Ultra Clean Earnings 2020-06-26

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

uctt-10q_20200626.htm

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 June 26, 2020

☐	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 July 24, 2020: 40.4 million

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	24
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 4.	CONTROLS AND PROCEDURES	32
	PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	34
ITEM 1A.	RISK FACTORS	34
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	34
ITEM 4.	MINE SAFETY DISCLOSURES	34
ITEM 5.	OTHER INFORMATION	34
ITEM 6.	EXHIBITS	35
SIGNATURES		36

- 2 -

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 26,			December 27,
(In millions, except par value)	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	214.4		$	162.5
Accounts receivable, net of allowance for doubtful accounts of $0.2 at June 26, 2020 and $0.3 at December 27, 2019		138.9			112.7
Inventories		193.8			172.4
Prepaid expenses and other current assets		18.7			19.4
Total current assets		565.8			467.0
Property, plant and equipment, net		148.1			145.3
Goodwill		171.1			171.1
Intangibles assets, net		170.4			180.3
Deferred tax assets, net		15.5			15.5
Operating lease right-of-use assets		38.9			34.9
Other non-current assets		5.0			5.2
Total assets	$	1,114.8		$	1,019.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank borrowings	$	7.7		$	8.8
Accounts payable		140.1			133.1
Accrued compensation and related benefits		27.7			24.8
Operating lease liabilities		12.1			13.2
Other current liabilities		39.3			30.7
Total current liabilities		226.9			210.6
Bank borrowings, net of current portion		322.1			283.4
Deferred tax liabilities		25.2			25.2
Operating lease liabilities		33.4			28.8
Other liabilities		19.0			18.8
Total liabilities		626.6			566.8
Commitments and contingencies (See Note 9)
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; 40.3 shares and 39.9 shares issued and outstanding at June 26, 2020 and December 27, 2019, respectively		0.1			0.1
Additional paid-in capital		306.0			300.9
Common shares held in treasury, at cost, 0.6 shares at June 26, 2020 and December 27, 2019		(3.3	)		(3.3	)
Retained earnings		171.0			140.3
Accumulated other comprehensive loss		(3.3	)		(1.3	)
Total UCT stockholders' equity		470.5			436.7
Noncontrolling interests		17.7			15.8
Total equity		488.2			452.5
Total liabilities and equity	$	1,114.8		$	1,019.3

(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
	June 26,			June 28,			June 26,			June 28,
(In millions, except per share amounts)	2020			2019			2020			2019
Revenues:
Product	$	277.9		$	210.4		$	537.3		$	410.6
Services		66.9			55.0			128.4			114.9
Total revenues		344.8			265.4			665.7			525.5
Cost of revenues:
Product		229.3		181.1				444.0		355.6
Services	41.6			36.1			82.1			76.9
Total cost of revenues	270.9			217.2			526.1			432.5
Gross profit		73.9			48.2			139.6			93.0
Operating expenses:
Research and development	3.8			3.9			7.2			7.3
Sales and marketing	5.9			5.4			11.7			10.8
General and administrative		33.4		29.9				67.3		57.7
Total operating expenses		43.1		39.2				86.2		75.8
Income from operations		30.8			9.0			53.4		17.2
Interest income		0.2			0.2			0.5			0.4
Interest expense		(3.8	)		(6.7	)		(9.0	)		(13.3	)
Other income (expense), net		0.6			-			(2.1	)		1.1
Income before provision for income taxes		27.8			2.5			42.8			5.4
Provision for income taxes		5.7		2.8				10.2		4.3
Net income (loss)		22.1			(0.3	)		32.6			1.1
Less: Net income (loss) attributable to noncontrolling interests		0.8			(0.1	)		1.9			0.7
Net income (loss) attributable to UCT	$	21.3		$	(0.2	)	$	30.7		$	0.4

Net income (loss) per share attributable to UCT common stockholders:
Basic	$	0.53		$	(0.01	)	$	0.77		$	0.01
Diluted	$	0.52		$	(0.01	)	$	0.75		$	0.01
Shares used in computing net income (loss) per share:
Basic		40.1			39.4			39.9			39.3
Diluted		40.8			39.4			40.8			39.6

(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
	June 26,		June 28,			June 26,			June 28,
(In millions)	2020		2019			2020			2019
Net income (loss)	$	22.1	$	(0.3	)	$	32.6		$	1.1
Other comprehensive income (loss):
Change in cumulative translation adjustment		1.2		(1.3	)		(2.0	)		(2.2	)
Change in defined benefit pension plan net actuarial loss		0.1	—			—			—
Cash flow hedges:
Change in fair value of derivatives	—			0.1		—				0.1
Total other comprehensive income (loss)		1.3		(1.2	)		(2.0	)		(2.1	)
Other comprehensive income, attributable to noncontrolling interests	0.8			(0.1	)		1.9			0.7
Comprehensive income (loss) attributable to UCT	$	22.6	$	(1.4	)	$	28.7		$	(1.7	)

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 5 -

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 26,			June 28,
(In millions)	2020			2019
Cash flows from operating activities:
Net income	$	32.6		$	1.1
Adjustments to reconcile net income to net cash provided by operating activities (excluding assets acquired and liabilities assumed):
Depreciation and amortization		12.6			10.4
Amortization of intangible assets		9.9			9.9
Stock-based compensation		6.2			5.8
Amortization of debt issuance costs		0.9			0.9
(Gain) loss on the disposal of assets and business		0.3			(0.3	)
Gain from insurance proceeds		(0.6	)		—
Deferred income taxes		—			(2.1	)
Change in the fair value of financial instruments and earn-out liability		4.2			—
Changes in assets and liabilities:
Accounts receivable		(26.0	)		10.0
Inventories		(21.5	)		32.4
Prepaid expenses and other current assets		(1.6	)		3.7
Other non-current assets		0.3			(0.6	)
Accounts payable		6.5			(4.7	)
Accrued compensation and related benefits		2.8			3.4
Income taxes payable		4.9			(2.2	)
Operating lease assets and liabilities		(0.5	)		0.5
Other liabilities		2.2			(0.2	)
Net cash provided by operating activities		33.2			68.0
Cash flows from investing activities:
Purchases of property, plant and equipment		(17.0	)		(6.8	)
Acquisition of Dynamic Manufacturing Solutions, LLC		—			(29.8	)
Proceeds from sale of equipment, including insurance proceeds		2.9			0.5
Net cash used in investing activities		(14.1	)		(36.1	)
Cash flows from financing activities:
Proceeds from bank borrowings		60.5			28.1
Proceeds from issuance of common stock		0.3			0.1
Principal payments on bank borrowings and finance leases		(26.3	)		(32.4	)
Taxes paid related to net share settlement of equity awards		(1.4	)		(1.4	)
Net cash provided by (used in) financing activities		33.1			(5.6	)
Effect of exchange rate changes on cash and cash equivalents		(0.3	)		(2.3	)
Net increase in cash and cash equivalents		51.9			24.0
Cash and cash equivalents at beginning of period		162.5			144.1
Cash and cash equivalents at end of period		214.4		$	168.1
Supplemental cash flow information:
Income taxes paid, net of income tax refunds	$	4.6		$	8.6
Interest paid	$	9.2		$	12.3
Non-cash investing and financing activities:
Fair value of earn-out payment related to DMS acquisition		—		$	1.4
Property, plant and equipment purchased included in accounts payable and other liabilities	$	2.5		$	5.1

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 6 -

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Common Stock

Treasury shares

(In millions)

Amount

Additional

Paid-in

Capital

Amount

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Total

Stockholders’

Equity of UCT

Noncontrolling

Interests

Total

Equity

Balance December 27, 2019

39.9

Price	14.49	EPS	0
Shares	40	P/E	284
MCap	580	P/FCF	7
Net Debt	-159	EBIT	15
TEV	421	TEV/EBIT	29
TTM 2019-09-27, in MM, except price, ratios

10-Q	2020-06-26	Filed 2020-08-03
10-Q	2020-03-27	Filed 2020-05-06
10-K	2019-12-27	Filed 2020-03-11
10-Q	2019-09-27	Filed 2019-11-05
10-Q	2019-06-28	Filed 2019-08-07
10-Q	2019-03-29	Filed 2019-05-08
10-K	2018-12-28	Filed 2019-03-22
10-Q	2018-09-28	Filed 2018-11-07
10-Q	2018-06-29	Filed 2018-08-08
10-Q	2018-03-30	Filed 2018-05-09
10-K	2017-12-29	Filed 2018-03-14
10-Q	2017-09-29	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-03-31	Filed 2017-05-10
10-K	2016-12-30	Filed 2017-03-15
10-Q	2016-09-23	Filed 2016-11-01
10-Q	2016-06-24	Filed 2016-08-03
10-Q	2016-03-25	Filed 2016-05-02
10-K	2015-12-25	Filed 2016-03-09
10-Q	2015-09-25	Filed 2015-11-04
10-Q	2015-06-26	Filed 2015-08-05
10-Q	2015-03-27	Filed 2015-05-04
10-K	2014-12-26	Filed 2015-03-11
10-Q	2014-09-26	Filed 2014-11-03
10-Q	2014-06-27	Filed 2014-08-04
10-Q	2014-03-28	Filed 2014-05-05
10-K	2013-12-27	Filed 2014-03-12
10-Q	2013-09-27	Filed 2013-11-01
10-Q	2013-06-28	Filed 2013-08-02
10-Q	2013-03-29	Filed 2013-05-03
10-K	2012-12-28	Filed 2013-03-13
10-Q	2012-09-28	Filed 2012-11-07
10-Q	2012-06-29	Filed 2012-08-07
10-Q	2012-03-30	Filed 2012-05-07
10-K	2011-12-30	Filed 2012-03-21
10-Q	2011-09-30	Filed 2011-11-03
10-Q	2011-07-01	Filed 2011-08-03
10-Q	2011-04-01	Filed 2011-05-06
10-K	2010-12-31	Filed 2011-03-16
10-Q	2010-10-01	Filed 2010-11-09
10-Q	2010-07-02	Filed 2010-08-09
10-Q	2010-04-02	Filed 2010-05-14
10-K	2010-01-01	Filed 2010-03-30

8-K	2020-10-28	Earnings, Exhibits
8-K	2020-07-29	Earnings, Exhibits
8-K	2020-06-02
8-K	2020-04-29
8-K	2020-02-19
8-K	2019-12-17
8-K	2019-10-30
8-K	2019-07-31
8-K	2019-05-30
8-K	2019-05-28
8-K	2019-05-23
8-K	2019-05-02
8-K	2019-03-25
8-K	2019-02-21
8-K	2018-11-06
8-K	2018-10-26
8-K	2018-10-01
8-K	2018-09-05
8-K	2018-08-27
8-K	2018-07-26
8-K	2018-07-24
8-K	2018-06-01
8-K	2018-06-01
8-K	2018-05-15
8-K	2018-04-25
8-K	2018-03-29
8-K	2018-02-21
8-K	2018-02-06
8-K	2018-01-30
8-K	2018-01-29
8-K	2018-01-16

EX-31.1	uctt-ex311_7.htm
EX-31.2	uctt-ex312_6.htm
EX-32.1	uctt-ex321_8.htm

UCTT 10Q Quarterly Report

Ultra Clean Earnings 2020-06-26