25.1

)

 

$

17.1

 

 

$

2.8

 

 

$

42.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to UCT common stockholders:

 

Basic

 

 

(0.56

)

 

$

0.39

 

 

$

0.06

 

 

$

1.00

 

Diluted

 

$

(0.56

)

 

$

0.39

 

 

$

0.06

 

 

$

0.98

 

Shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

45.2

 

 

 

43.3

 

 

 

45.1

 

 

 

41.9

 

Diluted

 

 

45.2

 

 

 

44.3

 

 

 

45.7

 

 

 

42.9

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 4 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 1,

 

 

June 25,

 

 

July 1,

 

 

June 25,

 

(In millions)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

(21.7

)

 

$

18.0

 

 

$

9.1

 

 

$

43.6

 

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Change in cumulative translation adjustment

 

 

(8.9

)

 

 

2.2

 

 

 

(12.0

)

 

 

(0.6

)

Change in fair value of derivatives

 

 

(1.4

)

 

 

0.8

 

 

 

(1.1

)

 

 

0.1

 

Total other comprehensive gain (loss)

 

 

(10.3

)

 

 

3.0

 

 

 

(13.1

)

 

 

(0.5

)

Other comprehensive income, attributable to
   noncontrolling interests

 

 

3.4

 

 

 

0.9

 

 

 

6.3

 

 

 

1.5

 

Comprehensive income (loss) attributable to UCT

 

$

(35.4

)

 

$

20.1

 

 

$

(10.3

)

 

$

41.6

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

 

- 5 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended

 

 

 

July 1,

 

 

June 25,

 

(In millions)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

9.1

 

 

$

43.6

 

Adjustments to reconcile net income to net cash provided by operating activities (excluding assets acquired and liabilities assumed):

 

 

 

 

 

 

Depreciation and amortization

 

 

20.0

 

 

 

15.1

 

Amortization of intangible assets

 

 

15.7

 

 

 

14.4

 

Stock-based compensation

 

 

10.1

 

 

 

7.2

 

Amortization of debt issuance costs

 

 

1.9

 

 

 

1.4

 

Gain from insurance proceeds

 

 

 

 

 

(7.3

)

Gain on disposal of fixed assets

 

 

(0.1

)

 

 

 

Net loss on divestitures

 

 

56.6

 

 

 

 

Deferred income taxes

 

 

1.1

 

 

 

0.9

 

Change in the fair value of financial instruments

 

 

(1.1

)

 

 

13.0

 

Others

 

 

 

 

 

0.2

 

Changes in assets and liabilities, net of effects of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

2.8

 

 

 

(13.3

)

Inventories

 

 

(43.2

)

 

 

(41.3

)

Prepaid expenses and other current assets

 

 

(2.9

)

 

 

0.3

 

Other non-current assets

 

 

(1.0

)

 

 

0.7

 

Accounts payable

 

 

(55.8

)

 

 

80.8

 

Accrued compensation and related benefits

 

 

4.6

 

 

 

(1.1

)

Income taxes payable

 

 

(2.5

)

 

 

0.9

 

Operating lease assets and liabilities

 

 

(2.3

)

 

 

(0.6

)

Other liabilities

 

 

1.3

 

 

 

3.8

 

Net cash provided by operating activities

 

 

14.3

 

 

 

116.7

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(46.5

)

 

 

(22.7

)

Proceeds from sale of equipment, including insurance proceeds

 

 

0.4

 

 

 

7.4

 

Settlement of forward contracts in conjunction with the acquisition of Ham-Let

 

 

 

 

 

(10.4

)

Divestiture of subsidiaries

 

 

(0.3

)

 

 

 

Acquisition of business, net of cash acquired

 

 

 

 

 

(344.8

)

Net cash used in investing activities

 

 

(46.4

)

 

 

(370.5

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from bank borrowings

 

 

4.7

 

 

 

371.5

 

Proceeds from issuance of common stock

 

 

0.7

 

 

 

193.1

 

Principal payments on bank borrowings and finance leases

 

 

(10.5

)

 

 

(43.4

)

Payments of debt issuance costs

 

 

 

 

 

(8.9

)

Payments of dividends to a joint venture shareholder

 

 

(0.3

)

 

 

(0.1

)

Employees' taxes paid upon vesting of restricted stock units

 

 

(3.8

)

 

 

(7.0

)

Net cash provided by (used in) financing activities

 

 

(9.2

)

 

 

505.2

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(3.8

)

 

 

(0.3

)

Net increase (decrease) in cash and cash equivalents

 

 

(45.1

)

 

 

251.1

 

Cash and cash equivalents at beginning of period

 

 

466.5

 

 

 

200.3

 

Cash and cash equivalents at end of period

 

$

421.4

 

 

$

451.4

 

Supplemental cash flow information:

 

 

 

 

 

 

Income taxes paid, net of income tax refunds

 

$

16.5

 

 

$

10.8

 

Interest paid

 

$

13.8

 

 

$

8.1

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Property, plant and equipment purchased included in accounts payable and other
   liabilities

 

$

4.4

 

 

$

4.7

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 6 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

Three Months Ended

 

 

 

July 1, 2022

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Treasury shares

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

Noncontrolling

 

 

Total

 

(In millions)

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

Amount

 

 

Earnings

 

 

Income (Loss)

 

 

Equity of UCT

 

 

Interests

 

 

Equity

 

Balance April 1, 2022

 

 

45.0

 

 

$

0.1

 

 

$

520.5

 

 

 

0.6

 

$

(3.3

)

 

$

365.3

 

 

$

(3.0

)

 

$

879.6

 

 

$

46.7

 

 

$

926.3